UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

BEAUMONT DIVISION

MEDLIANT INC., 

Plaintiff,

v. 

KATRINA PONCE DE LEON,

Defendant.

Civil Action No.: 

1:23-cv-00203-MAC

APPENDIX TO DEFENDANT 

KATRINA PONCE DE LEON’S 

MOTION TO DISMISS 

PLAINTIFF’S COMPLAINT

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 1 of 275 PageID #: 45
Page 1 of 2

APPENDIX TABLE OF CONTENTS

Exhibit 1: Agreement for Employment, dated January 18, 2022.................................................001

Exhibit 2: Demand letter, dated April 10, 2023 ...........................................................................007

Exhibit 3: The following authorities –

20 C.F.R. § 655.731 .........................................................................................................009

20 C.F.R. § 656.12 ...........................................................................................................011

Nev. Rev. Stat. § 104.2302...............................................................................................026

Nev. Rev. Stat. § 200.463.................................................................................................027

All Star Bonding v. State, 119 Nev. 47 (2003) .................................................................029

Am. First Fed. Credit Union v. Soro, 131 Nev. 737 (Nev. 2015).....................................033

Blacklands R.R. v. N.E. Texas Rural Rail Transp. Dist., 

No. 1:19-CV-250, 2019 WL 3613071 (E.D. Tex. Aug. 5, 2019).....................................037

Burch v. 2d Judicial Dist. Ct., 118 Nev. 438 (2002)........................................................042

Coppola v. Baron, 

No. 2:07-cv-00664-BES-RJJ, 2007 WL 4180590 (D. Nev. Nov. 20, 2007)....................047

Fed. Nat’l Mortgage Assoc. v. 8th Judicial Dist. Ct. in and for Cty. Of Clark, 

528 P.3d 586 (Table), 2022 WL 19697697 (Nev. Dec. 22, 2022)....................................051

Fremont Emergency Servs. (Mandavia), Ltd. v. UnitedHealth Group, Inc., 

No. A-19-792978-B, 2020 WL 10353883 (Nev. Dist. Ct. June 24, 2020) ......................055

Golden Rd. Motor Inn, Inc. v. Islam, 132 Nev. 476 (Nev. 2016).....................................097

Halcyon Silver, LLC v. Evelynmoe, 

526 P.3d 1110, 2023 WL 2661524 (Nev. Ct. App. Mar. 24, 2023)..................................114

Henderson v. Watson, 131 Nev. 1290, 2015 WL 2092073 (2015)...................................123

Huawei Techs. Co., Ltd. v. Yiren Huang, 

No. 4:17-CV-00893, 2018 WL 1964180 (E.D. Tex. Apr. 25, 2018)................................127

Iliescu v. Regional Trans. Comm’n of Washoe Cty., 

522 P.3d 453 (Nev. Ct. App. 2022) ..................................................................................139

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 2 of 275 PageID #: 46
Page 2 of 2

J.D. Fields, Inc. v. Indep. Enters., Inc., 

No. 4:12-CV-2605, 2012 WL 5818229 (S.D. Tex. Nov. 13, 2012) .................................149

Magtoles v. United Staffing Registry, Inc., 

No. 21-CV-1850 (KAM) (PK), 2023 WL 2710178 (E.D.N.Y. Mar. 30, 2023) ...............156

Mason v. Fakhimi, 865 P.2d 333 (1993) ..........................................................................185

Mort Wallin of Lake Tahoe, Inc. v. Commercial Cabinet Co., 105 Nev. 855 (1989).......190

Paguirigan v. Prompt Nursing Employment Agency, LLC, 

No. 17-CV-1302 (NG), 2019 WL 4647648 (E.D.N.Y. Sept. 24, 2019)...........................193

Phillipps v. Wells Fargo Bank, N.A., 

No. 4:16-CV-420, 2016 WL 4703067 (E.D. Tex. Sept. 8, 2016).....................................213

Phillips v. Valley View Surgical, LLC, 

498 P.3d 1290, 2021 WL 5370984 (Nev. Ct. App. Nov. 17, 2021)..................................215

Prothera, Inc. v. Zhou Ye, 

No. 3:18-cv-00410-MMD-CLB, 2020 WL 3073345 (D. Nev. June 10, 2020) ...............221

Reno Club, Inc. v. Young Inv. Co., 64 Nev. 312 (1947)....................................................228

Sherman v. Smead, 572 P.3d 973 (Table), 2023 WL 2960621 (Nev. Ct. App. 2023) ......241

Vorrey v. City of Brownsville, 

No. 17-cv-222, 2018 WL 7291458 (S.D. Tex. Oct. 5, 2018)...........................................249

Western Cab Co. v. Kellar, 90 Nev. 240 (1974)...............................................................259

White v. Health Carousel, LLC, 

No. MO:19-CV-00066-DC, 2019 WL 7824787 (W.D. Tex. Oct. 18, 2019)....................264

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Exhibit 1

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 4 of 275 PageID #: 48
Page 1 of 6

Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

AGREEMENT FOR EMPLOYMENT

This Agreement for Employment is entered into as of the latest date of the execution of the agreement by 

all parties (the “Effective Date”), by and between Medliant and individual indicated in the Signature 

block (Employee).

WHEREAS, Employer is a corporation which locates healthcare assignments in accordance with the 

needs of Employer’s Clients and/or Employer’s Clients’ Customers and which may include companies 

providing services competitive to Employer (any and all of which are hereafter referred to as "Clients"); 

and

WHEREAS, Employee possesses training, skills, and the requisite qualifications to provide healthcare 

services in the U.S., desires employment in the U.S.’s healthcare field, and requires services of a 

sponsoring Employer to facilitate the employment and immigration process through the United States 

Citizenship and Immigration Services (“USCIS”); and 

WHEREAS Employer desires to provide such services, including sponsorship, and Employee currently 

desires to be employed by Employer in the capacity of healthcare professional performing work at 

Clients' facilities as assigned by Employer.

NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions set forth herein, 

the parties hereto agree as follows:

1) SCOPE OF DUTIES. Employer employs Employee and Employee accepts employment upon the

terms and conditions set forth in this Agreement. Employee shall perform such specialized healthcare

work as he/she is directed to perform by Employer for Employer's Clients. Employer may direct

Employee to take directions from such Client, even though Employee remains employed by

Employer. Employee represents that, in the performance of his/her services for Employer's Clients,

he/she will regularly and typically exercise sound discretion and independent professional judgment

with respect to the significant matters entrusted to him/her. Employee agrees to work at Clients'

locations to which Employer directs him/her and at any other premises designated by Employer.

Employee agrees to adhere to applicable Employer and Clients' policies, procedures, and

requirements in performing his/her assigned work as well as applicable laws, rules, and regulations.

Employee further agrees to exert his/her best efforts and to conduct himself/herself in a professional

manner at all times while on assignment with Employer's Clients. Employee understands and agrees

that this Agreement establishes an at-will employment relationship. Employee further understands

and agrees that while working at Clients' sites he/she works in the name of and represents Employer,

but Employee has no right or authority to bind Employer to any contractual or other obligation.

2) TERM.

a) Employee’s employment shall commence upon the start date of services for Employer’s Client

and continue in effect for a minimum of five thousand two hundred (5,200) straight-time hours

(hereinafter referred to as “contractual hours”) or until such employment is terminated by

Employer or Employee in accordance with the provisions of this Agreement or law of the state in

which services are being performed, but under no circumstances in violation of any USCIS laws,

rules, regulations, policies, or guidelines, as they exist from time to time. In addition, any

termination of the employment relationship and/or this Agreement shall not release Employee

	
	




Exhibit 1

001

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Page 2 of 6 Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

from the satisfaction of the contractual hours, unless Employer agrees to waive the contractual 

hours’ provisions. The 5200 Straight Time hours relates only to damages and does not create any 

limitations on Employee’s employment with Medliant beyond the Initial Employment Period.

b) The terms of this Agreement shall commence upon the Effective Date of this Agreement and 

continue until all services for Employer are completed or for a minimum of five thousand two 

hundred (5,200) straight-time hours after commencement of services, except for the terms and 

conditions in Sections 4, 8, 10, 14, 15, 16, 17 and 18 herein which shall continue for four (4) 

years after termination of the Agreement per Section 2(a) above or otherwise.

c) Employee acknowledges that Employer has paid substantial sums in order for Employee to 

immigrate to the U.S. to work as an employee of Employer, so Employee commits to work for a 

minimum of five thousand two hundred (5,200) straight-time hours. Employee’s employment 

shall continue in effect for a minimum of five thousand two hundred (5,200) straight-time hours 

and until such employment is terminated by Employer or Employee in accordance with the 

provisions of this Agreement.

d) In the event that Employee voluntarily leaves the employment of the Employer prior to 

completion of the five thousand two hundred (5,200) straight-time hours, or Employee accepts 

employment other than through Employer, Employee acknowledges that Employer will not have 

made a reasonable amount of profit in relation to Employer’s investment of time, effort, and 

money in promoting, training, testing, and licensing and otherwise assisting Employee to become 

a U.S. employee. The difficulty in ascertaining damages due to Employee’s early termination is 

caused by Employer’s profits being made only when Employee performs work for Clients. 

However, Employee and Employer agree that a fair compromise for liquidated damages is the 

sum of $2,500 for each month (156 hours represents one month) remaining of the minimum five 

thousand two hundred (5,200) straight-time hours’ commitment at the time of the termination. 

This amount is reasonable as it is considerably less than the profit Employer would make if the 

Agreement were not terminated prematurely. This liquidated damage clause applies ONLY to 

the lost profits of Employer. The liquidated damages are separate, and are in addition to, any 

costs of immigration owed to Medliant pursuant to the terms of the Offer Letter. Said liquidated 

damages sum shall be due in full on the date of Employee’s termination. Should it become 

necessary to pursue an action or proceeding to enforce the obligations set forth in this Agreement, 

along with the costs of immigration and liquidated damages, Medliant shall also be entitled to an 

award of reasonable attorneys’ fees and costs incurred in attempting to enforce these terms.

e) Where Employee leaves voluntarily prior to the contract term expiring, Medliant may use 

Employee’s breach of this Agreement as grounds to file suit for breach of contract, amongst other 

claims, which Medliant has done previously upon prior Employees breaching the herein 

Agreement.

3) COMPENSATION, TIME RECORDS, DEDUCTIONS. Employer agrees to pay Employee as set 

forth in the Offer Letter. For each assignment Employee will record on Employer's prescribed time 

record, and in accordance with any procedures established by Employer, Employee's hours worked on 

each day. Prior to submitting any such time record to Employer, Employee shall obtain on each time 

record Client's signature confirming and approving the hours worked by Employee. Employee agrees 

that such Client-approved time record shall be conclusive as to time worked each day by Employee. 

Employee further agrees that he/she is responsible for ensuring that such time record (including 

Client’s signature) for any week is received by Employer's accounting office no later than three (3) 

	
	




002

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Page 3 of 6 Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

calendar days from final date of work period. Employee recognizes that Employer may elect to 

modify or supplement these procedures, orally or in writing, and, as a condition to continued 

employment, Employee agrees to be bound by any such future modifications or additions. Employer 

shall deduct amounts from Employee's compensation only as authorized by applicable law, including 

amounts attributable to all applicable income tax withholding and Federal Insurance Corporation Act 

("FICA") tax withholding.

4) REIMBURSEMENT OF EXPENSES. Employer shall reimburse Employee for necessary or 

ordinary expenses incurred in the course of performing work under this Agreement provided that 

Employee submits to Employer for written approval in advance and Employer approves the specific 

expenditure in writing in advance and notifies Employee in writing in advance of its intention to 

provide reimbursement. In order to receive an approved reimbursement, Employee shall present 

Employer with an itemized accounting of expenditures and supporting receipts and vouchers and any 

further information that Employer may request, and such reimbursement shall be contingent upon 

receipt of adequate information.

5) BENEFITS. Except as specified in the Offer Letter for benefits prior to the commencement of 

employment or the first short term of employment, Employee shall receive no other compensation or 

benefits.

6) HOURS. While performing work at Client’s site, Employee shall work the hours typically worked 

by Client’s employees unless directed otherwise by Employer, who shall set and enforce Employee’s 

amount and schedule of hours. Employee shall make themselves available for all on-call and callback 

at the discretion of the Client. However, Employee shall work only those hours approved by 

Employer. 

7) PERSONAL SERVICES OF EMPLOYEE. Employee must personally perform the work as 

directed by Client or Employer and has no right to subordinate or assign Employee’s work to another 

individual. Employee has no right to hire, supervise or pay assistants, unless as specifically directed 

in writing in advance by Employer to do so.

8) CONFIDENTIALITY AND NONDISCLOSURE. 

a) Employee acknowledges that confidential information and materials regarding Employer and its 

Clients have been or will be disclosed to him/her in hard copy, verbally and/or electronic methods 

only for the purpose of assisting him/her in performing his/her duties under this Agreement. Such 

information and materials are and shall remain the property of Employer or its Client. As used in 

this Agreement, the phrase "confidential information and materials" includes but is not limited to 

all information belonging to Employer or Employer's Clients relating to their respective services 

and products, customers, business methods, strategies and practices, internal operations, pricing 

and billing, financial data, costs, personnel information (including but not limited to names, 

educational background, prior experience and availability), customer and supplier contacts and 

needs, information designated by Employer or any of its Clients as confidential, and all other 

information that might reasonably be deemed confidential; and all of which is included in Section 

10. Employee acknowledges that he/she may use such confidential information and materials 

only during his/her term of employment and solely for the purpose of such employment, and that 

this right expires upon Employee’s discharge, resignation or other termination of employment or 

this Agreement. Employee therefore agrees not to use for his/her own benefit or for the benefit of 

any other person, except as

	
	




003

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Page 4 of 6 Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

specifically authorized in writing in advance by all owners of such information and materials, or 

divulge to any person for any reason, any such information and materials related to the business 

of Employer, any of its Clients, or their customers, clients and affiliates, both at any time during 

the term of this Agreement and at any time after its termination. Employee agrees to take any and 

all reasonable actions, including those requested by Employer or Client, to prevent such 

disclosure and preserve the security of confidential information and materials. Employee further 

agrees that he/she will not directly or indirectly disclose to any person, including to the Client or 

to any co-workers either during or after his/her period of employment, Employee's wage rates and 

terms without prior written consent of Employer (disclosure to a spouse or financial institution 

shall be permitted so long as further disclosure by such spouse or institution is prohibited).

b) Employee understands and agrees that he/she has a very high legal duty, i.e., a fiduciary duty, to 

maintain all confidences referenced in this Agreement and as may be discussed or otherwise 

communicated to Employee during the term of this Agreement. Any violation of this Section 8 

shall be a serious matter and dealt with accordingly, including, but without limitation, in 

Employer’s sole discretion a violation may be considered a material breach of this Agreement and 

thereupon Employer may pursue all legal and equitable remedies available through a court of law.

9) DIRECTION, SUPERVISION, AND COOPERATION. Employee agrees to adhere to all 

applicable laws, policies, procedures and rules of Employer, Client, and governmental agencies. 

Employee will ordinarily work as required by Employer at the direction of the Client but he/she 

agrees that Employer has the right to direct Employee as to when and where Employee is to perform 

the work. Employer has the right to require Employee's attendance at meetings at Employer's or any 

other premises. Employee’s performance is subject to the review and approval of Employer and 

Client and others, as may be required by law. Employee agrees to cooperate fully with any request by 

Employer for Employee to provide any information, orally and in writing, related to the performance 

of Employee's services, including but not limited to any information required by Employer to respond 

to any questions, claims, defenses, and the like raised by any person or governmental agency or 

required by Employer to prepare or file any claims, defenses or the like to be made by Employer.

10) RETURN OF PROPERTY.

a) Employer directs and Employee agrees that upon termination of an assignment with any Client, 

Employee will deliver to the Client or Employer all keys, pass cards, identification cards, policy 

and procedure manuals, or materials of any nature in Employee's possession or control that were 

given to Employee by Client or Employer that relate to Employee’s services for Client.

b) Employer directs and Employee agrees that upon termination of the employment relationship 

between Employee and Employer, Employee will deliver to Employer all keys, pass cards, 

identification cards, policy and procedure manuals, or materials of any nature in Employee’s 

possession or control that were given to Employee by Employer or a Client that relate to 

Employee’s employment with Employer.

11) EXCLUSIVITY/CONFLICT OF INTEREST. Employee hereby agrees that during the term of 

this Agreement he/she shall provide services only for the benefit of Employer and shall refrain from 

performing services for others, unless approved in advance by Employer. In no case shall Employee 

 provide services to other healthcare facilities or to others who are in direct competition to Employer's 

business.

	
	




004

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Page 5 of 6 Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

12) RESIGNATION. Employee may resign with or without reason as of a specified date after Employer 

receives written notice from Employee of his/her intention to resign as of a specified date. See 

Section 2 for details.

13) EMPLOYMENT AT-WILL. Consistent with the provisions set forth herein, the parties 

acknowledge and agree that the employment relationship created by this Agreement is at-will. Any 

cause for discharge mentioned in this Agreement or in any document maintained by Employer 

(including but not limited to employment manuals or recruitment materials) shall not in any way limit 

Employer's right to discharge Employee, or in any way alter Employee's at-will status. See Section 2 

for details.

14) SEVERABILITY. In the event that any provision herein is construed to be unenforceable, then the 

parties or a court of competent jurisdiction shall attempt to revise such provision while keeping its 

intent to the extent possible and having such revised provision enforceable. In the event that any 

provision cannot be revised into an enforceable form, then such provision of this Agreement shall be 

considered severable such that if any provision or clause conflicts with existing or future applicable 

law, or may not be given full effect because of such law, this shall not affect any other provision of 

the Agreement which, consistent with such law, shall remain in full force and effect. All surviving 

clauses shall be construed so as to effectuate the purpose and intent of the parties.

15) INTEGRATION. Each party hereto specifically acknowledges this Agreement is the culmination of 

many conversations, negotiations, and communications, both written and oral, between the parties. 

All such prior communication are made null and void and replaced by this Agreement. This 

Agreement contains all of the agreements, understandings, representations, conditions, warranties, 

and covenants made between the parties hereto. Unless set forth herein, neither party shall be liable 

for any representations made and all modifications and amendments hereto must be in a writing 

signed by both parties.

16) GOVERNING LAW/VENUE. This Agreement shall be governed by the laws of Nevada. Medliant 

is incorporated in Nevada and as such, chooses to utilize Nevada law for interpretation and analysis of 

the herein agreement as well as chooses to utilize the venue of the 8th Judicial District Court in Las 

Vegas, Nevada as and for any disputes that may arise from time to time. By signing below, you agree 

to Medliant’s choice of venue and choice of law.

17) WAIVER. No waiver of any provision of this Agreement shall be valid unless it is in writing and 

signed by the person against whom it is sought to be enforced (in the case of Employer by an officer 

of Employer). The failure of any party at any time to insist on strict performance of any condition, 

promise, agreement or understanding contained in this Agreement shall not be construed as a waiver 

or relinquishment of the right to insist on strict performance of the same condition, promise, 

agreement or understanding at any future time.

18) ATTORNEY’S FEES. Should it become necessary to pursue an action or proceeding to enforce the 

obligations set forth in this Agreement, Medliant shall be entitled to an award of reasonable attorneys’ 

fees and costs incurred in attempting to enforce these terms. 

19) MISCELLANEOUS. Employee represents that he/she has read and understands the terms of this 

Agreement, has had an opportunity to ask questions and to review this Agreement with legal counsel 

of his/her choice, is not relying on any advice from Employer in this regard, and is voluntarily signing 

this Agreement.

	
	




005

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Page 6 of 6 Initial ______

718 Thompson Lane, Suite 108-283, Nashville, TN 37204  Tel: 650 377 0990  Fax: 888 377 2460  www.medliant.com

20) SIGNATURES.

This Agreement is signed to be effective as of the date on the first page hereof and is signed first by 

Employee who makes this an offer to Medliant to accept it, in Clark County, Las Vegas, Nevada.

Medliant/Employer Employee

Allen B. Miller Jr.

President/CEO

Dated Signed Date Signed

	
	







	 


006

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 10 of 275 PageID #: 54
Exhibit 2

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 11 of 275 PageID #: 55
Bradley Arant Boult Cummings LLP | Roundabout Plaza | 1600 Division Street, Suite 700 | Nashville, TN 37203 | 615.244.2582 | bradley.com 

April 10, 2023 

VIA EMAIL AND VIA FEDERAL EXPRESS 

Katrina Ponce De Leon 

6550 Lexington Drive 

Apartment 48 

Beaumont, Texas 77706 

Email: katrinapdl@gmail.com 

Re: Breach of Agreement for Employment and Demand for Payment

Dear Ms. Ponce De Leon: 

My law firm represents Medliant, Inc. (“Medliant”) in connection with the Agreement for 

Employment by and between you and Medliant dated January 18, 2022 (the “Agreement”). 

As you are aware, Medliant provides employment-related placement services throughout 

the United States, including to hospitals and other healthcare providers in southeast Texas. One of 

the many reasons why Medliant is so successful in providing placement services to its healthcare 

clients is primarily due to Medliant’s willingness to incur significant upfront costs in securing 

quality employees from around the world. For example, Medliant sponsors each employee in 

connection with securing a Green Card from the United States Citizenship and Immigration 

Services, which includes paying for all costs and expenses associated with this process. Medliant 

also pays for all travel to the United States for each employee, one month living accommodations 

for each employee, and reimburses each employee for all federal and state license-related 

application fees and expenses. 

Your employment with Medliant was no exception. In consideration for the benefits 

described above, you agreed to work a minimum of five thousand two hundred (5,200) straighttime hours for Medliant. You further agreed that any termination of your employment with 

Medliant would not release you from this obligation. 

Effective February 15, 2023, you resigned from Medliant, twenty-one months shy of 

fulfilling your commitment under the Agreement. Given your resignation, the Agreement provides 

that you owe Medliant, as liquidated damages, two thousand five hundred dollars ($2,500.00) for 

each month remaining on your obligation, for a total of fifty-two thousand five hundred dollars 

($52,500.00) in liquidated damages. These liquidated damages are separate and are in addition to, 

the costs of immigration owed to Medliant, which amounts to seven thousand eight hundred 

seventy-eight dollars and seventy-eight cents ($7,878.78). Accordingly, Medliant demands that 

you pay it sixty thousand three hundred seventy-eight dollars and seventy-eight cents ($60,378.78) 

on or before Friday, May 12, 2023. 

R. Brandon Bundren

bbundren@bradley.com

615.252.4647 direct

Exhibit 2

007

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 12 of 275 PageID #: 56
April 10, 2023 

Page 2 

 Please be advised that if Medliant does not receive payment on or before Friday, May 12, 

2023, Medliant will pursue all relief available to it under the Agreement, which includes recovery 

of what is owed to Medliant along with Medliant’s reasonable attorneys’ fees and costs as provided 

for in Sections 2(d) and 18 of the Agreement. 

 Please contact me (615-252-4647 or at bbundren@bradley.com) if you would like to 

discuss this matter further. 

Sincerely, 

BRADLEY ARANT BOULT CUMMINGS LLP 

By: 

 R. Brandon Bundren 

 

 

cc: Allen Miller (miller@medliant.com) 

 

008

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 13 of 275 PageID #: 57
Exhibit 3

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 14 of 275 PageID #: 58
§ 656.12 Improper commerce and payment., 20 C.F.R. § 656.12

 © 2023 Thomson Reuters. No claim to original U.S. Government Works. 1

Code of Federal Regulations

Title 20. Employees' Benefits

Chapter V. Employment and Training Administration, Department of Labor

Part 656. Labor Certification Process for Permanent Employment of Aliens in the United States (Refs & Annos)

Subpart C. Labor Certification Process

20 C.F.R. § 656.12

§ 656.12 Improper commerce and payment.

Effective: July 16, 2007

Currentness

The following provision applies to applications filed under both this part and 20 CFR part 656 in effect prior to March 28, 2005,

and to any certification resulting from those applications:

(a) Applications for permanent labor certification and approved labor certifications are not articles of commerce. They shall

not be offered for sale, barter or purchase by individuals or entities. Any evidence that an application for permanent labor

certification or an approved labor certification has been sold, bartered, or purchased shall be grounds for investigation under this

part and may be grounds for denial under § 656.24, revocation under § 656.32, debarment under § 656.31(f), or any combination

thereof.

(b) An employer must not seek or receive payment of any kind for any activity related to obtaining permanent labor certification,

including payment of the employer's attorneys' fees, whether as an incentive or inducement to filing, or as a reimbursement

for costs incurred in preparing or filing a permanent labor certification application, except when work to be performed by the

alien in connection with the job opportunity would benefit or accrue to the person or entity making the payment, based on that

person's or entity's established business relationship with the employer. An alien may pay his or her own costs in connection

with a labor certification, including attorneys' fees for representation of the alien, except that where the same attorney represents

both the alien and the employer, such costs shall be borne by the employer. For purposes of this paragraph (b), payment includes,

but is not limited to, monetary payments; wage concessions, including deductions from wages, salary, or benefits; kickbacks,

bribes, or tributes; in kind payments; and free labor.

(c) Evidence that an employer has sought or received payment from any source in connection with an application for permanent

labor certification or an approved labor certification, except for a third party to whose benefit work to be performed in connection

with the job opportunity would accrue, based on that person's or entity's established business relationship with the employer,

shall be grounds for investigation under this part or any appropriate Government agency's procedures, and may be grounds for

denial under § 656.32, revocation under § 656.32, debarment under § 656.31(f), or any combination thereof.

Credits

[72 FR 27945, May 17, 2007]

SOURCE: 69 FR 77386, Dec. 27, 2004; 72 FR 27944, May 17, 2007; 73 FR 78068, Dec. 19, 2008; 85 FR 63915, Oct. 8, 2020;

86 FR 3608, 3672, Jan. 14, 2021; 86 FR 13995, March 12, 2021; 86 FR 26164, 26177, May 13, 2021; 86 FR 70731, Dec. 13,

2021, unless otherwise noted.

Exhibit 3

009

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 15 of 275 PageID #: 59
§ 656.12 Improper commerce and payment., 20 C.F.R. § 656.12

 © 2023 Thomson Reuters. No claim to original U.S. Government Works. 2

AUTHORITY: 8 U.S.C. 1182(a)(5)(A), 1182(p)(1); sec.122, Public Law 101–649, 109 Stat. 4978; and Title IV, Public Law

105–277, 112 Stat. 2681.

Current through Sept. 8, 2023, 88 FR 61985. Some sections may be more current. See credits for details.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

010

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 16 of 275 PageID #: 60
§ 655.731 What is the first LCA requirement, regarding wages?, 20 C.F.R. § 655.731

 © 2023 Thomson Reuters. No claim to original U.S. Government Works. 1

Code of Federal Regulations

Title 20. Employees' Benefits

Chapter V. Employment and Training Administration, Department of Labor

Part 655. Temporary Employment of Foreign Workers in the United States (Refs & Annos)

Subpart H. Labor Condition Applications and Requirements for Employers Seeking to Employ Nonimmigrants

on H–1b Visas in Specialty Occupations and as Fashion Models, and Requirements for Employers Seeking to

Employ Nonimmigrants on H–1b1 and E–3 Visas in Specialty Occupations (Refs & Annos)

20 C.F.R. § 655.731

§ 655.731 What is the first LCA requirement, regarding wages?

Effective: December 13, 2021

Currentness

An employer seeking to employ H–1B nonimmigrants in a specialty occupation or as a fashion model of distinguished merit

and ability shall state on Form ETA 9035 or 9035E that it will pay the H–1B nonimmigrant the required wage rate. For the

purposes of this section, “H–1B” includes “E–3 and H–1B1” as well.

(a) Establishing the wage requirement. The first LCA requirement shall be satisfied when the employer signs Form ETA 9035

or 9035E attesting that, for the entire period of authorized employment, the required wage rate will be paid to the H–1B

nonimmigrant(s); that is, that the wage shall be the greater of the actual wage rate (as specified in paragraph (a)(1) of this

section) or the prevailing wage (as specified in paragraph (a)(2) of this section). The wage requirement includes the employer's

obligation to offer benefits and eligibility for benefits provided as compensation for services to H–1B nonimmigrants on the

same basis, and in accordance with the same criteria, as the employer offers to U.S. workers.

(1) The actual wage is the wage rate paid by the employer to all other individuals with similar experience and qualifications

for the specific employment in question. In determining such wage level, the following factors may be considered:

Experience, qualifications, education, job responsibility and function, specialized knowledge, and other legitimate business

factors. “Legitimate business factors,” for purposes of this section, means those that it is reasonable to conclude are

necessary because they conform to recognized principles or can be demonstrated by accepted rules and standards. Where

there are other employees with substantially similar experience and qualifications in the specific employment in question

—i.e., they have substantially the same duties and responsibilities as the H–1B nonimmigrant—the actual wage shall be the

amount paid to these other employees. Where no such other employees exist at the place of employment, the actual wage

shall be the wage paid to the H–1B nonimmigrant by the employer. Where the employer's pay system or scale provides for

adjustments during the period of the LCA—e.g., cost of living increases or other periodic adjustments, or the employee

moves to a more advanced level in the same occupation—such adjustments shall be provided to similarly employed H–

1B nonimmigrants (unless the prevailing wage is higher than the actual wage).

(2) The prevailing wage for the occupational classification in the area of intended employment must be determined as of the

time of filing the application. The employer shall base the prevailing wage on the best information available as of the time

of filing the application. Except as provided in this section, the employer is not required to use any specific methodology to

determine the prevailing wage and may utilize a wage obtained from an OFLC NPC (OES), an independent authoritative

source, or other legitimate sources of wage data. One of the following sources shall be used to establish the prevailing wage:

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(i) A collective bargaining agreement which was negotiated at arms-length between a union and the employer which

contains a wage rate applicable to the occupation;

(ii) If the job opportunity is in an occupation which is not covered by paragraph (a)(2)(i) of this section, the prevailing

wage shall be the arithmetic mean of the wages of workers similarly employed, except that the prevailing wage shall be the

median when provided by paragraphs (a)(2)(ii)(A), (b)(3)(iii)(B)(2), and (b)(3)(iii)(C)(2) of this section. The prevailing

wage rate shall be based on the best information available. The following prevailing wage sources may be used:

(A) OFLC National Processing Center (NPC) determination. Prior to January 1, 2010, the SWA having jurisdiction

over the area of intended employment shall continue to receive and process prevailing wage determination requests,

but shall do so in accordance with these regulatory provisions and Department guidance. On or after January 1, 2010,

the NPC shall receive and process prevailing wage determination requests in accordance with these regulations and

with Department guidance. Upon receipt of a written request for a PWD on or after January 1, 2010, the NPC will

determine whether the occupation is covered by a collective bargaining agreement which was negotiated at arm's

length, and, if not, determine the arithmetic mean of wages of workers similarly employed in the area of intended

employment. The wage component of the Bureau of Labor Statistics Occupational Employment Statistics survey shall

be used to determine the arithmetic mean, unless the employer provides an acceptable survey. The NPC shall determine

the wage in accordance with secs. 212(n) and 212(t) of the INA. If an acceptable employer-provided wage survey

provides a median and does not provide an arithmetic mean, the median shall be the prevailing wage applicable to the

employer's job opportunity. In making a PWD, the Chicago NPC will follow 20 CFR 656.40 and other administrative

guidelines or regulations issued by ETA. The Chicago NPC shall specify the validity period of the PWD, which in no

event shall be for less than 90 days or more than 1 year from the date of the determination.

(1) An employer who chooses to utilize an NPC PWD shall file the labor condition application within the validity

period of the prevailing wage as specified in the PWD. Any employer desiring review of an NPC PWD, including

judicial review, shall follow the appeal procedures at 20 CFR 656.41. Employers which challenge an NPC PWD

under 20 CFR 656.41 must obtain a ruling prior to filing an LCA. In any challenge, the Department and the

NPC shall not divulge any employer wage data collected under the promise of confidentiality. Once an employer

obtains a PWD from the NPC and files an LCA supported by that PWD, the employer is deemed to have accepted

the PWD (as to the amount of the wage) and thereafter may not contest the legitimacy of the PWD by filing an

appeal with the CO (see 20 CFR 656.41) or in an investigation or enforcement action.

(2) If the employer is unable to wait for the NPC to produce the requested prevailing wage for the occupation in

question, or for the CO and/or the BALCA to issue a decision, the employer may rely on other legitimate sources

of available wage information as set forth in paragraphs (a)(2)(ii)(B) and (C) of this section. If the employer

later discovers, upon receipt of the PWD from the NPC, that the information relied upon produced a wage below

the final PWD and the employer was paying the NPC–determined wage, no wage violation will be found if the

employer retroactively compensates the H–2B nonimmigrant(s) for the difference between the wage paid and

the prevailing wage, within 30 days of the employer's receipt of the PWD.

(3) In all situations where the employer obtains the PWD from the NPC, the Department will deem that PWD

as correct as to the amount of the wage. Nevertheless, the employer must maintain a copy of the NPC PWD. A

complaint alleging inaccuracy of an NPC PWD, in such cases, will not be investigated.

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(B) An independent authoritative source. The employer may use an independent authoritative wage source in lieu

of an NPC PWD. The independent authoritative source survey must meet all the criteria set forth in paragraph (b)

(3)(iii)(B) of this section.

(C) Another legitimate source of wage information. The employer may rely on other legitimate sources of wage data

to obtain the prevailing wage. The other legitimate source survey must meet all the criteria set forth in paragraph

(b)(3)(iii)(C) of this section. The employer will be required to demonstrate the legitimacy of the wage in the event

of an investigation.

(iii) For purposes of this section, “similarly employed” means “having substantially comparable jobs in the occupational

classification in the area of intended employment,” except that if a representative sample of workers in the occupational

category can not be obtained in the area of intended employment, “similarly employed” means:

(A) Having jobs requiring a substantially similar level of skills within the area of intended employment; or

(B) If there are no substantially comparable jobs in the area of intended employment, having substantially comparable

jobs with employers outside of the area of intended employment.

(iv) A prevailing wage determination for LCA purposes made pursuant to this section shall not permit an employer to pay

a wage lower than required under any other applicable Federal, state or local law.

(v) Where a range of wages is paid by the employer to individuals in an occupational classification or among individuals

with similar experience and qualifications for the specific employment in question, a range is considered to meet the

prevailing wage requirement so long as the bottom of the wage range is at least the prevailing wage rate.

(vi) The employer shall enter the prevailing wage on the LCA in the form in which the employer will pay the wage (e.g.,

an annual salary or an hourly rate), except that in all cases the prevailing wage must be expressed as an hourly wage if the

H–1B nonimmigrant will be employed part-time. Where an employer obtains a prevailing wage determination (from any

of the sources identified in paragraphs (a)(2)(i) and (ii) of this section) that is expressed as an hourly rate, the employer

may convert this determination to a yearly salary by multiplying the hourly rate by 2080. Conversely, where an employer

obtains a prevailing wage (from any of these sources) that is expressed as a yearly salary, the employer may convert this

determination to an hourly rate by dividing the salary by 2080.

(vii) In computing the prevailing wage for a job opportunity in an occupational classification in an area of intended

employment in the case of an employee of an institution of higher education or an affiliated or related nonprofit entity, a

nonprofit research organization, or a Governmental research organization as these terms are defined in 20 CFR 656.40(e),

the prevailing wage level shall only take into account employees at such institutions and organizations in the area of

intended employment.

(viii) An employer may file more than one LCA for the same occupational classification in the same area of employment

and, in such circumstances, the employer could have H–1B employees in the same occupational classification in the same

area of employment, brought into the U.S. (or accorded H–1B status) based on petitions approved pursuant to different

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LCAs (filed at different times) with different prevailing wage determinations. Employers are advised that the prevailing

wage rate as to any particular H–1B nonimmigrant is prescribed by the LCA which supports that nonimmigrant's H–

1B petition. The employer is required to obtain the prevailing wage at the time that the LCA is filed (see paragraph

(a)(2) of this section). The LCA is valid for the period certified by ETA, and the employer must satisfy all the LCA's

requirements (including the required wage which encompasses both prevailing and actual wage rates) for as long as any

H–1B nonimmigrants are employed pursuant to that LCA (§ 655.750). Where new nonimmigrants are employed pursuant

to a new LCA, that new LCA prescribes the employer's obligations as to those new nonimmigrants. The prevailing wage

determination on the later/subsequent LCA does not “relate back” to operate as an “update” of the prevailing wage for the

previously-filed LCA for the same occupational classification in the same area of employment. However, employers are

cautioned that the actual wage component to the required wage may, as a practical matter, eliminate any wage-payment

differentiation among H–1B employees based on different prevailing wage rates stated in applicable LCAs. Every H–1B

nonimmigrant is to be paid in accordance with the employer's actual wage system, and thus is to receive any pay increases

which that system provides.

(3) Once the prevailing wage rate is established, the H–1B employer then shall compare this wage with the actual wage

rate for the specific employment in question at the place of employment and must pay the H–1B nonimmigrant at least

the higher of the two wages.

(b) Documentation of the wage statement.

(1) The employer shall develop and maintain documentation sufficient to meet its burden of proving the validity of the

wage statement required in paragraph (a) of this section and attested to on Form ETA 9035 or 9035E. The documentation

shall be made available to DOL upon request. Documentation shall also be made available for public examination to the

extent required by § 655.760. The employer shall also document that the wage rate(s) paid to H–1B nonimmigrant(s) is(are)

no less than the required wage rate(s). The documentation shall include information about the employer's wage rate(s) for

all other employees for the specific employment in question at the place of employment, beginning with the date the labor

condition application was submitted and continuing throughout the period of employment. The records shall be retained

for the period of time specified in § 655.760. The payroll records for each such employee shall include:

(i) Employee's full name;

(ii) Employee's home address;

(iii) Employee's occupation;

(iv) Employee's rate of pay;

(v) Hours worked each day and each week by the employee if:

(A) The employee is paid on other than a salary basis (e.g., hourly, piece-rate; commission); or

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(B) With respect only to H–1B nonimmigrants, the worker is a part-time employee (whether paid a salary or an hourly

rate).

(vi) Total additions to or deductions from pay each pay period, by employee; and

(vii) Total wages paid each pay period, date of pay and pay period covered by the payment, by employee.

(viii) Documentation of offer of benefits and eligibility for benefits provided as compensation for services on the same

basis, and in accordance with the same criteria, as the employer offers to U.S. workers (see paragraph (c)(3) of this section):

(A) A copy of any document(s) provided to employees describing the benefits that are offered to employees, the

eligibility and participation rules, how costs are shared, etc. (e.g., summary plan descriptions, employee handbooks,

any special or employee-specific notices that might be sent);

(B) A copy of all benefit plans or other documentation describing benefit plans and any rules the employer may have

for differentiating benefits among groups of workers;

(C) Evidence as to what benefits are actually provided to U.S. workers and H–1B nonimmigrants, including evidence

of the benefits selected or declined by employees where employees are given a choice of benefits;

(D) For multinational employers who choose to provide H–1B nonimmigrants with “home country” benefits, evidence

of the benefits provided to the nonimmigrant before and after he/she went to the United States. See paragraph (c)

(3)(iii)(C) of this section.

(2) Actual wage. In addition to payroll data required by paragraph (b)(1) of this section (and also by the Fair Labor

Standards Act), the employer shall retain documentation specifying the basis it used to establish the actual wage. The

employer shall show how the wage set for the H–1B nonimmigrant relates to the wages paid by the employer to all other

individuals with similar experience and qualifications for the specific employment in question at the place of employment.

Where adjustments are made in the employer's pay system or scale during the validity period of the LCA, the employer

shall retain documentation explaining the change and clearly showing that, after such adjustments, the wages paid to the

H–1B nonimmigrant are at least the greater of the adjusted actual wage or the prevailing wage for the occupation and area

of intended employment.

(3) Prevailing wage. The employer also shall retain documentation regarding its determination of the prevailing wage.

This source documentation shall not be submitted to ETA with the labor condition application, but shall be retained at

the employer's place of business for the length of time required in § 655.760(c). Such documentation shall consist of the

documentation described in paragraph (b)(3)(i), (ii), or (iii) of this section and the documentation described in paragraph

(b)(1) of this section.

(i) If the employer used a wage determination issued pursuant to the provisions of the Davis–Bacon Act, 40 U.S.C. 276a

et seq. (see 29 CFR part 1), or the McNamara–O'Hara Service Contract Act, 41 U.S.C. 351 et seq. (see 29 CFR part 4), the

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documentation shall include a copy of the determination showing the wage rate for the occupation in the area of intended

employment.

(ii) If the employer used an applicable wage rate from a union contract which was negotiated at arms-length between a

union and the employer, the documentation shall include an excerpt from the union contract showing the wage rate(s) for

the occupation.

(iii) If the employer did not use a wage covered by the provisions of paragraph (b)(3)(i) or (b)(3)(ii) of this section, the

employer's documentation shall consist of:

(A) A copy of the prevailing wage finding from the NPC for the occupation within the area of intended employment.

(B) A copy of the prevailing wage survey for the occupation within the area of intended employment published by

an independent authoritative source. For purposes of this paragraph (b)(3)(iii)(B), a prevailing wage survey for the

occupation in the area of intended employment published by an independent authoritative source shall mean a survey

of wages published in a book, newspaper, periodical, loose-leaf service, newsletter, or other similar medium, within

the 24–month period immediately preceding the filing of the employer's application. Such survey shall:

(1) Reflect the weighted average wage paid to workers similarly employed in the area of intended employment;

(2) Reflect the median wage of workers similarly employed in the area of intended employment if the survey

provides such a median and does not provide a weighted average wage of workers similarly employed in the

area of intended employment;

(3) Be based upon recently collected data—e.g., within the 24–month period immediately preceding the date of

publication of the survey; and

(4) Represent the latest published prevailing wage finding by the independent authoritative source for the

occupation in the area of intended employment; or

(C) A copy of the prevailing wage survey or other source data acquired from another legitimate source of wage

information that was used to make the prevailing wage determination. For purposes of this paragraph (b)(3)(iii)(C),

a prevailing wage provided by another legitimate source of such wage information shall be one which:

(1) Reflects the weighted average wage paid to workers similarly employed in the area of intended employment;

(2) Reflect the median wage of workers similarly employed in the area of intended employment if the survey

provides such a median and does not provide a weighted average wage of workers similarly employed in the

area of intended employment;

(3) Is based on the most recent and accurate information available; and

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(4) Is reasonable and consistent with recognized standards and principles in producing a prevailing wage.

(c) Satisfaction of required wage obligation.

(1) The required wage must be paid to the employee, cash in hand, free and clear, when due, except that deductions made in

accordance with paragraph (c)(9) of this section may reduce the cash wage below the level of the required wage. Benefits

and eligibility for benefits provided as compensation for services must be offered in accordance with paragraph (c)(3) of

this section.

(2) “Cash wages paid,” for purposes of satisfying the H–1B required wage, shall consist only of those payments that meet

all the following criteria:

(i) Payments shown in the employer's payroll records as earnings for the employee, and disbursed to the employee, cash

in hand, free and clear, when due, except for deductions authorized by paragraph (c)(9) of this section;

(ii) Payments reported to the Internal Revenue Service (IRS) as the employee's earnings, with appropriate withholding for

the employee's tax paid to the IRS (in accordance with the Internal Revenue Code of 1986, 26 U.S.C. 1, et seq.);

(iii) Payments of the tax reported and paid to the IRS as required by the Federal Insurance Contributions Act, 26 U.S.C.

3101, et seq. (FICA). The employer must be able to document that the payments have been so reported to the IRS and that

both the employer's and employee's taxes have been paid except that when the H–1B nonimmigrant is a citizen of a foreign

country with which the President of the United States has entered into an agreement as authorized by section 233 of the

Social Security Act, 42 U.S.C. 433 (i.e., an agreement establishing a totalization arrangement between the social security

system of the United States and that of the foreign country), the employer's documentation shall show that all appropriate

reports have been filed and taxes have been paid in the employee's home country.

(iv) Payments reported, and so documented by the employer, as the employee's earnings, with appropriate employer and

employee taxes paid to all other appropriate Federal, State, and local governments in accordance with any other applicable

law.

(v) Future bonuses and similar compensation (i.e., unpaid but to-be-paid) may be credited toward satisfaction of the

required wage obligation if their payment is assured (i.e., they are not conditional or contingent on some event such as

the employer's annual profits). Once the bonuses or similar compensation are paid to the employee, they must meet the

requirements of paragraphs (c)(2)(i) through (iv) of this section (i.e., recorded and reported as “earnings” with appropriate

taxes and FICA contributions withheld and paid).

(3) Benefits and eligibility for benefits provided as compensation for services (e.g., cash bonuses; stock options; paid

vacations and holidays; health, life, disability and other insurance plans; retirement and savings plans) shall be offered to the

H–1B nonimmigrant(s) on the same basis, and in accordance with the same criteria, as the employer offers to U.S. workers.

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(i) For purposes of this section, the offer of benefits “on the same basis, and in accordance with the same criteria” means

that the employer shall offer H–1B nonimmigrants the same benefit package as it offers to U.S. workers, and may not

provide more strict eligibility or participation requirements for the H–1B nonimmigrant(s) than for similarly employed

U.S. workers(s) (e.g., full-time workers compared to full-time workers; professional staff compared to professional staff).

H–1B nonimmigrants are not to be denied benefits on the basis that they are “temporary employees” by virtue of their

nonimmigrant status. An employer may offer greater or additional benefits to the H–1B nonimmigrant(s) than are offered

to similarly employed U.S. worker(s), provided that such differing treatment is consistent with the requirements of all

applicable nondiscrimination laws (e.g., Title VII of the 1964 Civil Rights Act, 42 U.S.C. 2000e–2000e17). Offers of

benefits by employers shall be made in good faith and shall result in the H–1B nonimmigrant(s)'s actual receipt of the

benefits that are offered by the employer and elected by the H–1B nonimmigrant(s).

(ii) The benefits received by the H–1B nonimmigrant(s) need not be identical to the benefits received by similarly

employed U.S. workers(s), provided that the H–1B nonimmigrant is offered the same benefits package as those workers but

voluntarily chooses to receive different benefits (e.g., elects to receive cash payment rather than stock option, elects not to

receive health insurance because of required employee contributions, or elects to receive different benefits among an array

of benefits) or, in those instances where the employer is part of a multinational corporate operation, the benefits received by

the H–1B nonimmigrant are provided in accordance with an employer's practice that satisfies the requirements of paragraph

(c)(3)(iii)(B) or (C) of this section. In all cases, however, an employer's practice must comply with the requirements of any

applicable nondiscrimination laws (e.g., Title VII of the 1964 Civil Rights Act, 42 U.S.C. 2000e–2000e17).

(iii) If the employer is part of a multinational corporate operation (i.e., operates in affiliation with business entities in other

countries, whether as subsidiaries or in some other arrangement), the following three options (i.e., (A), (B) or (C)) are

available to the employer with respect to H–1B nonimmigrants who remain on the “home country” payroll.

(A) The employer may offer the H–1B nonimmigrant(s) benefits in accordance with paragraphs (c)(3)(i) and (ii) of

this section.

(B) Where an H–1B nonimmigrant is in the U.S. for no more than 90 consecutive calendar days, the employer during

that period may maintain the H–1B nonimmigrant on the benefits provided to the nonimmigrant in his/her permanent

work station (ordinarily the home country), and not offer the nonimmigrant the benefits that are offered to similarly

employed U.S. workers, provided that the employer affords reciprocal benefits treatment for any U.S. workers (i.e.,

allows its U.S. employees, while working out of the country on a temporary basis away from their permanent work

stations in the United States, or while working in the United States on a temporary basis away from their permanent

work stations in another country, to continue to receive the benefits provided them at their permanent work stations).

Employers are cautioned that this provision is available only if the employer's practices do not constitute an evasion

of the benefit requirements, such as where the H–1B nonimmigrant remains in the United States for most of the year,

but briefly returns to the “home country” before any 90–day period would expire.

(C) Where an H–1B nonimmigrant is in the U.S. for more than 90 consecutive calendar days (or from the point

where the worker is transferred to the U.S. or it is anticipated that the worker will likely remain in the U.S. more

than 90 consecutive days), the employer may maintain the H–1B nonimmigrant on the benefits provided in his/her

home country (i.e., “home country benefits”) (and not offer the nonimmigrant the benefits that are offered to similarly

employed U.S. workers) provided that all of the following criteria are satisfied:

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(1) The H–1B nonimmigrant continues to be employed in his/her home country (either with the H–1B employer

or with a corporate affiliate of the employer);

(2) The H–1B nonimmigrant is enrolled in benefits in his/her home country (in accordance with any applicable

eligibility standards for such benefits);

(3) The benefits provided in his/her home country are equivalent to, or equitably comparable to, the benefits

offered to similarly employed U.S. workers (i.e., are no less advantageous to the nonimmigrant);

(4) The employer affords reciprocal benefits treatment for any U.S. workers while they are working out of the

country, away from their permanent work stations (whether in the United States or abroad), on a temporary basis

(i.e., maintains such U.S. workers on the benefits they received at their permanent work stations);

(5) If the employer offers health benefits to its U.S. workers, the employer offers the same plan on the same basis

to its H–1B nonimmigrants in the United States where the employer does not provide the H–1B nonimmigrant

with health benefits in the home country, or the employer's home-country health plan does not provide full

coverage (i.e., coverage comparable to what he/she would receive at the home work station) for medical treatment

in the United States; and

(6) The employer offers H–1B nonimmigrants who are in the United States more than 90 continuous days those

U.S. benefits which are paid directly to the worker (e.g., paid vacation, paid holidays, and bonuses).

(iv) Benefits provided as compensation for services may be credited toward the satisfaction of the employer's required wage

obligation only if the requirements of paragraph (c)(2) of this section are met (e.g., recorded and reported as “earnings”

with appropriate taxes and FICA contributions withheld and paid).

(4) For salaried employees, wages will be due in prorated installments (e.g., annual salary divided into 26 bi-weekly pay

periods, where employer pays bi-weekly) paid no less often than monthly except that, in the event that the employer

intends to use some other form of nondiscretionary payment to supplement the employee's regular/pro-rata pay in order to

meet the required wage obligation (e.g., a quarterly production bonus), the employer's documentation of wage payments

(including such supplemental payments) must show the employer's commitment to make such payment and the method

of determining the amount thereof, and must show unequivocally that the required wage obligation was met for prior pay

periods and, upon payment and distribution of such other payments that are pending, will be met for each current or future

pay period. An employer that is a school or other educational institution may apply an established salary practice under

which the employer pays to H–1B nonimmigrants and U.S. workers in the same occupational classification an annual

salary in disbursements over fewer than 12 months, provided that the nonimmigrant agrees to the compressed annual salary

payments prior to the commencement of the employment and the application of the salary practice to the nonimmigrant

does not otherwise cause him/her to violate any condition of his/her authorization under the INA to remain in the U.S.

(5) For hourly-wage employees, the required wages will be due for all hours worked and/or for any nonproductive time

(as specified in paragraph (c)(7) of this section) at the end of the employee's ordinary pay period (e.g., weekly) but in no

event less frequently than monthly.

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(6) Subject to the standards specified in paragraph (c)(7) of this section (regarding nonproductive status), an H–1B

nonimmigrant shall receive the required pay beginning on the date when the nonimmigrant “enters into employment” with

the employer.

(i) For purposes of this paragraph (c)(6), the H–1B nonimmigrant is considered to “enter into employment” when he/she

first makes him/herself available for work or otherwise comes under the control of the employer, such as by waiting for

an assignment, reporting for orientation or training, going to an interview or meeting with a customer, or studying for a

licensing examination, and includes all activities thereafter.

(ii) Even if the H–1B nonimmigrant has not yet “entered into employment” with the employer (as described in paragraph

(c)(6)(i) of this section), the employer that has had an LCA certified and an H–1B petition approved for the H–1B

nonimmigrant shall pay the nonimmigrant the required wage beginning 30 days after the date the nonimmigrant first is

admitted into the U.S. pursuant to the petition, or, if the nonimmigrant is present in the United States on the date of the

approval of the petition, beginning 60 days after the date the nonimmigrant becomes eligible to work for the employer.

For purposes of this latter requirement, the H–1B nonimmigrant is considered to be eligible to work for the employer

upon the date of need set forth on the approved H–1B petition filed by the employer, or the date of adjustment of the

nonimmigrant's status by DHS, whichever is later. Matters such as the worker's obtaining a State license would not be

relevant to this determination.

(7) Wage obligation(s) for H–1B nonimmigrant in nonproductive status—

(i) Circumstances where wages must be paid. If the H–1B nonimmigrant is not performing work and is in a nonproductive

status due to a decision by the employer (e.g., because of lack of assigned work), lack of a permit or license, or any other

reason except as specified in paragraph (c)(7)(ii) of this section, the employer is required to pay the salaried employee

the full pro-rata amount due, or to pay the hourly-wage employee for a full-time week (40 hours or such other number of

hours as the employer can demonstrate to be full-time employment for hourly employees, or the full amount of the weekly

salary for salaried employees) at the required wage for the occupation listed on the LCA. If the employer's LCA carries

a designation of “part-time employment,” the employer is required to pay the nonproductive employee for at least the

number of hours indicated on the I–129 petition filed by the employer with the DHS and incorporated by reference on the

LCA. If the I–129 indicates a range of hours for part-time employment, the employer is required to pay the nonproductive

employee for at least the average number of hours normally worked by the H–1B nonimmigrant, provided that such average

is within the range indicated; in no event shall the employee be paid for fewer than the minimum number of hours indicated

for the range of part-time employment. In all cases the H–1B nonimmigrant must be paid the required wage for all hours

performing work within the meaning of the Fair Labor Standards Act, 29 U.S.C. 201 et seq.

(ii) Circumstances where wages need not be paid. If an H–1B nonimmigrant experiences a period of nonproductive status

due to conditions unrelated to employment which take the nonimmigrant away from his/her duties at his/her voluntary

request and convenience (e.g., touring the U.S., caring for ill relative) or render the nonimmigrant unable to work (e.g.,

maternity leave, automobile accident which temporarily incapacitates the nonimmigrant), then the employer shall not be

obligated to pay the required wage rate during that period, provided that such period is not subject to payment under

the employer's benefit plan or other statutes such as the Family and Medical Leave Act (29 U.S.C. 2601 et seq.) or the

Americans with Disabilities Act (42 U.S.C. 12101 et seq.). Payment need not be made if there has been a bona fide

termination of the employment relationship. DHS regulations require the employer to notify the DHS that the employment

relationship has been terminated so that the petition is canceled (8 CFR 214.2(h)(11)), and require the employer to provide

the employee with payment for transportation home under certain circumstances (8 CFR 214.2(h)(4)(iii)(E)).

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(8) If the employee works in an occupation other than that identified on the employer's LCA, the employer's required wage

obligation is based on the occupation identified on the LCA, and not on whatever wage standards may be applicable in

the occupation in which the employee may be working.

(9) “Authorized deductions,” for purposes of the employer's satisfaction of the H–1B required wage obligation, means a

deduction from wages in complete compliance with one of the following three sets of criteria (i.e., paragraph (c)(9)(i),

(ii), or (iii))—

(i) Deduction which is required by law (e.g., income tax; FICA); or

(ii) Deduction which is authorized by a collective bargaining agreement, or is reasonable and customary in the occupation

and/or area of employment (e.g., union dues; contribution to premium for health insurance policy covering all employees;

savings or retirement fund contribution for plan(s) in compliance with the Employee Retirement Income Security Act,

29 U.S.C. 1001, et seq.), except that the deduction may not recoup a business expense(s) of the employer (including

attorney fees and other costs connected to the performance of H–1B program functions which are required to be performed

by the employer, e.g., preparation and filing of LCA and H–1B petition); the deduction must have been revealed to the

worker prior to the commencement of employment and, if the deduction was a condition of employment, had been clearly

identified as such; and the deduction must be made against wages of U.S. workers as well as H–1B nonimmigrants (where

there are U.S. workers); or

(iii) Deduction which meets the following requirements:

(A) Is made in accordance with a voluntary, written authorization by the employee (Note to paragraph (c)(9)(iii)(A):

an employee's mere acceptance of a job which carries a deduction as a condition of employment does not constitute

voluntary authorization, even if such condition were stated in writing);

(B) Is for a matter principally for the benefit of the employee (Note to paragraph (c)(9)(iii)(B): housing and food

allowances would be considered to meet this “benefit of employee” standard, unless the employee is in travel status,

or unless the circumstances indicate that the arrangements for the employee's housing or food are principally for the

convenience or benefit of the employer (e.g., employee living at worksite in “on call” status));

(C) Is not a recoupment of the employer's business expense (e.g., tools and equipment; transportation costs where such

transportation is an incident of, and necessary to, the employment; living expenses when the employee is traveling

on the employer's business; attorney fees and other costs connected to the performance of H–1B program functions

which are required to be performed by the employer (e.g., preparation and filing of LCA and H–1B petition)). (For

purposes of this section, initial transportation from, and end-of-employment travel, to the worker's home country shall

not be considered a business expense.);

(D) Is an amount that does not exceed the fair market value or the actual cost (whichever is lower) of the matter

covered (Note to paragraph (c)(9)(iii)(D): The employer must document the cost and value); and

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(E) Is an amount that does not exceed the limits set for garnishment of wages in the Consumer Credit Protection Act, 15

U.S.C. 1673, and the regulations of the Secretary pursuant to that Act, 29 CFR part 870, under which garnishment(s)

may not exceed 25 percent of an employee's disposable earnings for a workweek.

(10) A deduction from or reduction in the payment of the required wage is not authorized (and is therefore prohibited) for

the following purposes (i.e., paragraphs (c)(10)(i) and (ii)):

(i) A penalty paid by the H–1B nonimmigrant for ceasing employment with the employer prior to a date agreed to by the

nonimmigrant and the employer.

(A) The employer is not permitted to require (directly or indirectly) that the nonimmigrant pay a penalty for ceasing

employment with the employer prior to an agreed date. Therefore, the employer shall not make any deduction from

or reduction in the payment of the required wage to collect such a penalty.

(B) The employer is permitted to receive bona fide liquidated damages from the H–1B nonimmigrant who ceases

employment with the employer prior to an agreed date. However, the requirements of paragraph (c)(9)(iii) of this

section must be fully satisfied, if such damages are to be received by the employer via deduction from or reduction

in the payment of the required wage.

(C) The distinction between liquidated damages (which are permissible) and a penalty (which is prohibited) is to

be made on the basis of the applicable State law. In general, the laws of the various States recognize that liquidated

damages are amounts which are fixed or stipulated by the parties at the inception of the contract, and which are

reasonable approximations or estimates of the anticipated or actual damage caused to one party by the other party's

breach of the contract. On the other hand, the laws of the various States, in general, consider that penalties are amounts

which (although fixed or stipulated in the contract by the parties) are not reasonable approximations or estimates of

such damage. The laws of the various States, in general, require that the relation or circumstances of the parties, and

the purpose(s) of the agreement, are to be taken into account, so that, for example, an agreement to a payment would

be considered to be a prohibited penalty where it is the result of fraud or where it cloaks oppression. Furthermore,

as a general matter, the sum stipulated must take into account whether the contract breach is total or partial (i.e., the

percentage of the employment contract completed). (See, e.g., Vanderbilt University v. DiNardo, 174 F.3d 751 (6th

Cir. 1999) (applying Tennessee law); Overholt Crop Insurance Service Co. v. Travis, 941 F.2d 1361 (8th Cir. 1991)

(applying Minnesota and South Dakota law); BDO Seidman v. Hirshberg, 712 N.E.2d 1220 (N.Y. 1999); Guiliano v.

Cleo, Inc., 995 S.W.2d 88 (Tenn. 1999); Wojtowicz v. Greeley Anesthesia Services, P.C., 961 P.2d 520 (Colo.Ct.App.

1998); see generally, Restatement (Second) Contracts § 356 (comment b); 22 Am.Jur.2d Damages §§ 683, 686, 690,

693, 703). In an enforcement proceeding under subpart I of this part, the Administrator shall determine, applying

relevant State law (including consideration where appropriate to actions by the employer, if any, contributing to

the early cessation, such as the employer's constructive discharge of the nonimmigrant or non-compliance with its

obligations under the INA and its regulations) whether the payment in question constitutes liquidated damages or a

penalty. (Note to paragraph (c)(10)(i)(C): The $500/$1,000 filing fee, if any, under section 214(c) of the INA can

never be included in any liquidated damages received by the employer. See paragraph (c)(10)(ii), which follows.)

(ii) A rebate of the $500/$1,000 filing fee paid by the employer, if any, under section 214(c) of the INA. The employer may

not receive, and the H–1B nonimmigrant may not pay, any part of the $500 additional filing fee (for a petition filed prior to

December 18, 2000) or $1,000 additional filing fee (for a petition filed on or subsequent to December 18, 2000), whether

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directly or indirectly, voluntarily or involuntarily. Thus, no deduction from or reduction in wages for purposes of a rebate of

any part of this fee is permitted. Further, if liquidated damages are received by the employer from the H–1B nonimmigrant

upon the nonimmigrant's ceasing employment with the employer prior to a date agreed to by the nonimmigrant and the

employer, such liquidated damages shall not include any part of the $500/$1,000 filing fee (see paragraph (c)(10)(i) of

this section). If the filing fee is paid by a third party and the H–1B nonimmigrant reimburses all or part of the fee to

such third party, the employer shall be considered to be in violation of this prohibition since the employer would in such

circumstances have been spared the expense of the fee which the H–1B nonimmigrant paid.

(11) Any unauthorized deduction taken from wages is considered by the Department to be non-payment of that amount

of wages, and in the event of an investigation, will result in back wage assessment (plus civil money penalties and/or

disqualification from H–1B and other immigration programs, if willful).

(12) Where the employer depresses the employee's wages below the required wage by imposing on the employee any of

the employer's business expenses(s), the Department will consider the amount to be an unauthorized deduction from wages

even if the matter is not shown in the employer's payroll records as a deduction.

(13) Where the employer makes deduction(s) for repayment of loan(s) or wage advance(s) made to the employee, the

Department, in the event of an investigation, will require the employer to establish the legitimacy and purpose(s) of the

loan(s) or wage advance(s), with reference to the standards set out in paragraph (c)(9)(iii) of this section.

(d) Enforcement actions.

(1) In the event that a complaint is filed pursuant to subpart I of this part, alleging a failure to meet the “prevailing wage”

condition or a material misrepresentation by the employer regarding the payment of the required wage, or pursuant to

such other basis for investigation as the Administrator may find, the Administrator shall determine whether the employer

has the documentation required in paragraph (b)(3)of this section, and whether the documentation supports the employer's

wage attestation. Where the documentation is either nonexistent or is insufficient to determine the prevailing wage (e.g.,

does not meet the criteria specified in this section, in which case the Administrator may find a violation of paragraph

(b)(1), (2), or (3), of this section); or where, based on significant evidence regarding wages paid for the occupation in

the area of intended employment, the Administrator has reason to believe that the prevailing wage finding obtained from

an independent authoritative source or another legitimate source varies substantially from the wage prevailing for the

occupation in the area of intended employment; or where the employer has been unable to demonstrate that the prevailing

wage determined by another legitimate source is in accordance with the regulatory criteria, the Administrator may contact

ETA, which shall provide the Administrator with a prevailing wage determination, which the Administrator shall use as

the basis for determining violations and for computing back wages, if such wages are found to be owed. The 30–day

investigatory period shall be suspended while ETA makes the prevailing wage determination and, in the event that the

employer timely challenges the determination (see § 655.731(d)(2)), shall be suspended until the challenge process is

completed and the Administrator's investigation can be resumed.

(2) In the event the Administrator obtains a prevailing wage from ETA pursuant to paragraph (d)(1) of this section, and

the employer desires review, including judicial review, the employer shall challenge the ETA prevailing wage only by

filing a request for review under § 656.41 of this chapter within 30 days of the employer's receipt of the PWD from

the Administrator. If the request is timely filed, the decision of OFLC is suspended until the Center Director issues a

determination on the employer's appeal. If the employer desires review, including judicial review, of the decision of the

NPC Center Director, the employer shall make a request for review of the determination by the Board of Alien Labor

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Certification Appeals (BALCA) under § 656.41(e) of this chapter within 30 days of the receipt of the decision of the Center

Director. If a request for review is timely filed with the BALCA, the determination by the Center Director is suspended

until the BALCA issues a determination on the employer's appeal. In any challenge to the wage determination, neither

ETA nor the NPC shall divulge any employer wage data collected under the promise of confidentiality.

(i) Where an employer timely challenges an OFLC PWD obtained by the Administrator, the 30–day investigative

period shall be suspended until the employer obtains a final ruling. Upon such a final ruling, the investigation and any

subsequent enforcement proceeding shall continue, with the PWD as determined by the BALCA serving as the conclusive

determination for all purposes.

(ii) [Reserved]

(3) For purposes of this paragraph (d), OFLC may consult with the NPC to ascertain the prevailing wage applicable under

the circumstances of the particular complaint.

Credits

[65 FR 80214, Dec. 20, 2000; 66 FR 10814, Feb. 20, 2001; 66 FR 63302, Dec. 5, 2001; 69 FR 68228, Nov. 23, 2004; 69 FR

77384, Dec. 27, 2004; 71 FR 35521, June 21, 2006; 71 FR 37804, June 30, 2006; 73 FR 19949, April 11, 2008; 73 FR 78067,

Dec. 19, 2008; 74 FR 45561, Sept. 3, 2009; 85 FR 63914, Oct. 8, 2020; 86 FR 3608, 3672, Jan. 14, 2021; 86 FR 13995, March

12, 2021; 86 FR 26164, May 13, 2021; 86 FR 70730, Dec. 13, 2021]

SOURCE: 42 FR 45899, Sept. 13, 1977; 51 FR 24141, July 2, 1986; 51 FR 30351, Aug. 26, 1986; 52 FR 20507, June 1, 1987;

54 FR 28046, July 5, 1989; 55 FR 29358, July 19, 1990; 55 FR 50510, Dec. 6, 1990; 56 FR 24666, May 30, 1991; 56 FR 54738,

Oct. 22, 1991; 56 FR 56875, Nov. 6, 1991; 57 FR 1337, Jan. 13, 1992; 57 FR 40989, Sept. 8, 1992; 59 FR 897, Jan. 6, 1994.;

59 FR 5484, Feb. 4, 1994; 59 FR 65659, Dec. 20, 1994; 59 FR 65676, Dec. 20, 1994; 60 FR 3976, Jan. 19, 1995; 65 FR 43542,

July 13, 2000; 65 FR 51149, Aug. 22, 2000; 65 FR 80208, Dec. 20, 2000; 65 FR 80209, Dec. 20, 2000; 67 FR 59779, Sept. 24,

2002; 69 FR 68226, Nov. 23, 2004; 71 FR 37804, June 30, 2006; 73 FR 19947, April 11, 2008; 73 FR 77207, Dec. 18, 2008;

73 FR 78052, Dec. 19, 2008; 74 FR 25985, May 29, 2009; 75 FR 6959, Feb. 12, 2010; 75 FR 10403, March 5, 2010; 78 FR

24061, April 24, 2013; 80 FR 24108, April 29, 2015; 80 FR 63066, Oct. 16, 2015; 81 FR 43448, July 1, 2016; 81 FR 48700,

July 26, 2016; 84 FR 12431, April 1, 2019; 85 FR 63914, Oct. 8, 2020; 86 FR 3608, 3672, Jan. 14, 2021; 86 FR 13995, March

12, 2021; 86 FR 26164, May 13, 2021; 86 FR 70730, Dec. 13, 2021, unless otherwise noted.

AUTHORITY: Section 655.0 issued under 8 U.S.C. 1101(a)(15)(E)(iii), 1101(a)(15)(H)(i) and (ii), 8 U.S.C. 1103(a)(6),

1182(m), (n), and (t), 1184(c), (g), and (j), 1188, and 1288(c) and (d); sec. 3(c)(1), Pub.L. 101–238, 103 Stat. 2099, 2102 (8

U.S.C. 1182 note); sec. 221(a), Pub.L. 101–649, 104 Stat. 4978, 5027 (8 U.S.C. 1184 note); sec. 303(a)(8), Pub.L. 102–232, 105

Stat. 1733, 1748 (8 U.S.C. 1101 note); sec. 323(c), Pub.L. 103–206, 107 Stat. 2428; sec. 412(e), Pub.L. 105–277, 112 Stat. 2681

(8 U.S.C. 1182 note); sec. 2(d), Pub.L. 106–95, 113 Stat. 1312, 1316 (8 U.S.C. 1182 note); 29 U.S.C. 49k; Pub.L. 107–296, 116

Stat. 2135, as amended; Pub.L. 109–423, 120 Stat. 2900; 8 CFR 214.2(h)(4)(i); 8 CFR 214.2(h)(6)(iii); and sec. 6, Pub.L. 115–

218, 132 Stat. 1547 (48 U.S.C. 1806).; Subpart A issued under 8 CFR 214.2(h).; Subpart B issued under 8 U.S.C. 1101(a)(15)

(H)(ii)(a), 1184(c), and 1188; and 8 CFR 214.2(h).; Subpart E issued under 48 U.S.C. 1806.; Subparts F and G issued under 8

U.S.C. 1288(c) and (d); sec. 323(c), Pub.L. 103–206, 107 Stat. 2428; and 28 U.S.C. 2461 note, Pub.L. 114–74 at section 701.;

Subparts H and I issued under 8 U.S.C. 1101(a)(15)(H)(i)(b) and (b)(1), 1182(n), and (t), and 1184(g) and (j); sec. 303(a)(8),

Pub.L. 102–232, 105 Stat. 1733, 1748 (8 U.S.C. 1101 note); sec. 412(e), Pub.L. 105–277, 112 Stat. 2681; 8 CFR 214.2(h); and

28 U.S.C. 2461 note, Pub.L. 114–74 at section 701.; Subparts L and M issued under 8 U.S.C. 1101(a)(15)(H)(i)(c) and 1182(m);

sec. 2(d), Pub.L. 106–95, 113 Stat. 1312, 1316 (8 U.S.C. 1182 note); Pub.L. 109–423, 120 Stat. 2900; and 8 CFR 214.2(h).

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Notes of Decisions (4)

Current through Sept. 8, 2023, 88 FR 61985. Some sections may be more current. See credits for details.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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104.2302. Unconscionable contract or clause, NV ST 104.2302

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West's Nevada Revised Statutes Annotated

Title 8. Commercial Instruments and Transactions (Chapters 97-104a)

Chapter 104. Uniform Commercial Code--Original Articles (Refs & Annos)

Article 2. Sales (Refs & Annos)

Part 3. General Obligation and Construction of Contract

N.R.S. 104.2302

104.2302. Unconscionable contract or clause

Currentness

1. If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was

made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable

clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result.

2. When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall

be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in

making the determination.

Credits

Added by Laws 1965, p. 790.

N. R. S. 104.2302, NV ST 104.2302

Current through legislation of the 82nd Regular Session (2023) effective through October 1, 2023, excluding chapters 280 and

505. Text subject to revision and classification by the Legislative Counsel Bureau.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

026

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200.463. Involuntary servitude; penalties, NV ST 200.463

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West's Nevada Revised Statutes Annotated

Title 15. Crimes and Punishments (Chapters 193-207)

Chapter 200. Crimes Against the Person (Refs & Annos)

Involuntary Servitude; Purchase or Sale of Person

N.R.S. 200.463

200.463. Involuntary servitude; penalties

Effective: July 1, 2023

Currentness

<2023 legislation subject to revision and classification by the Legislative Counsel Bureau.>

1. A person who knowingly subjects, or attempts to subject, another person to forced labor or services by:

(a) Causing or threatening to cause physical harm to any person;

(b) Physically restraining or threatening to physically restrain any person;

(c) Abusing or threatening to abuse the law or legal process;

(d) Knowingly destroying, concealing, removing, confiscating or possessing any actual or purported passport or other

immigration document, or any other actual or purported government identification document, of the person;

(e) Extortion;

(f) Causing or threatening to cause financial harm to any person;

(g) Debt bondage;

(h) Peonage; or

(i) Using a scheme, plan or pattern intended to cause the person to believe that the failure to perform an act would result in

serious harm or physical restraint against any person,

is guilty of holding a person in involuntary servitude.

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200.463. Involuntary servitude; penalties, NV ST 200.463

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2. Unless a greater penalty is provided in NRS 200.4631, a person who is found guilty of holding a person in involuntary

servitude is guilty of a category B felony and shall be punished:

(a) Where the victim suffers substantial bodily harm while held in involuntary servitude or in attempted escape or escape

therefrom, by imprisonment in the state prison for a minimum term of not less than 7 years and a maximum term of not more

than 20 years, and may be further punished by a fine of not more than $50,000.

(b) Where the victim suffers no substantial bodily harm as a result of being held in involuntary servitude, by imprisonment in

the state prison for a minimum term of not less than 5 years and a maximum term of not more than 20 years, and may be further

punished by a fine of not more than $50,000.

3. As used in this section:

(a) “Debt bondage” has the meaning ascribed to it in 22 U.S.C. § 7102.

(b) “Peonage” means a status or condition of compulsory service based upon real or alleged indebtedness.

Credits

Added by Laws 2005, c. 44, § 3. Amended by Laws 2013, c. 354, § 3; Laws 2023, c. 46, § 10, eff. July 1, 2023.

N. R. S. 200.463, NV ST 200.463

Current through legislation of the 82nd Regular Session (2023) effective through October 1, 2023, excluding chapters 280 and

505. Text subject to revision and classification by the Legislative Counsel Bureau.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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1124 Nev. 62 PACIFIC REPORTER, 3d SERIES

ALL STAR BONDING, Appellant,

v.

The STATE OF NEVADA, Respondent.

No. 38699.

Supreme Court of Nevada.

Feb. 12, 2003.

Surety moved to exonerate bail bond on

ground that contract was void and of no legal

effect when criminal defendant failed to appear for sentencing. The Eighth Judicial District Court, Clark County, Michael L. Douglas, J., ordered bail bond forfeited. Surety

appealed. The Supreme Court held that bail

bond term, expressly limiting effect of agreement to one year, was enforceable, such that

bond had expired and had no legal effect by

time defendant failed to appear at sentencing

hearing.

Reversed and remanded.

1. Bail O54.1

A bail bond is a contract between the

State and the surety of the accused.

2. Appeal and Error O893(1)

Contract interpretation is a question of

law and thus, the Supreme Court reviews the

district court’s findings with respect to such

interpretation de novo.

3. Bail O54.1

Bail bonds are governed by statute.

4. Appeal and Error O893(1)

Supreme Court reviews the construction

of a statute de novo.

5. Bonds O48

The language of a bond contract is

strictly construed in accordance with the

terms contained therein.

6. Contracts O143(3)

Neither a court of law nor a court of

equity can interpolate in a contract what the

contract does not contain.

7. Bail O74(1)

Bail bond term, limiting effect of agreement to one year, was not against public

policy of ensuring that a defendant would

return to court when released; statute requiring that bail bond terms be no shorter

than one year in duration did not express

public policy against limitations in bond

terms, but rather allowed such limitations,

and nothing in State statutes or in bond

contract itself provided a requirement for

delivery of the criminal defendant to custody

after expiration of bond term. West’s NRSA

178.502, subd. 2.

8. Bail O74(1)

Bail bond term, limiting effect of agreement to one year, was enforceable, and thus,

bond had expired and had no legal effect by

time criminal defendant failed to appear at

sentencing hearing after one-year period

passed; bond unambiguously provided that

bond would become void and of no legal

effect after one year from date of bond,

district court accepted bail agreement, and

nothing in bond contract itself or State statutes provided a requirement for delivery of

the defendant to custody after expiration of

bond term. West’s NRSA 178.502, subd. 2.

9. Courts O87, 89

Court may consider legislation or judicial decisions to determine public policy considerations.

10. Bonds O48

Terms of a bond should be construed

strictly in favor of the surety.

11. Contracts O143(3)

Supreme Court is not free to modify or

vary the terms of an unambiguous agreement.

Mayfield, Turco & Gruber, Henderson, for

Appellant.

David J. Roger, District Attorney, and

James Tufteland, Chief Deputy District Attorney, Clark County, for Respondent.

Before SHEARING, LEAVITT and

BECKER, JJ.

029

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ALL STAR BONDING v. STATE OF NEVADA Nev. 1125

Cite as 62 P.3d 1124 (Nev. 2003)

OPINION

PER CURIAM:

In this appeal, we consider whether a bail

bond containing an express provision that it

would expire and have no legal effect after

one year from the date of the bond should

have been forfeited when the criminal defendant failed to appear in court after the oneyear period had passed. The district court

held there is an implied requirement in a bail

bond that the criminal defendant be returned

to custody before a bondsman can be relieved

of liability. We disagree. We conclude that

the terms of the bond contract are controlling. We reverse the district court’s order

forfeiting the bond and remand the matter to

the district court to exonerate the bond.

FACTS

On April 1, 2000, appellant All Star Bonding posted a $3,000 bail bond with the Las

Vegas Justices’ Court for the release of a

criminal defendant charged with attempted

grand larceny. The bond provided:

This bond shall be in full force and effect

until any of the following events: 1) Exoneration by court order, 2) Termination of

this case by dismissal or conviction or 3)

The expiration of one (1) year from the

date of this bond, at which time this bond

shall become void and of no legal effect.

Following the posting of the bail bond, the

criminal defendant failed to appear before

the court for his initial arraignment on two

occasions. Finally, on February 8, 2001, the

criminal defendant made an appearance, was

arraigned, and entered a guilty plea to attempted grand larceny. He was ordered to

appear for sentencing on May 24, 2001.

On May 24, 2001, the criminal defendant

failed to appear for sentencing. As a result,

on June 4, 2001, the district court sent a

notice of intent to forfeit All Star’s surety

bond. This notice provided that the surety

bond would be declared forfeited on December 2, 2001.

On August 6, 2001, All Star filed a motion

to exonerate the bond, arguing that because

the bond had expired, by its terms, on April

1, 2001, the contract was void and of no legal

effect on May 24, 2001, when the criminal

defendant failed to appear for sentencing.

The motion was heard and denied on September 7, 2001. The court concluded, ‘‘The

Court’s premise is very simple. If you put

up collateral promising that someone’s going

to appear, and you don’t come back and then

surrender on the expiration date, you still

have an obligation. You can’t just walk

away, and you say you had no responsibility.’’

The district court ordered the bail bond forfeited.

All Star filed a timely appeal claiming the

district court erred in ordering forfeiture of

the bond after the bond had expired.

DISCUSSION

[1–4] ‘‘A bail bond is a contract between

the State and the surety of the accused.’’ 1

Contract interpretation is a question of law

and this court reviews the district court’s

findings de novo.2

 Bail bonds are also governed by statute.3

 ‘‘This court reviews the

construction of a statute de novo.’’ 4

[5, 6] ‘‘ ‘The language of the bond contract is strictly construed in accordance with

the terms contained therein.’ ’’ 5

 We have

previously stated that the court should not

revise a contract under the guise of construing it.6

 Further, ‘‘[n]either a court of law nor

a court of equity can interpolate in a contract

what the contract does not contain.’’ 7

1. State v. District Court, 97 Nev. 34, 35, 623 P.2d

976, 976 (1981).

2. Grand Hotel Gift Shop v. Granite St. Ins., 108

Nev. 811, 815, 839 P.2d 599, 602 (1992).

3. State v. Stu’s Bail Bonds, 115 Nev. 436, 438,

991 P.2d 469, 470 (1999).

4. Id. at 438, 991 P.2d at 471 (citing County of

Clark v. Upchurch, 114 Nev. 749, 753, 961 P.2d

754, 757 (1998)).

5. U.S. v. Vaccaro, 51 F.3d 189, 193 (9th Cir.1995)

(quoting United States v. Lujan, 589 F.2d 436,

438 (9th Cir.1978)).

6. Club v. Investment Co., 64 Nev. 312, 324, 182

P.2d 1011, 1016 (1947).

7. Id. at 324, 182 P.2d at 1017 (internal quotation

marks and citation omitted).

030

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1126 Nev. 62 PACIFIC REPORTER, 3d SERIES

In this case, the bail bond contract provided that it would expire one year from the

date of the bond and become void and of no

legal effect. This only guaranteed the criminal defendant’s appearance in court for a

period of one year, beginning April 1, 2000.

When the criminal defendant failed to appear

for sentencing on May 24, 2001, the bond had

already expired.

[7–9] The State argues that the bond

term, limiting the effect of the agreement to

one year, is unenforceable because such a

limitation is against the public policy of ensuring that a defendant returns to court

when he is released. The State argues that

public policy requires an implied term that

the surety must return the defendant to the

court at the end of the bond contract period.

The State accurately points out that the

court may consider legislation or judicial decisions to determine public policy considerations. Neither, however, supports the

State’s position.

NRS 178.502(2) provides, ‘‘Any bond or

undertaking for bail must provide that the

bond or undertaking extends, for a period of

at least 1 year.’’ This statute requires that

bail bond terms be no shorter than one year

in duration. This does not express a public

policy against limitations in the bail bond

term; rather, it allows such limitations.

There is nothing in the bond contract itself,

or in Nevada’s statutes, that provides a requirement for delivery of the criminal defendant to custody after the expiration of the

bond term.

A New York court, on similar facts, held

that the bond became void after one year

based on an express term limit in the bond

contract.8

 The New York court followed the

general rule that liability of a surety is limited to the express contractual obligation.9

The court refused to impose a duty on the

bondsman to notify the court that the bond

was about to expire, stating that case law in

other contexts clearly establishes that ‘‘a

surety is not responsible for the principal’s

failure to appear in court after the court has

erroneously permitted the principal to remain at liberty beyond the terms of the bail

bond.’’ 10

Here, the district court accepted the bail

agreement, which expressly limited its effectiveness to one year. The criminal defendant

appeared for his arraignment on February 8,

2001, when the bond was still in effect.

When the criminal defendant failed to appear

for sentencing, the bond had already expired.

It is noteworthy that in Bronx County,

New York, as well as in Nevada’s Eighth

Judicial District Court, the problems arising

from limited-term bail bonds have been

solved in the same manner.11 By court order, entered by the criminal judges, the

courts will no longer accept bonds that have

a limited term.

[10, 11] Other courts, construing bond

contracts, have stated that because bondsmen make calculated risks when entering

into surety agreements, they cannot be held

to any greater undertaking than they have

agreed to.12 The terms of the bond should

be ‘‘construed strictly in favor of the surety.’’ 13 We agree. As we have previously

stated, ‘‘We are not free to modify or vary

the terms of an unambiguous agreement.’’ 14

CONCLUSION

The bail bond in this case unambiguously

provided that the bond would become void

and of no legal effect after one year from the

date of the bond. Accordingly, we conclude

that the bond had expired and had no legal

effect by the time the criminal defendant

8. People v. Stuyvesant Ins. Co., 98 Misc.2d 210,

413 N.Y.S.2d 843, 850 (Sup.Ct.1979).

9. Id. at 846–47.

10. Id. at 849.

11. See id. at 850.

12. See U.S. v. Vaccaro, 51 F.3d 189, 193 (9th

Cir.1995); Rodriquez v. People, 554 P.2d 291,

292–93 (Colo.1976); State v. Ericksons, 106 N.M.

567, 746 P.2d 1099, 1100 (1987).

13. Ericksons, 746 P.2d at 1100.

14. Kaldi v. Farmers Ins. Exch., 117 Nev. 273,

281, 21 P.3d 16, 21 (2001) (citing State ex rel.

List v. Courtesy Motors, 95 Nev. 103, 107, 590

P.2d 163, 165 (1979)).

031

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MATTER OF GUARDIANSHIP & ESTATE OF D.R.G. Nev. 1127

Cite as 62 P.3d 1127 (Nev. 2003)

failed to appear. We, therefore, reverse the

district court’s forfeiture of the bond and

remand for the bond to be exonerated.

,

In the Matter of the GUARDIANSHIP

OF the Person and Estate of

D.R.G.

Dwight G., Appellant,

v.

Connie E.P., Respondent.

No. 38575.

Supreme Court of Nevada.

Feb. 12, 2003.

Unwed father appealed from decision of

the Eighth Judicial District Court, Clark

County, Gerald W. Hardcastle, J., appointing child’s maternal aunt as general guardian

of child following mother’s death. The Supreme Court held that: (1) statutory parental

presumption properly was rebutted, and (2)

aunt, as opposed to father, properly was

appointed as child’s general guardian.

Affirmed.

1. Child Custody O7

District Court enjoys broad discretionary powers in determining questions of child

custody.

2. Child Custody O921(1)

Supreme Court will not disturb the District Court’s exercise of discretion in child

custody matters unless the discretion is

abused; however, Supreme Court must be

satisfied that the District Court’s decision

was based upon appropriate reasons.

3. Guardian and Ward O10

Statutory parental preference is a presumption that must be overcome before a

court can grant guardianship to a non-parent.

West’s NRSA 159.061(1).

4. Guardian and Ward O10

Before the statutory parental preference

is applied in guardianship proceeding, the

court must first determine if a parent is

‘‘qualified and suitable’’; qualification and

suitability are based on the parent’s fitness

for guardianship at the time of the hearing.

West’s NRSA 159.061(1).

5. Guardian and Ward O10

If a parent is qualified and suitable, the

parent prevails over non-parents for guardianship of the child. West’s NRSA

159.061(1).

6. Guardian and Ward O10

If neither parent is qualified and suitable, or if both parents are, the statute setting forth preferences in appointing guardian

for child requires the court to move to the

second step, namely determining who is most

suitable to be child’s guardian. West’s

NRSA 159.061(1).

7. Guardian and Ward O10

Child’s basic needs or welfare are superior to the claim of a parent with respect to

statute providing that one of the factors in

determining a parent’s suitability to be

child’s guardian is whether the parent can

provide for the basic needs of the child,

including medical care. West’s NRSA

159.061(1).

8. Guardian and Ward O10

Statutory parental preference with respect to guardianship of child can be rebutted by showing parental unfitness or other

extraordinary circumstances. West’s NRSA

159.061.

9. Guardian and Ward O10

Relevant factors to be considered in determining whether statutory parental preference presumption for guardianship of child

has been overcome include: abandonment or

persistent neglect of child by parent; likelihood of serious physical or emotional harm to

child if placed in parent’s custody; extended,

unjustifiable absence of parental custody;

continuing neglect or abdication of parental

032

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AM. FIRST FED. CREDIT UNION v. SORO Nev. 105

Cite as 359 P.3d 105 (Nev. 2015)

AMERICA FIRST FEDERAL CREDIT

UNION, A Federally Chartered

Credit Union, Appellant,

v.

Franco SORO, an Individual; Myra Taigman–Farrell, an Individual; Isaac Farrell, an Individual; Kathy Arrington, an

Individual; and Audie Embestro, an Individual, Respondents.

No. 64130.

Supreme Court of Nevada.

Sept. 24, 2015.

Background: After lender held trustee’s

sale of property that secured commercial

loan, lender brought action deficiency action against borrowers. The Eighth Judicial District Court, Clark County, Jerry A.

Wiese, J., 2013 WL 10871290, dismissed

for lack of subject matter jurisdiction.

Lender appealed.

Holding: On an issue of apparent first

impression, the Supreme Court, Hardesty,

C.J., held that forum selection clause was

permissive rather than mandatory.

Reversed and remanded.

1. Appeal and Error O893(1)

The Supreme Court reviews a district

court’s decision regarding subject matter jurisdiction de novo.

2. Appeal and Error O893(1)

Contract interpretation is a question of

law and, as long as no facts are in dispute,

the Supreme Court views contract issues de

novo, looking to the language of the agreement and the surrounding circumstances.

3. Contracts O147(1)

The objective of interpreting contracts is

to discern the intent of the contracting parties.

4. Contracts O143(1, 2)

When interpreting a contract, the Supreme Court initially determines whether the

language of the contract is clear and unambiguous; if it is, the contract will be enforced

as written.

5. Contracts O143(2), 155

An ambiguous contract is susceptible to

more than one reasonable interpretation, and

any ambiguity should be construed against

the drafter.

6. Contracts O206

Clause in commercial loan agreement

stating that the parties were required to

‘‘submit themselves to the jurisdiction of’’

another state constituted a permissive forum

selection clause, rather than a mandatory

forum selection clause, and therefore clause

did not deprive trial court of subject matter

jurisdiction over action seeking to recover

deficiency following trustee’s sale of real

property that secured loan, where no language within clause containing words of exclusivity.

Ballard Spahr, LLP, and Stanley W. Parry, Timothy R. Mulliner, and Matthew D.

Lamb, Las Vegas, for Appellant.

Bogatz Law Group and I. Scott Bogatz and

Charles M. Vlasic III, Las Vegas, for Respondents.

Before the Court En Banc.

OPINION

By the Court, HARDESTY, C.J.:

In this opinion, we must determine whether a contract clause stating that the parties

‘‘submit themselves to the jurisdiction of’’

another state results in a mandatory forum

selection clause requiring dismissal of the

Nevada action. We hold that such a clause

consenting to jurisdiction is permissive and

therefore reverse the district court’s order

granting a motion to dismiss based on lack of

subject matter jurisdiction in Nevada.

FACTS AND PROCEDURAL HISTORY

In 2002, appellant America First Federal

Credit Union (the credit union) loaned $2.9

million, secured by real property in Mes033

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106 Nev. 359 PACIFIC REPORTER, 3d SERIES

quite, Nevada, to respondents (borrowers) 1

for the purchase of a liquor/mini-mart. The

borrowers defaulted, and the credit union

held a trustee’s sale, resulting in a deficiency

on the loan balance of approximately $2.4

million. The Utah-based credit union sued

the borrowers in Clark County to recover the

deficiency.

The borrowers moved to dismiss the action

under NRCP 12(b)(1), arguing that the credit

union could not sue to recover the deficiency

in Nevada and citing several clauses in the

‘‘Commercial Promissory Note’’ and ‘‘Business Loan Agreement’’ to support their argument. An ‘‘Applicable Law’’ clause in the

loan agreement stated that ‘‘[t]his Agreement (and all loan documents in connection

with this transaction) shall be governed by

and construed in accordance with the laws of

the State of Utah.’’ The loan agreement also

contained the following: ‘‘Jurisdiction. The

parties agree and submit themselves to the

jurisdiction of the courts of the State of Utah

with regard to the subject matter of this

agreement.’’ A clause in the note stated: ‘‘If

there is a lawsuit, Borrower(s) agrees to

submit to the jurisdiction of the court in the

county in which Lender is located.’’

The district court agreed with the borrowers and granted the motion to dismiss. The

district court found that the note and loan

agreement ‘‘contain language which clearly

expresses the parties’ intent to submit litigation relating to the Agreement and the Note,

to the jurisdiction of the State of UtahTTTT

[T]he language clearly enough identifies

Utah as the forum[,] which they selected for

purposes of subject matter jurisdiction.’’

This appeal followed.

DISCUSSION

On appeal, the credit union argues that the

district court erred in enforcing the clauses

in question to preclude its complaint for a

deficiency action.2

 More specifically, the

credit union argues that the jurisdiction

clauses here were permissive, and while the

complaint could have been brought in Utah,

the clauses do not mandate that Utah was

the exclusive forum. In response, the borrowers contend that whether a forum selection clause is mandatory or permissive is a

matter of contract interpretation, and therefore, the clauses are ambiguous and must be

construed against the credit union as the

contract drafter. Whether forum selection

clauses may be mandatory or permissive is

an issue of first impression for this court.

Standard of review

[1–5] This court reviews a district court’s

decision regarding subject matter jurisdiction de novo. Ogawa v. Ogawa, 125 Nev.

660, 667, 221 P.3d 699, 704 (2009). Additionally, ‘‘[c]ontract interpretation is a question

of law and, as long as no facts are in dispute,

this court reviews contract issues de novo,

looking to the language of the agreement and

the surrounding circumstances.’’ Redrock

Valley Ranch, LLC v. Washoe Cnty., –––

Nev. ––––, ––––, 254 P.3d 641, 647–48 (2011).

The objective of interpreting contracts ‘‘is to

discern the intent of the contracting parties.

Traditional rules of contract interpretation

are employed to accomplish that result.’’

Davis v. Beling, ––– Nev. ––––, ––––, 278

P.3d 501, 515 (2012) (citation and internal

quotation marks omitted). This court initially determines whether the ‘‘language of the

contract is clear and unambiguous; if it is,

the contract will be enforced as written.’’ Id.

An ambiguous contract is susceptible to more

than one reasonable interpretation, and

‘‘[a]ny ambiguity, moreover, should be construed against the drafter.’’ Anvui, LLC v.

G.L. Dragon, LLC, 123 Nev. 212, 215–16, 163

P.3d 405, 407 (2007).

The district court erred when it dismissed

the case based on the forum selection clauses

[6] The credit union argues that the

clauses do not contain any mandatory lan1. While eight individuals signed the note and

loan agreement, the only borrowers in the instant action are Franco Soro, Myra Taigman–

Farrell, Isaac Farrell, Kathy Arrington, and Audie Embestro.

2. Additionally, the credit union argues that Nevada’s six-month statute of limitations for recovery

of deficiency judgments applies to the action, not

Utah’s three-month statute of limitations. However, because the district court did not decide

this issue, we do not address it here.

034

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 40 of 275 PageID #: 84
AM. FIRST FED. CREDIT UNION v. SORO Nev. 107

Cite as 359 P.3d 105 (Nev. 2015)

guage and, therefore, all of the forum selection clauses are merely permissive. We

agree.

We have not yet distinguished between

mandatory and permissive forum selection

clauses. In Tuxedo International, Inc. v.

Rosenberg, 127 Nev. 11, 251 P.3d 690 (2011),

we reversed a district court’s grant of a

motion to dismiss based on the defendants’

argument that any litigation must be brought

in Peru. Id. at 14, 24–25, 251 P.3d at 692, 699.

There, we remanded the case to the district

court to determine which of three separate

forum selection clauses potentially controlled

the dispute. Id. at 26, 251 P.3d at 699–700.

In analyzing the clauses, we noted that one

of the clauses contained both a consent to

jurisdiction in Peru and a Peruvian choice-oflaw provision. Id. at 22–23, 251 P.3d at 697.

We then stated:

It can be argued, however, that there is no

requirement contained in this clause that

Peru is the exclusive forum for jurisdiction

over any dispute between the parties. See,

e.g., Hunt Wesson Foods, Inc. v. Supreme

Oil Co., 817 F.2d 75, 76–77 (9th Cir.1987)

(distinguishing between exclusive and nonexclusive forum selection clauses). If it is

determined that the parties did not intend

for the clause to act as an exclusive forum

selection clause, then arguably, there is no

contractual bar to [plaintiff] bringing its

tort claims in the Nevada district court.

Id. at 23–24, 251 P.3d at 698 (second emphasis added). We also noted that another

clause ‘‘resemble[d] a traditional exclusive

forum selection clause,’’ containing language

that ‘‘any action TTT must be brought in a

court in the Country of Peru.’’ Id. at 24, 251

P.3d at 698. Thus, Tuxedo International

observed the distinctions between mandatory

and permissive forum selection clauses, but

the facts of the case did not provide an

opportunity for us to affirmatively adopt a

rule. See id. at 26 n. 5, 251 P.3d at 700 n. 5.

Other state courts have distinguished between mandatory and permissive forum selection clauses. See, e.g., Garcia Granados

Quinones v. Swiss Bank Corp. (Overseas),

S.A., 509 So.2d 273, 274 (Fla.1987) (recognizing that a mandatory jurisdiction clause requires ‘‘a particular forum be the exclusive

jurisdiction for litigation,’’ while permissive

jurisdiction is merely a consent to jurisdiction in a venue (internal quotation marks

omitted)); Polk Cnty. Recreational Ass’n v.

Susquehanna Patriot Commercial Leasing

Co., 273 Neb. 1026, 734 N.W.2d 750, 758–59

(2007) (distinguishing a mandatory forum selection clause based on the words ‘‘shall be

brought only in’’ a particular jurisdiction

from a permissive forum selection clause

where parties only ‘‘consent and submit to

the jurisdiction’’ of other courts); Caperton

v. A.T. Massey Coal Co., 225 W.Va. 128, 690

S.E.2d 322, 338–39 (2009) (‘‘[T]o be enforced

as mandatory, a forum-selection clause must

do more than simply mention or list a jurisdiction; in addition, it must either specify

venue in mandatory language, or contain other language demonstrating the parties’ intent

to make jurisdiction exclusive.’’). For example, the Wisconsin Court of Appeals stated:

Clauses in which a party agrees to submit

to jurisdiction are not necessarily mandatory. Such language means that the party

agrees to be subject to that forum’s jurisdiction if sued there. It does not prevent

the party from bringing suit in another

forum. The language of a mandatory

clause shows more than that jurisdiction is

appropriate in a designated forum; it unequivocally mandates exclusive jurisdiction. Absent specific language of exclusion, an agreement conferring jurisdiction

in one forum will not be interpreted as

excluding jurisdiction elsewhere.

Converting/Biophile Labs., Inc. v. Ludlow

Composites Corp., 296 Wis.2d 273, 722

N.W.2d 633, 640–41 (2006) (citations and internal quotation marks omitted).

Similarly, federal circuit courts generally

agree that where venue is specified [in a

forum selection clause] with mandatory or

obligatory language, the clause will be enforced; where only jurisdiction is specified

[in a forum selection clause], the clause will

generally not be enforced unless there is

some further language indicating the parties’ intent to make venue exclusive.

Paper Express, Ltd. v. Pfankuch Maschinen

GmbH, 972 F.2d 753, 757 (7th Cir.1992); see

Excell, Inc. v. Sterling Boiler & Mech., Inc.,

106 F.3d 318, 321 (10th Cir.1997) (describing

035

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108 Nev. 359 PACIFIC REPORTER, 3d SERIES

the ‘‘mandatory/permissive dichotomy’’ and

concluding that the clause, ‘‘jurisdiction shall

be in the State of Colorado, and venue shall

lie in the County of El Paso, Colorado,’’ was

mandatory (internal quotation marks omitted)); John Boutari & Son, Wines & Spirits,

S.A. v. Attiki Imps. & Distribs. Inc., 22 F.3d

51, 52–53 (2d Cir.1994) (holding the forum

selection clause, ‘‘[a]ny dispute arising between the parties hereunder shall come within the jurisdiction of the competent Greek

Courts, specifically of the Thessaloniki

Courts,’’ as permissive (internal quotation

marks omitted)); Hunt Wesson Foods, Inc.

v. Supreme Oil Co., 817 F.2d 75, 76–78 (9th

Cir.1987) (holding the forum selection clause,

‘‘[t]he courts of California, County of Orange,

shall have jurisdiction over the parties in any

action at law relating to the subject matter

or the interpretation of this contract,’’ as

permissive, and noting that to be considered

mandatory, a forum selection clause must

clearly require that a particular court is the

only one that has jurisdiction (internal quotation marks omitted)); Keaty v. Freeport Indon., Inc., 503 F.2d 955, 956–57 (5th Cir.

1974) (holding the forum selection clause,

‘‘[t]his agreement shall be construed and enforceable according to the law of the State of

New York and the parties submit to the

jurisdiction of the courts of New York,’’ as

permissive (internal quotation marks omitted)).

We agree with the distinctions made by

other state and federal courts regarding

mandatory and permissive forum selection

clauses described above. Here, there are

two jurisdictional clauses at issue. First, the

loan agreement contains a clause entitled

‘‘Jurisdiction,’’ which provides that ‘‘[t]he

parties agree and submit themselves to the

jurisdiction of the courts of the State of Utah

with regard to the subject matter of this

agreement.’’ We conclude that this language

is permissive as there is no language within

the clause containing words of exclusivity.

Absent such language, we deem the clause

permissive.

Second, a clause in the note stated: ‘‘If

there is a lawsuit, Borrower(s) agrees to

submit to the jurisdiction of the court in the

county in which Lender is located.’’ This

language is also permissive as there is no

language within the clause containing words

of exclusivity. See Golden Palm Hospitality,

Inc. v. Stearns Bank Nat’l Ass’n, 874 So.2d

1231, 1233–37 (Fla.Dist.Ct.App.2004) (concluding that the language, ‘‘[i]f there is a

lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the

courts of STEARNS County, the State of

Minnesota’’ as permissive, and thus permitted, but did not require, that the action be

brought in Minnesota (internal quotation

marks omitted)). Thus, the case may be

heard in another appropriate venue besides

the courts in Utah.

Without articulating why, the borrowers

argue that the forum selection clauses are

ambiguous and therefore must be construed

against the credit union. We conclude that

this argument is without merit as the clauses

are clear and unambiguous and this court

need not interpret the contract any differently from the contract’s plain meaning. See,

e.g., Hunt Wesson Foods, 817 F.2d at 77 (‘‘A

primary rule of interpretation is that ‘[t]he

common or normal meaning of language will

be given to the words of a contract unless

circumstances show that in a particular case

a special meaning should be attached to it.’ ’’)

(quoting 4 Samuel Williston & Walter H.E.

Jaeger, A Treatise on the Law of Contracts

§ 618 (3d ed.1961)). The clauses provide no

words of exclusivity and to interpret the

clauses as mandatory forum selection clauses

would read language into the contract that is

not there.

CONCLUSION

In this case, none of the clauses contain

exclusive language. Accordingly, all clauses

are permissive forum selection clauses, and

the district court erred when it found Utah

was the sole forum for any controversy and

dismissed the case for lack of subject matter

jurisdiction. We therefore reverse the district court’s order dismissing the case and

remand this matter to the district court for

further proceedings.

PARRAGUIRRE, CHERRY, GIBBONS,

DOUGLAS, SAITTAA and PICKERING,

JJ.

,

036

Case 1:23-cv-00203-MAC Document 8-1 Filed 09/11/23 Page 42 of 275 PageID #: 86
Blacklands Railroad v. Northeast Texas Rural Rail..., Not Reported in Fed....

2019 WL 3613071

 © 2023 Thomson Reuters. No claim to original U.S. Government Works. 1

2019 WL 3613071

Only the Westlaw citation is currently available.

United States District Court, E.D. Texas.

The BLACKLANDS RAILROAD, Plaintiff,

v.

NORTHEAST TEXAS RURAL RAIL TRANSPORTATION DISTRICT, Defendant.

CIVIL ACTION NO. 1:19-CV-250

|

Signed 08/05/2019

Attorneys and Law Firms

Wayne Lindsey Robbins, Jr., Tania Sethi, Robbins Travis PLLC, Southlake, TX, for Plaintiff.

Jeffrey J. Wolf, The Wolf Law Firm, PC, Southlake, TX, Philip William Danaher, Mackie Wolf Zientz & Mann, PC, Dallas,

TX, for Defendant.

MEMORANDUM AND ORDER

MARCIA A. CRONE, UNITED STATES DISTRICT JUDGE

*1 Pending before the court is Defendant Northeast Texas Rural Rail Transportation District's (“NETEX”) Rule 12(b)(3)

Motion to Transfer Venue (#3). NETEX seeks to transfer this action to the Eastern District of Texas, Tyler Division, on the

grounds that the Eastern District of Texas, Beaumont Division, is an improper venue. NETEX claims the Operating Agreement

between it and Plaintiff the Blacklands Railroad (“Blacklands”) requires transfer to the Tyler Division in view of the forum

selection clause included in the agreement. Having reviewed the pending motion, the submissions of the parties, the pleadings,

and the applicable law, the court is of the opinion that the Beaumont Division is an improper venue and the Sherman Division

is the proper venue. Therefore, NETEX's Motion is GRANTED in part and DENIED in part.

I. Background

Blacklands initiated this action in the 62nd Judicial District Court of Hopkins County, Texas. Blacklands alleges that NETEX:

(1) breached the Operating Agreement, which gave Blacklands exclusive, complete control over NETEX's right-of-way and

track, by soliciting business relations from Blacklands' competitors; (2) anticipatorily repudiated the Operating Agreement; (3)

falsely published disparaging statements regarding Blacklands' capabilities; (4) misappropriated Blacklands' trade secrets; (5)

tortiously interfered with Blacklands' contract with Union Pacific Railroad, Iowa Northern Railway, and the Mount Vernon

Economic Development Corporation; and (6) violated 49 U.S.C. § 11904 (#1-7, 3). On June 10, 2019, NETEX removed the

case from Hopkins County to this court. On June 17, 2019, NETEX filed the instant motion requesting the court to transfer this

case to the Tyler Division pursuant to the parties' Operating Agreement (#3, 1). The Operating Agreement states: “In the event

any litigation arises in connection with this Agreement, the parties agree that jurisdiction will lie with either any Texas State

court in Hunt County or Federal court in the Eastern District of Texas, Tyler division.”

On July 2, 2019, Blacklands filed a response asserting that venue in the Tyler Division is improper and the case should be

transferred to the Eastern District of Texas, Sherman Division, in accordance with Texas law. Blacklands argues that the action

was properly filed prior to removal in Hopkins County, which the Sherman Division geographically encompasses, because the

Operating Agreement's venue provision cannot be enforced under state law. Blacklands further alleges that venue selection

clauses cannot waive mandatory venue provisions unless a statute grants such ability. TEX. CIV. PRAC. REM. CODE § 15.020;

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In re Fisher, 433 S.W.3d 523, 533-34 (Tex. 2014). Accordingly, Blacklands contends that Hopkins County is the mandatory

venue for state court actions against NETEX pursuant to Texas law (#1-7, 2). TEX. CIV. PRAC. & REM. CODE §§ 15.0151,

15.017, 15.004.

In response, NETEX argues that the forum selection clause is valid and enforceable, and that Blacklands has not met its burden

of proof to avoid enforcement (#11, 3). Further, NETEX states the court should take into consideration the following public

interest factors in determining whether venue is proper in the Tyler Division: (1) the administrative difficulties flowing from

court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the

law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws in the application of foreign

law (#11, 3). NETEX argues that there are not “any administrative difficulties ... or local interests that would require venue to

remain in the Beaumont Division and both [the Beaumont and Tyler Divisions] would apply the same laws.”

II. Analysis

*2 District courts are authorized to transfer venue under both 28 U.S.C. §§ 1404(a) and 1406. “[T]he determination of whether

§ 1406 or § 1404(a) applies turns on whether venue is proper in the court in which the suit was originally filed. If venue is

improper in that court, then § 1406 or Rule 12(b)(3) applies. If venue is proper in that court, then § 1404(a) applies.” In re

Atl. Marine Constr. Co., Inc., 701 F.3d 736, 739 (5th Cir. 2012), rev'd on other grounds, 571 U.S. 49 (2013). Because NETEX

asserts that venue is improper in the Beaumont Division, the court first considers § 1406 and Rule 12(b)(3)’s application before

considering the relevance of the Operating Agreement.

A. 28 U.S.C. § 1406 and Rule 12(b)(3)

“The Federal Rules of Civil Procedure authorize a court, upon suitable showing, to dismiss an action where venue in that court

is improper.” J.D. Fields, Inc. v. Indep. Enterprises, Inc., 4:12-CV-2605, 2012 WL 5818229, at *8 (S.D. Tex. Nov. 13, 2012)

(citing FED. R. CIV. P. 12(b)(3)); accord Herman v. Cataphora, Inc., 730 F.3d 460, 463 (5th Cir. 2013); Williamson-Dickie

Mfg. Co. v. M/V HEINRICH J, 762 F. Supp. 2d 1023, 1026 (S.D. Tex. 2011). The relevant statute provides:

The district court of a district in which is filed a case laying venue in the wrong division or district shall

dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could

have been brought.

28 U.S.C. § 1406(a); Atl. Marine Constr. Co., Inc. v. U.S. Dist. Court for the W. Dist. of Tex., 571 U.S. 49, 55 (2013) (hereafter

“Atl. Marine”). If the court determines that venue is improper in this district, it may dismiss the case or transfer it to the proper

venue in the interest of justice. 28 U.S.C. § 1406(a); Atl. Marine, 571 U.S. at 55; Herman, 730 F.3d at 466; Zurich Am. Ins. Co.

v. Tejas Concrete & Materials Inc., 982 F. Supp. 2d 714, 720 (W.D. Tex. 2013).

The general venue statute, 28 U.S.C. § 1391, usually governs whether venue is proper or improper in a district. Subsection (a)

states that § 1391, “[e]xcept as otherwise provided by law ... shall govern the venue of all civil actions brought in district courts

of the United States.” 28 U.S.C. § 1391 (emphasis added). The United States Supreme Court has interpreted this language to

mean that the federal venue provisions “alone define whether venue exists in a given forum.” Atl. Marine, 571 U.S. at 56. Thus,

“[w]hen venue is challenged, the court must determine whether the case falls within [the federal venue provisions]. If it does,

venue is proper; if it does not, venue is improper, and the case must be dismissed or transferred under § 1406(a).” Id. As a

consequence, the parties' inclusion of a forum selection clause in their contract “has no bearing on whether a case falls” under

a federal venue provision. Id.

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The removal statute, 28 U.S.C. § 1441 supersedes § 1391 in removed actions. Polizzi v. Cowles Magazines, Inc., 345 U.S. 663,

665-66 (1953); Ashton v. Knight Transp., Inc., Civ. A. 309-CV-0759-B, 2009 WL 2407829, at *2 (N.D. Tex. Aug. 6, 2009);

Republic Capital Dev. Grp., L.L.C., v. A.G. Dev. Grp., Inc., Civ.A. H–05–1714, 2005 WL 3465728, at *8 (S.D. Tex. Dec. 19,

2005); Dunn v. Babco Textron, 912 F. Supp. 231, 232 (E.D. Tex. 1995). In such actions, venue is proper in “the district court of

the United States for the district and division embracing the place where such action is pending.” 28 U.S.C. §§ 1441(a), 1446;

Polizzi, 345 U.S. at 665-66; Dunn, 912 F. Supp. at 232.

When an objection to venue is raised, the plaintiff bears the burden of demonstrating that venue is proper in the selected forum. 1

Breidel v. Harris Cty. Sheriff's Office, No. 4:13-cv-23, 2014 WL 3891693, at *3 (S.D. Tex. Aug. 6, 2014); Nuttall v. Juarez, 984

F. Supp. 2d 637, 642 (N.D. Tex. 2013); Zurich Am. Ins. Co., 982 F. Supp. 2d at 719; Graham v. Dyncorp Int'l Inc., 973 F. Supp.

2d 698, 700 (S.D. Tex. 2013). “If there is no evidentiary hearing, a plaintiff may carry its burden by presenting facts, deemed

to be true, that establish venue.” Norsworthy v. Mystik Transp., Inc., 430 F. Supp. 2d 631, 633 (E.D. Tex. 2006) (citing Langton

v. Cbeyond Commc'n, L.L.C., 282 F. Supp. 2d 504, 508 (E.D. Tex. 2003)). The court must accept as true all the allegations in

the plaintiff's complaint and resolve all factual conflicts and draw all reasonable inferences in the plaintiff's favor. Nuttall, 984

F. Supp. 2d at 642; see Zurich Am. Ins. Co., 982 F. Supp. 2d at 719; Graham, 973 F. Supp. 2d at 701; Asevedo v. NBCUniversal

Media, LLC, 921 F. Supp. 2d 573, 589 (E.D. La. 2013). The court may also consider other evidence in the record “beyond

the facts alleged in the complaint and its proper attachments.” Nuttall, 984 F. Supp. 2d at 643 (citing Ginter ex rel. Ballard v.

Belcher, Prendergast & Laporte, 536 F.3d 439, 449 (5th Cir. 2008)).

*3 Neither party contests the propriety of venue in the Eastern District; rather, the parties dispute which division within the

Eastern District is proper. While NETEX filed a motion to transfer venue with the state court three days prior to removing the

suit to this court, the state court did not rule upon the motion. Unlike § 1391, under which a wide array of venues might be

proper, § 1441 states venue is proper in the United States district court and division embracing the place where the action was

pending prior to removal. 28 U.S.C. at §§ 1391, 1441. This action was pending in Hopkins County, which is located in the

Sherman Division. Id. at § 124(c)(3). Pursuant to § 1441(a), venue is proper in the Sherman Division to the exclusion of any

other division. Id. at § 1441.

An appropriate forum for this action is the Eastern District of Texas, Sherman Division, the district and division embracing

Hopkins County. Recognizing that the purpose of § 1406(a) “is to eliminate impediments to the timely dispositions of cases

on their merits,” the court finds that it is in the interest of justice to transfer this case to the Eastern District of Texas, Sherman

Division. See Youman v. Newfield Expl. Co., 977 F. Supp. 809, 812 (E.D. Tex. 1997). Furthermore, both parties reside within

the Sherman Division. See Atl. Marine, 571 U.S. at 59; Van Dusen v. Barrack, 376 U.S. 612, 624 (1964). Rather than requiring

Blacklands “to undergo what the Supreme Court termed ‘time-consuming and justice-defeating technicalities,’ such as the

procedure of dismissal of this complaint and refiling of this lawsuit,” the court finds that it is in the interest of justice to transfer

this matter to the Sherman Division, the division to which this action should have been removed initially. Harrison v. McDonald's

Mgmt. Co., No. 1:10CV587, 2011 WL 2036443, at *2 (S.D. Miss. May 24, 2011) (quoting Goldlawr, Inc. v. Heiman, 369 U.S.

463, 467 (1962)). Moreover, dismissing this suit would mean forcing Blacklands alone to face the repercussions of NETEX's

mistake in removing this action to an improper venue.

B. The Operating Agreement

A forum selection clause does not make an otherwise proper venue “ ‘wrong’ or ‘improper’ within the meaning of § 1406(a)

or Rule 12(b)(3).” Atl. Marine, 571 U.S. at 59. Even so, “NETEX seeks to enforce the Operating Agreement's venue provision

by transferring this action from an improper venue to the ... Tyler Division” because NETEX contends that the forum selection

clause renders the Beaumont and Sherman Divisions improper; however, contractual provisions cannot render venue improper.

See Atl. Marine, 571 U.S. at 59. As venue is not proper in this forum under § 1441, the court must either dismiss Blacklands'

suit or transfer it to a judicial district in which venue is proper under § 1406(a). Am. Gen. Life Ins. Co. v. Rasche, 273 F.R.D.

391, 396 (S.D. Tex. 2011); Wade v. Bordelon Marine, Inc., 770 F. Supp. 2d 822, 828 n.4 (E.D. La. 2011); Horihan v. Hartford

Ins. Co. of the Midwest, 979 F. Supp. 1073, 1078 (E.D. Tex. 1997).

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Even if the Operating Agreement rendered the Tyler Division a proper venue, this court would not transfer this case to the Tyler

Division because the forum selection clause is unenforceable under Texas law. The court applies the forum state's choice-of-law

rules to determine what substantive law governs when the interpretation of a forum-selection clause is at issue in a diversity case.

Weber, 811 F.3d at 770-71 (“But the presence or absence of a specific choice-of-law clause does not alter the core obligation

of a federal court, sitting in diversity, to ascertain which body of substantive law to apply by [ ] implementing the choice-oflaw rules of its home jurisdiction.”); accord Barnett v. DynCorp Int'l, LLC, 831 F.3d 296, 301-02 (5th Cir. 2016); see Layne

Heavy Civil, Inc. v. Carter & Verplanck, Inc., 16-80609-CIV, 2018 WL 6303691 *3 (S.D. Fla. Oct. 31, 2018); Sabal Ltd. LP v.

Deutsche Bank AG, 209 F. Supp. 3d 907, 918 (W.D. Tex. 2016). Accordingly, Texas's choice-of-law rules apply.

*4 Under Texas law, a court must make an initial determination of whether the agreement at issue contains a choice-oflaw provision and whether that provision should be controlling. Mayo v. Hartford Life Ins. Co., 354 F.3d 400, 403 (5th Cir.

2004). The Supreme Court of Texas has held that contractual choice-of-law provisions should generally be enforced. DeSantis

v. Wackenhut Corp., 793 S.W.2d 670, 677-78 (Tex. 1990), cert. denied, 498 U.S. 1048 (1991); see Int'l Interests, L.P. v. Hardy,

448 F.3d 303, 306-07 (5th Cir. 2006); Fina, Inc. v. ARCO, 200 F.3d 266, 269 (5th Cir. 2000). “The most basic policy of contract

law is the protection of the justified expectations of the parties.” Nexen Inc. v. Gulf Interstate Eng'g Co., 224 S.W.3d 412, 419

(Tex. App.—Houston [1st Dist.] 2006, no pet.) (quoting Chase Manhattan Bank, N.A. v. Greenbriar N. Section II, 835 S.W.2d

720, 723 (Tex. App.—Houston [1st Dist.] 1992, no writ)); accord DeSantis, 793 S.W.2d at 677. “The parties' understanding

of their respective rights and obligations under the contract depends in part upon how certain they are about how the law will

interpret and enforce their agreement.” Chase Manhattan Bank, N.A., 835 S.W.2d at 723 (citing DeSantis, 793 S.W.2d at 677).

“Judicial respect for their choice promotes the policy of protecting their expectations.” Id. (citing DeSantis, 793 S.W.2d at 677);

accord Cudd Pressure Control, Inc. v. Sonat Expl. Co., 202 S.W.3d 901, 904 (Tex. App.—Texarkana 2006, no pet.); Mary Kay

Inc. v. Woolf , 146 S.W.3d 813, 816 (Tex. App.—Dallas 2004, pet. denied), cert. denied, 544 U.S. 1061 (2005).

In the case at bar, the Operating Agreement expressly states Texas law governs: “[t]he parties agree that this Agreement shall

be interpreted in accordance with the internal laws of the State of Texas.” Neither party argues that the contract's choice-of-law

provision is invalid or that the law of a different state should govern this dispute. Moreover, because both parties are located in

Texas, the choice of Texas law bears a reasonable relationship to the parties and the Operating Agreement. See Monsanto Co.

v. Boustany, 73 S.W.3d 225, 229 (Tex. 2002). Finally, neither party contends that the application of Texas law would thwart or

offend a public policy of Texas or another possible forum. See id. Thus, the court finds no reason to disregard the parties' clear

intention to select Texas law to govern their Operating Agreement. Hence, Texas law determines whether the venue-selection

clause of the Operating Agreement requires litigation to be brought in the Tyler Division.

Under Texas law, venue “cannot be selected by private contract unless provided by statute.” In re OSH Ship Mgmt., 514 S.W.3d

331, 337 (Tex. App.—Houston [14th Dist.] 2016, no pet.).

2

 The Texas Civil Practice and Remedies Code mandates venue in

this action in Hopkins County because NETEX resides there. TEX. CIV. PRAC. & REM. CODE § 15.0151 (libel actions against

certain political subdivision must be brought in the county of the subdivision's location), § 15.017 (business disparagement

claims must be brought in the county in which plaintiff or defendant resides), § 15.004 (if mandatory venue provisions govern

one of the claims arising from the same transaction, occurrence, or series of transactions or occurrences, the provision governs

all of the claims).

Pursuant to § 15.020, parties may contract around mandatory venue provisions when the agreement pertains to a “major

transaction.” Id. § 15.020. “ ‘[M]ajor transaction’ means a transaction evidenced by a written agreement under which a person

pays or receives, or is obligated to pay or entitled to receive, consideration with an aggregate stated value equal to or greater

than $1 million.” Id. (emphasis added). In order for a venue provision to subvert the statutes, § 15.020 requires the terms of

the contract to the include provisions stating the contract's value. In re Tex. Ass'n of Sch. Bds., Inc., 169 S.W.3d 653, 658 (Tex.

2005). While the Affidavit of Phil Davila states Blacklands has generated an annual revenue in excess of $1 million, neither

party indicates whether the Operating Agreement states the value of the consideration or whether such a provision identifies

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a value in excess of $1 million. Accordingly, § 15.020 does not apply, and under Texas law, the venue selection provision is

inapplicable to the issues before the court.

III. Conclusion

*5 In accordance with the preceding analysis, this case shall be transferred to the United States District Court for the Eastern

District of Texas, Sherman Division. NETEX's Motion to Transfer Venue (#3) is GRANTED in part and DENIED in part.

All Citations

Not Reported in Fed. Supp., 2019 WL 3613071

Footnotes

1 Although the federal courts are split as to which party bears the burden of proof when venue is challenged, this court has

previously adopted the majority view that the burden rests on the plaintiff. See Payne v. Grayco Cable Servs., Inc., No.

1:1-CV-487, at *2 (E.D. Tex. Dec. 8, 2011). As other courts have recognized, “the burden should be on the plaintiff to

institute an action in the proper place, because ‘[t]o hold otherwise would circumvent the purpose of the venue statutes

—it would give plaintiffs an improper incentive to attempt to initiate actions in a forum favorable to them but improper

as to venue.’ ” Seariver Mar. Fin. Holdings, Inc. v. Pena, 952 F. Supp. 455, 458 (S.D. Tex. 1996) (quoting Delta Airlines,

Inc. v. W. Conference of Teamsters Pension Tr. Fund, 722 F. Supp. 725, 727 (N.D. Ga. 1989)); accord Ortiz v. Robert

Holman Trucking, Inc., No. B-06-020, 2006 WL 1098904, at *1 (S.D. Tex. Apr. 11, 2006). Moreover, Blacklands does

not contest that it bears the burden of proof.

2 Under Texas law, the provision in dispute is referred to as a venue selection clause as opposed to a forum selection

clause, because the provision designates a court within Texas. Id.

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BURCH v. DIST. CT. Nev. 647

Cite as 49 P.3d 647 (Nev. 2002)

James BURCH and Linda

Burch, Petitioners,

v.

The SECOND JUDICIAL DISTRICT

COURT OF the STATE of Nevada, in

and for the COUNTY OF WASHOE, and

the Honorable Steven R. Kosach, District Judge, Respondents,

and

Double Diamond Ranch, LLC, A Nevada

Corporation; and Double Diamond

Homes, LLC, A Nevada Corporation,

Real Parties in Interest.

No. 38283.

Supreme Court of Nevada.

July 17, 2002.

 Rehearing Denied Sept. 11, 2002.

Home purchasers brought action against

developer for breach of express and implied

warranties, negligence, and fraud and misrepresentation. The Second Judicial District

Court, Washoe County, Steven R. Kosach, J.,

granted developer’s motion to compel arbitration. Home purchasers petitioned for writ

of mandamus. The Supreme Court held that

arbitration clause in home warranty was procedurally and substantively unconscionable.

Petition granted.

1. Arbitration O6.2

Home buyers warranty offered by developer was procedurally unconscionable adhesion contract, and thus arbitration clause in

warranty was unenforceable, where application and warranty were pre-printed, standardized contract forms, home buyers were

not given opportunity to negotiate warranty’s

terms with developer or its insurer, home

buyers did not receive copy of warranty’s

terms until after developer paid premium to

enroll home in warranty program and almost

four months after they closed escrow on their

home, developer told buyers that warranty’s

issuance was automatic and it offered extra

protection for their home, when in fact warranty limited their protection under Nevada

law, home buyers did not have opportunity to

read application form, 31-page warranty

booklet, or view video explaining warranty

before signing application, home buyers were

not sophisticated consumers, and warranty’s

disclaimers were not conspicuous.

2. Mandamus O3(3), 26, 28

When there is no plain, speedy, and

adequate remedy at law, a writ of mandamus

is available to compel the district court to

perform a required act, or to control an

arbitrary or capricious abuse of discretion.

West’s NRSA 34.160, 34.170.

3. Contracts O1

The Supreme Court permits the enforcement of adhesion contracts where there is

plain and clear notification of the terms and

an understanding consent, and if it falls within the reasonable expectations of the weaker

party.

4. Arbitration O6.2

 Contracts O1

The Supreme Court need not enforce a

contract, or any clause of a contract, including an arbitration clause, that is unconscionable.

5. Arbitration O6.2

Although the Federal Arbitration Act

(FAA) establishes a strong public policy favoring arbitration for the purpose of avoiding

the unnecessary expense and delay of litigation where parties have agreed to arbitrate,

it does not mandate the enforcement of an

unconscionable contract or arbitration clause.

9 U.S.C.A. § 1 et seq.

6. Contracts O1

Both procedural and substantive unconscionability generally must be present in order for a court to exercise its discretion to

refuse to enforce a contract or clause as

unconscionable.

7. Arbitration O6.2

Arbitration clause in home warranty was

substantively, as well as procedurally unconscionable, where clause granted insurer unilateral and exclusive right to decide rules

that govern arbitration and to select arbitrators.

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648 Nev. 49 PACIFIC REPORTER, 3d SERIES

Robert C. Maddox & Associates and Samuel S. Crano, Reno, for Petitioners.

Walther Key Maupin Oats Cox & LeGoy

and Donald A. Lattin, Reno, for Real Parties

in Interest.

Vannah Costello Canepa Riedy Rubino &

Lattie, Las Vegas, for Amicus Curiae Nevada

Trial Lawyers Association.

Before SHEARING, ROSE and

BECKER, JJ.

OPINION

PER CURIAM:

This petition challenges a district court

order granting a motion to compel arbitration in favor of real parties in interest Double

Diamond Ranch, LLC and Double Diamond

Homes, LLC (Double Diamond). Petitioners

James and Linda Burch purchased a new

home and a homebuyer warranty from Double Diamond. When problems developed in

their home, they contacted Double Diamond

to fix them. After attempts at mediation

failed, the Burches filed a complaint in district court for damages relating to Double

Diamond’s construction of their new home.

The district court concluded that the Burches

had entered into a valid contractual agreement, via the homebuyer warranty, to resolve any disputes concerning their home

through arbitration. We disagree, and we,

therefore, grant this petition for a writ of

mandamus.

FACTS

In March 1997, the Burches purchased a

new Diamond Country home developed and

constructed by real parties in interest Double

Diamond. In October 1997, approximately

four months after closing, Double Diamond

gave Linda Burch a thirty-one-page warranty booklet and asked her to sign a one-page

‘‘Application for Home Enrollment’’ for the

2–10 Home Buyers Warranty (HBW) offered

by Double Diamond. She signed the ‘‘application’’ form, but she did not read the thirtyone-page booklet.

The HBW purports to be an express limited warranty. It provides one-year coverage

that warrants the home will be free from

materials and workmanship defects. In the

second year, the coverage narrows to electrical, plumbing, and mechanical systems defects. For ten years, the HBW provides

coverage that warrants the home will be free

from structural defects.

The one-page ‘‘Application for Home Enrollment’’ states in paragraph nine that,

[b]y signing, Homebuyer acknowledges

that s/he has viewed and received a video

of ‘‘Warranty Teamwork: You, Your Builder & HBW’’, read the warranty and has

received a copy of this form with the Home

Buyers Warranty Booklet and CONSENTS TO THE TERMS OF THESE

DOCUMENTS INCLUDING THE

BINDING ARBITRATION PROVISION

contained therein.

The HBW’s arbitration clause provides, in

pertinent part, that:

Any controversy, claim or complaint arising out of or relating to Builder’s workmanship/systems limited warranty coverages provided by Builder under the terms

of this agreement which Homebuyer and

Builder do not resolve by mutual agreement shall be settled by final and binding

arbitration in accordance with the Construction Arbitration Services (CAS) or

other [National Home Insurance Company] NHIC/HBW approved rules applicable

to the home warranty industry in effect at

the time of the arbitrationTTTT

Any controversy concerning a claim arising

out of or relating to the Builder’s ten year

structural coverage (insured by NHIC)

shall be settled by final and binding arbitrationTTTT Arbitration of all structural

warranty disputes will be conducted by

arbitrators supplied by an NHIC approved

arbitration service.

This arbitration clause further provides that

the final and binding arbitration is governed

by the Federal Arbitration Act (FAA) 1

 ‘‘to

the exclusion of any provisions of state arbitration law.’’

1. 9 U.S.C. §§ 1–16 (2000).

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BURCH v. DIST. CT. Nev. 649

Cite as 49 P.3d 647 (Nev. 2002)

In January 1999, the Burches complained

to Double Diamond about ‘‘serious problems

underneath [their] house’’—saturated floor

joists, wet insulation, muddy ground, and a

wet, moldy foundation. They requested that

Double Diamond remedy the situation by

removing the insulation, professionally treating the area with mildew and fungicide controls, installing upgraded insulation with

proper venting, constructing a proper water

barrier underneath the house, and reimbursing them for all current and future fees for

professional inspections. While contesting liability, Double Diamond offered to completely dry the crawl space underneath the house,

install two additional foundation vents and a

six-mill vapor barrier, treat all areas of active

fungus with an approved fungicide, and reinstall insulation except at the rim joist.

The Burches were not satisfied with this

offer. After both parties stipulated to waive

mediation, the Burches filed a complaint for

damages with the district court, alleging

breach of express and implied warranties,

negligence, and fraud and misrepresentation.

Double Diamond filed a motion for a stay and

a motion to compel arbitration, arguing that

the HBW provided for final and binding arbitration of all disputes relating to the construction of the Burch home. The district

court found the HBW valid and granted the

motion to compel arbitration. The Burches

now request that this court issue a writ of

mandamus directing the district court to vacate its order compelling the Burches to arbitrate their claims against Double Diamond.

DISCUSSION

[1, 2] Because an order compelling arbitration is not directly appealable, the Burches appropriately seek writ relief from this

court.2

 When there is no plain, speedy, and

adequate remedy at law, a writ of mandamus

is available to compel the district court to

perform a required act, or to control an

arbitrary or capricious abuse of discretion.3

Under the circumstances of this case, the

HBW is an unconscionable adhesion contract

and, therefore, unenforceable. The district

court should not have compelled arbitration

under the unenforceable clause. Accordingly, we grant the petition for a writ of mandamus.

[3, 4] This court has defined an adhesion

contract as ‘‘a standardized contract form

offered to consumers TTT on a ‘take it or

leave it’ basis, without affording the consumer a realistic opportunity to bargain.’’ 4

 ‘‘The

distinctive feature of an adhesion contract is

that the weaker party has no choice as to its

terms.’’ 5 Here, the one-page ‘‘application’’

and the HBW were pre-printed, standardized

contract forms. The Burches, the weaker

party, were not given an opportunity to negotiate the HBW’s terms with Double Diamond

or its insurer, National Home Insurance

Company (NHIC); they were required to

‘‘take it or leave it.’’ Therefore, the HBW

agreement between the Burches and Double

Diamond is an adhesion contract. This court

permits the enforcement of adhesion contracts where there is ‘‘plain and clear notification of the terms and an understanding

consent[,]’’ 6 and ‘‘if it falls within the reasonable expectations of the weaker TTT party.’’ 7

This court need not, however, enforce a contract, or any clause of a contract, including

an arbitration clause,8 that is unconsciona2. See NRS 38.205 (no direct appeal from order

granting motion to compel arbitration); NRS

34.170 (writ to issue when no plain, speedy, and

adequate remedy in law exists); Kindred v. Dist.

Ct., 116 Nev. 405, 409, 996 P.2d 903, 906 (2000)

(recognizing that mandamus is an appropriate

method to challenge an order compelling arbitration).

3. See NRS 34.160; NRS 34.170; see also Round

Hill Gen. Imp. Dist. v. Newman, 97 Nev. 601,

603–04, 637 P.2d 534, 536 (1981).

4. Obstetrics and Gynecologists v. Pepper, 101 Nev.

105, 107, 693 P.2d 1259, 1260 (1985).

5. Id.

6. Id. at 108, 693 P.2d at 1261.

7. See id. at 107–08, 693 P.2d at 1261; see also

Bernstein v. GTE Directories Corp., 827 F.2d 480,

482 (9th Cir.1987) (applying Nevada law).

8. See NRS 38.035 (‘‘A written agreement to submit any existing controversy to arbitration or a

provision in a written contract to submit to arbitration any controversy thereafter arising between the parties is valid, enforceable and irrevocable, save upon such grounds as exist at law or

in equity for the revocation of any contract.’’

(emphasis added)).

044

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650 Nev. 49 PACIFIC REPORTER, 3d SERIES

ble.9

[5] Although the FAA establishes a

strong public policy favoring arbitration for

the purpose of avoiding the unnecessary expense and delay of litigation where parties

have agreed to arbitrate,10 it does not mandate the enforcement of an unconscionable

contract or arbitration clause.11 The United

States Supreme Court has interpreted § 2 of

the FAA and held that ‘‘[s]tates may regulate

contracts, including arbitration clauses, under general contract law principles and they

may invalidate an arbitration clause ‘upon

such grounds as exist at law or in equity for

the revocation of any contract.’ ’’ 12 Unconscionability, therefore, is a legitimate ground

upon which to refuse to enforce the HBW

and its arbitration clause.13

[6] Generally, both procedural and substantive unconscionability must be present in

order for a court to exercise its discretion to

refuse to enforce a contract or clause as

unconscionable.14 The circumstances present

in this case significantly render the HBW

procedurally unconscionable. The Burches

did not receive a copy of the HBW’s terms

until after Double Diamond had paid the

premium to enroll the Burch home in the

warranty program and almost four months

after they closed escrow on their home.

Double Diamond told the Burches that the

HBW’s issuance was ‘‘automatic’’ and offered

extra protection for their home, when in fact

the warranty limited their protection under

Nevada law.15 The Burches did not have an

opportunity to read the one-page ‘‘application’’ form, or the thirty-one-page HBW

booklet, or to view the HBW video before

signing the ‘‘application.’’ The arbitration

clause was located on page six of the HBW

booklet, after five pages of material only

relevant to persons residing outside of Nevada. The Burches were not sophisticated consumers, they did not understand the HBW’s

terms, and the HBW’s disclaimers were not

conspicuous.16 Under these circumstances,

the Burches did not have a meaningful opportunity to decide if they wanted to agree to

the HBW’s terms, including its arbitration

provision. As a result, the HBW was procedurally unconscionable.

[7] Because the procedural unconscionability in this case is so great, less evidence of

substantive unconscionability is required to

establish unconscionability.17 The HBW’s

arbitration clause is also substantively unconscionable because it grants Double Diamond’s insurer, NHIC, the unilateral and

exclusive right to decide the rules that govern the arbitration and to select the arbitra9. See NRS 104.2302(1) (court may refuse to enforce an unconscionable contract).

10. See Allied–Bruce Terminix Cos. v. Dobson, 513

U.S. 265, 270–71, 115 S.Ct. 834, 130 L.Ed.2d

753 (1995).

11. See Doctor’s Associates, Inc. v. Casarotto, 517

U.S. 681, 687, 116 S.Ct. 1652, 134 L.Ed.2d 902

(1996) (holding that generally applicable contract defenses, such as unconscionability, may be

used to invalidate an arbitration clause).

12. Allied–Bruce Terminix, 513 U.S. at 281, 115

S.Ct. 834 (quoting 9 U.S.C. § 2 (emphasis added)); see also Doctor’s Associates, 517 U.S. at

687, 116 S.Ct. 1652.

13. See Doctor’s Associates, 517 U.S. at 687, 116

S.Ct. 1652.

14. See, e.g., First Family Financial Services, Inc.

v. Fairley, 173 F.Supp.2d 565, 569–71 (S.D.Miss.

2001); Data Based Systems, Intern., Inc. v. Hewlett–Packard Co., No. CIV. 00–CV–4425, 2001 WL

1251212, at *10 (E.D.Pa. Sept.26, 2001); Thomas Engineering, Inc. v. Trane Co., No. 92 C 1251,

1994 WL 692698, at *2–3 (N.D.Ill.Dec.1, 1994);

Armendariz v. Foundation Health Psychcare, 24

Cal.4th 83, 99 Cal.Rptr.2d 745, 6 P.3d 669, 690

(2000); Villa Milano Homeowners Ass’n v. Il

Davorge, 84 Cal.App.4th 819, 102 Cal.Rptr.2d 1,

6–7 (2000); Complete Interiors, Inc. v. Behan,

558 So.2d 48, 52 (Fla.Dist.Ct.App.1990); M.A.

Mortenson Co. v. Timberline Software, 140

Wash.2d 568, 998 P.2d 305, 314–15 (2000).

15. Cf. Sierra Diesel Injection Service v. Burroughs

Corp., 890 F.2d 108, 113 (9th Cir.1989) (‘‘[E]xclusions of warranties are generally disfavored

TTTT They are subject to the general obligation of

good faith and of not imposing unconscionable

terms upon a party.’’).

16. See NRS 104.1201(10) (‘‘Whether a term or

clause is ‘conspicuous’ or not is for decision by

the court.’’); see also Sierra Diesel, 890 F.2d at

115 (explaining that even the use of capital letters in disclaimers will not be ‘‘effective in all

cases’’).

17. See Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at

690.

045

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ROSEQUIST v. INT’L ASS’N OF FIREFIGHTERS Nev. 651

Cite as 49 P.3d 651 (Nev. 2002)

tors. These provisions are ‘‘oppressive

terms,’’ 18 and as such, are substantively unconscionable and unenforceable. We do not

hold that a homebuyer warranty with an

arbitration clause will always be unconscionable or unenforceable. Under the circumstances in this case, however, the HBW and

its arbitration clause are unconscionable and,

therefore, unenforceable.

We, therefore, grant the petition and direct the clerk of this court to issue a writ of

mandamus directing the district court to vacate its order compelling arbitration.19

,

Larry ROSEQUIST, Appellant,

v.

INTERNATIONAL ASSOCIATION

OF FIREFIGHTERS LOCAL

1908, Respondent.

No. 36506.

Supreme Court of Nevada.

July 18, 2002.

Firefighter who was denied disability

benefits brought action against county and

his union, claiming breach of collective bargaining agreement, breach of duty of fair

representation, improper submission of

grievances, breach of covenant of good faith

and fair dealing, wrongful termination of his

employment, and conspiracy to violate collective bargaining agreement. The Eighth Judicial District Court, Clark County, Mark R.

Denton, J., granted summary judgment in

favor of county and granted union’s motion to

dismiss without prejudice. Firefighter appealed. The Supreme Court held that: (1)

firefighter’s allegations against union were

within exclusive jurisdiction of the EmployeeManagement Relations Board (EMRB), and

(2) firefighter was required to exhaust his

administrative remedies before the EMRB

before filing his complaint in district court.

Affirmed.

1. Labor Relations O510

Firefighter’s allegations that union

breached collective bargaining agreement,

breached duty of fair representation, improperly submitted grievances, breached duties of

good faith and fair dealing, and conspired to

violate collective bargaining agreement fell

within scope of the Employee-Management

Relations Act and, thus, were within the

exclusive jurisdiction of the Employee-Management Relations Board (EMRB). West’s

NRSA 288.110, subd. 2, 288.270, subd. 2(a).

2. Pretrial Procedure O554

A motion to dismiss is properly granted

when there is a lack of subject matter jurisdiction on the face of the complaint.

3. Administrative Law and Procedure

O229

Failure to exhaust administrative remedies generally deprives a district court of

subject matter jurisdiction.

4. Appeal and Error O893(1)

The construction of a statute is a question of law subject to de novo review.

5. Statutes O190

If the plain meaning of a statute is clear

on its face, then the court will not go beyond

the language of the statute to determine its

meaning.

6. Labor Relations O219

Fair representation of an employee by a

union involving the implementation of the

terms of a collective bargaining agreement is

a right arising under the Employee-Management Relations Act and the failure of a union

to fairly represent an employee interferes

with that right. West’s NRSA 288.270, subd.

2(a).

18. 24 Hour Fitness, Inc. v. Superior Court, 66

Cal.App.4th 1199, 78 Cal.Rptr.2d 533, 541

(1998).

19. See NRS 34.160; see also Round Hill, 97 Nev.

at 603–04, 637 P.2d at 536.

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2007 WL 4180590

Only the Westlaw citation is currently available.

United States District Court, D. Nevada.

Anthony F. COPPOLA, as Trustee of the Anthony F. Coppola Living Trust (A), Plaintiff,

v.

Jed BARON, individually and doing business as Nevada Title

Loans; Nevada Title Loans; E & G Investments, Inc., Defendants.

No. 2:07–CV–00664–BES–RJJ.

|

Nov. 20, 2007.

Attorneys and Law Firms

Neil J. Beller, Neil J. Beller, Ltd., Las Vegas, NV, for Plaintiff.

Richard A. Schonfeld, Las Vegas, NV, for Defendants.

Terrence A. Mazura, Santa Ana, CA.

ORDER

BRIAN E. SANDOVAL, District Judge.

*1 Presently before this Court is a Motion to Dismiss (# 11) filed on June 25, 2007 by Defendants Jed Baron, Nevada Title

Loans and E & G Investments, Inc. (“Defendants”). Plaintiff Anthony F. Coppola, as Trustee of the Anthony F. Coppola Living

Trust (“Coppola”) filed an Opposition to the Motion to Dismiss (# 16) on July 12, 2007. No Reply was filed.

I. Background

This dispute arises out of three promissory notes executed by Nevada Title Loans in favor of the Coppola Trust. According to

the Complaint (# 1) filed on May 23, 2007, between August 2005 and April of 2006, Nevada Title Loans executed three separate

promissory notes in favor of the Coppola Trust. The total amount owed to the Coppola Trust based upon the three notes was

the sum of $200,000 plus interest. Coppola alleges that Defendant E & G Investments and Defendant Jed Baron (“Baron”) are

both guarantors of the notes. Baron signed a separate Guaranty Agreement which was attached to the Complaint. The maturity

date of each note has passed. Coppola made a written demand for payment to each of the Defendants, but the Defendants have

failed to pay the money due under any of the notes.

Coppola filed the Complaint in the federal district court of Nevada in Clark County. In the Complaint, Coppola seeks money

damages for breach of contract for each of the three notes. Each of the notes contains a forum selection clause which states,

“Venue of any action brought hereon shall be Clark County, Nevada.”

Defendants seek dismissal of the Complaint for lack of venue based upon the forum selection clause. Defendants also seek

dismissal of all claims against Baron on the basis that Coppola has failed to state a claim upon which relief can be granted,

primarily because the Complaint does not allege that Baron received consideration for guaranteeing the debt.

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II. Analysis

A. Motion to Dismiss Based Upon Venue

Defendant has requested that Plaintiffs' Complaint be dismissed “pursuant to 28 U.S.C. § 1391(a) for improper venue. Such a

motion is recognized by Rule 12(b)(3) as a motion to dismiss for improper venue. On a 12(b)(3) motion, the pleadings need

not be accepted as true. Murphy v. Schneider Nat'l, Inc., 362 F.3d 1133, 1137 (9th Cir.2004). In the context of a Rule 12(b)

(3) motion based upon a forum selection clause, the trial court must draw all reasonable inferences in favor of the non-moving

party and resolve all factual conflicts in favor of the non-moving party. Murphy v. Schneider National, Inc., 362 F.3d 1133,

1138 (9th Cir.2004).

The Ninth Circuit has held that forum selection clauses should be enforced as written. See, Mannetti–Farrow, Inc. v. Gucci

America, Inc., 858 F.2d 509, 514 (9th Cir.1988). Forum selection clauses are prima facie valid and are enforceable absent a

strong showing by the party opposing the clause that enforcement would be unreasonable or unjust, or that the clause is invalid

for such reasons as fraud or overreaching. Id. (citation omitted).

*2 Here, Defendants are not arguing that the forum selection clause is invalid. Instead, Defendants are taking a position that

the forum selection clause mandates that an action be filed in the state courts for Clark County. A forum selection clause will

be enforced only where venue is specified with mandatory language. Docksider, Ltd. v. Sea Technology, Ltd., 875 F.2d 762, 764

(9th Cir.1989). If the language of the forum selection clause is non-mandatory, the forum selection clause will not preclude suit

elsewhere. Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir.1987). Hence, the issue before the Court is

whether the forum selection clause is mandatory or permissive.

To be a mandatory forum selection clause, the clause must contain language that clearly designates a forum as the exclusive

one. Northern California Dist. Council of Laborers v. Pittsburg–Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir.1995). The

prevailing rule is clear that where venue is specified with mandatory language the clause will be enforced. Docksider, Ltd., 875

F.2d at 763–764. “When only jurisdiction is specified, the clause will generally not be enforced without some further language

indicating the parties' intent to make jurisdiction exclusive.” Docksider, 875 F.2d at 764. A forum selection clause needs to

contain mandatory language requiring a case be litigated in only one forum. Council of Laborers, 69 F.3d at 1037.

A forum selection clause providing a particular court or state has jurisdiction, but says nothing about it being exclusive

jurisdiction, is permissive rather than mandatory. Hunt Wesson Foods Inc. v. Supreme Oil Co., 817 F.2d 75, 77 (9th Cir.1987).

The effect of the language is merely that the parties consent to the jurisdiction of that particular court or state. Kachal, Inc. v.

Menzie, 738 F.Supp. 371, 373 (D.Nev.1990). Such consent does not preclude the action from being litigated in another court.

Id; Northern California Dist. Council of Laborers, 69 F.3d at 1036.

The forum selection clause in the parties' promissory notes provides that “Venue of any action brought hereon shall be Clark

County, Nevada.” This clause specifies that venue will be in Clark County, however, it does not specify whether the forum is the

state court or the federal district court, both of which are located in Clark County. The language in the forum selection clause

states nothing about the Clark County state courts having exclusive jurisdiction. The effect of the language is merely that the

parties consent to the jurisdiction of the Clark County courts.

The language in the forum selection clause here is similar to that found in Hunt Wesson Foods. In Hunt Wesson Foods, 817 F .2d

75, the clause at issue contained the following language: “The courts of California, County of Orange, shall have jurisdiction

over the parties in any action at law relating to the subject matter of the interpretation of this contract.” Id. at 76. The Ninth Circuit

held that the clause was permissive because “in cases in which forum selection clauses have been held to require litigation in a

particular court, the language of the clauses clearly required exclusive jurisdiction.” Id. at 77. Hence, the forum selection clause

in this case is permissive rather than mandatory and the action is not precluded from being litigated in the federal district court.

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*3 Defendants rely on Docksider Ltd. v. Sea Technology Ltd., 875 F.2d 762 (9th Cir.1989), which had a similar clause as the

present one and which held that the matter must be pursued in state court. In Docksider Ltd., the forum selection clause stated,

“Venue of any action brought hereunder shall be deemed to be in Gloucester County, Virginia” and the court held that the action

must be held in the county courts for Gloucester County. Docksider Ltd., 875 F.2d at 763–764. However, of importance in that

case is the fact that there were no federal courts in Gloucester County. Hence, the court in Docksider Ltd. never addressed

the issue of whether the state or federal court was the more appropriate venue and instead analyzed the issue in terms of the

suit being brought in Virginia as opposed to courts in other states. As such, the Docksider Ltd. case is distinguishable from

the facts of this case.

The Court has determined that the forum selection clause in this case is permissive. A permissive forum selection clause does

not divest this Court of jurisdiction. This Court's subject matter jurisdiction is properly based on diversity of citizenship. Venue

is proper in the district of Nevada under 28 U.S.C. § 1391(a).

B. Motion to Dismiss Baron

Defendant's Motion also challenges jurisdiction over Baron, asserting that the Complaint should be dismissed because it fails

to state a claim upon which relief can be granted against Baron because he did not sign the promissory notes in his personal

capacity and the Complaint fails to state that Baron received any consideration for signing the Guaranty Agreement.

When considering a motion to dismiss under Rule 12(b)(6), the challenged complaint is construed liberally in favor of the

plaintiff, and all factual allegations set forth in the complaint are accepted as true. McGary v. City of Portland, 386 F.3d 1259,

1261 (9th Cir.2004). However, a complaint, or portion thereof, will be dismissed for failure to state a claim upon which relief

may be granted if Plaintiff cannot establish “any set of facts consistent with the allegations in the complaint.” Bell Atlantic Corp.

v. Twombly, ––– U.S. ––––, 127 S.Ct. 1955, 1968–69 (2007). Plaintiff's obligation to provide the “grounds” of her entitlement

to relief requires more than labels and conclusions or a formulaic recitation of the elements of the cause of action. Id. at 1964–

65. To state a valid claim, a complaint must contain either direct or inferential allegations respecting all the material elements

to sustain recovery under some viable legal theory. Id. at 1969. “Factual allegations must be enough to raise a right to relief

above the speculative level.” Id. at 1965 citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235–236

(3d ed.2004). In other words, “a complaint must be dismissed if it does not plead ‘enough facts to state a claim to relief that is

plausible on its face.’ “ Id. at 1974; Garvais v. U.S., 2007 WL 1724956, *4 (E.D.Wash.,2007).

*4 Defendants argue that the Guaranty Agreement violates the statute of frauds because the Guaranty Agreement fails to

express that any consideration was given in return for the guaranty by Baron. However, the facts as alleged and presented in the

Complaint and the accompanying documents do not support Defendants' position. The Guaranty Agreement specifically states

that the guaranty was being given for good consideration. 1 Furthermore, the Guaranty Agreement was signed by Baron and

indicates that the Guaranty Agreement was executed by Baron in favor of Coppola. Hence, construing the Complaint liberally

in favor of Coppola and accepting all factual allegations set forth in the Complaint as true, Coppola has stated a claim for relief

against Baron under the Guaranty Agreement. As such, Baron is not dismissed from this matter.

II. Conclusion

Based on the foregoing, IT IS ORDERED that Defendants' Motion to Dismiss (# 11) is DENIED.

All Citations

Not Reported in F.Supp.2d, 2007 WL 4180590

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Footnotes

1 Defendants argue that the consideration was lined out of the guaranty agreement, making the guaranty agreement

invalid for failure of consideration. However, the Court finds that this crossed-out language only went to supplemental

information regarding the guarantors' reasons for entering into the Guaranty Agreement.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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528 P.3d 586 (Table)

Unpublished Disposition

This is an unpublished disposition. See Nevada Rules of Appellate Procedure, Rule 36(c) before citing.

Supreme Court of Nevada.

FEDERAL NATIONAL MORTGAGE ASSOCIATION, Petitioner,

v.

The EIGHTH JUDICIAL DISTRICT COURT of the State of Nevada, IN AND FOR the

COUNTY OF CLARK; and the Honorable Mark R. Denton, District Judge, Respondents,

and

Westland Liberty Village, LLC, a Nevada Limited Liability Company; Westland Village Square, LLC, a Nevada Limited

Liability Company; Amusement Industry, Inc.; Westland Corona LLC; Westland Amber Ridge LLC; Westland Hacienda

Hills LLC; 1097 North State, LLC; Westland Tropicana Royale LLC; Vellagio Apts of Westland LLC; the Alevy Family

Protection Trust; Westland AMT, LLC; AFT Industry NV, LLC; and A&D Dynasty Trust, Real Parties in Interest.

No. 84575

|

Filed December 22, 2022

Attorneys and Law Firms

Snell & Wilmer, LLP/Las Vegas

Snell & Wilmer, LLP/Reno

Cooper & Kirk PLLC/Wash DC

Campbell & Williams

Law Offices of John Benedict

John W. Hofsaess

ORDER GRANTING PETITION FOR EXTRAORDINARY WRIT RELIEF

**1 This original petition for extraordinary writ relief challenges a district court order denying petitioner's motion to dismiss.

Real parties in interest Westland Liberty Village and Westland Village Square (collectively, Westland) acquired properties

secured by loan agreements for which petitioner Federal National Mortgage Association (Fannie Mae) is the successor-ininterest to the original lender. Fannie Mae commenced an action in district court, seeking the appointment of a receiver as part

of the process to foreclose on the properties. Westland answered and asserted counterclaims against Fannie Mae. As part of

its first amended countercomplaint, Westland joined several affiliated corporate entities as parties (collectively with Westland,

RPIs) and asserted two counterclaims related to those entities and a Master Credit Facility Agreement (MCFA). The MCFA

provided a credit line that RPIs allege Fannie Mae improperly restricted. The MCFA contains a forum selection clause providing

that MCFA claims shall be litigated in the District of Columbia. Fannie Mae filed a motion to dismiss, arguing that the MCFA

counterclaims could not be litigated in Nevada. The district court denied Fannie Mae's motion to dismiss, and Fannie Mae

petitioned this court for a writ of prohibition.

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A writ of prohibition may issue when a district court acts without or in excess of its jurisdiction and the petitioner lacks a plain,

speedy, and adequate remedy at law. NRS 34.320; NRS 34.330; Smith v. Eighth Judicial Dist. Court, 107 Nev. 674, 677, 818

P.2d 849, 851 (1991). A writ of mandamus, by contrast, is available to compel the performance of an act that the law requires

as a duty resulting from an office, trust, or station or to control an arbitrary or capricious exercise of discretion. NRS 34.160;

Int'l Game Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556, 558 (2008). This court may treat a

petition seeking prohibition as a petition for a writ of mandamus where, although prohibition is not available, mandamus is

appropriate. City of Sparks v. Second. Judicial Dist. Court, 112 Nev. 952, 953 n.1, 920 P.2d 1014, 1015 n.1 (1996). We grant the

petition for extraordinary writ relief after concluding that the district court committed clear legal error amounting to a manifest

abuse of discretion in failing to dismiss the MCFA counterclaims based on the mandatory forum selection clause to which the

parties agreed.

When a contract contains a forum selection clause, courts determine whether the clause is mandatory, meaning that the specified

forum is the exclusive forum agreed upon by the parties, or permissive, meaning that the parties merely consented to venue in a

particular forum. Am. First Fed. Credit Union v. Soro, 131 Nev. 737, 740-42, 359 P.3d 105, 107-08 (2015) (noting and agreeing

with other courts’ explanation of the dichotomy between mandatory and permissive forum selection clauses). As with other

issues of contractual interpretation, whether a forum selection clause is mandatory turns on its language, looking for “words of

exclusivity.” Id. at 742, 359 P.3d at 108; see also id. at 737, 739, 359 P.3d at 106 (providing that the court reviews contracts de

novo and interprets clear and unambiguous provisions according to the contractual language as written). When a forum selection

clause is mandatory and suit is brought in the incorrect forum, the matter should be dismissed. See id. at 738, 359 P.3d at 105

(reversing dismissal where forum selection clause was permissive, not mandatory).

**2 The MCFA has a forum selection clause entitled “Choice of Law; Consent to Jurisdiction” that provides that “Borrower

agrees that any controversy arising under or in relation to the Notes, the Security Documents (other than the Security

Instruments), or any other Loan Document shall be, except as otherwise provided herein, litigated in the District of Columbia.”

(Emphasis added.) It further provides that D.C. courts “shall ... have jurisdiction over all controversies which may arise under or

in relation to the Loan Documents ....” It continues that “Borrower irrevocably consents to service, jurisdiction, and venue of such

courts for any litigation arising from [the loan instrument] and waives any other venue to which it might be entitled.” (Emphasis

added.) The clause also provides that it does not bar the Lender from bringing suit against the Borrower or the collateral in

another forum and that any such action does not waive the designation of D.C. law as the controlling law.

We conclude that the forum selection clause here is mandatory. The clause states that litigation for “any controversy” arising

under its loan documents “shall be litigated” in the District of Columbia. The phrase “shall be litigated,” while not conclusive,

strongly suggests that the forum selection clause is mandatory. Soro, 131 Nev. at 741-42, 359 P.3d at 107-08 (collecting and

comparing forum selection clause cases). Confirming that the clause mandates Washington, D.C. as the forum for litigating

MCFA claims, the agreement irrevocably consents to the jurisdiction and forum of D.C. courts and waives “any other venue.”

E.g., Aguas Lenders Recovery Grp. v. Suez, S.A., 585 F.3d 696, 700 (2d Cir. 2009); AAR Int'l, Inc. v. Nimelias Enters. S.A., 250

F.3d 510, 526 (7th Cir. 2001). Because the clause here goes further than signaling merely that D.C. courts are an appropriate

forum and includes both irrevocable consent to the designated forum and a waiver of all other fora the borrower might otherwise

be entitled to access, we conclude that the forum selection clause demonstrates an intent to designate the District of Columbia

exclusively and is therefore mandatory.

RPIs make three additional arguments against enforcing this clause as mandatory, none of which is persuasive. First, RPIs

maintain the clause cannot be mandatory because it permits Fannie Mae to bring suit outside the District of Columbia. But onesided forum selection clauses are permissible when the parties voluntarily agree to them. See Montoya v. Fin. Fed. Credit, Inc.,

872 F. Supp. 2d 1251, 1276 (D.N.M. 2012) (rejecting an argument that a forum selection clause was not binding where it was

permissive as to actions filed by the lender but mandatory as to those filed by the borrower); see also Union Steel Am. Co. v. M/V

Sanko Spruce, 14 F. Supp. 2d 682, 687 (D.N.J. 1998) (concluding that a forum selection clause was mandatory despite providing

the cargo carrier alone with an option to pursue arbitration). Second. RPIs characterize their counterclaims as compulsory and

argue that this takes them outside a mandatory forum selection clause. Even assuming the accuracy of this characterization,

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which is debatable, we agree with courts elsewhere that have held that this does not defeat a mandatory forum selection clause.

See, e.g., Publicis Commc'n v. True N. Commc'ns Inc., 132 F.3d 363, 366 (7th Cir. 1997) (enforcing forum selection clause

“whether or not they would be ‘compulsory’ counterclaims” because the defendant had contracted not to litigate those claims

in forums other than that designated in the forum selection clause); see also Water & Sand Int'l Capital, Ltd. v. Capacitive

Deionization Tech. Sys., Inc., 563 F. Supp. 2d 278, 284 (D.D.C. 2008) (refusing to allow parties to evade enforceable forum

selection clauses by alleging what may be properly considered compulsory counterclaims). And finally, insofar as RPIs contend

that fairness requires trying the counterclaims in Nevada courts, we disagree. “The parties are sophisticated corporations that

freely contracted with each other, and enforcement of the forum selection clause does not offend due process.” Holland Am.

Line Inc. v. Wartsila N. Am., Inc., 485 F.3d 450, 457 (9th Cir. 2007).

1

**3 The dispute asserted in counterclaims three and four arises from the MCFA, so the mandatory forum selection clause

applies, and requires that those claims “shall be litigated” in Washington, D.C. Nevada public policy favors enforcing freely

negotiated mandatory forum selection clauses that are not unreasonable or unjust and are entered into by sophisticated parties.

See Soro, 131 Nev. at 741, 359 P.3d at 741 (quoting with approval decisions recognizing that mandatory forum selection clauses

will be enforced); Whitemaine v. Aniskovich, 124 Nev. 302, 312 n.31, 183 P.3d 137, 144 n.31 (2008) (recognizing that the

parties were sophisticated counterparts in determining whether appellant knowingly, voluntarily, and intelligently entered into

an arbitration agreement); Tandy Comput. Leasing v. Terina's Pizza, Inc., 105 Nev. 841, 844, 784 P.2d 7, 8 (1989) (barring

enforcement of a forum selection clause that was not “freely negotiated” and would be “unreasonable and unjust” to enforce

(internal quotation marks omitted); see also M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972) (looking to declarations

by statute or judicial decision to determine a states public policy concerning the enforcement of forum selection clauses); Tuxedo

Int'l Inc. v. Rosenberg, 127 Nev. 11, 22, 251 P.3d 690, 697 (2011) (recognizing that parties are free to agree to binding forum

selection clauses). The district court clearly erred in not applying the mandatory forum selection clause in this instance. See

Soro, 131 Nev. at 739, 359 P.3d at 105 (providing that clear contractual provisions will be enforced as written).

The final question concerns the form, of writ relief appropriate. This court has original jurisdiction to issue a writ of prohibition

to “arrest” proceedings that are “without or in excess of the jurisdiction” of the district court. NRS 34.320. The mandatory

forum selection clause mandates Washington, D.C. as the venue for the MCFA counterclaims; it does not destroy jurisdiction

in Nevada. See Marra v. Papandreou, 216 F.3d 1119, 1123 (D.C. Cir. 2000) (“[W]hile the forum-selection clause defense is a

creature that has evaded precise classification, most courts and commentators have characterized it as a venue objection[.]”)

(footnote omitted; collecting cases). This raises a question whether prohibition is available in this setting. See C.P. Jhong,

Annotation, Prohibition as an Appropriate Remedy to Restrain Civil Action for Lack of Venue, 93 A.L. R.2d 882 (1962). But it

is not necessary to decide the question here, since the district judge committed clear legal error amounting to a manifest abuse

of discretion in not enforcing the parties’ mandatory forum selection clause as to the MCFA counterclaims. This error qualifies

for mandamus relief and we therefore elect to treat the petition as one seeking mandamus relief. See City of Sparks, 112 Nev. at

953 n.1, 920 P.2d at 1015 n.1. Although an appeal from final judgment would generally be an adequate legal remedy, because

there is no factual dispute and a clear rule warranted dismissal, we grant writ relief as to these counterclaims. Int'l Game Tech.,

124 Nev. at 197-98, 179 P.3d at 559.

Accordingly, we

ORDER the petition *587 GRANTED AND DIRECT THE CLERK OF THIS COURT TO ISSUE A WRIT OF MANDAMUS

directing the district court to grant petitioner's motion to dismiss counterclaims three and four.

2

All Citations

528 P.3d 586 (Table), 2022 WL 19697697

053

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Federal National Mortgage Association v. Eighth Judicial..., 528 P.3d 586 (2022)

2022 WL 19697697

 © 2023 Thomson Reuters. No claim to original U.S. Government Works. 4

Footnotes

1 RPIs argue that the clause is not mandatory because its inclusion of the phrase “except as otherwise provided herein”

adds unspecified exceptions to its scope. Because RPIs do not explain this argument in detail or provide supporting

caselaw, therefore we do not consider it. See Edwards v. Emperor's Garden Rest., 122 Nev. 317, 330 n.38, 130 P.3d

1280, 1288 n.38 (2006).

2 The Honorable Patricia Lee did not participate in the decision in this matter.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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ODM 

Pat Lundvall (NSBN 3761) 

Kristen T. Gallagher (NSBN 9561) 

Amanda M. Perach (NSBN 12399) 

McDONALD CARANO LLP 

2300 West Sahara Avenue, Suite 1200 

Las Vegas, Nevada 89102 

Telephone: (702) 873-4100 

plundvall@mcdonaldcarano.com 

kgallagher@mcdonaldcarano.com 

aperach@mcdonaldcarano.com 

Attorneys for Plaintiffs 

DISTRICT COURT 

CLARK COUNTY, NEVADA 

FREMONT EMERGENCY SERVICES 

(MANDAVIA), LTD., a Nevada professional 

corporation; TEAM PHYSICIANS OF 

NEVADA-MANDAVIA, P.C., a Nevada 

professional corporation; CRUM, 

STEFANKO AND JONES, LTD. dba RUBY 

CREST EMERGENCY MEDICINE, a 

Nevada professional corporation, 

 Plaintiffs, 

vs. 

UNITEDHEALTH GROUP, INC., a 

Delaware corporation; UNITED 

HEALTHCARE INSURANCE COMPANY, 

a Connecticut corporation; UNITED 

HEALTH CARE SERVICES INC., dba 

UNITEDHEALTHCARE, a Minnesota 

corporation; UMR, INC., dba UNITED 

MEDICAL RESOURCES, a Delaware 

corporation; OXFORD HEALTH PLANS, 

INC., a Delaware corporation; SIERRA 

HEALTH AND LIFE INSURANCE 

COMPANY, INC., a Nevada corporation; 

SIERRA HEALTH-CARE OPTIONS, INC., 

a Nevada corporation; HEALTH PLAN OF 

NEVADA, INC., a Nevada corporation; 

DOES 1-10; ROE ENTITIES 11-20, 

 Defendants. 

Case No.: A-19-792978-B 

Dept. No.: XXVII 

ORDER DENYING DEFENDANTS’ (1) 

MOTION TO DISMISS FIRST 

AMENDED COMPLAINT; AND (2) 

SUPPLEMENTAL BRIEF IN SUPPORT 

OF THEIR MOTION TO DISMISS 

PLAINTIFFS’ FIRST AMENDED 

COMPLAINT ADDRESSING 

PLAINTIFFS’ EIGHTH CLAIM FOR 

RELIEF 

This matter came before the Court on June 5 and 9, 2020 on the (1) Motion to Dismiss 

Plaintiffs’ First Amended Complaint (“Motion”); and (2) Supplemental Brief in Support of 

Electronically Filed

06/24/2020 2:45 PM

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Motion To Dismiss Plaintiffs’ First Amended Complaint Addressing Plaintiffs’ Eighth Claim 

For Relief (“Supplement”) filed by defendants UnitedHealth Group, Inc., UnitedHealthcare 

Insurance Company; United HealthCare Services, Inc.; UMR, Inc.; Oxford Health Plans, Inc. 

(the foregoing United entities are referred to as the “UH Parties”); Sierra Health and Life 

Insurance Co., Inc.; Sierra Health-Care Options, Inc.; and Health Plan of Nevada, Inc. (Sierra 

Health, Sierra Health-Care and Health Plan of Nevada are referred to as the “Sierra Affiliates”) 

(UH Parties and Sierra Affiliates are collectively referred to as “United”). Pat Lundvall, Amanda 

M. Perach and Kristen T. Gallagher, McDonald Carano LLP, appeared on behalf of plaintiffs 

Fremont Emergency Services (Mandavia), Ltd. (“Fremont”); Team Physicians of NevadaMandavia, P.C. (“Team Physicians”); Crum, Stefanko and Jones, Ltd. dba Ruby Crest 

Emergency Medicine (“Ruby Crest” and collectively the “Health Care Providers”). D. Lee 

Roberts, Jr. and Colby L. Balkenbush, Weinberg, Wheeler, Hudgins, Gunn & Dial, LLC, 

appeared on behalf of United. 

The Court, having considered the Motion and Supplement, the Health Care Providers’ 

opposition to the Motion and Supplement and United’s replies thereto, and the argument of 

counsel at the hearings on this matter, makes the following findings of fact, conclusions of law 

and Order: 

FINDINGS OF FACT RELEVANT TO THE COURT’S DECISION 

Procedural History 

1. On April 15, 2019, Fremont filed the original Complaint against

UnitedHealthcare Insurance Company; United HealthCare Services, Inc.; UMR, Inc.; Oxford 

Health Plans, Inc.; Sierra Health and Life Insurance Co., Inc.; Sierra Health-Care Options, Inc.; 

and Health Plan of Nevada, Inc. (collectively, “Removing Defendants”) and asserted claims for 

breach of implied-in-fact contract, breach of implied-in-fact contract, tortious breach of the 

implied covenant of good faith and fair dealing, unjust enrichment, violation of NRS 686A.020 

and 686A.310, violations of Nevada Prompt Pay statutes and regulations, violations of Nevada 

Consumer Fraud & Deceptive Trade Practices Acts, and declaratory judgment. See generally 

Compl. 

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2. As the Health Care Providers allege, all of these legal claims are based on 

United’s underpayment of claims which it had determined were payable and paid, i.e., a dispute 

over the proper rates of payment rather than the right to payment. Compl. ¶ 27. 

3. On May 14, 2019, the Removing Defendants filed a Notice of Removal with this 

Court, contending that the state law claims asserted are completely preempted by Employee 

Retirement Income Security Act of 1974, as amended (“ERISA”), 29 U.S.C. § 1132(a)(1)(B). 

See Notice of Removal. 

4. In the removed action in the United States District Court, District of Nevada (the 

“Federal District Court”), Case No. 2:19-cv-00832-JCM-VCF, on May 21, 2019, the Removing 

Defendants filed a Motion to Dismiss arguing, inter alia, that each of Fremont’s claims are 

preempted by complete preemption and conflict preemption and that even if such claims are not 

preempted, they fail as a matter of law. 

5. On May 24, 2019, Fremont filed a Motion to Remand (ECF No. 5) on the basis 

that this case, which only involves questions of the proper rate of payment, and not the right to 

payment, is not completely preempted by ERISA. 

6. With the Federal District Court’s permission, the Health Care Providers filed their 

First Amended Complaint (the “FAC”) on January 7, 2020. The FAC added plaintiffs Team 

Physicians and Ruby Crest, defendant UnitedHealth Group, Inc. and a claim for violation of 

NRS 207.350 et seq. (“NV RICO”) 

7. Given the procedural posture of the action, the Federal District Court directed the 

Health Care Providers to file an amended motion to remand, which they did on January 18, 2020 

(ECF No. 49). 

8. After completed briefing, the Federal District Court granted the Amended Motion 

to Remand, expressly rejecting United’s argument that the Health Care Providers’ claims were 

completely preempted by ERISA, the same arguments that United reasserts in the Motion to 

Dismiss pending before the Court. The Federal District Court recognized the Ninth Circuit has 

distinguished between claims involving the “right to payment” and claims involving the “proper 

“amount of payment.” Marin General Hosp. v. Modesto & Empire Traction Co., 581 F.3d 941, 

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948 (9th Cir. 2009); Blue Cross of Cal. v. Anesthesia Care Assocs. Med. Grp., Inc., 187 F.3d 

1045, 1051 (9th Cir. 1999). The Federal District Court found that the Health Care Providers’ 

claims fall outside the scope of Section 502(a) of ERISA, failing the first prong of the test 

articulated by Aetna Health Inc. v. Davila, 542 U.S. 200 (2004) because they: 

[D]o not contend they are owed an additional amount from the 

patients’ ERISA plans.” Instead, they allege these claims arise from 

their alleged implied-in-fact contract with United. 

United attempts to distinguish the implied-in-fact contract from 

other types of contracts referenced in the case law. (ECF No. 64). 

However, Nevada courts have found that implied-in-fact agreements 

and express agreements have the same legal effects. See Magnum 

Opes Constr. v. Sanpete Steel Corp., 2013 WL 7158997 (Nev. 

2013); Certified Fire Prot. Inc. v. Precision Constr., 283 P. 3d 250, 

256 (Nev. 2012). Consequently, the court finds that plaintiffs’

claims fall outside the scope of § 502(a) of ERISA, failing prong 1 

of the Davila test. 

See Notice of Entry of Remand Order, Remand Order at 5:4-13. 

9. After remand and pursuant to a May 15, 2020 Order, the Health Care Providers 

filed the FAC in this state court action. 

10. United filed the Motion and Supplement addressing the Health Care Providers’ 

claim for violation of NRS 207.350 et seq. (eighth claim for relief). The Health Care Providers 

filed oppositions to the Motion and Supplement. 

11. The Court heard oral argument on June 5 and 9, 2020 and issued its ruling at the 

conclusion of the June 9, 2020 hearing, directing the Health Care Providers’ counsel to submit 

an order consistent with its oral ruling as well as consistent with the Health Care Providers’ 

Oppositions to the Motion and Supplement. 

Relevant Allegations Concerning the Relationship Between the Parties and the Dispute 

12. The Health Care Providers are professional emergency medicine service groups 

that staff the emergency departments at ten hospitals and other facilities throughout Nevada. 

FAC ¶¶ 3-5. 

13. Defendants (“United”) are large health insurance companies and claims 

administrators. FAC ¶¶ 6-13. United provides healthcare benefits to its members (“United’s 

Members”), including coverage for emergency care. FAC ¶¶ 19, 33. 

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14. The Health Care Providers and the hospitals whose emergency departments they 

staff are obligated by both federal and Nevada law and medical ethics to render emergency 

services and care to all patients who present in the emergency department, regardless of an 

individual’s insurance coverage or ability to pay. FAC ¶ 18; see also Emergency Medical 

Treatment and Active Labor Act (EMTALA), 42 U.S.C. § 1395dd; NRS 439B.410. 

15. The Health Care Providers have submitted claims to United seeking 

reimbursement for this emergency care. FAC ¶¶ 25-26, 40. United, in turn, has paid the Health 

Care Providers. Id. 

16. As the Health Care Providers allege, this longstanding and historical practice 

establishes the basis for an implied-in-fact contract, as well as the usual and customary (or 

reasonable) rates of reimbursement for the emergency services. FAC ¶¶ 54, 189-206, 216-226. 

17. The Health Care Providers allege that, thereafter, United continued to pay the 

Health Care Providers’ claims for emergency services, but arbitrarily and drastically reduced the 

rates of reimbursement to levels below the billed charges and usual and customary rates. FAC 

¶ 55. 

18. United is responsible for administering and/or paying for certain emergency 

medical services provided by Fremont which are at issue in the litigation. FAC ¶¶ 6-13. United 

provides, either directly or through arrangements with providers such as hospitals and Fremont, 

healthcare benefits to its members. FAC ¶ 19. 

19. The Health Care Providers allege that United arbitrarily began manipulating the 

rate of payment for claims submitted by the Health Care Providers. United drastically reduced 

the rates at which they paid the Health Care Providers for emergency services for some claims, 

but not others. FAC ¶ 57. 

20. For each of the healthcare claims at issue in this litigation, United has already 

determined that each claim is payable; however, it paid the claim at an artificially reduced rate. 

Id. at ¶ 27. 

... 

... 

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21. The Health Care Providers allege that there is no open question of whether the 

claim should be covered under a health plan or whether it is payable – United already answered 

those questions affirmatively when it paid the claims. 

22. Rather, the Court finds that, as the Health Care Providers allege, the questions to 

be answered in this case are whether United paid the claim at rates that complied with applicable 

state law as set forth in the Health Care Providers’ claims. 

23. The Health Care Providers also allege a Nevada state law claim for civil 

racketeering (“NV RICO”) against United because they have been financially harmed by an 

orchestrated scheme crafted and implemented by an Enterprise consisting of United and third 

parties including National Care Network, LLC dba Data iSight (“Data iSight”) to artificially and 

fraudulently reduce payment rates and manipulate the related benchmark pricing data to 

“support” United’s position. 

24. In support of the NV RICO claim, the Health Care Providers allege, among other 

facts, as follows: 

a. From late 2017 to 2018, over the course of multiple meetings in person, 

by phone, and by email correspondence, the Health Care Providers' representatives tried to 

negotiate with Defendants to become participating, in-network providers. FAC ¶ 91. 

b. As part of these negotiations, the Health Care Providers' representatives 

met with Dan Rosenthal, President of Defendant UnitedHealth Networks, Inc., John Haben, Vice 

President of Defendant UnitedHealth Networks, Inc., and Greg Dosedel, Vice President of 

National Ancillary Contracting & Strategy at Defendant UnitedHealthCare Services, Inc. FAC 

¶ 92. 

c. Around December 2017, Mr. Rosenthal told the Health Care Providers' 

representatives that Defendants intended to implement a new benchmark pricing program 

specifically for their employer funded plans to decrease the rate at which such claims were to be 

paid. FAC ¶ 93. 

d. Defendants then proposed a contractual rate for their employer funded 

plans that was roughly half the average reasonable rate at which Defendants have historically 

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reimbursed providers - a drastic and unjustified discount from what Defendants have been paying 

the Health Care Providers on their non-participating claims in these plans, and an amount 

materially less than what Defendants were paying other contracted providers in the same market. 

FAC ¶ 94. 

e. Defendants’ proposed rate was neither reasonable nor fair. FAC ¶ 95. 

f. In May 2018, Mr. Rosenthal escalated his threats, making clear during a 

meeting that, if the Health Care Providers did not agree to contract for the drastically reduced 

rates, Defendants would implement benchmark pricing that would reduce the Health Care 

Providers' non-participating reimbursement by 33%. FAC ¶ 96. 

g. Dan Schumacher, the President and Chief Operating Officer of 

UnitedHealthcare Inc. and part of the Office of the Chief Executive of Defendant UnitedHealth 

Group, Inc., said that, by April 2019, Defendants would cut the Health Care Providers' nonparticipating reimbursement by 50%. FAC ¶ 97. 

h. Asked why Defendants were forcing such dramatic cuts on the Health 

Care Providers' reimbursement, Mr. Schumacher said simply "because we can." FAC ¶ 98. 

i. Defendants made good on their threats and knowingly engaged in a 

fraudulent scheme to slash reimbursement rates paid to the Health Care Providers for nonparticipating claims submitted under their employer funded plans to levels at, or even below, 

what they had threatened in 2018. FAC ¶ 99. 

j. Defendants falsely claim that their new rates comply with the law because 

they contracted with a purportedly objective and transparent third party, Data iSight, to process 

the Health Care Providers' claims and to determine reasonable reimbursement rates. FAC ¶ 100. 

k. Data iSight is the trademark of an analytics service used by health plans 

to set payment for claims for services provided to Defendants' Members by non-participating 

providers. Data iSight is owned by National Care Network, LLC, a Delaware limited liability 

company with its principal place of business in Irving, Texas. Data iSight and National Care 

Network, LLC will be collectively referred to as "Data iSight." Data iSight is a wholly-owned 

subsidiary of MultiPlan, Inc., a New York corporation with its principal place of business in New 

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York, NY. MultiPlan acts as a Rental Network "broker" and, in this capacity, has contracted 

since as early as June 1, 2016 with some of the Health Care Providers to secure reasonable rates 

from payors for the Health Care Providers' non-participating emergency services. The Health 

Care Providers have no contract with Data iSight, and the Non-Participating Claims identified 

in this action are not adjudicated pursuant to the MultiPlan agreement. FAC ¶ 101. 

l. Since January 2019, Defendants have engaged in a scheme and conspired 

with Data iSight to impose arbitrary and unreasonable payment rates on the Health Care 

Providers under the guise of utilizing an independent, objective database purportedly created by 

Data iSight to dictate the rates imposed by Defendants. FAC ¶ 102. 

m. Defendants also continued to advance this scheme on the negotiation 

front. FAC ¶ 103. 

n. On July 7, 2019, Mr. Schumacher advised, in a phone call, that 

Defendants planned to cut the Health Care Providers' rates over three years to just 42% of the 

average and reasonable rate of reimbursement that the Health Care Providers had received in 

2018 if the Health Care Providers did not formally contract with them at the rate dictated by 

Defendants. FAC ¶ 104. 

o. Mr. Schumacher additionally advised that leadership across the Defendant 

entities were aware and supportive of the drastic cuts and provided no objective basis for them. 

FAC ¶ 105. 

p. The next day, Angie Nierman, a Vice President of Networks at 

UnitedHealth Group, Inc., sent a written proposal reflecting Mr. Schumacher's stated cuts. FAC 

¶ 106. 

q. In addition to denying the Health Care Providers what is owed to them for 

the Non-Participating Claims, Defendants' scheme is an attempt to use their market power to 

reset the rate of reimbursement to unreasonably low levels. FAC ¶ 107. 

r. As further evidence of Defendants’ scheme to use their market power to the 

detriment of the Health Care Providers and other emergency provider groups that are part of the 

TeamHealth organization, in August 2019, UHG advised at least one Florida medical surgical 

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facility (the “Florida Facility”) that Defendants will not continue negotiating an in-network 

agreement unless the Florida Facility identifies an in-network anesthesia provider. The current 

out-of-network anesthesia provider is part of the TeamHealth organization. Defendants’ threats 

to discontinue contract negotiations prompted the Florida Facility’s Chief Operating Officer to 

send TeamHealth a “Letter of Concern” on August 14, 2019. Defendants’ threats and leverage 

are aimed at intentionally interfering with existing contracts and with a goal of reducing 

TeamHealth’s market participation. FAC ¶ 108. 

s. Additionally, Defendants first threatened, and then, on or about July 9, 

2019, globally terminated all existing in-network contracts with medical providers that are part of 

the TeamHealth organization, including the Health Care Providers, in an effort to widen the scale 

of the scheme to deprive the Health Care Providers of reasonable reimbursement rates through its 

manipulation of reimbursement rate data. FAC ¶ 109. 

25. The Health Care Providers allege that United’s and Data iSight’s scheme has been 

in development and implementation over the last several years (FAC ¶¶ 90-109) and that United 

and Data iSight concealed the scheme (id. ¶¶ 123-131). As claims were processed and Data 

iSight increasingly emerged as a new entity providing supposed benchmark pricing, the Health 

Care Providers’ representatives became aware of reductions in payments and began uncovering 

the scheme. Id. ¶¶ 132-141; ¶¶ 104-105, 109 (recounting communications from United in July 

2019 regarding the plan to drastically cut payment rates with no objective basis); ¶ 108 (August 

2019 threats and intended leverage aimed at intentionally interfering with existing contracts); ¶ 

136 (July 2019 communications with Data iSight). 

26. The Health Care Providers allege that this scheme is not new: United was 

previously caught manipulating and skewing payment rates for out-of-network providers. Id. ¶ 

70. 

27. The Health Care Providers further allege: 

a. In 2009, defendant UnitedHealth Group, Inc. was investigated by the New 

York Attorney General for allegedly using its wholly-owned subsidiary, Ingenix, to illegally 

manipulate reimbursements to non-participating providers. FAC ¶ 71. 

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b. The investigation revealed that Ingenix maintained a database of health 

care billing information that intentionally skewed reimbursement rates downward through faulty 

data collection, poor pooling procedures, and lack of audits. FAC ¶ 72. 

c. Defendant UnitedHealth Group, Inc. ultimately paid a $50 million 

settlement to fund an independent nonprofit organization known as FAIR Health to operate a 

new database to serve as a transparent reimbursement benchmark. FAC ¶ 73. 

d. In a press release announcing the settlement, the New York Attorney 

General noted that: "For the past ten years, American patients have suffered from unfair 

reimbursements for critical medical services due to a conflict-ridden system that has been owned, 

operated, and manipulated by the health insurance industry." FAC ¶ 74. 

e. Also in 2009, for the same conduct, defendants UnitedHealth Group, Inc., 

United HealthCare Insurance Co., and United HealthCare Services, Inc. paid $350 million to 

settle class action claims alleging that they underpaid non-participating providers for services in 

The American Medical Association, et al. v. United Healthcare Corp., et al., Civil Action No. 

00-2800 (S.D.N.Y.). FAC ¶ 75. 

f. Since its inception, FAIR Health's benchmark databases have been used 

by state government agencies, medical societies, and other organizations to set reimbursement 

for non-participating providers. FAC ¶ 76. 

g. For example, the State of Connecticut uses FAIR Health's database to 

determine reimbursement for non-participating providers' emergency services under the state's 

consumer protection law. FAC ¶ 77. 

h. Defendants tout the use of FAIR Health and its benchmark databases to 

determine non-participating, out-of-network payment amounts on its website. FAC ¶ 78. 

i. As stated on Defendants' website 

(https://www.uhc.com/legal/information-on-payment-of-out-of-network-benefits) for nonparticipating provider claims, the relevant United Health Group affiliate will "in many cases" 

pay the lower of a provider's actual billed charge or "the reasonable and customary amount," "the 

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usual customary and reasonable amount," "the prevailing rate," or other similar terms that base 

payment on what health care providers in the geographic area are charging. FAC ¶ 79. 

28. Based on the foregoing and a review of all of the allegations in the FAC, the Court 

finds that each of the Health Care Providers’ causes of action contain sufficient factual 

allegations to meet the applicable pleading standard and an actionable claim exists in every 

instance. Taking the FAC as true, which is required under a NRCP 12(b)(5) motion, the Court 

finds that relief could be granted in favor of the Health Care Providers if, in fact, the proof and 

determination at trial is made. 

29. Any of the foregoing factual statements that are more properly considered 

conclusions of law should be deemed so. Any of the following conclusions of law that are more 

properly considered factual statements should be deemed so. 

CONCLUSIONS OF LAW 

ERISA Preemption 

ERISA Overview 

30. ERISA was passed by Congress in 1974 primarily to address “mismanagement 

of funds accumulated to finance employee benefits and the failure to pay employees benefits 

from accumulated funds. Gobeille v. Liberty Mut. Ins. Co., 136 S. Ct. 936, 946 (2016); Skillin v. 

Rady Children's Hosp.-San Diego, 226 Cal. Rptr. 3d 505, 509 (Ct. App. 2017). 

31. “The comprehensive and reticulated statute, contains elaborate provisions for the 

regulation of employee benefit plans.” Skillin, 226 Cal. Rptr. 3d 505, 509. It sets forth reporting 

and disclosure obligations for plans, imposes a fiduciary standard of care for plan administrators, 

and establishes schedules for the vesting and accrual of pension benefits.” Massachusetts v. 

Morash, 490 U.S. 107, 112–113, 109 S. Ct. 1668 (1989). 

32. “ERISA does not guarantee substantive benefits. The statute, instead, seeks to 

make the benefits promised by an employer more secure by mandating certain oversight systems 

and other standard procedures.” Gobeille, 136 S.Ct. at 943. 

... 

... 

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33. ERISA is “one of only a few federal statutes under which two types of preemption 

may arise: conflict preemption and complete preemption.” Conn. State Dental Ass’n v. Anthem 

Health Plans, Inc., 591 F.3d 1337, 1343 (11th Cir. 2009). 

34. These two forms of preemption are doctrinally distinct. Cleghorn v. Blue Shield 

of Cal., 408 F.3d 1222, 1225 (9th Cir. 2005) (these “two strands to ERISA’s powerful preemptive 

force, differ in their purpose and function.”) (internal quotations omitted). 

Complete Preemption 

1. Separately, ERISA completely preempts state law only to the extent that the state 

law “duplicates, supplements, or supplants the ERISA civil enforcement remedy.” Davila, 542 

U.S. at 209. Section 502 (codified at 29 U.S.C. § 1132) sets forth “a comprehensive scheme of 

civil remedies to enforce ERISA’s provisions.” Rudel v. Hawai'i Mgmt. All. Ass'n, 937 F.3d 

1262, 1269-70 (9th Cir. 2019), cert. denied sub nom. HI Mgmt. All. Assoc. v. Rudel, 19-752, 

2020 WL 871750 (U.S. Feb. 24, 2020). 

2. Section 502’s purpose is to ensure that federal courts remain the only forum and 

vehicle for adjudicating claims for benefits under ERISA. Marin Gen. Hosp., 581 F.3d at 945. 

3. Complete preemption is a jurisdictional doctrine and cannot be used to obtain 

dismissal of a state law claim on a Rule 12(b)(5) motion to dismiss. Owayawa v. Am. United Life 

Ins. Co., CV 17-5018-JLV, 2018 WL 1175106, at *3 (D.S.D. Mar. 5, 2018) (“[A]lthough 

complete preemption...can be used to invoke federal question jurisdiction, Defendants cannot 

use [the doctrine] as a ground for dismissing Plaintiffs’ claims under Federal Rule of Civil 

Procedure 12(b)(6).”); Summit Estate, Inc. v. Cigna Healthcare of Cal., Inc., Case No. 17-CV03871, 2017 WL 4517111, at *13 (N.D. Cal. Oct. 10, 2017) (complete preemption under § 

1132(a) is “really a jurisdictional rather than a preemption doctrine....[and was] created...as a 

basis for federal question removal jurisdiction under 28 U.S.C. § 1441(a).”); Marin Gen. Hosp., 

581 F.3d at 945 (complete preemption under ERISA is not a defense to a state law claim); MidTown Surgical Ctr., L.L.P. v. Humana Health Plan of Tex., Inc., 16 F. Supp. 3d 767, 779 (S.D. 

Tex. 2014) (“complete preemption is not grounds for dismissal, but instead a mechanism to 

confer federal jurisdiction on a state-law claim that is in fact an ERISA claim.”); Autonation, 

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Inc. v. United Healthcare Ins. Co., 423 F.Supp.2d 1265, 1268 (S.D. Fla. 2006) (complete 

preemption is a jurisdictional doctrine which converts state law claims into federal claims for 

purposes of removal, but does not dismiss claims). 

4. The Court concludes that complete preemption is not a defense to a state law 

claim; therefore, it cannot serve as the foundation of an argument in a Rule 12(b)(5) motion to 

dismiss. 

5. Binding Ninth Circuit precedent makes clear that disputes concerning rates of 

payment do not fall within ERISA’s scope and are not subject to complete preemption. Marin 

Gen. Hosp., 581 F.3d at 948 (9th Cir. 2009); see also California Spine & Neurosurgery Inst. v. 

Boston Scientific Corp., No. 18-CV-07610-LHK, 2019 WL 1974901, at *3 (“Under Ninth 

Circuit law, ERISA does not preempt claims by a third party [medical provider] who sues an 

ERISA plan not as an assignee of a purported ERISA beneficiary, but as an independent entity 

claiming damages.”). 

6. The Court concludes that this dispute is one concerning rates of payment (see, 

e.g., FAC ¶¶ 43, 265); therefore, none of the claims asserted in the FAC fall within ERISA’s 

scope and the claims are not subject to complete preemption. 

7. The Court further considered the two-part test set forth in Davila, 542 U.S. at 

210- 211, and concluded that neither prong is met. 

8. Davila provides complete preemption applies only where: (1) a plaintiff “could 

have brought his claim under ERISA § 502(a)(1)(B),” and (2) “no other independent legal duty 

. . . is implicated by a defendant’s actions.” Id. at 210. The test is conjunctive; a claim is 

completely preempted only if both prongs are satisfied. McCulloch Orthopaedic Surgical Servs., 

PLLC v. Aetna Inc., 857 F.3d 141, 146 (2d Cir. 2017). 

9. Regarding the first Davila prong, the Court concludes that the Health Care 

Providers’ claims challenge the rates of reimbursement paid for covered healthcare services, 

rather than the right to reimbursement for such services, therefore they do not fall within the 

scope of § 502(a)(1)(B). FAC ¶¶ 1, 26; 1 n.1 (“The Health Care Providers also do not assert any 

claims...with respect to the right to payment under any ERISA plan.”); Conn. State Dental 

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Ass’n., 591 F.3d at 1349-50; Lone Star OB/GYN Associates v. Aetna Health Inc., 579 F.3d 525, 

531 (5th Cir. 2009); Montefiore, 642 F.3d at 325; CardioNet Inc. v. Cigna Health Corp., 751 

F.3d 165, 177-78 (3d Cir. 2014); Blue Cross of Cal., 187 F.3d at 1051 (affirming remand of 

health care providers’ state law claim for breach of contract because the dispute was “not over 

the right to payment, which might be said to depend on the patients’ assignments to the Providers, 

but the amount, or level, of payment, which depends on the terms of the provider agreements.”); 

see also Garber v. United Healthcare Corp., 2016 WL 1734089, at *3-5 (E.D.N.Y. May 2, 

2016); Long Island Thoracic Surgery, P.C. v. Building Serv. 32BJ Health Fund, 2019 WL 

5060495, at *2 (E.D.N.Y. Oct. 9, 2019); Premier Inpatient Partners LLC v. Aetna Health & Life 

Ins. Co., 371 F. Supp. 3d 1056, 1068-74 (M.D. Fla. 2019); Gulf-to-Bay Anesthesiology Assocs. 

v. UnitedHealthCare of Fla., Inc., 2018 WL 3640405, at *3 (M.D. Fla. July 20, 2018); Hialeah 

Anesthesia Specialists, LLC v. Coventry Health Care of Fla., Inc., 258 F. Supp. 3d 1323, 1327-

30 (S.D. Fla. 2017); N. Jersey Brain & Spine Ctr. v. MultiPlan, Inc., 2018 WL 6592956, at *7 

(D.N.J. Dec. 14, 2018); E. Coast Advanced Plastic Surgery v. AmeriHealth, 2018 WL 1226104, 

at *3 (D.N.J. Mar. 9, 2018).

10. The second Davila prong looks to whether an independent legal duty is implicated

by the defendant’s actions. 542 U.S. at 210. “If there is some other independent legal duty beyond 

that imposed by an ERISA plan, a claim based on that duty is not completely preempted . . . .” 

Marin, 581 F.3d at 949. “A legal duty is independent if it is not based on an obligation under an 

ERISA plan, or it would exist whether or not an ERISA plan existed.” N.J. Carpenters and the 

Trs. Thereof v. Tishman Constr. Corp. of N.J., 760 F.3d 297, 303 (3d Cir. 2014). 

11. Claims predicated upon duties imposed by state common and statutory law do not 

satisfy Davila’s second prong. See, e.g., McCulloch, 857 F.3d at 150 (second Davila prong 

unsatisfied because “[plaintiff’s] promissory-estoppel claim against Aetna arises not from an 

alleged violation of some right contained in the plan, but rather from a freestanding state-law duty 

grounded in conceptions of equity and fairness.”); Wurtz v. Rawlings Co., LLC, 761 F.3d 232, 243 

(2d Cir. 2014) (“[W]hile defendants’ reimbursement claims relate to plaintiffs’ plans, this is not 

the test for complete preemption. Plaintiffs’ claims do not derive from their plans or require 

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investigation into the terms of their plans; rather, they derive from [a state statute].”); Bay Area 

Surgical, 2012 WL 3235999, at *4 (second Davila prong unsatisfied because plaintiff alleging 

claim under an oral agreement “is suing on its own right pursuant to an independent obligation, 

and its claims would exist regardless of an ERISA plan.”); Christ Hosp. v. Local 1102 Health and 

Benefit Fund, 2011 WL 5042062, at *4 (D.N.J. Oct. 24, 2011) (second Davila prong unsatisfied 

where claims “depend[ed] on the operation of a third-party contract” between plaintiff medical 

provider and defendant ERISA plan, rather than on the terms of the ERISA plan). 

12. The Court concludes that the Health Care Providers’ claims are founded on 

independent legal duties beyond that imposed by an ERISA plan, therefore the claims do not 

satisfy Davila’s second prong. 

13. Further, the Court finds the Federal District Court’s Order granting the Health 

Care Providers’ Amended Motion to Remand to be persuasive. There, in accord with the 

overwhelming weight of legal authority, the Federal District Court concluded that a third-party 

medical provider’s challenge to the rate of payment afforded by an ERISA plan on indisputably 

covered claims for reimbursement is not completely preempted. 

14. The Court does not find merit in United’s argument that the claims asserted in the 

FAC are preempted because an implied-in-fact agreement is different than a written, oral or quasi 

contract. In Nevada, implied-in-fact agreements and express agreements stand on equal footing. 

See Certified Fire Prot. Inc. v. Precision Constr., 128 Nev. 371, 379, 283 P.3d 250, 256 (2012) 

(an implied-in-fact contract “is a true contract that arises from the tacit agreement of the 

parties.”); Smith v. Recrion Corp., 91 Nev. 666, 668, 541 P.2d 663, 665 (1975) (“Both express 

and implied contracts are founded on an ascertained agreement.”); Magnum Opes Const. v. 

Sanpete Steel Corp., 2013 WL 7158997 (Nev. Nov. 1, 2013) (quoting 1 Williston on Contracts 

§ 1:5 (4th ed. 2007) (noting that the legal effects of express and implied-in-fact contracts are 

identical); Cashill v. Second Judicial Dist. Court of State ex rel. Cty. of Washoe, 128 Nev. 887, 

381 P.3d 600 (2012) (unpublished) (“The distinction between express and implied in fact 

contracts relates only to the manifestation of assent; both types are based upon the expressed or 

apparent intention of the parties.”). As a result, the Court concludes that implied-in-fact 

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agreements are treated the same as written, oral and quasi contracts in Nevada and, consequently, 

the caselaw rejecting ERISA preemption for claims arising out of such contracts equally applies 

to implied-in-fact agreements. 

15. The Court does not find Pilot Life Ins. v. Dedeaux, 481 U.S. 41, 57, 107 S. Ct. 

1549, 1558 (1987), a case cited by United, to be analogous or persuasive in light of the FAC’s 

allegations. 

16. The Court also does not find merit in United’s argument that the state law claims 

threaten to disrupt nationally uniform plan administration by “seeking to use state law claims to 

force the plans to pay more.” Motion at 3:22-23. Other courts have similarly rejected United’s 

argument, finding that “state law claims brought by health care providers against plan insurers 

too tenuously affect ERISA plans to be preempted.” Lordmann Enters., Inc. v. Equicor, Inc., 32 

F.3d 1529, 1533 (11th Cir. 1994); Glastein v. Aetna, Inc., 2018 WL 4562467, at *3 n.4 (D.N.J. 

Sept. 24, 2018) (collecting cases); Rocky Mountain Holdings LLC v. Blue Cross and Blue Shield 

of Fla., Inc., 2008 WL 3833236, at *5 (M.D. Fla. Aug. 13, 2008) (collecting cases); Med. & 

Chirurgical Facility of the State of Md. v. Aetna U.S. Healthcare, Inc., 221 F. Supp. 2d 618, 619-

20 (D. Md. 2002) (collecting cases). 

17. Despite a heading in the Supplement that suggests the Court can dismiss the 

Health Care Provider’s NV RICO claim on complete preemption grounds, United does not cite 

to any case that discusses or holds that ERISA’s Section 502 (complete preemption) preempts a 

state civil racketeering claim. Thus, the Court finds no merit in United’s argument. 

18. To the extent any of United’s other arguments specific to its Motion and 

Supplement regarding complete preemption are not specifically addressed herein, the Court 

considered all of the defenses raised in the Motion and Supplement, as well as all arguments made 

during oral argument, and the Court does not find merit to any of them. 

Conflict Preemption 

19. Section 514 (codified at 29 U.S.C. § 1144) contains ERISA’s conflict preemption 

provision. It expressly preempts “any and all State laws insofar as they may now or hereafter 

relate to any employee benefit plan[.]” 29 U.S.C. § 1144(a). 

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20. However, § 514 saves from preemption “any law of any State which regulates 

insurance, banking, or securities.” 29 U.S.C. § 1144(b)(2)(A). The saving clause functions to 

preserve a state’s traditional regulatory power over insurance, banking, and securities. Rudel, 

937 F.3d at 1269-70; Gobeille, 136 S. Ct. at 943. 

21. Section 514, however, does not confer federal jurisdiction. Marin Gen. Hosp., 

581 F.3d at 945. 

22. In addressing conflict preemption under ERISA, the “starting presumption” is 

that “Congress does not intend to supplant state law,” and “‘that the historic police powers of the 

States were not to be superseded by [ERISA] unless that was the clear and manifest purpose of 

Congress.’” Viad Corp v. MoneyGram Int'l, Inc., No. 1 CA-CV 15-0053, 2016 WL 6436827, at 

*2 (Ariz. Ct. App. Nov. 1, 2016), as amended (May 3, 2017) (quoting New York State Conference 

of Blue Cross & Blue Shield Plans v. Travelers, 514 U.S. 645, 654-55 (1995)). 

23. The proper analysis under Section 514(a) starts with a presumption that ERISA 

does not supplant state law claims. 

24. A common law claim “relates to” an employee benefit plan governed by ERISA 

“if it has a connection with or reference to such a plan.” Providence Health Plan v. McDowell, 

385 F.3d 1168, 1172 (9th Cir. 2004); see also Blue Cross of Cal., 187 F.3d at 1052 (9th Cir. 

1999). 

25. The Supreme Court has limited the parameters of § 514(a) preemption to two 

categories of state laws. Gobeille, 136 S.Ct. at 943. Those categories are: (1) laws “with a 

reference to ERISA plans,” which include laws which “act[ ] immediately and exclusively upon 

ERISA plans . . .or where the existence of ERISA plans is essential to the law’s operation,” and 

(2) laws with “an impermissible connection with ERISA plans, meaning a state law that governs 

a central matter of plan administration or interferes with nationally uniform plan administration.” 

Id.

26. The Ninth Circuit has made it clear that § 514(a) does not apply to claims brought 

by third-party healthcare providers, like the Health Care Providers here. Morris B. Silver M.D., 

Inc. v. Int'l Longshore & Warehouse etc., 2 Cal. App. 5th 793, 799, 206 Cal. Rptr. 3d 461, 466 

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(Ct. App. 2016); Providence Health Plan, 385 F.3d at 1172; Abraham v. Norcal Waste Sys., Inc., 

265 F.3d 811, 820–21 (9th Cir.2001); Blue Cross of Cal., 187 F.3d at 1052–53; see also The 

Meadows v. Employers Health Ins., 47 F.3d 1006, 1008 (9th Cir. 1995) (stating that § 1144(a) 

does not preempt “claims by a third-party who sues an ERISA plan not as an assignee of a 

purported ERISA beneficiary, but as an independent entity claiming damages”). 

27. Other jurisdictions have also made it clear that § 514(a) claims by third-party 

providers arising out of analogous circumstances to those asserted by Health Care Providers 

here, are not preempted. See, e.g., Memorial Hosp. System v. Northbrook Life Ins. Co., 904 F.2d 

236, 243–246 (5th Cir. 1990) (holding hospital’s claim for deceptive and unfair practices arising 

from representations regarding coverage not preempted and articulating two-factor test); see also 

Access Mediquip LLC v. UnitedHealthcare Ins. Co., 662 F.3d 376, 385 (5th Cir. 2011) (“The 

state law underlying Access’s misrepresentation claims does not purport to regulate what 

benefits United provides to the beneficiaries of its ERISA plans, but rather what representations 

it makes to third parties about the extent to which it will pay for their services.”); Depot, Inc. v. 

Caring for Montanans, Inc., 915 F.3d 643, 667 (9th Cir. 2019), cert. denied, 140 S. Ct. 223 

(2019) (“State-law claims are based on other independent legal duties when they are in no way 

based on an obligation under an ERISA plan and would exist whether or not an ERISA plan 

existed.”) (citing Marin Gen. Hosp., 581 F.3d at 950) (internal alteration omitted). 

28. The Court agrees with the foregoing legal authority that the relationship between 

the parties – i.e. provider/insurer –is not a relationship that is intended to be governed by Section 

514(a). As a result, the Court concludes that none of the Health Care Providers’ claims set forth 

in the FAC are subject to conflict preemption. 

29. The Court further finds that the Health Care Providers’ state-law claims do not 

fall within either of the Gobeille categories because the Health Care Providers allege that they 

have an implied-in-fact contract with United, which obligates United, under Nevada law, to pay 

the Health Care Providers reasonable compensation (FAC ¶¶ 189-206), and that, alternatively, 

Nevada law of unjust enrichment obligates United to pay the Health Care Providers the 

reasonable value for their services. Id. ¶¶ 216-226. 

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30. Under controlling Supreme Court precedent, ERISA preempts only those state 

laws “with a reference to” or “impermissible connection with” ERISA plans. The Health Care 

Providers’ common law and statutory claims fall into neither category. 

31. The Health Care Providers’ state law claims are not subject to conflict preemption 

because they neither seek recovery under an ERISA plan, require examination of an ERISA plan, 

nor implicate any discernible goal of ERISA. Because the Health Care Providers are pursuing the 

instant lawsuit in their own capacity and not as assignees, the Health Care Providers' claims are 

not preempted. The Court or jury will not need to reference any ERISA plan to resolve the question 

of at what rate Nevada law requires United to reimburse the Health Care Providers for the services 

in question. 

32. Therefore, the Court concludes that the Health Care Providers have not pled 

claims for ERISA benefits. See Blue Cross of California Inc. v. Insys Therapeutics Inc., 390 F. 

Supp. 3d 996, 1004 (D. Ariz. 2019) (holding that state-law claims for common law fraud, 

misrepresentation, negligent misrepresentation, unjust enrichment, civil conspiracy, tortious 

interference with contract, and statutory claims for unfair and deceptive competition and 

practices were not subject to conflict preemption); Spinedex v. Physical Therapy, U.S.A., Inc. v. 

Arizona, No. 04-CV-1576-PHX-JAT, 2005 WL 3821387, at *8 (D. Ariz. Nov. 9, 2005); Almont 

Ambulatory Surgery Center, LLC v. UnitedHealth Grp., Inc., 121 F. Supp. 3d 950, 962-71 (C.D. 

Cal. 2015); Scripps Health v. Schaller Anderson, LLC, No. 12-CV-252-AJB(DHB), 2012 WL 

2390760, at *2-*6 (S.D. Cal. Jun. 22, 2012); Ass'n of N.J. Chiropractors v. Aetna, Inc., No. 

CIV.A. 09-3761 JAP, 2012 WL 1638166, at *5-7 (D.N.J. May 8, 2012); United Healthcare 

Servs., Inc. v. Sanctuary Surgical Ctr., Inc., 5 F. Supp. 3d 1350, 1363 (S.D. Fla. 2014)); Aetna 

Life Ins. Co. v. Huntingdon Valley Surgery Ctr., 2015 WL 1954287, at *10 (E.D. Pa. Apr. 30, 

2015) (holding that the out-of-network provider claims for unjust enrichment and breach of 

contract were not preempted by ERISA because the plaintiff’s state law claims were independent 

of the ERISA beneficiaries’ rights under any ERISA plan); Jewish Lifeline Network, Inc. v. 

Oxford Health Plans (NJ), Inc., 2015 WL 2371635, at *3 (D.N.J. May 18, 2015) (ERISA 

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preemption “does not foreclose a plaintiff from pleading a state law claim based on a legal duty 

that is independent from ERISA or an ERISA-governed plan”). 

33. The United States Supreme Court and more recent Ninth Circuit cases have 

declined to adopt a literal interpretation of the “relates to” language. In New York State 

Conference of Blue Cross & Blue Shield Plans, 514 U.S. at 654, 115 S. Ct. at 1671, the court 

clarified that the “starting presumption” is that Congress does not intend to supplant state law. 

See also Bertoni v. Stock Bldg. Supply, 989 So. 2d 670, 674–75 (Fla. Dist. Ct. App. 2008). It 

went on to describe the “relates to” language of the preemption statute as “unhelpful,” and 

instructed that one is instead to look “to the objectives of the ERISA statute as a guide to the 

scope of the state law that Congress understood would survive.” Id. at 656, 115 S.Ct. 1671. The 

Travelers court noted that in light of the objectives of ERISA and its preemption clause, 

Congress intended to preempt “state laws providing alternative enforcement mechanisms” for 

employees to obtain ERISA plan benefits. Id. at 658, 115 S.Ct. 1671; see also Egelhoff v. 

Egelhoff ex rel. Breiner, 121 S. Ct. 1322, 1327 (2001) (“But at the same time, we have recognized 

that the term “relate to” cannot be taken “to extend to the furthest stretch of its indeterminacy,” 

or else “for all practical purposes pre-emption would never run its course). 

34. In the face of this controlling law, United relies on outdated and a now-rejected 

overbroad interpretations of Section 514(a). See Evans v. Safeco Life Ins. Co., 916 F.2d 1437, 

1439 (9th Cir. 1990). United argues that the “relates to” language in the preemption provision of 

Section 514 (a) is one of the “broadest preemption clauses ever enacted by Congress.” However, 

the Court does not find merit in United’s argument and therefore rejects the argument. 

35. The Court also finds that United relies on legal authority that is inapplicable to a 

conflict preemption analysis because it addresses complete preemption under Section 502(a) of 

ERISA. The cases cited by United involved claims expressly seeking ERISA benefits and/or 

brought directly by plan members rather than third-party medical providers. See e.g. Aetna Life 

Ins. Co. v. Bayona, 223 F.3d 1030, 1034 (9th Cir. 2000), as amended on denial of reh'g and reh'g 

en banc (Nov. 3, 2000) (employee plan member’s counterclaims directly against plan 

administrator conflict preempted); Blau v. Del Monte Corp., 748 F.2d 1348 (9th Cir. 1984) 

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(nonunion salaried employees brought suit against employer for benefits under employee welfare 

plan); Parlanti v. MGM Mirage, No. 2:05-CV-1259-ECR-RJJ, 2006 WL 8442532, at *1 (D. 

Nev. Feb. 15, 2006) (plaintiff directly sued former employer over supplemental executive 

retirement plan). 

36. The Court does not find merit in United’s argument that the Health Care 

Providers’ claims expressly depend on the existence of the employee welfare benefit plans and 

the administration of claims for benefits submitted under those plans. This argument has been 

rejected by other courts and the Court agrees with the Health Care Providers that this is not the 

test for conflict preemption. See In re Managed Care Litig., 2011 WL 1595153, at *5 (S.D. Fla. 

Mar. 31, 2011). 

37. The Court also considered and does not find merit to United’s attempt to 

distinguish self-funded plans from other employee-sponsored plans. Self-funded ERISA plans 

are only shielded from state laws (insurance or otherwise) that “relate to” ERISA. See FMC 

Corp. v. Holliday, 498 U.S. 52, 61 (1990) (“[S]elf-funded ERISA plans are exempt from state 

regulation insofar as that regulation ‘relate[s] to’ the plans. State laws directed toward the [selffunded] plans are pre-empted because they relate to an employee benefit plan but are not ‘saved’ 

because they do not regulate insurance.”) (emphasis added). The Court therefore rejects the 

argument raised by United. 

38. The Court has also considered United’s argument that the NV RICO claim is 

subject to complete preemption under Moorman v. UnumProvident Corp., CIV.A. 

104CV2075BBM, 2007 WL 4984162, at *1 (N.D. Ga. Oct. 30, 2007), but the Court does not find 

merit to United’s position for the reasons set forth in the Health Care Providers’ Opposition to 

the Supplement and at the related hearings. 

39. Instead, the Court concludes that the FAC’s allegations sufficiently detail 

improper conduct to manipulate and deflate reimbursement payment rates so that United can then 

point to that same manufactured data as justification for paying the Health Care Providers a 

fraction of what they are owed for the emergency medicine services provided. FAC ¶¶ 90-188, 

¶¶ 261-273. 

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40. To the extent any of United’s other arguments specific to its Motion and 

Supplement regarding conflict preemption are not specifically addressed herein, the Court 

considered all of the defenses raised in the Motion and Supplement, as well as all arguments made 

during oral argument, and the Court does not find merit to any of them. 

NRCP 12(b)(5) Legal Standard 

41. Rule 8(a)(2) of the Nevada Rules of Civil Procedure states that a complaint shall 

contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” 

NRCP 8(a)(2). Thus, Nevada is a notice-pleading state and a pleading is liberally construed to 

“place into issue matter which is fairly noticed to the adverse party.” Chavez v. Robberson Steel 

Co., 94 Nev. 597, 598, 584 P.2d 159, 160 (Nev. 1978); Hay v. Hay, 100 Nev. 196, 198, 678 P.2d 

672, 674 (1984). In other words, so long as the “adverse party has adequate notice of the nature 

of the claim and relief sought,” trial courts should allow a pleading to survive any challenge 

asking for dismissal. Hay, 100 Nev. at 198, 678 P.2d at 674; see also Liston v. Las Vegas Metro. 

Police Dept., 111 Nev. 1575, 1579, 908 P.2d 720, 723 (1995). 

42. When examining whether a defendant received notice of the claims against it, 

Nevada courts have recognized that notice is “knowledge of facts which would naturally lead 

a...person to make inquiry of everything which such injury pursued in good faith would 

disclose.” Liston, 111 Nev. at 1579, 908 P.2d at 723. Furthermore, a plaintiff is not required to 

give itemized descriptions of evidence but rather “need only broadly recite the ‘ultimate facts’ 

necessary to set forth the elements of a cognizable claim that a party believes can be proven at 

trial.” Nutton v. Sunset Station, Inc., 131 Nev. 279, 290, 357 P.3d 966, 974 (Nev. App. 2015). 

43. Accordingly, in considering the dismissal of a complaint pursuant to NRCP 

12(b)(5), a court must “determine whether or not the challenged pleading sets forth allegations 

sufficient to make out the elements of a right to relief.” Bemis v. Estate of Bemis, 114 Nev. 1021, 

1021, 967 P.2d 437, 439 (1998) (citing Edgar v. Wagner, 101 Nev. 226, 227, 699 P.2d 110, 111 

(1985)). 

44. A district court is required to accept all factual allegations as true and to draw all 

inferences in favor of the non-moving party; dismissal is only proper where there is a complete 

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lack of a cognizable legal theory. See Buzz Stew, LLC v. City of North Las Vegas, 124 Nev. 224, 

228-229, 181 P.3d 670, 672 (2008); Garcia v. Prudential Ins. Co. of Am., 129 Nev. 15, 19, 293 

P.3d 869, 871-72 (2013). 

45. A complaint should only be dismissed “if it appears beyond a doubt that [the 

plaintiff] could prove no set of facts, which, if true, would entitle [the plaintiff] to relief.” Buzz 

Stew, LLC, 124 Nev. at 228, 181 P.3d at 672. 

The Health Care Providers’ Claims 

Breach of Implied-in-Fact Contract 

46. A plaintiff states a claim for breach of contract, whether express or implied, by 

alleging: (1) the existence of a valid contract, (2) a breach by the defendant, and (3) damage as 

a result of the breach. Saini v. Int’l Game Tech., 434 F. Supp. 2d 913, 919-20 (D. Nev. 2006) 

(citing Richardson v. Jones, 1 Nev. 405, 405 (1865)); Recrion Corp., 541 P.2d at 664 

(recognizing the elements of breach of express and implied contract claims are the same). 

47. In an implied contract, such intent is inferred from the conduct of the parties and 

other relevant facts and circumstances. Warrington v. Empey, 95 Nev. 136, 138–139 (1979). The 

terms of an implied contract can also be manifested by conduct or by other customs. Recrion 

Corp., 541 P.2d at 668; Nevada Ass'n Servs., Inc. v. First Am. Title Ins. Co., No. 2:11-cv-02015-

KD-VCF, 2012 WL 3096706, at *3 (D. Nev. July 30, 2012) (denying motion to dismiss on 

breach of contract claim because the plaintiff stated “a plausible claim that, through a course of 

dealing involving hundreds of transactions over several years, Defendants and Plaintiff 

manifested an intent to be bound and agreed to material terms of an implied contract.”). 

48. In Nevada Ass’n Servs., Inc., the district court also noted that a motion to dismiss 

is not the proper place for such a factual evaluation of whether parties entered into an implied 

contract because “it necessarily requires examination of the facts and circumstance.” Id. 

49. The Health Care Providers allege an implied-in-fact agreement exists between the 

Health Care Providers and Defendants, specifically alleging that “there is no written agreement 

between Defendants and the Health Care Providers for the healthcare claims at issue in this 

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litigation; the Health Care Providers are therefore designated as a ‘non-participating’ or ‘out-ofnetwork’ provider for all of the claims at issue.” FAC ¶ 20; see also FAC ¶¶ 189-206. 

50. Thus, the FAC adequately alleges a claim for breach of implied-in-fact contract. 

51. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ claim for breach of implied-in-fact contract are not specifically addressed 

herein, the Court considered all of the defenses raised in the Motion, as well as all arguments made 

during oral argument, and the Court does not find merit to any of them. 

Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing 

52. In Nevada, a plaintiff need only allege three elements to assert a claim for tortious 

breach of the implied covenant of good faith and fair dealing: (1) an enforceable contract (2) “a 

special relationship between the tortfeasor and the tort victim...a relationship of trust and special 

reliance” and (3) the conduct of the tortfeasor must go beyond the bounds of ordinary liability 

for breach of contract. Martin v. Sears, Roebuck and Co., 111 Nev. 923, 929, 899 P.2d 551, 555 

(1995). 

53. The special relationship required in Martin is characterized by elements of public 

interest, adhesion, and fiduciary responsibility.” Ins. Co. of the W. v. Gibson Tile Co., 122 Nev. 

455, 461, 134 P.3d 698, 702 (2006). 

54. Moreover, a tortious breach of the covenant requires that “the party in the superior 

or entrusted position has engaged in grievous and perfidious misconduct.” Great Am. Ins. Co. v. 

Gen. Builders, Inc., 113 Nev. 346, 355, 934 P.2d 257, 263 (1997) (internal quotes and citations 

omitted). 

55. The Health Care Providers have satisfied its pleading requirements under NRCP 

8(a), and at this stage in litigation, the Health Care Providers have articulated a special 

relationship exists between United and the Health Care Providers. FAC ¶¶ 207-215.

56. The Court does not find merit to United’s argument that Aluevich v. Harrah's, 99 

Nev. 215, 218, 660 P.2d 986, 987 (1983) stands for the proposition that this claim for relief 

cannot apply to sophisticated parties in the commercial realm. 

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57. To the extent United contends that a higher pleading standard is required for a 

claim of tortious breach of implied covenant of good faith and fair dealing, the Court does not 

find merit to that argument. 

58. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ claim for tortious breach of the implied covenant of good faith and fair 

dealing are not specifically addressed herein, the Court considered all of the defenses raised in the 

Motion, as well as all arguments made during oral argument, and the Court does not find merit to 

any of them. 

Alternative Claim for Unjust Enrichment 

59. Nevada law permits recovery for unjust enrichment where a plaintiff provides an 

indirect benefit to the defendant that defendant accepts without adequate compensation, as 

United has done here. Topaz Mut. Co. v. Marsh, 108 Nev. 845, 856, 839 P.2d 606, 613 (1992) 

(recognizing that benefit in unjust enrichment claim can be indirect). 

60. The overwhelming majority of cases considering this issue conclude that where 

a state allows for an indirect benefit to provide the basis for an unjust enrichment claim, a claim 

of unjust enrichment against an insurer is actionable. See Emergency Physicians LLC v. Arkansas 

Health & Wellness Health Plan, Inc., No. 4:17-CV-00492-KGB, 2018 WL 3039517, at *5 (E.D. 

Ark. Jan. 31, 2018) (finding that because Texas law allows for an indirect benefit to sustain a 

claim for unjust enrichment, a claim for unjust enrichment based on indirect benefits received 

by insurer for services provided to insureds was actionable); Bell v. Blue Cross of California, 

131 Cal. App. 4th 211, 221, 31 Cal. Rptr. 3d 688, 695–96 (2005) (emergency provider had 

standing to assert quantum meruit claim against payor because “he who has ‘performed the duty 

of another by supplying a third person with necessaries...is entitled to restitution...”); El Paso 

Healthcare System, Ltd. v. Molina Healthcare of New Mexico, 683 F.Supp.2d 454, 461–462 

(W.D. Tex. 2010) (insurer “receive[d] the benefit of having its obligations to its plan members, 

and to the state in the interests of plan members, discharged.”); Appalachian Reg'l Healthcare 

vs. Coventry Health & Life Ins. Co., 2013 WL 1314154 at *4 (E.D. Ky. Mar. 28, 2013) (granting

summary judgment to provider on unjust enrichment claim where plaintiff’s services allowed 

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managed care organization to discharge its duty to provide coverage to Medicaid patients); 

Fisher v. Blue Cross Blue Shield of Texas, Inc., 2011 WL 11703781, at *8 (N.D. Tex. June 27, 

2011) (defendant insurer received the benefit of having its obligations to its plan members 

discharged.); Forest Ambulatory Surgical Associates, L.P. v. United Healthcare Ins. Co., 2013 

WL 11323600, at *10 (C.D. Cal. March 12, 2013) (“Plaintiff sufficiently stated a claim upon 

which relief can be granted because the allegations ... establish that Defendants received the 

benefit of having their obligations to the [policyholders] discharged.”); River Park Hosp., Inc. v. 

BlueCross BlueShield of Tennessee, Inc., 173 S.W.3d 43, 58-59 (Tenn. Ct. App. 2002) (MCO 

was unjustly enriched by hospital’s emergency services provided to the insurer’s enrollees); New 

York City Health & Hosps. Corp. v. Wellcare of New York, Inc., 35 Misc. 3d 250, 251, 937 

N.Y.S.2d 540, 541, 546 (2011) (non-contracted hospital’s unjust enrichment claim for 

systematic underpayment for emergency services by MCO should not be dismissed under New 

York law). 

61. Nevada law permits an unjust enrichment claim to lie on assertions of United’s 

receipt of a material, indirect benefit from the Health Care Providers’ services. Thus, the Court 

concludes that the Health Care Providers sufficiently allege an alternative claim for unjust 

enrichment by the contention that their provision of services to United’s Members allows United 

to discharge its duties under its contracts with its Members to cover medically necessary 

emergency healthcare services, thereby creating an indirect benefit to United, giving rise to an 

actionable claim for unjust enrichment under Nevada law. FAC ¶¶ 216-226. 

62. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ alternative claim for unjust enrichment are not specifically addressed 

herein, the Court considered all of the defenses raised in the Motion, as well as all arguments made 

during oral argument, and the Court does not find merit to any of them. 

Violation of NRS 686A.020 and 686A3.10

63. Under NRS 686A.020, “[a] person shall not engage in this state in any practice 

which is defined in NRS 686A.010 to 686A.310, inclusive, as, or determined pursuant to NRS 

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686A.170 to be, an unfair method of competition or an unfair or deceptive act or practice in the 

business of insurance.” 

64. One prohibited unfair claim settlement practice is “[f]ailing to effectuate prompt, 

fair and equitable settlements of claims in which liability of the insurer has become reasonably 

clear." NRS 686A.310(1)(e). 

65. The plain language of NRS 686A.310 does not prohibit a third party, such as the 

Health Care Providers, from raising claims under NRS 686A.310, but, instead, provides that 

claims may be asserted by the Commissioner and an insured. NRS 686A.310(2) (“In addition to 

any rights or remedies available to the Commissioner, an insurer is liable to its insured for any 

damages sustained by the insured as a result of the commission of any act set forth in subsection 

1 as an unfair practice.”). 

66. As the Health Care Providers allege in Paragraphs 64, 66, 230 of the FAC, United 

has failed to comply with NRS 686A.310(1)(e) by failing to pay the Health Care Providers’ 

medical professionals the usual and customary rate for emergency care provided to United’s 

members. 

67. The Health Care Providers also sufficiently allege that United has acted in bad faith 

regarding its obligation to pay the usual and customary fee (see, e.g., FAC ¶¶ 57, 69, 233); 

therefore, pursuant to NRS 42.005, the Health Care Providers are entitled to maintain their claim 

to recover punitive damages against United associated with this claim. 

68. The Court does not find merit to United’s argument that Gunny v. Allstate Ins. 

Co., 108 Nev. 344, 346, 830 P.2d 1335, 1336 (1992) stands for the proposition that Nevada’s 

Unfair Insurance Practices Act “does not create a private right of action against insurers in favor 

of third party claimants like Fremont.” Motion at 23:16-17. Nor is Gunny analogous because the 

Health Care Providers allege the existence of an implied-in-fact contract with United and, 

consequently, a claim asserted by a medical services provider under NRS 686A.020 and 

686A.310 is actionable. The absence of a contract between Gunny and the insurer makes this 

case distinguishable. 

... 

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69. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ claim for Violation of NRS 686A.020 and 686A3.10 are not specifically 

addressed herein, the Court considered all of the defenses raised in the Motion, as well as all 

arguments made during oral argument, and the Court does not find merit to any of them. 

Violations of Nevada Prompt Pay Statutes and Regulations 

70. The Nevada Insurance Code requires an HMO, MCO or other health insurer to 

pay a healthcare provider’s claim within 30 days of receipt of a claim. NRS 683A.0879 (third 

party administrator), NRS 689A.410 (Individual Health Insurance), NRS 689B.255 (Group and 

Blanket Health Insurance), NRS 689C.485 (Health Insurance for Small Employers), NRS 

695C.185 (HMO), NAC 686A.675 (all insurers) (collectively, the “NV Prompt Pay Laws”). 

Thus, for all submitted claims, United was obligated to pay the Health Care Providers the usual 

and customary rate within 30 days of receipt of the claim.

71. The Court concludes that the Health Care Providers adequately allege in the FAC 

that United has failed to reimburse the Health Care Providers at the usual and customary rate 

within 30 days of the submission of the claim. FAC ¶ 237. The Health Care Providers further 

allege that United has failed to reimburse the Health Care Providers at the usual and customary 

rate at all. Id.

72. Additionally, the Health Care Providers adequately state a claim for violation of 

NV Prompt Pay Laws by alleging that United has only paid part of the subject claims that have 

been approved and are fully payable. Id. ¶ 238. 

73. As a result, the FAC adequately alleges that United has failed to reimburse the 

Health Care Providers at the usual and customary rate within 30 days of submission of the claims 

as the Nevada Insurance Code requires. If established, United is liable to the Health Care 

Providers for statutory penalties. 

74. Moreover, United did not challenge the Health Care Providers’ claim for violation 

of NV Prompt Pay Laws under NRCP 12(b)(5). 

75. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ claim for Violations of Nevada Prompt Pay statutes and regulations are 

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not specifically addressed herein, the Court considered all of the defenses raised in the Motion, as 

well as all arguments made during oral argument, and the Court does not find merit to any of them. 

Violations of Nevada Consumer Fraud & Deceptive Trade Practices Acts

76. The Nevada Deceptive Trade Practices Act (DTPA) prohibits United from 

engaging in “deceptive trade practices,” including but not limited to (1) knowingly making a false 

representation in a transaction; (2) violating “a state or federal statute or regulation relating to the 

sale or lease of goods or services”; (3) using “coercion, duress or intimidation in a transaction”; 

and (4) knowingly misrepresent the “legal rights, obligations or remedies of a party to a 

transaction.” NRS 598.0915(15), 598.0923(3), 598.0923(4), NRS 598.092(8), respectively. 

77. The Nevada Consumer Fraud Statute provides that a legal action “may be brought 

by any person who is a victim of consumer fraud.” NRS 41.600(1). “Consumer fraud” includes a 

deceptive trade practice as defined by the DTPA. 

78. The Health Care Providers sufficiently allege that United has violated the DTPA 

and the Consumer Fraud Statute through its acts, practices, and omissions described in the FAC, 

including but not limited to (a) wrongfully refusing to pay the Health Care Providers for the 

medically necessary, covered emergency services the Health Care Providers provided to Members 

in order to gain unfair leverage against the Health Care Providers now that they are out-of-network 

and in contract negotiations to potentially become a participating provider under a new contract 

in an effort to force the Health Care Providers to accept lower amounts than it is entitled for its 

services; and (b) engaging in systematic efforts to delay adjudication and payment of the Health 

Care Providers’ claims for its services provided to United’s members in violation of their legal 

obligations. FAC ¶ 246. 

79. The Nevada Supreme Court has held that violations of DTPA do not need to be 

proven with the same level of particularity as fraud claims. Betsinger v. D.R. Horton, Inc., 232 

P.3d 433, 436 (2010) (holding that a violation of the DTPA need not be proven under the clear 

and convincing standard as is required for a fraud claim). 

80. Even if this Court were to require that this claim be subject to heightened pleading 

standards, the Court concludes that the Health Care Providers pled the claim for violation of 

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DTPA with particularity. FAC ¶ 246; see also ¶¶ 25, 57, 65. 

81. The Health Care Providers sufficiently allege that United violated “a state or 

federal statute or regulation relating to the sale or lease of goods or services” with allegations 

that United has violated NRS 679B.152, NRS 686A.020, 686A.310, NRS 683A.0879 (third party 

administrator), NRS 689A.410 (Individual Health Insurance), NRS 689B.255 (Group and 

Blanket Health Insurance), NRS 689C.485 (Health Insurance for Small Employers), NRS 

695C.185 (HMO) and NAC 686A.675 by failing to timely pay claims submitted at a usual and 

customary rate within 30 days of receipt of the claim. FAC ¶¶ 243-249. The Health Care 

Providers expressly state that the UH Parties began to violate these provisions in July 2017 (FAC 

¶ 254) and the Sierra Affiliates in March 2019 (id. ¶ 255) and continue to violate such provisions 

through the present date. Nothing further is required to establish that this claim is actionable. As 

such, the Health Care Providers sufficiently allege this portion of the DTPA claim. 

82. The Health Care Providers also sufficiently allege that the DPTA has been 

violated by United’s use of “coercion, duress or intimidation in a transaction.” FAC ¶ 244. 

Specifically, the Health Care Providers allege that United is “wrongfully refusing to pay the 

Health Care Providers for the medically necessary, covered emergency services the Health Care 

Providers provided to Members in order to gain unfair leverage against the Health Care Providers 

now that they are out-of-network and in contract negotiations to potentially become a 

participating provider under a new contract in an effort to force the Health Care Providers to 

accept lower amounts than it is entitled for its services.” FAC ¶ 246. 

83. Further, the Health Care Providers allege: 

Defendants paid some claims at an appropriate rate and others at a 

significantly reduced rate which is demonstrative of an arbitrary and 

selective program and motive or intent to unjustifiably reduce the 

overall amount Defendants pay to the Health Care Providers. 

Defendants implemented this program to coerce, influence and 

leverage business discussions with the Health Care Providers to

become a participating provider at significantly reduced rates, as 

well as to unfairly and illegally profit from a manipulation of

payment rates. 

FAC ¶ 65. 

... 

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84. Based on the foregoing, the Health Care Providers sufficiently allege who 

engaged in these bad acts (the United entities) when such parties engaged in these acts (from 

2017 to present, FAC ¶ 90) and the scope of the bad acts alleged (improperly lowering amounts 

paid to leverage negotiations) (FAC ¶ 65). 

85. The Health Care Providers also sufficiently allege that United has knowingly 

misrepresented the “legal rights, obligations or remedies of a party to a transaction.” FAC ¶ 244. 

Specifically, the Health Care Providers assert that by paying claims at artificially reduced rates, 

United is representing that these claims are being paid at usual and customary and reasonable 

rates when such a representation is inaccurate. With respect to the UH Parties, this conduct 

commenced in July 2017 (FAC ¶ 254); and with respect to the Sierra Affiliates this conduct 

commenced in September 2019 (id. ¶ 255) and continues to present date and each Defendant has 

engaged in these bad acts. Thus, the Health Care Providers sufficiently allege this aspect of its 

claim for violation of DTPA. 

86. As is detailed in the FAC, the Court finds that if claims based on violation of 

DTPA require a heightened pleading standard, the Health Care Providers have satisfied such a 

standard. 

87. The Court considered United’s argument that it is improper to lump all the 

defendant parties together in the Health Care Providers’ allegations, but the Court rejects the 

argument. The Health Care Providers allege that United has improperly engaged in artificially 

reducing the rates paid to the Health Care Providers for an ulterior purpose. Thus, it is 

permissible for the Health Care Providers to make an allegation which encompasses all of these 

parties. To force the Health Care Providers to reallege this same claim using each of the 

Defendants’ names would be inefficient and unnecessary under these circumstances. 

88. To the extent any of United’s other arguments specific to its Motion regarding the 

Health Care Providers’ claim for are not specifically addressed herein, the Court considered all of 

the defenses raised in the Motion, as well as all arguments made during oral argument, and the 

Court does not find merit to any of them. 

... 

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89. United argues that the Health Care Providers are not “victims” under NRS 

41.600; however, the Court does not find merit to the argument based on Nevada law. 

90. NRS 41.600(1) provides that “[a]n action may be brought by any person who is 

a victim of consumer fraud.” The statute does not define the scope of “victim,” but upon review 

of the deceptive trade practice statutes as a whole, the legislature did not intend to limit the scope 

of this term. 

91. The term “victim of consumer fraud” is broad and includes “any person” who is 

a victim of consumer fraud, including business competitors, consumers and even businesses 

which do not have competing interests. Del Webb Community, Inc. v. Partington, 652 F.3d 1145, 

1153 (9th Cir. 2011). 

92. Even under the narrow definition of “victim” adopted by Igbinovia v. State, 111 

Nev. 699, 706, 895 P.2d 1304, 1308 (1995), limiting the term to passive victims who suffered a 

loss that was “unexpected and occurs without voluntary participation of the person suffering the 

harm or loss,” the Health Care Providers qualify as victims. 

93. The Health Care Providers allege they do not voluntarily provide services to out 

of network patients. Rather, state law mandates that the Health Care Providers provide 

emergency medical services to any person presenting to an emergency room in need of 

emergency medical services. NRS 439B.410(1) (“each hospital ... has an obligation to provide 

emergency services and care, including care provided by physicians...regardless of the financial 

status of the patient.”). 

94. The Health Care Providers allege that the provision of services to United’s 

Members was not voluntary and the loss the Health Care Providers have suffered was unexpected 

given that United is refusing to pay usual and customary rates and the reasonable value of the 

services provided despite previously doing so. Thus, the Court concludes that, accepting all 

allegations of the Health Care Providers as true, the Health Care Providers are not active 

participants in United’s fraudulent conduct and are “victims” under NRS 41.600(1) even if the 

definition of “victim” is limited in the way United proposes. 

... 

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95. The Court also does not find United’s argument that the term “victim of consumer 

fraud” is to be construed narrowly such that the Health Care Providers would be excluded from 

the definition under NRS 41.600. 

96. To the extent any of United’s other arguments specific to its Motion regarding 

the Health Care Providers’ claim for Violations of Nevada Consumer Fraud & Deceptive Trade 

Practices Acts are not specifically addressed herein, the Court considered all of the defenses 

raised in the Motion, as well as all arguments made during oral argument, and the Court does 

not find merit to any of them. 

Declaratory judgment 

97. United did not challenge the Health Care Provider’s declaratory relief claim under 

a NRCP 12(b)(5) standard. As a result, this claim is not subject to dismissal for failure to state a 

claim for relief. 

Violation of NRS 207.350 et seq. (NV RICO) 

98. Under Nevada law, any person who is injured in his business or property by reason 

of any violation of NRS 207.400 has a cause of action against a person causing such injury for 

three times the actual damages sustained. NRS 207.470(1). 

99. Pursuant to NRS 207.470 and NRS 207.400, to state a civil RICO cause of action 

requires a plaintiff to allege that defendants have: 

engag[ed] in at least two crimes related to racketeering that have the 

same or similar pattern, intents, results, accomplices, victims or 

methods of commission, or are otherwise interrelated by 

distinguishing characteristics and are not isolated incidents, if at least 

one of the incidents occurred after July 1, 1983, and the last of the 

incidents occurred within 5 years after a prior commission of a crime 

related to racketeering. 

NRS 207.390. “Crimes related to racketeering” are enumerated in NRS 207.360 and include the 

crime of obtaining money or property valued at $650 or more, violation of 205.377 and 

involuntary servitude, the crimes that the Health Care Providers allege. NRS 207.360(28), (35), 

(36). 

100. In order to recover, three conditions must be met: (1) the plaintiff’s injury must 

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flow from the defendant’s violation of a predicate Nevada RICO act; (2) the injury must be 

proximately caused by the defendant’s violation of the predicate act; and (3) the plaintiff must 

not have participated in the commission of the predicate act. Allum v. Valley Bank of Nevada, 

109 Nev. 280, 283, 849 P.2d 297, 299 (1993). 

101. “A state RICO complaint need allege no more than that which is set forth in the 

Nevada statute.” Siragusa v. Brown, 114 Nev. 1384, 1399, 971 P.2d 801, 811 (1998). 

102. While Nevada’s civil RICO statutes are patterned after the federal RICO statutes, 

Nevada’s statute differs in some respects. Hale v. Burkhardt, 104 Nev. 632, 634-635, 764 P.2d 

866, 867-868 (1988). 

103. The Court concludes that the FAC satisfies each of these elements and United’s 

challenges must be rejected for the following reasons. 

104. To have standing to bring a civil RICO claim, a plaintiff must allege injury that 

flowed from the violation of a predicate RICO act. Allum, 109 Nev. at 284, 849 P.2d at 300 

(citing Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 266-268 (1992)); Brown v. 

Kinross Gold, U.S.A., 378 F. Supp. 2d 1280, 1287 (D. Nev. 2005). 

105. A plaintiff satisfies this requirement by alleging “some direct relation between the 

injury asserted and the injurious conduct alleged.” Holmes, 503 U.S. at 266-268; Canyon County 

v. Syngenta Seeds, Inc., 519 F.3d 969, 980 (9th Cir. 2008) (a court evaluates proximate causation 

under federal civil RICO by asking “whether the alleged violation led directly to the plaintiff's 

injuries.”); Allum, 109 Nev. at 286, 849 P.2d at 301. 

106. Proximate cause is a factual issue not appropriate for resolution on a Rule 12(b)(5) 

motion. Yamaha Motor Co., U.S.A. v. Arnoult, 114 Nev. 233, 238, 955 P.2d 661, 664-665 (1998). 

107. The requirement of proximate cause seeks to “limit a person’s responsibility for 

the consequences of that person’s own acts.” Painters & Allied Trades Dist. Council 82 Health 

Care Fund v. Takeda Pharmaceuticals Co. Ltd., 943 F.3d 1243, 1248 (9th Cir. 2019) (allegations 

sufficient to satisfy RICO’s proximate cause requirement where the plaintiff alleged a third party 

had relied on the defendants’ false statements). 

108. The proximate causation analysis is concerned with: (1) whether plaintiff would 

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have difficulty showing its damages flowed from defendant conduct; (2) whether there is a risk 

of double recovery; and (3) whether others are positioned to make the same claims. Holmes at 

503 U.S. at 269. These factors emphasize that proximate cause is “a flexible concept that does 

not lend itself to a black-letter rule that will dictate the result in every case.” Takeda 

Pharmaceuticals Co. Ltd., 2019 WL 6484263, at *5. 

109. Similarly, the Ninth Circuit has developed three non-exhaustive factors to 

determine whether the proximate causation requirement has been met: (1) whether there are more 

direct victims of the alleged wrongful conduct who can be counted on to vindicate the law as 

private attorneys general; (2) whether it will be difficult to ascertain the amount of the plaintiffs 

damages attributable to defendant's wrongful conduct; and (3) whether the courts will have to 

adopt complicated rules apportioning damages to obviate the risk of multiple recoveries. Brown 

v. Bettinger, No. 2:15-cv-00331-APG, 2015 WL 4162505, at *4 (D. Nev. July 8, 2015) (citing 

Mendoza v. Zirkle Fruit Co., 301 F.3d 1163, 1168–69 (9th Cir. 2002). Here, as they allege, the 

Health Care Providers are directly impacted by the scheme, they can ascertain their damages 

attributable to the scheme and there are no complicated rules to apportion damages to avoid 

multiple recoveries because the Health Care Providers only seek to recover their damages. 

110. The Court concludes that the three Holmes (and reiterated in Mendoza v. 

Amalgamated Transit Union Int'l, No. 2:18-cv-959-JCM-NJK, 2019 WL 4221078, at *6 (D. Nev. 

Sept. 5, 2019)) factors are met. 

111. Accepting all of the allegations in the FAC as true, the Health Care Providers are 

directly being defrauded by the Enterprises’ scheme (see, e.g., FAC ¶¶ 148, 187-188) and no one 

else is better suited to bring this action. FAC ¶¶ 102, 107-109, 113-115, 148. 

112. The Court concludes that the foregoing allegations squarely link the scheme to 

manipulate and reduce rate payment data to an actual reduction in payment for emergency 

services to the Health Care Providers. 

113. Further, the Court does not find merit to United’s argument that there is a risk of 

double recovery because the Health Care Providers only seek recovery for emergency services 

they rendered and no one else is positioned to make the same Nevada civil RICO claims regarding 

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the emergency services at issue in this case. Holmes, 503 U.S. at 266-268. 

114. The Court also considered, and rejects, United’s argument that (1) the civil 

racketeering allegations fail because the alleged underpayment has no causal connection to 

alleged misrepresentations as the Health Care Providers are required to provide emergency care 

under federal and state law; and (2) United previewed its scheme, resulting in a break in the 

causal connection. Supplement at 5:14-6:3. Both of arguments misunderstand the proximate 

cause inquiry. 

115. Instead, the Court concludes that the FAC sufficiently alleges proximate cause 

because the facts the Health Care Providers allege – that there was a change in United’s 

reimbursement rates and the Health Care Providers’ relied on the prior reimbursement – support 

a finding of proximate cause. 

116. The Court concludes that the Health Care Providers sufficiently allege that they 

are the direct victims of the predicate acts of obtaining money by false pretenses, multiple 

transactions involving fraud or deceit and involuntary servitude. 

117. The Court does not find merit in United’s argument that the Health Care Providers 

failed to plead the civil RICO claim with the requisite particularity under NRCP 9(b). Supplement 

at 6:18-25; see FAC ¶¶ 100-188, 261-273. 

118. The Court has also considered and rejected United’s argument that the civil 

racketeering claims should be dismissed because the Health Care Providers “lumped” the United 

Defendants together (Supplement at 9:18-23). The Court concludes that the cases on which 

United relies involve allegations that are not analogous. In Doane v. First Franklin Financial, 

No. 2:11-CV-02130-MCE, 2012 WL 2129369, at *6 (E.D. Cal. June 12, 2012), the pleadings 

referred to multiple, unrelated defendants and where the complaints at issue were otherwise 

wholly deficient, “conclusory, convoluted, vague and generally fail to satisfy the pleading 

standards under Rule 8(a) or 9(b).” 

119. The Court finds that the FAC contains substantial allegations that detail the 

alleged scheme and United’s involvement. 

... 

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120. Section 205.377 provides, in part: 

A person shall not, in the course of an enterprise or occupation, 

knowingly and with the intent to defraud, engage in an act, practice 

or course of business or employ a device, scheme or artifice which 

operates or would operate as a fraud or deceit upon a person by

means of a false representation or omission of a material fact that: 

(a) The person knows to be false or omitted; (b) The person intends 

another to rely on; and (c) Results in a loss to any person who relied 

on the false representation or omission... 

121. “False pretense is a representation of some fact or circumstance which is not true 

and is calculated to mislead, and may consist of any words or actions intended to deceive.” Hale, 

104 Nev. at 636–37, 764 P.2d at 869; NRS 205.380. Specifically, the Health Care Providers have 

provided ample allegations to support a claim for violation of NRS 205.377 and for obtaining 

money by false pretenses in violation of NRS 207.360(28). 

122. The Court finds that the Health Care Providers sufficiently allege the elements for 

two fraud-based predicate acts in violation of NRS 205.377 (multiple transactions involving fraud 

or deceit in course of enterprise or occupation) and for obtaining possession of money or property 

by false pretenses. 

123. Specifically, in establishing the elements of NRS 205.377, the Court concludes 

that Health Care Providers have sufficiently pled that in at least two transactions (see, e.g., id. ¶ 

115), the Enterprise intended to defraud, engage in an act, practice or course of business or 

employ a device, scheme or artifice which operates or would operate as a fraud or deceit upon a 

person by means of a false representation or omission of a material fact (see, e.g., id. ¶¶ 177-179, 

182, 183); that the Enterprise knows to be false or omitted (see, e.g., ¶¶ 99, 100, 102, 107, 109, 

113, 271); upon which United intends the Health Care Providers to rely (see e.g. id. ¶¶ 111, 183-

185); and which has resulted and continues to result in losses to the Health Care Providers who 

relied on the false representations or omissions (see, e.g., id. ¶¶ 187-188). 

124. The FAC also sufficiently alleges “Defendants illegally conduct the affairs of the 

Enterprise, and/or control the Enterprise, that includes Data iSight though a pattern of unlawful 

activity.” FAC ¶ 112. 

125. With respect to the claim under NRS 207.360(28), the Health Care Providers 

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sufficiently allege that the Enterprise intended to defraud the Health Care Providers through 

written false representations (see, e.g., id. ¶¶ 126, 177-178), causing the Health Care Providers’ 

reliance thereon (see, e.g., id. ¶¶ 111, 183-185). FAC ¶¶ 123-126; see also ¶¶ 149-188. 

126. Under NRS 207.360(36), involuntary servitude is defined as: 

1. A person who knowingly subjects, or attempts to subject, 

another person to forced labor or services by: 

*** 

 (c) Abusing or threatening to abuse the law or legal process; 

*** 

(f) Causing or threatening to cause financial harm to any person, 

 is guilty of holding a person in involuntary servitude. 

NRS 200.463(1). 

127. The Court concludes that the FAC sufficiently pleads such a claim premised on 

subsections (c) and (f) of NRS 200.463(1) by alleging that United has developed and 

implemented a scheme that forces the Health Care Providers to perform services at arbitrarily 

deflated payment rates and has threatened to abuse the law or legal process by interfering with 

other contracts, disclaiming it has an obligation to pay a reasonable rate for emergency services 

and has caused and threatened to cause financial harm to the Health Care Providers. See FAC ¶¶ 

21, 55, 69, 108-109, ¶¶ 90-188. 

128. The Court has considered and rejected the cases United relied upon and concludes 

that the cases are not analogous. Supplement at 11:17-26. 

129. An “enterprise” is defined in NRS 207.380: 

“Enterprise” includes: 

1. Any natural person, sole proprietorship, partnership, 

corporation, business trust or other legal entity; and 

2. Any union, association or other group of persons associated in 

fact although not a legal entity. 

 The term includes illicit as well as licit enterprises and 

governmental as well as other entities. 

130. United contends that the Health Care Providers have failed to adequately plead 

the existence of an “enterprise” under NRS 205.377 (multiple transactions involving fraud or 

deceit in the course of enterprise). Supplement at 12:12. 

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131. The Court concludes that the existence of an enterprise is not required in 

connection with violations of NRS 207.400(1)(d), (1)(f) or (1)(i). See NRS 207.470. Therefore, 

this argument can only be applicable to violations of NRS 207.400(1)(a)-(c) and 1(j). 

132. The Court concludes that, for all unlawful acts that require the existence of an 

enterprise, the Health Care Providers adequately allege the existence of an enterprise in 

paragraphs 121 and 122 of the FAC. See also FAC ¶¶ 112, 115, 124. 

133. Further the FAC provides sufficient factual allegations, namely that United and 

third-party entities, including Data iSight have joined together to falsely claim to provide 

transparent, objective and geographically-adjusted determinations of reimbursement rates; and 

they illegally conduct the affairs of the Enterprise, and/or control the Enterprise through a pattern 

of unlawful activity. Id. ¶¶ 112, 115, 124. 

134. The Court has also considered and rejects United’s argument that the alleged 

Enterprise’s conduct should be overlooked because United purports to have “an ordinary 

commercial contractual relationship...through MultiPlan’s Data iSight tool.” Supplement at 

13:19-21; see, e.g., Gomez v. Guthy-Renker, No. EDCV 14–01425 JGB (KKx), 2015 WL 

4270042 (C.D. Cal. July 13, 2015). The Court concludes that the Health Care Providers allege 

“something more” than a routine contract. FAC ¶ 115. 

135. As the Health Care Providers allege, United would not be able to operate its 

deceptive scheme absent Data iSight’s purported functioning as a third-party supplier of 

transparent, market-based benchmark data. Assuming all allegations in the FAC as true, Data 

iSight is conduit through which United seeks to color its arbitrary, deficient payments with the 

false appearance of good faith objectivity. The Court concludes that these allegations sufficiently 

detail the existence of an “enterprise” under Nevada law. 

... 

... 

... 

... 

... 

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Case No.: A-19-792978-B 

Order Denying Defendants’ Motion To 

(1) Dismiss First Amended Complaint; 

And (2) Supplemental Brief In Support 

Of Their Motion To Dismiss Plaintiffs’ 

First Amended Complaint Addressing 

Plaintiffs’ Eighth Claim For Relief 

Accordingly, good cause appearing, therefor, 

ORDER 

 IT IS HEREBY ORDERED that United’s Motion is DENIED in its entirety. 

IT IS FURTHER ORDERED that United’s Supplement is DENIED in its entirety. 

DATED this ___ day of June, 2020. 

 ____________________________ 

 DISTRICT COURT JUDGE 

 

Submitted by: 

McDONALD CARANO LLP 

By: /s/ Kristen T. Gallagher Pat Lundvall (NSBN 3761) 

Kristen T. Gallagher (NSBN 9561) 

Amanda M. Perach (NSBN 12399) 

2300 West Sahara Avenue, Suite 1200 

Las Vegas, Nevada 89102 

plundvall@mcdonaldcarano.com 

kgallagher@mcdonaldcarano.com 

aperach@mcdonaldcarano.com 

Attorneys for Plaintiffs

JD

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DISTRICT COURT

CLARK COUNTY, NEVADA

Fremont Emergency Services CASE NO: A-19-792978-B

(Mandavia) Ltd, Plaintiff(s)

vs.

United Healthcare Insurance 

Company, Defendant(s)

DEPT. NO. Department 27

AUTOMATED CERTIFICATE OF SERVICE

This automated certificate of service was generated by the Eighth Judicial District 

Court. The foregoing Order Denying Motion was served via the court’s electronic eFile 

system to all recipients registered for e-Service on the above entitled case as listed below:

Service Date: 6/24/2020

Audra Bonney abonney@wwhgd.com

Cindy Bowman cbowman@wwhgd.com

D. Lee Roberts lroberts@wwhgd.com

Raiza Anne Torrenueva rtorrenueva@wwhgd.com

Colby Balkenbush cbalkenbush@wwhgd.com

Brittany Llewellyn bllewellyn@wwhgd.com

Pat Lundvall plundvall@mcdonaldcarano.com

Kristen Gallagher kgallagher@mcdonaldcarano.com

Amanda Perach aperach@mcdonaldcarano.com

Beau Nelson bnelson@mcdonaldcarano.com

Marianne Carter mcarter@mcdonaldcarano.com

Karen Surowiec ksurowiec@mcdonaldcarano.com

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Flor Gonzalez-Pacheco FGonzalez-Pacheco@wwhgd.com

Kelly Gaez kgaez@wwhgd.com

Kimberly Kirn kkirn@mcdonaldcarano.com

096

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GOLDEN RD. MOTOR INN, INC. v. ISLAM Nev. 151

Cite as 376 P.3d 151 (Nev. 2016)

GOLDEN ROAD MOTOR INN, INC., a

Nevada Corporation d/b/a Atlantis Casino Resort Spa, Appellant/Cross–Respondent,

v.

Sumona ISLAM, an Individual,

Respondent/Cross–

Appellant,

and

MEI–GSR Holdings, LLC, a Nevada Limited Liability Company d/b/a Grand Sierra Resort, which claims to be the Successor in Interest to NAV–RENO–GS,

LLC, Respondent.

Sumona Islam, an Individual, Appellant,

v.

Golden Road Motor Inn, Inc., a Nevada

Corporation d/b/a Atlantis Casino

Resort Spa, Respondent.

MEI–GSR Holdings, LLC, d/b/a Grand

Sierra Resort, Appellant/Cross–

Respondent,

v.

Golden Road Motor Inn, Inc., a Nevada

Corporation d/b/a Atlantis Casino Resort Spa, Respondent/Cross–Appellant.

Nos. 64349, 64452, 65497.

Supreme Court of Nevada.

July 21, 2016.

Background: Casino brought action

against former employee, a casino host,

and her new employer, alleging breach of

contract, tortious interference with contractual relations, conversion, and violation

of the Nevada Uniform Trade Secrets Act.

The Second Judicial District Court, Washoe County, Patrick Flanagan, J., entered

judgment finding former employee liable

for breach of contract and violation of the

Uniform Trade Secrets Act, and imposed a

permanent injunction prohibiting employee

from further use of trade secrets. Parties

appealed.

Holdings: The Supreme Court, Douglas,

J., held that:

(1) one-year noncompete agreement prohibiting employee from any employment, affiliation, or service with any

gaming business or enterprise within a

150–mile radius was unreasonable and

wholly unenforceable;

(2) unreasonable noncompete agreement

was wholly unenforceable and not subject to reformation by the court;

(3) former employee’s altering and concealing contact information for 87 players in employer’ electronic database

did not amount to conversion;

(4) trial court could not properly award

attorney fees to employer without permitting former employee to review

itemizations; and

(5) casino failed to establish that new employer knowingly misappropriated

trade secrets.

Affirmed in part, reversed in part, and remanded.

Hardesty, J., dissented in part and filed opinion, with which Parraguirre, C.J., and Pickering, J., agreed.

1. Appeal and Error O893(1)

The Supreme Court reviews the district

court’s legal conclusions de novo on appeal.

2. Appeal and Error O1008.1(5), 1010.1(6)

The Supreme Court will not disturb a

district court’s findings of fact unless they

are clearly erroneous and not based on substantial evidence.

3. Appeal and Error O893(1)

Contract interpretation is a legal question considered under a de novo standard of

review.

4. Contracts O116(1)

A restraint of trade is unreasonable, in

the absence of statutory authorization or

dominant social or economic justification, if it

is greater than is required for the protection

of the person for whose benefit the restraint

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152 Nev. 376 PACIFIC REPORTER, 3d SERIES

is imposed or imposes undue hardship upon

the person restricted.

5. Contracts O116(1), 117(2)

Time and territory are important factors

to consider when evaluating the reasonableness of a noncompete agreement; however,

there is no inflexible formula for deciding the

ubiquitous question of reasonableness.

6. Contracts O117(3)

One-year noncompete agreement prohibiting former employee, a casino host, from

any employment, affiliation, or service with

any gaming business or enterprise within a

150–mile radius was overly broad, and presented an undue hardship for employee, and

thus was unreasonable.

7. Contracts O137(4)

 Reformation of Instruments O7

Unambiguous noncompete agreement

that was overbroad and thus unreasonable

was wholly unenforceable and not subject to

reformation by the court.

8. Contracts O136

An overbroad and unreasonable provision in a noncompete agreement renders the

agreement wholly unenforceable.

9. Contracts O137(4), 143(3)

A court is not free to modify or vary the

terms of an unambiguous agreement, and

this rule has no exception for overbroad noncompete agreements.

10. Contracts O202(2)

The terms of a noncompete agreement

must be construed in the employee’s favor.

11. Contracts O137(4)

District court did not abuse its discretion in refusing to redraft an unambiguously

overbroad noncompete agreement.

12. Contracts O143(3)

Parties are not entitled to make an

agreement that they will be bound by whatever contract the courts may make for them

at some time in the future; courts are not

empowered to make private agreements.

13. Labor and Employment O903

Where underlying noncompete agreement was unreasonable and wholly unenforceable, former employer had no cause of

action against former employee’s new employer for tortious interference with a contractual relationship.

14. Conversion and Civil Theft O117

Former casino host’s conduct in altering

and concealing the contact information for 87

players in casino employer’ electronic database did not amount to conversion; the information was not lost and was properly restored at relatively minimal cost.

15. Conversion and Civil Theft O108

‘‘Conversion’’ is a distinct act of dominion wrongfully exerted over another’s personal property in denial of, or inconsistent with

his title or rights therein or in derogation,

exclusion, or defiance of such title or rights.

 See publication Words and Phrases

for other judicial constructions and definitions.

16. Conversion and Civil Theft O108, 205

‘‘Conversion’’ generally is limited to

those severe, major, and important interferences with the right to control personal property that justify requiring the actor to pay

the property’s full value.

17. Costs O208

Trial court could not properly award

attorney fees to plaintiff without permitting

defendant to review itemizations. Rules Civ.

Proc., Rule 54.

18. Antitrust and Trade Regulation O421

Casino, having established that former

employee misappropriated trade secrets by

entering certain player information she had

copied from casino’s electronic database into

the database of her new employer, failed to

establish that new employer also knowingly

misappropriated trade secrets; new employer’s hiring personnel advised employee before she began working to bring only herself

and her relationships when she left casino,

new employer’s management sought and

gained employee’s reassurance that the player information she communicated was built

on her own relationships, and casino’s letter

098

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GOLDEN RD. MOTOR INN, INC. v. ISLAM Nev. 153

Cite as 376 P.3d 151 (Nev. 2016)

to new employer regarding ‘‘potential trade

secret violations’’ did not sufficiently put new

employer on notice that it was using wrongfully obtained player information. West’s

NRSA 600A.030(2).

West Codenotes

Recognized as Unconstitutional

West’s Ga.Code Ann. § 13–8–2.1

Dotson Law and Robert A. Dotson, Reno;

Lemons, Grundy & Eisenberg and Robert L.

Eisenberg, Reno, for Golden Road Motor

Inn, Inc., dba Atlantis Casino Resort Spa.

Law Offices of Mark Wray and Mark D.

Wray, Reno, for Sumona Islam.

Cohen–Johnson, LLC, and H. Stan Johnson and Steven B. Cohen, Las Vegas, for

MEI–GSR Holdings, LLC, dba Grand Sierra

Resort.

Before the Court En Banc.

OPINION

By the Court, DOUGLAS, J.:

In this appeal, we are asked to consider

(1) whether a noncompete agreement is reasonable and enforceable, (2) whether an alteration of electronic information amounts to

conversion, and (3) whether one gaming establishment misappropriated another gaming

establishment’s trade secrets.

Casino host Sumona Islam entered into an

agreement with her employer, Atlantis Casino Resort Spa, to refrain from employment,

association, or service with any other gaming

establishment within 150 miles of Atlantis for

one year following the end of her employment. Islam eventually grew dissatisfied

with her work at Atlantis and, while searching for work elsewhere, altered and copied

gaming customers’ information from Atlantis’

computer management system. Soon after,

she resigned from Atlantis and began working as a casino host at Grand Sierra Resort

(GSR), where she accessed the computer

management system to enter the copied information. Without knowing the information

was wrongfully obtained, GSR used this and

other information conveyed by Islam to market to those customers.

As to the noncompete agreement, we affirm the district court, concluding that the

type of work from which Islam is prohibited

is unreasonable because it extends beyond

what is necessary to protect Atlantis’ interests and is an undue hardship on Islam. We

further conclude that because the work exclusion term is unreasonable, the agreement

is wholly unenforceable, as we do not modify

or ‘‘blue pencil’’ contracts. With regard to

Atlantis’ conversion claim based on Islam’s

alteration of electronic customer information,

which Atlantis quickly restored, we affirm

the district court’s denial. The minimal disruption and expense incurred were insufficient to require Islam to pay the full value of

the information. Finally, as to the misappropriation of trade secrets claim, we conclude

that Atlantis failed to demonstrate that GSR

knew or should have known the player information was obtained by improper means and

therefore affirm the district court’s finding of

nonliability.1

BACKGROUND

While working as a casino host at Atlantis,

Islam executed several agreements pertaining to her employment. Pursuant to those

agreements, Atlantis restricted Islam from

sharing confidential information, disseminating intellectual property, and downloading or

uploading information without authorization.

Additionally, a noncompete agreement prohibited Islam from employment, affiliation, or

service with any gaming operation within 150

miles of Atlantis for one year following the

end of her employment.2

1. We also affirm the parties’ appeals from attorney fees awards, except that we reverse the

award to Atlantis against Islam because the district court erred by prohibiting Islam’s review of

the itemized attorney fees.

2. In particular, the noncompete agreement provides as follows:

In the event that the employment relationship between Atlantis and Team Member

ends for any reason, either voluntary or nonvoluntary, Team Member agrees that (s)he

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After more than three years at Atlantis,

Islam became dissatisfied with her work environment. As Islam pursued employment

elsewhere, she altered and concealed the contact information for 87 players in Atlantis’

electronic database. She also hand-copied

players’ names, contact information, level of

play, game preferences, credit limits, and

other proprietary information from the database onto notebook paper. Soon after, she

resigned, and when newly assigned casino

hosts attempted to contact players formerly

assigned to Islam, they discovered that the

information had been altered. Despite Islam’s actions, Atlantis was able to fully restore the correct contact information for its

players, incurring $2,117 in repair expenses.

Meanwhile, GSR interviewed Islam for a

position as a casino host. During the hiring

process, GSR personnel advised Islam not to

bring anything from Atlantis but herself and

her established relationships. Despite GSR’s

request, when Islam began working at GSR,

she entered certain player information she

had copied from Atlantis’ database into

GSR’s database. Evidence adduced at trial

also indicated that Islam communicated copied information to GSR by email. However,

Islam never presented to GSR personnel the

notebooks containing the copied information

and repeatedly insisted that the information

she provided was from her own ‘‘book of

trade.’’ 3

 Thus, GSR used the information it

received from Islam to market to Atlantis

players.

Thereafter, Atlantis became aware that

GSR hired Islam and that GSR was marketing to its players. Atlantis sent a letter to

GSR, informing GSR of Islam’s noncompete

agreement, that Islam may have confidential

information, and that GSR was to refrain

from using that information. In response,

GSR sent a letter to Atlantis advising that it

was not in possession of trade secret information and that the information provided by

Islam came from her book of trade. GSR

additionally requested that Atlantis provide

more specific information as to what Atlantis

believed was protectable as a trade secret.

Atlantis did not comply with GSR’s request.

Subsequently, Atlantis filed a complaint

against both Islam and GSR, alleging seven

causes of action and requesting a restraining

order. The district court issued a restraining order prohibiting Islam from employment

with GSR. The parties later stipulated to a

preliminary injunction pending resolution of

the case, and GSR served Atlantis with an

offer of judgment. However, Atlantis rejected the offer and a bench trial ensued.

As between Atlantis and Islam, the district

court found Islam liable for breach of contract and violation of the Nevada Uniform

Trade Secrets Act and imposed a permanent

injunction prohibiting Islam from further use

of Atlantis’ trade secrets. The district court

awarded Atlantis compensatory and punitive

damages, in addition to attorney fees and

costs. However, the district court also found

that Islam was not liable for tortious interference with contractual relations or conversion and ruled that the noncompete agreement was unenforceable. As to Atlantis’

claims against GSR, the district court found

that GSR was not liable for tortious interference with contractual relations or misappropriation of trade secrets and awarded GSR

attorney fees and costs based on its offer of

judgment, but denied fees requested under

NRS 600A.060.

All three parties appealed. Atlantis challenges the noncompete and conversion rulings in its claims against Islam, and the

tortious interference and attorney fees rulings in its claims against GSR. Islam’s appeal

challenges the award of attorney fees to Atlantis. GSR challenges the denial of attorney fees under NRS 600A.060.

will not, without the prior written consent of

Atlantis, be employed by, in any way affiliated with, or provide any services to, any

gaming business or enterprise located within

150 miles of Atlantis Casino Resort for a

period of one (1) year after the date that the

employment relationship between Atlantis

and Team Member ends.

3. The district court found that a casino host’s

‘‘book of trade’’ is a collection of ‘‘names and

contact information of guests with whom the

host has developed relationships through [the

host’s] own efforts.’’

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DISCUSSION

[1, 2] ‘‘We review the district court’s legal conclusions de novo.’’ Buzz Stew, LLC v.

City of N. Las Vegas, 124 Nev. 224, 228, 181

P.3d 670, 672 (2008). However, ‘‘this court

will not disturb a district court’s findings of

fact unless they are clearly erroneous and

not based on substantial evidence.’’ Int’l

Fid. Ins. Co. v. State, 122 Nev. 39, 42, 126

P.3d 1133, 1134–35 (2006).

Atlantis v. Islam

Noncompete agreement

Atlantis argues that the noncompete

agreement signed by Islam was reasonable

and enforceable. Even if the noncompete

agreement was unenforceable as written, Atlantis argues that the agreement should be

preserved by judicial modification of provisions that are decidedly too broad. In contrast, Islam and GSR argue that the court

properly found the noncompete agreement

unreasonable and correctly determined that

the proper remedy was to void the contract

as a whole. Further, Islam and GSR contend that courts may not create a contract

for the parties that the parties did not intend.

Reasonableness

[3–5] Contract interpretation is a legal

question we consider under a de novo standard of review. May v. Anderson, 121 Nev.

668, 672, 119 P.3d 1254, 1257 (2005). Under

Nevada law, ‘‘[a] restraint of trade is unreasonable, in the absence of statutory authorization or dominant social or economic justification, if it is greater than is required for the

protection of the person for whose benefit

the restraint is imposed or imposes undue

hardship upon the person restricted.’’ Hansen v. Edwards, 83 Nev. 189, 191–92, 426

P.2d 792, 793 (1967). Time and territory are

important factors to consider when evaluating the reasonableness of a noncompete

agreement. Id. at 192, 426 P.2d at 793.

However, ‘‘[t]here is no inflexible formula for

deciding the ubiquitous question of reasonableness.’’ Ellis v. McDaniel, 95 Nev. 455,

458–59, 596 P.2d 222, 224 (1979). Thus, we

look to our caselaw.

In Jones v. Deeter, an employer that performed lighting services hired an assistant,

who agreed in writing not to compete within

100 miles of Reno/Sparks for five years subsequent to the end of his employment. 112

Nev. 291, 292, 913 P.2d 1272, 1273 (1996).

After three months, the employer fired his

assistant and, when the assistant sought

work elsewhere, the employer brought suit

against him to enforce the noncompete

agreement. Id. at 293, 913 P.2d at 1273.

We concluded that the five-year restriction

imposed too great a hardship for the employee and was not necessary to protect the

employer’s interests, even in light of the

employer’s argument that developing a customer base in the industry was difficult. Id.

at 296, 913 P.2d at 1275.

Also, in Camco, Inc. v. Baker, we held that

a noncompete agreement term of two years

and ‘‘within fifty miles of any area which was

the ‘target of a corporate plan for expansion’ ’’ was unreasonable. 113 Nev. 512, 519–

20, 936 P.2d 829, 833–34 (1997). We explained ‘‘that the covenant at issue [was]

overly broad as to future territory for possible expansion,’’ and thus, operated ‘‘as a

greater restraint on trade than [was] necessary to protect [the former employer’s] interests.’’ Id.

[6] In this case, similar to Jones and

Camco, we conclude that the term prohibiting Islam from employment, affiliation, or

service with any gaming business or enterprise is overly broad, as it extends beyond

what is necessary to protect Atlantis’ interests. According to the term, Islam is prohibited from being employed, for instance, as a

custodian, at every casino within a 150–mile

radius. Yet, in such a hypothetical, it is

unlikely that Islam would be luring players

from Atlantis; thus, Atlantis’ interests would

remain protected. Additionally, similar to

Jones, the work exclusion term presents an

undue hardship for Islam. The agreement’s

prohibition of all types of employment with

gaming establishments severely restricts Islam’s ability to be gainfully employed. For

these reasons, we deem the term to be over101

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broad and unreasonable.4

Enforceability

[7–9] Under Nevada law, such an unreasonable provision renders the noncompete

agreement wholly unenforceable. See Jones,

112 Nev. at 296, 913 P.2d at 1275 (holding

that the noncompete agreement as a whole

was unenforceable after concluding that a

particular provision was unreasonable).

Rightfully, we have long refrained from reforming or ‘‘blue penciling’’ 5

 private parties’

contracts. See Reno Club, Inc. v. Young Inv.

Co., 64 Nev. 312, 323, 182 P.2d 1011, 1016

(1947) (‘‘This would be virtually creating a

new contract for the parties, which TTT under

well-settled rules of construction, the court

has no power to do.’’). In All Star Bonding

v. State, we reaffirmed that ‘‘[w]e are not

free to modify or vary the terms of an unambiguous agreement.’’ 119 Nev. 47, 51, 62

P.3d 1124, 1126 (2003) (internal quotation

omitted); see Kaldi v. Farmers Ins. Exch.,

117 Nev. 273, 278, 21 P.3d 16, 20 (2001) (‘‘It

has long been the policy in Nevada that

absent some countervailing reason, contracts

will be construed from the written language

and enforced as written.’’ (internal quotation

omitted)). Under Nevada law, this rule has

no exception for overbroad noncompete

agreements, thus Atlantis’ failure to suggest

that the noncompete agreement is ambiguous

leaves us only to apply our clear precedent.

However, our precedent appears inconsequential to the dissent’s blue-penciling advocacy, as they, too, fail to charge the contract

with ambiguity before picking up the pencil.

But even if an argument as to the contract’s

ambiguity were offered, and even if it had

merit, reformation may still be inappropriate,

as the dissent points to no Nevada case

reforming ambiguous noncompete agreements. Thus, we act in conformance with

our precedent when we refrain from rewriting the parties’ contract.

Importantly, we have not overturned or

abrogated our caselaw establishing our refusal to reform parties’ contracts where they are

unambiguous. Nonetheless, citing to Hansen, 83 Nev. at 192, 426 P.2d at 793–94, and

Ellis, 95 Nev. at 458, 596 P.2d at 224, Atlantis contends that if the noncompete agreement was overly broad and unreasonable, the

district court was required to modify it. In

opposition, GSR contends that Atlantis misconstrues Hansen and Ellis because the

cases do not allow for the court’s modification

of a noncompete agreement. According to

GSR, the cases provide for modification of a

preliminary injunction rather than the original contract. We agree with GSR.

The procedural posture of the case at bar

distinguishes it from Hansen and Ellis, and

likens it to Jones. Both Hansen, 83 Nev. at

191, 426 P.2d at 793, and Ellis, 95 Nev. at

457, 596 P.2d at 223, were appeals from

district court orders granting preliminary injunctions. The particular thing modified after finding the terms of the employment

contracts unreasonable were the injunctions,

not the employment contracts. See, e.g.,

Hansen, 83 Nev. at 193, 426 P.2d at 794 (‘‘We

deem the restriction thus modified to be reasonable.’’). Thus, the blue pencil was not

taken up. In contrast, in Jones, the appeal

followed a final judgment on the merits of

the noncompete agreement’s reasonableness

and enforceability. 112 Nev. at 293, 913 P.2d

at 1274. We held that the entire agreement

was unenforceable after concluding that the

five-year time restriction provision was unreasonable. Id. at 296, 913 P.2d at 1275.

Thus, here, as in Jones, the unreasonable

work exclusion term renders the contract as

a whole unenforceable. See Harlan M.

Blake, Employee Agreements Not to Compete, 73 Harv. L. Rev. 625, 681–82 (1960)

(‘‘[M]ost courts either issue an injunction

which is regarded as reasonable, even though

narrower than the terms of the restraining

4. In accord with this conclusion, the Georgia

Court of Appeals has stated that ‘‘[a] noncompete

covenant is too broad and indefinite to be enforceable where it contains no limit on the work

restricted and effectively prohibits an employee

from working for a competitor in any capacity.’’

Lapolla Indus., Inc. v. Hess, 325 Ga.App. 256,

750 S.E.2d 467, 474 (2013).

5. ‘‘The ‘blue-pencil test’ is ‘[a] judicial standard

for deciding whether to invalidate the whole contract or only the offending words.’ ’’ Griffin Toronjo Pivateau, Putting the Blue Pencil Down: An

Argument for Specificity in Noncompete Agreements, 86 Neb. L. Rev. 672, 681 (2008) (quoting

Blue-pencil test, Black’s Law Dictionary (8th

ed.2004)).

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covenant, or refuse enforcement altogether.’’

(footnote omitted)).

The dissent cites to caselaw from other

jurisdictions to argue that Nevada should

similarly indulge. Other states are divided

on whether to reform parties’ contracts.

Compare Federated Mut. Ins. Co. v. Whitaker, 232 Ga. 811, 209 S.E.2d 161, 164 (1974)

(holding that the entire ‘‘covenant must fall

because this court has refused to apply the

‘Blue-pencil theory of severability’ ’’ (internal

quotations omitted)), with Farm Bureau

Serv. Co. of Maynard v. Kohls, 203 N.W.2d

209, 212 (Iowa 1972) (upholding a lower

court’s finding that a noncompete agreement

was unreasonable, but rejecting its conclusion that the contract as a whole was therefore void). Georgia courts explicitly considered and adamantly rejected the blue-pencil

way:

We have given careful consideration to

the severance theory, and we decline to

apply itTTTT

‘‘Courts and writers have engaged in hot

debate over whether severance should ever

be applied to an employee restraint. The

argument against doing so is persuasive.

For every covenant that finds its way to

court, there are thousands which exercise

an in terrorem effect on employees who

respect their contractual obligations and

on competitors who fear legal complications if they employ a covenantor, or who

are anxious to maintain gentlemanly relations with their competitors. Thus, the

mobility of untold numbers of employees is

restricted by the intimidation of restrictions whose severity no court would sanction. If severance is generally applied,

employers can fashion truly ominous covenants with confidence that they will be

pared down and enforced when the facts of

a particular case are not unreasonableTTTT’’

There are some good reasons in support

of the doctrine of severance. However, we

conclude that those reasons are not of

sufficient weight to offset those reasons for

refusing to apply the doctrine. In short,

we have weighed the ‘‘blue-pencil’’ doctrine

in the balance, and found it wanting.

Richard P. Rita Pers. Servs. Int’l, Inc. v.

Kot, 229 Ga. 314, 191 S.E.2d 79, 81 (1972)

(quoting Blake, supra, at 682–83).6

 We are

persuaded by Georgia’s rationale, but there

are additional reasons for abstaining.

Our exercise of judicial restraint when confronted with the urge to pick up the pencil is

sound public policy. Restraint avoids the

possibility of trampling the parties’ contractual intent. See Pivateau, supra, at 674

(‘‘[T]he blue pencil doctrine TTT creates an

agreement that the parties did not actually

agree to.’’); Reno Club, 64 Nev. at 323, 182

P.2d at 1016 (concluding that creating a contractual term operates beyond the parties’

intent and the court’s power). Even assuming only minimal infringement on the parties’

intent, as the dissent suggests, a trespass at

all is indefensible, as our use of the pencil

should not lead us to the place of drafting.

Our place is in interpreting. Moreover, although the transgression may be minimal

here, setting a precedent that establishes the

judiciary’s willingness to partake in drafting

would simply be inappropriate public policy

as it conflicts with the impartiality that is

required of the bench, irrespective of some

jurisdictions’ willingness to overreach.

Restraint also preserves judicial resources.

Pivateau, supra, at 674 (‘‘Both [types of blue

penciling] essentially turn courts into attor6. We note that the Georgia Legislature implemented laws attempting to advance blue penciling in Georgia courts. See Ga. Code Ann. § 13–

8–2.1 (repealed 2009); Ga. Code Ann. § 13–8–

53(d) (2010). However, the Legislature’s first

attempt, Ga. Code Ann. § 13–8–2.1 (1990), providing that courts must reform unlawful contracts, was held unconstitutional by Jackson &

Coker, Inc. v. Hart, 261 Ga. 371, 405 S.E.2d

253, 255 (1991). See Atlanta Bread Co. Int’l,

Inc. v. Lupton–Smith, 285 Ga. 587, 679 S.E.2d

722, 724–25 (2009) (‘‘[T]his Court has rejected a

legislative attempt to usurp the application of

standards of reasonableness to noncompetition

covenants in employment agreements.’’). Another legislative attempt, Ga. Code Ann. § 13–8–

53(d) (2010), providing that courts may blue

pencil, did not affect Georgia’s precedent. The

Georgia Court of Appeals reiterated that ‘‘the

rule is that the court will not sever or ‘blue

pencil’ an unenforceable noncompete covenant

and enforce reasonable restrictions in other

noncompete covenants, but will declare all the

noncompete covenants unenforceable.’’ Lapolla, 750 S.E.2d at 473.

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neys after the fact.’’). And restraint is consistent with basic principles of contract law

that hold the drafter to a higher standard.

Williams v. Waldman, 108 Nev. 466, 473, 836

P.2d 614, 619 (1992) (‘‘[I]t is a well settled

rule that ‘[i]n cases of doubt or ambiguity, a

contract must be construed most strongly

against the party who prepared it, and favorably to a party who had no voice in the

selection of its language.’ ’’ (alteration in original) (quoting Jacobson v. Sassower, 66

N.Y.2d 991, 499 N.Y.S.2d 381, 489 N.E.2d

1283, 1284 (1985))).

[10] We have been especially cognizant of

the care that must be taken in drafting contracts that are in restraint of trade. Hansen, 83 Nev. at 191, 426 P.2d at 793 (‘‘An

agreement on the part of an employee not to

compete with his employer after termination

of the employment is in restraint of trade

and will not be enforced in accordance with

its terms unless the same are reasonable.’’).

A strict test for reasonableness is applied to

restrictive covenants in employment cases

because the economic hardship imposed on

employees is given considerable weight.

Ferdinand S. Tinio, Annotation, Enforceability, Insofar as Restrictions Would Be Reasonable, of Contract Containing Unreasonable Restrictions on Competition, 61

A.L.R.3d 397, § 2b (1975). ‘‘One who has

nothing but his labor to sell, and is in urgent

need of selling that, cannot well afford to

raise any objection to any of the terms in the

contract of employment offered him, so long

as the wages are acceptable.’’ Menter Co. v.

Brock, 147 Minn. 407, 180 N.W. 553, 555

(1920). Hence, leniency must favor the employee and the terms of the contract must be

construed in the employee’s favor.

Conversely, blue penciling favors the employer by presuming the employer’s good

faith.7

 Demonstrating compassion for the

employer, one professor offered that ‘‘in most

such cases, the employer does not require

the promise because the employer is a hardhearted oppressor of the poor,’’ instead, ‘‘the

employer is engaged in the struggle for prosperity and must utilize all avenues to gain

and retain the good will of customers.’’ 15

Grace McLane Giesel, Corbin on Contracts

§ 80.15, at 120 (rev. ed.2003). Further,

‘‘[t]he function of the law is to maintain a

reasonable balance’’ because ‘‘a former employee may compete unfairly and an employer may oppress unreasonably.’’ Id. This

analysis sympathizes with employers at most

and equivocates the employer’s and employee’s plight at least. However, it is plain that

the scales are most imbalanced when the

party who holds a superior bargaining position, and who is the contract drafter, drafts a

contract that is greater than required for its

protection and is thereafter rewarded with

the court’s legal drafting aid, as the other

party faces economic impairment, restrained

in his trade. In the context of an agreement

that is in restraint of trade, a good-faith

presumption benefiting the employer is unwarranted.

At the outset, the bargaining positions of

the employer and employee are generally

unequal. Star Direct, Inc. v. Dal Pra, 319

Wis.2d 274, 767 N.W.2d 898, 924 n. 10 (2009).

When an employment contract is made, the

party seeking employment must consent to

almost any restrictive covenant if he or she

desires employment Id. Hence, even an employer-drafted contract containing unenforceable provisions will likely be signed by the

employee. Under a blue pencil doctrine,

‘‘[t]he employer then receives what amounts

to a free ride on’’ the provision, perhaps

knowing full well that it would never be

enforced. Pivateau, supra, at 690. Consequently, the practice encourages employers

with superior bargaining power ‘‘to insist

upon unreasonable and excessive restrictions,

secure in the knowledge that the promise will

be upheld in part, if not in full.’’ Streiff v.

Am. Family Mut. Ins. Co., 118 Wis.2d 602,

348 N.W.2d 505, 509 (1984).8

 It thereby

7. Although we acknowledge that some courts

only allow blue penciling ‘‘if the party who seeks

to enforce the term obtained it in good faith,’’

Ellis v. James V. Hurson Associates, Inc., 565

A.2d 615, 617 (D.C.1989) (internal quotations

omitted), still other courts do not make good

faith a condition of reformation, see, e.g., Farm

Bureau, 203 N.W.2d at 212.

8. A California court explains:

Many, perhaps most, employees would honor these clauses without consulting counsel

or challenging the clause in court, thus di104

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forces the employee to bear the burden as

employers carelessly, or intentionally, overreach. Pivateau, supra, at 689. ‘‘In the

words of one commentator, ‘[t]his smacks of

having one’s employee’s cake, and eating it

too.’ ’’ Id. at 690 (quoting Blake, supra, at

683).

[11] The dissent argues that refusal to

blue pencil is antiquated. However, it has

been noted that ‘‘eliminating the blue pencil

doctrine comports with recent trends as

courts have indicated a greater willingness to

refuse to reform agreements that are not

reasonable on their face.’’ Id. at 674. Some

states, such as Wisconsin, have even codified

the ‘‘no modification rule.’’ See Wis. Stat.

§ 103.465 (2012).9

 Based on the argument of

antiquity, and the rule of law in other jurisdictions, the dissent would force the district

court to change the contract to only prohibit

Islam from being employed as a casino

host.10 The dissent’s overreach in such an

indulgent application of the doctrine is troubling.

[12] Under a strict application of the blue

pencil doctrine, ‘‘only the offending words are

invalidated if it would be possible to delete

them simply by running a blue pencil

through them, as opposed to changing, adding, or rearranging words.’’ Pivateau, supra,

at 681 (internal quotation omitted). The dissent purports to reword the provision by

changing the work exclusion term to limit it

to employment as a casino host. Thus, the

dissent embraces the most liberal form of the

blue pencil doctrine, id. at 682, a use of

judicial resources that is unwarranted and

blurs the line between the bench and the

bar.11 As explained by the Supreme Court

of Arkansas, ‘‘[w]e are firmly convinced that

parties are not entitled to make an agreement, as these litigants have tried to do, that

they will be bound by whatever contract the

courts may make for them at some time in

the future.’’ Rector–Phillips–Morse, Inc. v.

Vroman, 253 Ark. 750, 489 S.W.2d 1, 4

(1973). Courts are not empowered to make

private agreements. Id. Such actions are

simply not within the judicial province. Id.

[13] In light of Nevada’s caselaw and

stated public policy concerns, we will not

reform the contract to change the type of

employment from which Islam is prohibited.

As written, the contract is an unenforceable

restraint of trade. See Hansen, 83 Nev. at

191, 426 P.2d at 793 (recognizing that contracts in restraint of trade will not be enrectly undermining the statutory policy favoring competition. Employers would have

no disincentive to use the broad, illegal

clauses if permitted to retreat to a narrow,

lawful construction in the event of litigation.

Kolani v. Gluska, 64 Cal.App.4th 402, 75 Cal.

Rptr.2d 257, 260 (1998). On the other hand, the

‘‘all or nothing’’ approach encourages employers

to carefully draft agreements devoid of ‘‘overreaching terms for fear that the entire agreement

will be voided.’’ Kenneth R. Swift, Void Agreements, Knocked–Out Terms, and Blue Pencils: Judicial and Legislative Handling of Unreasonable

Terms in Noncompete Agreements, 24 Hofstra

Lab. & Emp. L.J. 223, 246 (2007).

9. Wis. Stat. § 103.465 provides:

A covenant by an assistant, servant or agent

not to compete with his or her employer or

principal during the term of the employment

or agency, or after the termination of that

employment or agency, within a specified territory and during a specified time is lawful and

enforceable only if the restrictions imposed are

reasonably necessary for the protection of the

employer or principal. Any covenant, described in this subsection, imposing an unreasonable restraint is illegal, void and unenforceable even as to any part of the covenant or

performance that would be a reasonable restraint.

10. Even assuming that the blue pencil doctrine is

not contrary to Nevada precedent and stated

public policy, reformation is certainly not a mandate placed on a district court. Laura J. Thalacker & Hartwell Thalacker, Non–Compete

Laws: Nevada, Practical Law State Q & A § 6

(2015) (suggesting that ‘‘[c]ourts in Nevada may,

but are not required to, modify or blue pencil the

terms in non-compete agreements and may enforce them as modified’’). Under a review for

discretion, the district court certainly did not

abuse its discretion in refusing to redraft a noncompete agreement that banned the employer

from ‘‘employment, affiliation, or service with

any gaming operation.’’ See Dowell v. Biosense

Webster, Inc., 179 Cal.App.4th 564, 102 Cal.

Rptr.3d 1, 11 (2009) (affirming a lower court’s

invalidation of an overbroad noncompete clause

prohibiting ‘‘an employee from rendering services, directly or indirectly, to a competitor’’).

11. Redrafting the contract, rather than striking

the offending work exclusion term, is the dissent’s only option because striking the term renders the agreement unintelligible.

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forced unless the terms are reasonable).

Without a contract, there was no violation.12

Accordingly, we affirm the district court’s

ruling as to the noncompete agreement.

Conversion

[14] Atlantis claims the district court

erred by determining that Islam was not

liable for conversion. According to Atlantis,

Islam converted its property when she altered the player contact information for 87

guests, taking control of its data in a form

that was inconsistent with its property

rights. Islam and GSR contend that conversion requires a more serious interference

with property rights.

[15, 16] Nevada law defines conversion

‘‘as a distinct act of dominion wrongfully

exerted over another’s personal property in

denial of, or inconsistent with his title or

rights therein or in derogation, exclusion, or

defiance of such title or rights.’’ M.C. Multi–Family Dev., LLC v. Crestdale Assocs.,

Ltd., 124 Nev. 901, 910, 193 P.3d 536, 542

(2008) (internal quotations omitted). Furthermore, ‘‘conversion generally is limited to

those severe, major, and important interferences with the right to control personal property that justify requiring the actor to pay

the property’s full value.’’ Edwards v. Emperor’s Garden Rest., 122 Nev. 317, 328–29,

130 P.3d 1280, 1287 (2006).

We conclude that Islam’s act of altering

the player contact information in Atlantis’

gaming database did not amount to conversion. The information was not lost, and with

relatively minimal cost, the contact information was properly restored. To be sure, the

interruption in marketing caused by Islam’s

conduct was not severe enough to justify

requiring her to pay the full value of the

information, which was estimated to be much

more valuable than the cost of repair.13

Therefore, we also affirm the district court’s

finding of no liability as to Atlantis’ conversion claim against Islam.

Attorney fees awarded to Atlantis against

Islam

[17] Islam contends that the district

court violated her right to due process by

awarding Atlantis $308,711 in attorney fees

without allowing her to view the itemized

fees. In response, Atlantis contends that

NRCP 54 does not require the detailed documentation that Islam sought.

We conclude that the district court’s award

of attorney fees to Atlantis against Islam

without permitting Islam to review the itemizations was improper. See Love v. Love, 114

Nev. 572, 582, 959 P.2d 523, 529 (1998) (concluding that the district court’s grant of attorney fees based upon sealed billing statements unfairly precluded the opposing party

from disputing the legitimacy of the award).

Therefore, as to the award of attorney fees

against Islam, we reverse and remand with

instructions to allow Islam to review the

itemized attorney fees,

Atlantis v. GSR

Nevada Uniform Trade Secrets Act

Atlantis contends that the district court’s

conclusions that GSR did not misappropriate

its trade secrets, but that Islam did, are

irreconcilable with one another. Thus, Atlantis claims that GSR is also liable for misappropriation. GSR argues that it did not

misappropriate Atlantis’ trade secrets because it reasonably relied on Islam’s representation that she had relationships with

each of the players she put in its database,

and thus, GSR had no knowledge that the

information was a trade secret.

We conclude that the district court’s conclusion was not clearly erroneous because

Atlantis failed to establish the essential elements of its misappropriation claim against

12. Based on our determination that the noncompete agreement was unenforceable, we also conclude that Atlantis’ cause of action for tortious

interference with a contractual relationship

against GSR was properly dismissed as a matter

of law. See J.J. Indus., LLC v. Bennett, 119 Nev.

269, 274, 71 P.3d 1264, 1267 (2003) (requiring a

valid and existing contract to establish an intentional interference with contractual relations

claim).

13. We note that the district court awarded Atlantis the cost of repair as compensation in its

breach of contract claim.

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GSR. The following was set forth by the

United States District Court for the Northern District of California in interpreting California’s almost identical Uniform Trade Secrets Act:

The elements of a claim of indirect trade

secret misappropriation TTT are: (1) the

plaintiff is the owner of a valid trade secret; (2) the defendant acquired the trade

secret from someone other than the plaintiff and (a) knew or had reason to know

before the use or disclosure that the information was a trade secret and knew or had

reason to know that the disclosing party

had acquired it through improper means

or was breaching a duty of confidentiality

by disclosing it; or (b) knew or had reason

to know it was a trade secret and that the

disclosure was a mistake; (3) the defendant used or disclosed the trade secret

without plaintiff’s authorization; and (4)

the plaintiff suffered harm as a direct and

proximate result of the defendant’s use or

disclosure of the trade secret, or the defendant benefitted from such use or disclosure.

MedioStream, Inc. v. Microsoft Corp., 869

F.Supp.2d 1095, 1114 (N.D.Cal.2012). Compare Cal. Civ. Code § 3426.1 (2012), with

NRS 600A.030(2).14

[18] Atlantis failed to establish that GSR

knew or should have known that the information Islam provided was a trade secret. GSR

took steps to ensure that it did not receive

trade secret information from Islam. GSR’s

hiring personnel advised Islam before she

began working to bring only herself and her

relationships when she left Atlantis. Additionally, GSR management sought and

gained Islam’s reassurance that the player

information she communicated was built on

her own relationships. Based on Islam’s representations, there was no reason for GSR to

know that it was using trade secrets that

belonged to Atlantis.

Furthermore, Atlantis’ letter to GSR did

not sufficiently put GSR on notice that it was

using wrongfully obtained player information. The letter expressed doubt as to

whether GSR was in fact in possession of

Atlantis’ trade secrets and failed to identify

the trade secrets. Atlantis’ letter advised

that there were ‘‘[p]otential [t]rade [s]ecret

[v]iolations’’ and, rather elusively, communicated that ‘‘[i]f GSR has incorporated into its

data base TTT confidential information that is

the property of the Atlantis, we demand that

GSR immediately advise us of the same.’’ In

addition to the uncertainty communicated by

Atlantis’ use of the terms ‘‘potential’’ and

‘‘if,’’ Atlantis placed the onus on GSR to

know what trade secrets GSR had in its

possession that belonged to Atlantis. However, without Atlantis’ player list, or Islam’s

candid insight, it was nearly impossible for

GSR to know whether it was using Atlantis’

trade secrets. Moreover, when GSR requested more specific information, Atlantis

failed to provide it. Because GSR received

both trade secret and nontrade secret information from Islam without knowing which, if

any, information was protected, it cannot be

said that GSR sufficiently knew or should

have known that the information provided to

it was a trade secret. See MicroStrategy

Inc. v. Bus. Objects, S.A., 331 F.Supp.2d 396,

431 (E.D.Va.2004) (limiting scope of protected documents to those identified as trade

secrets).

14. NRS 600A.030(2) provides that ‘‘misappropriation’’ means as follows:

(a) Acquisition of the trade secret of another

by a person by improper means;

(b) Acquisition of a trade secret of another

by a person who knows or has reason to know

that the trade secret was acquired by improper

means; or

(c) Disclosure or use of a trade secret of

another without express or implied consent by

a person who:

(1) Used improper means to acquire knowledge of the trade secret;

(2) At the time of disclosure or use, knew or

had reason to know that his or her knowledge of the trade secret was:

(I) Derived from or through a person who

had used improper means to acquire it;

(II) Acquired under circumstances giving

rise to a duty to maintain its secrecy or limit

its use; or

(III) Derived from or through a person who

owed a duty to the person seeking relief to

maintain its secrecy or limit its use; or

(3) Before a material change of his or her

position, knew or had reason to know that it

was a trade secret and that knowledge of it

had been acquired by accident or mistake.

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An alternative result, which establishes the

sufficiency of GSR’s knowledge based on

these facts, would be harmful to the casino

host trade. To protect Atlantis’ potential

trade secrets, GSR would need to cease marketing to all players communicated to by

Islam. This result would encourage all casino hosts’ former employers to send letters

accusing the host’s new employer of trade

secret violations, knowing that with no real

claim of misappropriation, they could quash

competition. The consequences would suffocate a casino host’s very purpose, whose

trade is built on providing its employer with

relationships established with customers.

Hosts provide a unique advantage to casinos

by expanding a casino’s client base, Choctaw

Resort Development Enterprise v. Applequist, 161 So.3d 1134, 1136 (Miss.Ct.App.

2015), and the result the dissent and Atlantis

seek could stifle the trade.

Our holding considers the nature of the

casino host’s trade. With more specific information about which players were improperly solicited, GSR could have ceased its use

of information improperly obtained while

continuing its use of information rightfully

obtained. We deem this to be the best outcome.

Therefore, we reject the assertion that

GSR knew, or had reason to know, from

Atlantis’ vague accusations, that it was using

information improperly obtained. We conclude that, without more, GSR appropriately

relied on Islam’s statements that the information she relayed was based on her own

relationships and her book of trade. The

district court properly held Islam responsible

for her actions but distinguished Islam’s conduct from that of GSR. Because the district

court’s determination that GSR did not misappropriate Atlantis’ trade secrets was not

clearly erroneous, we affirm.

Attorney fees awarded to GSR against Atlantis

Atlantis claims the district court’s award of

attorney fees in favor of GSR in the amount

of $190,124.50, pursuant to GSR’s NRCP 68

offer of judgment, is unsupported and should

be vacated. GSR contends that it was entitled to the award of attorney fees based on

the offer of judgment, but that it is additionally entitled to an award of attorney fees

based on Atlantis’ bad faith, pursuant to

NRS 600A.060. We conclude that the district

court properly awarded attorney fees pursuant to the offer of judgment. GSR made an

offer that Atlantis rejected, and Atlantis

failed to receive a more favorable judgment.15

Upon a review of the record, we also conclude that the district court properly refused

to award fees under NRS 600A.060 because

Atlantis’ claim was not brought in bad faith.16

Thus, as to the district court’s award of

attorney fees between Atlantis and GSR, we

affirm.

Based on the foregoing, we affirm the district court’s judgment and attorney fees orders except as to the order awarding fees

against Islam in favor of Atlantis. With

respect to that order, we reverse and remand

to the district court for further proceedings

consistent with this opinion.

We concur: CHERRY, SAITTA, and

GIBBONS, JJ.

HARDESTY, J., with whom

PARRAGUIRRE, C.J., and PICKERING,

J., agree, dissenting in part:

While I agree that the non-compete agreement was written too broadly, there is no

doubt that Islam and Atlantis agreed to restrict Islam’s future employment as a casino

host and that such a restriction is reasonable.

Absent some showing of bad faith on Atlantis’ part, of which there was none, I would

follow the approach taken by this court and a

majority of other courts and preserve the

15. We note that Atlantis’ argument that the offer

of judgment was invalid because it was made by

a nonparty lacks merit.

16. In the district court’s order dated September

27, 2013, it found that Atlantis acted in bad faith

in pursuing the misappropriation claim against

GSR, However, the district court later denied the

fees under NRS 600A.060 because it had already

awarded attorney fees based on the offer of judgment. We conclude that substantial evidence did

not support the district court’s bad-faith finding,

but we affirm because the district court reached

the right result.

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non-compete agreement by modifying or severing the overly broad provision and thereby

maintain the restriction on Islam’s future

employment in a competing casino host position. Reformation is an equitable remedy,

and here, the equities run in favor of Atlantis

and against the employee who admittedly

stole trade secret information from her employer to use in her new casino host job for a

competitor. I therefore dissent from the

majority’s adoption of a minority view to

invalidate the entire agreement. I also dissent from the majority’s determination that

GSR did not violate the Uniform Trade Secret Act. GSR had knowledge of the Islam/Atlantis non-compete and trade secret

agreements soon after GSR hired Islam. As

a result, GSR had reason to know that its

new employee had acquired trade secrets by

‘‘improper means.’’ NRS 600A.030(2)(a)–(c).

Invalidating the non-compete agreement

does not provide a defense to the use of trade

secret information appropriated in violation

of the enforceable trade secret agreement.

Non-compete agreement

A majority of courts agree that overly

broad non-compete agreements should be altered, where possible, to recognize the intent

of the parties and bring them within reasonable parameters. See Ferdinand S. Tinio,

Annotation, Enforceability, Insofar as Restrictions Would Be Reasonable, of Contract

Containing Unreasonable Restrictions on

Competition, 61 A.L.R.3d 397, §§ 4–5 (1975)

(outlining jurisdictions that allow some form

of modification and those that do not). The

modification test has been adopted by ‘‘most

United States jurisdictions.’’ Data Mgmt.,

Inc. v. Greene, 757 P.2d 62, 64 (Alaska 1988)

(adopting the approach that allows a court to

reasonably alter a non-compete agreement so

long as the agreement was drafted in good

faith). See, e.g., Hilligoss v. Cargill, Inc.,

649 N.W.2d 142, 147 n. 8 (Minn.2002) (explaining that ‘‘a court at its discretion [can]

modify unreasonable restrictions on competition in employment agreements by enforcing

them to the extent reasonable’’); Whelan

Sec. Co. v. Kennebrew, 379 S.W.3d 835, 844

(Mo.2012) (‘‘[W]hen the provisions of a noncompete clause impose a restraint that is

unreasonably broad, appellate courts still can

give effect to its purpose by refusing to give

effect to the unreasonable terms or modifying the terms of the contract to be reasonable.’’); Merrimack Valley Wood Prods., Inc.

v. Near, 152 N.H. 192, 876 A.2d 757, 764

(2005) (‘‘Courts have the power to reform

overly broad restrictive covenants if the employer shows that it acted in good faith in the

execution of the employment contract.’’);

Cardiovascular Surgical Specialists, Corp. v.

Mammana, 61 P.3d 210, 213 (Okla.2002) (‘‘To

cure an overly broad and thus unreasonable

restraint of trade, an Oklahoma court may

impose reasonable limitations concerning the

activities embraced, time, or geographical

limitation but it will refuse to supply material

terms of a contract.’’ (internal quotation

marks omitted)); Durapin, Inc. v. Am.

Prods., Inc., 559 A.2d 1051, 1058 (R.I.1989)

(‘‘We believe this is the appropriate time to

choose the route that permits unreasonable

restraints to be modified and enforced,

whether or not their terms are divisible, unless the circumstances indicate bad faith or

deliberate overreaching on the part of the

promisee.’’); Simpson v. C & R Supply, Inc.,

598 N.W.2d 914, 920 (S.D.1999) (allowing

modification of ‘‘noncompetition provisions to

conform to the statutory mandate TTT via

partial enforcement’’). The policy behind

this approach is that ‘‘[a]n otherwise reasonable restrictive covenant should not be held

invalid because it is unreasonable solely as to

[breadth] where voiding the agreement, rather than enforcing it in a reasonable way,

would be contrary to legislative intent, and

frustrate the intent of the parties.’’ 17A

C.J.S. Contracts § 381 (2011); see also Kenneth R. Swift, Void Agreements, Knocked–

Out Terms, and Blue Pencils: Judicial and

Legislative Handling of Unreasonable

Terms in Noncompete Agreements, 24 Hofstra Lab. & Emp. L.J. 223, 249–50 (2007)

(explaining that this test allows ‘‘courts [to]

exercise their inherent equity powers to the

extent necessary to protect the employer’s

legitimate business interest’’).

In addition to the modification test, the

‘‘blue-pencil test’’ also allows modification by

permitting a court to delete an overly broad

portion of a non-compete covenant and to

enforce the remainder. Id.; see also 17A Am.

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Jur. 2d Contracts § 318 (2004) (‘‘While

recognizing that illegal contracts are generally unenforceable or void, a court may, where

possible, sever the illegal portion of the

agreement and enforce the remainder.’’ (footnotes omitted)). Several jurisdictions have

embraced this test. See, e.g., Ellis v. James

V. Hurson Assocs., Inc., 565 A.2d 615, 617

(D.C.1989); Cent. Ind. Podiatry, P.C. v.

Krueger, 882 N.E.2d 723, 730 (Ind.2008);

Hartman v. W.H. Odell & Assocs., Inc., 117

N.C.App. 307, 450 S.E.2d 912, 920 (1994);

Star Direct, Inc. v. Dal Pra, 319 Wis.2d 274,

767 N.W.2d 898, 916 (2009).

Contrarily, the draconian all-or-nothing

rule invalidates the entire contract if any

part of the non-compete agreement is overly

broad. 17A C.J.S. Contracts § 381 (2011).

Only a few jurisdictions still use this approach. See, e.g., Rector–Phillips–Morse,

Inc. v. Vroman, 253 Ark. 750, 489 S.W.2d 1, 5

(1973); Rollins Protective Servs. Co. v. Palermo, 249 Ga. 138, 287 S.E.2d 546, 549 (1982).

In this case, Islam signed a non-compete

agreement more than a year after beginning

her employment as a casino host with Atlantis. Pursuant to the non-compete agreement:

In the event that the employment relationship between Atlantis and [Islam] ends for

any reason, either voluntary or non-voluntary, [Islam] agrees that (s)he will not,

without the prior written consent of Atlantis, be employed by, in any way affiliated

with, or provide any services to, any gaming business or enterprise located within

150 miles of Atlantis Casino Resort for a

period of one (1) year after the date that

the employment relationship between Atlantis and [Islam] ends.

(Emphasis added.)

By modifying and narrowing the broad

language describing the scope of Islam’s future employment, this court can give effect to

the admitted intent of the parties to restrict

her future employment as a casino host.

Therefore, the text ‘‘be employed by, in any

way affiliated with, or provide any services

to’’ should be narrowed to ‘‘be employed as a

casino host,’’ allowing the non-compete provision to survive.

The majority based its decision to invalidate the entire non-compete agreement on

Reno Club v. Young Investment Co., 64 Nev.

312, 182 P.2d 1011 (1947); All Star Bonding

v. State, 119 Nev. 47, 62 P.3d 1124 (2003);

Kaldi v. Farmers Insurance Exchange, 117

Nev. 273, 21 P.3d 16 (2001); and Jones v.

Deeter, 112 Nev. 291, 913 P.2d 1272 (1996).

The majority’s reliance on Reno Club, All

Star Bonding, and Kaldi is unfounded. Not

only do Reno Club, All Star Bonding, and

Kaldi fail to discuss non-compete agreements, they also focus on ambiguity (not

overbreadth), a factor that does not apply

when deciding to alter a non-compete agreement. See Reno Club, 64 Nev. at 325, 182

P.2d at 1017 (‘‘[T]here is no ambiguity or

uncertainty in the meaning of the language

employed in the option agreement TTT, and

hence no room for judicial construction.’’);

All Star Bonding, 119 Nev. at 51, 62 P.3d at

1126 (explaining that this court is ‘‘not free to

modify or vary the terms of an unambiguous

agreement’’ (internal quotation marks omitted)); Kaldi, 117 Nev. at 281, 21 P.3d at 21

(same); see also 17A C.J.S. Contracts § 381

(2011) (explaining that the three approaches

to altering a non-compete agreement are

used when the agreement is overly broad).

Further, in Jones, this court determined that

a five-year restriction was improper and,

thus, concluded that the non-compete ‘‘covenant [was] per se unreasonable and therefore, unenforceable.’’ 112 Nev. at 296, 913

P.2d at 1275. This conclusory determination

should not be construed as establishing a

strict rule against modifying and limiting unreasonable portions of non-compete agreements. In fact, this court has allowed preliminary injunctions based on non-compete

agreements to be modified in order to make

restrictions reasonable. See, e.g., Ellis v.

McDaniel, 95 Nev. 455, 459, 596 P.2d 222,

225 (1979) (declining to enforce a preliminary

injunction based on a non-compete agreement that ‘‘purport[ed] to prohibit [appellant]

from practicing orthopedic surgery,’’ but

modifying the restriction to prohibit appellant ‘‘from engaging in the general practice

of medicine’’); Hansen v. Edwards, 83 Nev.

189, 191, 193, 426 P.2d 792, 793–94 (1967)

(modifying an employment restriction from

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tation to Reno’s boundary limits for one year

because ‘‘[a] preliminary injunction may be

modified at any time whenever the ends of

justice require such action’’). The procedural postures of Ellis and Hansen differ from

this case as explained by the majority.

While Ellis and Hansen did not use the

expression ‘‘blue pencil,’’ they effectively applied the doctrine by modifying the restrictions placed on the employee. Accordingly, I

conclude that Ellis and Hansen demonstrate

this court’s willingness to preserve a noncompete agreement’s reasonable terms.

Moreover, the majority’s apparent adoption of the wholesale invalidation rule is a

reversion to an antiquated, ill-favored rule.

See Durapin, 559 A.2d at 1058 (explaining

that ‘‘[m]ore recent court decisions TTT reject

this all-or-nothing rule in favor of some form

of judicial modification’’); see also Data

Mgmt., 757 P.2d at 64 (‘‘There is a need to

strike a balance between protecting the

rights of parties to enter into contracts, and

the need to protect parties from illegal contracts. Obliterating all overbroad covenants

not to compete, regardless of their factual

settings, is too mechanistic and may produce

unduly harsh results.’’). Quoting a law review article, the majority alleges that the

‘‘ ‘recent trend[ ]’ ’’ of courts is to reject the

blue pencil doctrine. Majority opinion ante

at 156 (quoting Griffin Toronjo Pivateau,

Putting the Blue Pencil Down: An Argument for Specificity in Noncompete Agreements, 86 Neb. L. Rev. 672, 674 (2008)).

Interestingly, this recent trend only includes

six United States District Court cases, two of

which are unpublished, issued from 2003 to

2007. See Pivateau, supra, at 694–97.

The majority provides several public policy

arguments for refusing to adopt the blue

pencil test: (1) altering the non-compete

agreement may violate the parties’ intent, (2)

requiring a court to modify or blue pencil a

non-compete agreement wastes judicial resources, and (3) leniency favors the employee

because a non-compete agreement should be

construed against the employer who drafted

it. I address each of these arguments in

turn.

First, the court takes evidence of the parties’ intent into consideration when modifying

a non-compete agreement, so any infringement on the parties’ intent should be minimal. And contrary to the majority’s assertion that modification conflicts with the

bench’s impartiality, see majority opinion

ante at 157–58, this evidence allows the modification of a non-compete agreement to be

based on objective criteria. In fact, the court

is able to accurately modify the non-compete

agreement in this case because Islam and

Atlantis acknowledge their intent to limit

Islam’s future employment as a casino host

and protect Atlantis’ gaming trade secrets.

The trade secret agreement, which the majority does not invalidate, prohibits Islam

from using or disseminating any intellectual

property, including customer lists. The ethics and code of conduct agreement, which the

majority also does not invalidate, prohibits

Islam from disclosing confidential information, including customer lists. The non-compete agreement is an extension of this intent:

it protects customer lists from being exploited by competing casinos in the event an

employment relationship fails. Because the

three agreements relate to each other, this

court need not speculate as to the parties’

intent. Applying the wholesale invalidation

rule completely ignores, rather than violates,

the parties’ intent in this case.

Second, because the court is already

tasked with determining whether the noncompete agreement is overbroad, deciding

how to modify an agreement is a natural next

step, such that only a negligible amount of

extrajudicial resources are being expended.

Additionally, the court will not always be

charged with modifying an agreement, as

such a decision is discretionary. See Swift,

supra, at 251. For example, ‘‘clear overreaching on the part of the employer may

preclude a’’ court from exercising its discretion to modify. Id. Use of that discretion

rejects the majority’s suggestion that modification allows an employer to receive a ‘‘ ‘free

ride.’ ’’ Majority opinion ante at 158 (quoting

Pivateau, supra, at 690). Instead of incentivizing an employer to draft a stricter-thannecessary non-compete agreement with the

knowledge that the court will simply limit it,

as the majority asserts, modification discourages bad faith while also providing a safety

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net to protect agreements that were inadvertently drafted too broadly. And in this case,

there is no evidence to suggest Atlantis acted

in bad faith in preparing the agreements or

seeks to enforce the non-complete agreement

against Islam in an overly broad way. Atlantis’ claim is directed to Islam’s future employment as a casino host and does not seek

to limit her employment in another capacity

with another casino.

Finally, while the majority focuses on the

unfairness to the employee, it is important

to note that non-compete agreements are intended to balance the employer’s and the

employee’s interests. See Employers May

Face New Challenges in Drafting Noncompetes, 19 No. 2 Nev. Emp. L. Letter 4

(2013) (‘‘[R]estrictive covenants strike a delicate balance between employers’ interests—

protecting confidential information and institutional knowledge, preserving hard-won

customer and client relationships, and incentivizing key talent to remain loyal—and employees’ interests in maintaining work mobility and the freedom to command competitive

compensation for their skills.’’). Thus, we

must not forget that non-compete agreements are extraordinarily important to Nevada businesses, especially in industries that

rely on proprietary client lists, such as Atlantis. See Traffic Control Servs., Inc. v.

United Rentals Nw., Inc., 120 Nev. 168, 172,

87 P.3d 1054, 1057 (2004) (‘‘Employers commonly rely upon restrictive covenants TTT to

safeguard important business interests.’’).

On this note, the majority also contends that

modification favors the employer. While the

all-or-nothing rule ultimately favors the employee—to the extreme disadvantage of the

employer—by removing any restriction

placed on future employment, modification

also favors the employee by appropriately

limiting the restriction.

Moreover, it is difficult to reconcile the

majority’s concern for Islam in this case

when the facts demonstrate that Islam

sought to compete as a casino host using

trade secret information she appropriated

from Atlantis. Islam committed theft, and

GSR sanctioned Islam’s behavior.

Uniform Trade Secret Act

Atlantis’ cease and desist letter informed

GSR that Islam was improperly soliciting

guests in violation of its trade secret agreement, a copy of which was enclosed with the

letter. The letter did not ‘‘express[ ] doubt,’’

as the majority depicts. See majority opinion ante at 161. The letter stated that Atlantis ‘‘reasonably believe[d] that [Islam’s]

contact with these guests was facilitated by

improper use of Atlantis’ information.’’ In

response, GSR merely rejected Atlantis’ assertions, maintained that there was no

wrongdoing, and wrongly asserted that it did

not possess any of Atlantis’ property. Importantly, during her interview process, Islam provided GSR with a copy of her noncompete agreement with Atlantis. Because

the non-compete agreement sought to restrict Islam from employment and, as such,

using her book of trade in a competing casino, GSR was on notice that using any information provided by Islam may be improper.

The non-compete agreement and the cease

and desist letter play a crucial role in Atlantis’ claim against GSR for violation of the

Uniform Trade Secret Act. The majority concluded that GSR did not know, or have a

reason to know, that it had used improperly

obtained information. I disagree.

As defined in NRS 600A.030(2):

‘‘Misappropriation’’ means:

TTTT

(c) TTT use of a trade secret of another

without express or implied consent by a

person who:

TTTT

(2) At the time of disclosure or use,

knew or had reason to know that his or

her knowledge of the trade secret was:

(I) Derived from or through a person

who had used improper means to acquire it;

(II) Acquired under circumstances

giving rise to a duty to maintain its

secrecy or limit its use; or

(III) Derived from or through a person who owed a duty to the person

seeking relief to maintain its secrecy

or limit its use.

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Cite as 376 P.3d 167 (Nev. 2016)

As stated previously, the non-compete and

trade secret agreements sought to restrict

Islam from employment and using any guest

information in a competing casino for one

year. Because GSR had knowledge of the

non-compete and trade secret agreements

soon after it hired Islam, it ‘‘had reason to

know’’ that it was potentially using trade

secret information ‘‘[d]erived from or

through a person who owed a duty to TTT

maintain its secrecy.’’ 1

 NRS

600A.030(2)(c)(2)(III). Accordingly, I conclude that any use of Atlantis’ guest information after it hired Islam and decidedly after

receiving the cease and desist letter constituted misappropriation in violation of the

Uniform Trade Secret Act.

The majority contends that this conclusion

incentivizes employers to accuse their former

employees’ new employers of violating trade

secrets. See majority opinion ante at 161–62.

This dubious risk of dishonesty is outweighed

by the culture of distrust that the majority is

creating by holding that a casino can ignore

another casino’s report of wrongdoing.

Conclusion

Because (1) the non-compete agreement

can and should be narrowed instead of being

invalidated and (2) GSR misappropriated Atlantis’ trade secrets, I believe that the district court erred in dismissing Atlantis’

breach of the non-compete agreement claim

against Islam, tortious interference with a

contractual relationship claim against GSR,

and violation of the Uniform Trade Secret

Act claim against GSR. Therefore, I would

reverse the judgment of the district court

with regard to these claims.

We concur: PARRAGUIRRE, C.J., and

PICKERING, J.

,

HUMBOLDT GENERAL HOSPITAL;

and Sharon McIntyre, M.D.,

Petitioners,

v.

The SIXTH JUDICIAL DISTRICT COURT

of the State of Nevada, In and for the

County of Humboldt; and the Honorable Michael Montero, District Judge,

Respondents,

and

Kelli Barrett, Real Party in Interest.

No. 65562.

Supreme Court of Nevada.

July 28, 2016.

Background: Patient brought action

against hospital and physician, alleging

batter based on alleged lack of informed

consent. The Sixth Judicial District Court,

Humboldt County, Michael Montero, J.,

denied defendant’s motion to dismiss that

was based on patient’s failure to file medical expert affidavit. Defendants petitioned

for writ of mandamus.

Holdings: The Supreme Court, Hardesty,

J., held that:

(1) consideration of merits of petition for

writ of mandamus challenging denial of

motion to dismiss was warranted, and

(2) on an issue of first impression, battery

claim based on alleged lack of informed

consent was medical malpractice claim

that required medical expert affidavit.

Writ granted.

1. Mandamus O43

Consideration of merits of petition for

writ of mandamus challenging denial of mo1. The majority highlights the fact that Atlantis

failed to provide GSR with specific information

upon GSR’s request. See majority opinion ante

at 161–62. Misappropriation only requires a

‘‘reason to know,’’ NRS 600A.030(2)(c)(2), so

Atlantis was under no obligation to provide evidence to GSR. Atlantis’ letter to Islam, which

was enclosed with Atlantis’ letter to GSR, explained that it possessed electronic records

showing Islam’s sabotage, and its guests who

were not a part of Islam’s book of trade had been

contacted by GSR. This information sufficiently

demonstrates that GSR ‘‘had reason to know’’

about the trade secret violation. NRS

600A.030(2)(c)(2).

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526 P.3d 1110 (Table)

Unpublished Disposition

This is an unpublished disposition. See Nevada Rules of Appellate Procedure, Rule 36(c) before citing.

Court of Appeals of Nevada.

HALCYON SILVER, LLC, d/b/a Metropolitan Auto Body & Paint,

A Nevada Corporation; and Charles Fox, an Individual, Appellants,

v.

Hollis EVELYNMOE, an Individual, Respondent.

No. 84299-COA

|

Filed March 24, 2023

Halcyon Silver, LLC, d/b/a Metropolitan Auto Body & Paint (Metropolitan), and Charles Fox appeal from a final judgment in

a contract action concerning automotive repair and restoration. 1 Eighth Judicial District Court, Clark County; Crystal Eller,

Judge.

Attorneys and Law Firms

McAvoy Amaya & Revero, Attorneys

Law Office of S. Don Bennion

ORDER AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

*1 In 2013, Hollis Evelynmoe took his 1970 Ford Mustang (vehicle) to Vegas Stang—at the time, an auto body shop in Las

Vegas—which conducted numerous repairs. 2 As relevant to this case, Evelynmoe made the following approximate payments

to Vegas Stang: $2,500 for a rebuilt engine, $2,550 for a rebuilt transmission, $1,300 for a new exhaust system, and at least

$400 for four tires and rims. Vegas Stang went out of business in 2016, at which time Evelynmoe decided to take his vehicle to

Metropolitan for completion of additional repairs. In November 2016, Evelynmoe delivered his vehicle to Metropolitan along

with the rebuilt engine, transmission, exhaust system, tires and rims, and the remaining parts installed by Vegas Stang. On

November 4, 2016, Evelynmoe paid Metropolitan $4,039.38 to strip the vehicle down to bare metal and examine its component

parts, which allowed Metropolitan to generate a preliminary estimate of $40,918.03 for the cost of the full repair and restoration

work to be performed. Metropolitan later revised this estimate to reflect Evelynmoe's desire for his vehicle to be converted to

a fastback. The revised estimate reflected a cost of $68,704.28, which Evelynmoe approved.

On December 15, 2016, Evelynmoe met with Fox, the owner of Metropolitan, to sign a work authorization contract for

Metropolitan to begin working on his vehicle. The contract did not contain a “time is of the essence” provision, nor did it list

a specific date in which the work would be completed. Rather, it merely stated that Metropolitan would not be “responsible

for the availability of parts, or delays in part shipments beyond their control.” Additionally, the contract contained a bolded

provision which read, “PLEASE NOTE: A daily storage charge may be applied of up to $70.30 per day for motor vehicles

that have not been picked up after 3 working days from the date of notification that repairs have been complete.” Further, the

contract contained a brief paragraph in which the signee agreed to “pay all legal fees associated with any and all disputes.” The

contract also stated that “[a]n express mechanics lien is hereby acknowledged on the above vehicle to secure the amount of

repairs thereto.” Upon signing the contract, Evelynmoe paid Metropolitan $20,000 to begin the work. When Evelynmoe signed

the contract, Fox explained that he could reasonably expect the work to be completed by the end of summer 2017.

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In the six months after Evelynmoe signed the contract, Metropolitan obtained and installed a fastback conversion kit in

the amount of $4,944 and made preparations for paint in the amount of $1,500. In this same timeframe, Evelynmoe made

payments of $15,367.46 on January 4, 2017, and $20,000 on February 4, 2017. However, at some point during that time frame,

Metropolitan stopped working on Evelynmoe's vehicle. On May 31, 2017, Evelynmoe visited Metropolitan to examine his

vehicle's status and select a paint color. Upon visiting, Evelynmoe learned that Metropolitan had not resumed work on his vehicle

since the work stoppage. After selecting a paint color, Evelynmoe made a final payment of $12,736.82 to Metropolitan, bringing

his collective payments to the $68,704.28 estimated for the completed repair and restoration work. 3 Upon making this final

payment, Fox again told Evelynmoe that he could expect the work on his vehicle to be completed by the end of summer 2017.

*2 After making his final payment, Evelynmoe returned to Metropolitan approximately once a month to check on the status

of his vehicle, only to learn that no further work had been performed by Metropolitan. On April 25, 2018—approximately 11

months after Evelynmoe paid the full price for the repair and restoration work—Evelynmoe discovered again that Metropolitan

had performed no further work on his vehicle, whereupon he demanded that Metropolitan cease performing any further work

and that they relinquish possession of his vehicle. Evelynmoe then took extensive photographs, which demonstrated that

Metropolitan had not completed a majority of the contracted work.

Before Evelynmoe was allowed to retrieve his vehicle, Fox presented him with two forms, an indemnification agreement and

a “Stop Work” order. The indemnification agreement required Evelynmoe to forego all legal claims against Metropolitan. The

Stop Work order required Evelynmoe to pay Metropolitan $70.30 per day in storage fees and to agree that his vehicle received

all of the contracted work. Believing that these agreements misrepresented the condition of his vehicle and required him to

forego legal action that he was entitled to pursue, Evelynmoe refused to sign them. Thus, Fox and Metropolitan refused to

relinquish Evelynmoe's vehicle to him on April 25, 2018. Evelynmoe arranged for a tow truck to retrieve his vehicle on April

25, 2018; however, he cancelled the tow truck because Fox and Metropolitan would not release any part of the vehicle without

him signing the two agreements.

On May 11, 2018, Evelynmoe received a letter from Metropolitan demanding that he pay substantial storage fees or his vehicle

would be sold at auction on June 27, 2018. This forced Evelynmoe to file a motion for preliminary injunction, the hearing for

which took place on June 26, 2018. The court found Evelynmoe's testimony regarding the work performed by Metropolitan and

its refusal to release his vehicle to be credible, and the court granted the preliminary injunction. In its order, the court demanded

that Metropolitan return Evelynmoe's vehicle to him “at a mutually convenient time to the parties.” Additionally, the court

ordered that Metropolitan's lien on Evelynmoe's vehicle for storage fees was still valid. Finally, the court ordered Evelynmoe

to post a bond in the amount of $2,000 to secure payment of storage fees should they be awarded. Despite the court's order,

Evelynmoe did not post the required bond until September 4, 2019.

Metropolitan did not release Evelynmoe's vehicle until September 5, 2019, when a tow truck hired by Silver Arrow, another auto

body shop in Las Vegas, picked it up. Gregory Young, the owner of Silver Arrow, was present at Silver Arrow when Evelynmoe's

vehicle arrived. Young recalled that only the shell of the vehicle was received, and that it was missing, at a minimum, the engine,

transmission, exhaust system, and four tires with rims that Evelynmoe received from Vegas Stang, as well as the driveshaft,

radiator, wiring harness, air conditioning assembly, seats, door panels, glass windows other than the rear window, gas tank,

and rear bank drums.

Evelynmoe initiated the underlying action against Metropolitan and Fox in June of 2018. In the operative complaint, Evelynmoe

alleged that Metropolitan breached the work authorization contract and the implied covenant of good faith and fair dealing by

failing to perform the contracted work on his vehicle. Evelynmoe also asserted a claim for conversion against Metropolitan

and Fox, alleging that they wrongfully exerted dominion over his vehicle in a manner inconsistent with his ownership rights.

Evelynmoe additionally alleged that Fox made an intentional misrepresentation when he communicated that the contracted work

would be completed by the end of summer 2017. In their answer, appellants contested each of Evelynmoe's claims and asserted

a counterclaim for unjust enrichment, as they believed they were entitled to storage fees incurred from the time Evelynmoe's

motion for preliminary injunction was granted to the time that Evelynmoe posted the $2,000 bond mandated by the court's order.

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*3 Following a three-day bench trial, the district court entered its findings of fact, conclusions of law, and judgment.

Preliminarily, the district court found that “Evelynmoe's testimony was consistent throughout the trial and was extremely

credible,” and that “Fox’[s] testimony was somewhat inconsistent and at times thoroughly unbelievable.” The district court

found that Metropolitan materially breached the work authorization contract by failing “to perform a majority of its promised

work between December 16, 2016, and April 25, 2018.” The district court further found that Metropolitan breached the implied

covenant of good faith and fair dealing by performing in a manner that was unfaithful to the purpose of the contract. Moreover,

the district court found that Metropolitan and Fox were liable for conversion for exerting wrongful dominion over Evelynmoe's

vehicle and parts in a manner inconsistent with his ownership rights. Finding that the legal fees provision of the contract was

both procedurally and substantively unconscionable, the district court refused to enforce the provision. And because the written

contract governed the duties of the parties, the district court denied both parties’ claims for unjust enrichment. Finally, the court

found that the estimated completion date communicated by Fox was an estimate rather than a guarantee, and thus, Fox did not

make any intentional misrepresentation to Evelynmoe. In accordance with its findings of fact and conclusions of law, the district

court awarded Evelynmoe damages of $76,332.90, which were broken down as follows:

a. $58,232.90 in monetary losses for work not performed by Metropolitan pursuant to the [work authorization] contract;

b. $11,350.00 for the value of the 1970 Ford Mustang at the time it was delivered to Metropolitan, and the fees for transfer

and storage by Silver Arrow Car Restoration; 4

c. $400.00 for the conversion of four tires and rims;

d. $2,500.00 for the conversion of [Evelynmoe]’s rebuilt engine;

e. $2,550.00 for the conversion of [Evelynmoe]’s transmission; and

f. $1,300.00 for the conversion of [Evelynmoe]’s exhaust system.

On appeal, appellants argue that the district court erred in ruling in Evelynmoe's favor on his claims for breach of contract,

breach of the implied covenant of good faith and fair dealing, and conversion. 5 Appellants further aver that the district court's

award of damages violated the double recovery doctrine. Finally, appellants assert that the district court erred in denying their

unjust enrichment claim, as well as in refusing to enforce the legal fees provision of the contract as unconscionable.

While Evelynmoe fails to address several of appellants’ arguments, he argues that the district court appropriately ruled in his

favor on his contract and conversion claims and that the district court correctly denied appellants’ unjust enrichment claim and

refused to enforce the contract's legal fees provision.

Metropolitan breached the implied covenant of good faith and fair dealing by failing to perform a majority of its promised

work between December 16, 2016, and April 25, 2018

Metropolitan argues that, because the work authorization contract contained no “time is of the essence” provision, Evelynmoe

never expressed dissatisfaction with appellants’ progress in completing the contracted work, and both parties were experienced

in transactions of this kind, its failure to complete the contracted work on Evelynmoe's vehicle between December 16, 2016,

and April 25, 2018, cannot be considered a material breach under Mayfield v. Koroghli, 124 Nev. 343, 184 P.3d 362 (2008).

Metropolitan further contends that the district court erred in concluding that it breached the implied covenant of good faith and

fair dealing because the district court did not make explicit findings of bad faith on its part, even though the district court found

that Metropolitan “failed to complete the repair and restoration work on [the vehicle] in a reasonable time” and that Evelynmoe's

“justified expectations were denied.” Conversely, Evelynmoe argues that, because Metropolitan failed to perform a majority

of the contracted work between December 16, 2016, and April 25, 2018, the district court correctly found that Metropolitan

materially breached the work authorization contract.

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*4 We review the district court's determination that Metropolitan materially breached the contract for clear error. See Sheehan

& Sheehan v. Nelson Malley & Co., 121 Nev. 481, 486, 117 P.3d 219, 223 (2005) (“[T]he district court's determination that

the contract was or was not breached will be affirmed unless clearly erroneous ....”). Similarly, we review the district court's

findings regarding Metropolitan's breach of the implied covenant of good faith and fair dealing for clear error, which will be

upheld so long as such findings are supported by substantial evidence. APCO Constr., Inc. v. Helix Elec. of Nev., LLC, 138

Nev., Adv. Op. 31, 509 P.3d 49, 53-54 (2022). “A finding is ‘clearly erroneous’ when although there is evidence to support

it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed.”

Unionamerica Mortg. & Equity Tr. v. McDonald, 97 Nev. 210, 211-12, 626 P.2d 1272, 1273 (1981) (quoting United States v.

U.S. Gypsum Co., 333 U.S. 364, 395 (1948)).

The time for performance pursuant to a contract is not considered of the essence unless indicated by an express provision or

the circumstances so imply. Mayfield, 124 Nev. at 349, 184 P.3d at 366. Where a contract does not contain a clause indicating

that time for performance is of the essence, the parties generally must render performance within a reasonable time. Id. “What

constitutes a reasonable time for a contract's performance is a question of fact to be determined based on the nature of the

contract and the circumstances surrounding its making.” Id. at 346, 184 P.3d at 364. However, in the absence of a provision

making time of the essence, “a party's failure to perform within a reasonable time generally does not constitute a material breach

of the agreement.” Id. at 349, 184 P.3d at 366. Nevertheless, we need not decide whether the district court correctly determined

that Metropolitan materially breached the contract, as the district court appropriately held Metropolitan liable for breach of the

implied covenant of good faith and fair dealing.

Even where a defendant does not breach the express terms of a contract, a plaintiff may still recover contract damages for a

defendant's breach of the implied covenant of good faith and fair dealing. APCO Constr., Inc., 138 Nev., Adv. Op. 31, 509 P.3d

at 53. A party to a contract breaches the implied covenant of good faith and fair dealing where it performs “in a manner that is

unfaithful to the purpose of the contract and the justified expectations of the other party are thus denied.” Hilton Hotels Corp.

v. Butch Lewis Prods., Inc., 107 Nev. 226, 234, 808 P.2d 919, 923 (1991). Whether a party's performance denies another of

their reasonable expectations under a contract “is determined by the various factors and special circumstances that shape these

expectations.” See id. at 234, 808 P.2d at 924.

Our jurisprudence has noted that whether a party acted in bad faith is the primary inquiry in determining whether they breached

the implied covenant of good faith and fair dealing. See Renown Health v. Holland & Hart, LLP, No. 72039, 2019 WL 1530161,

at *2 (Nev. Apr. 5, 2019) (Order of Affirmance) (citing Geysen v. Securitas Sec. Servs. USA, Inc., 142 A.3d 227, 237-38 (Conn.

2016)). “Examples of bad faith include ‘evasion of the spirit of the bargain, lack of diligence and slacking off, willful rendering

of imperfect performance ... and interference with or failure to cooperate in the other party's performance.’ ” Id. at *2 (emphasis

added) (quoting Restatement (Second) of Contracts § 205 cmt. d (Am. Law Inst. 1981)).

Despite Evelynmoe making his final payment on May 31, 2017, and despite Fox's estimation that the work would be completed

by summer 2017, Metropolitan performed no further work on Evelynmoe's vehicle from then until April 25, 2018, when

Evelynmoe demanded that his vehicle be returned to him. 6 Metropolitan's lack of diligence in completing the contracted work,

which denied Evelynmoe his justified expectations under the contract, illustrates that Metropolitan acted in bad faith, thereby

breaching the implied covenant of good faith and fair dealing. 7 Therefore, we affirm the district court's award of damages for

the work not performed by Metropolitan, not under the theory that Metropolitan materially breached the contract, but under the

alternate theory that Metropolitan breached the implied covenant of good faith and fair dealing.

Appellants exerted wrongful dominion over the component parts of Evelynmoe's vehicle and are thus liable for conversion

*5 Whether a conversion has occurred is a question of fact. Evans v. Dean Witter Reynolds, Inc., 116 Nev. 598, 606, 5 P.3d

1043, 1048 (2000). As such, we defer to the district court's findings regarding appellants’ conversion of the component parts of

Evelynmoe's vehicle so long as they are not clearly erroneous and supported by substantial evidence. Certified Fire Prot. Inc.

v. Precision Constr., Inc., 128 Nev. 371, 377, 283 P.3d 250, 254 (2012) (“Where a question of fact has been determined by the

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trial court, this court will not reverse unless the judgment is clearly erroneous and not based on substantial evidence.” (quoting

Kockos v. Bank of Nev., 90 Nev. 140, 143, 520 P.2d 1359, 1361 (1974))).

“Conversion is ‘a distinct act of dominion wrongfully exerted over another's personal property in denial of, or inconsistent

with his title or rights therein or in derogation, exclusion, or defiance of such title rights.’ ” Evans, 116 Nev. at 606, 5 P.3d

at 1048 (quoting Wantz v. Redfield, 74 Nev. 196, 198, 326 P.2d 413, 414 (1958)). A party is not considered to have exerted

wrongful dominion over property “where it affirmatively submits a genuine dispute regarding the property to the courts and

then appropriately holds the subject property pending the court's decision.” Nev. State Educ. Assn v. Clark Cty. Educ. Assn, 137

Nev. 76, 86, 482 P.3d 665, 675 (2021).

At trial, counsel for appellants claimed that the title to Evelynmoe's vehicle was transferred to Fox following the June 26, 2018,

preliminary injunction hearing and before the order granting the preliminary injunction was entered and Evelynmoe posted the

requisite $2,000 bond. But the record does not support that the title was transferred, nor was such transfer permitted by the

court following the preliminary injunction hearing, The requisite bond pursuant to the preliminary injunction was only to ensure

that appellants would be able to recover storage fees should they be awarded by the court pursuant to their counterclaim, not

to prevent the sale of the vehicle that the court unequivocally prohibited in its order. Because appellants attempted to transfer

the title of Evelynmoe's vehicle to Fox, which the district court prohibited, their actions suggest that they were attempting to

assert wrongful dominion over Evelynmoe's vehicle in violation of Nevada law. See Nev. State Educ. Ass'n, 137 Nev. at 86,

482 P.3d at 675 (“Of course, [the rule that a party does not exert wrongful dominion over property where it submits a genuine

dispute regarding the property to the courts and holds the property pending the court's decision] would not apply if the party

s claim of right is made with ‘malice,’ or if the party improperly disposes of the property.” (citations omitted)). Further, the

fact that appellants did not raise the dispute of the vehicle's ownership to the court prior to allegedly transferring the title of the

vehicle to Fox s name, coupled with the court's finding that appellants never released Evelynmoe's four tires and rims, rebuilt

engine, transmission, and exhaust system demonstrates that their actions were inconsistent with Evelynmoe's ownership of the

property, and supported the court's finding of liability for conversion. Id. at 85-86, 482 P.3d at 674. Therefore, we conclude

that the district court did not err in finding that appellants were liable for the conversion of these missing parts and in awarding

their corresponding values as damages. 8

The district court awarded Evelynmoe duplicative damages in violation of the double recovery doctrine

*6 “Whether a party is entitled to a particular measure of damages is a question of law reviewed de novo.” Dynalectric Co.

of Nev., Inc. v. Clark & Sullivan Constructors, Inc., 127 Nev. 480, 483, 255 P.3d 286, 288 (2011) (internal quotation marks

omitted). Our jurisdiction applied the double recovery doctrine in Elyousef v. O Reilly & Ferrario, LLC, 126 Nev. 441, 442,

245 P.3d 547, 548 (2010). “[A] plaintiff can recover only once for a single injury even if the plaintiff asserts multiple legal

theories.” Id. at 444, 245 P.3d at 549. Accordingly, “satisfaction of the plaintiff's damages for an injury bars further recovery

for that injury.” Id.

At trial, testimony established that Evelynmoe suffered damages of $750 to remove the body of his vehicle from Metropolitan.

Additionally, Young's testimony demonstrated that as of September 1, 2020, Evelynmoe owed Silver Arrow $2,600 for “[t]he

initial retrieval of the car, the moving of the car into the warehouse, and storage [fees] incurred.” This testimony indicates that

the $2,600 figure also reflected the $750 cost to remove Evelynmoe's vehicle from Metropolitan. Nonetheless, the district court

apparently awarded both these amounts in calculating Evelynmoe's damages. Because awarding Evelynmoe both amounts may

have permitted him to recover damages twice for the same injury, the district court may have erred by awarding double recovery

in violation of the double recovery doctrine and, thus, the court will need to recalculate these damages on remand. See id.

Turning to the value of Evelynmoe's vehicle and/or its parts, despite appellants’ assertion that no testimony was offered at trial

to establish the value of the vehicle when it was first dropped off at Metropolitan, Fox testified that “[t]he entire vehicle as a

whole, as a coupe, is probably worth 3,500 to 8 grand.” Because Evelynmoe first delivered his vehicle to Metropolitan along

with the rebuilt engine, transmission, exhaust system, and four rims with tires, it stands to reason that this estimated value

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given by Fox included the value of these parts that accompanied the vehicle. Despite this, the district court awarded Evelynmoe

damages of $11,350 “for the value of the 1970 Ford Mustang at the time it was delivered to Metropolitan, and the fees for

transfer and storage by Silver Arrow Car Restoration,” as well as “$400.00 for the conversion of four tires and rims; $2,500.00

for the conversion of Plaintiff's rebuilt engine; $2,550.00 for the conversion of Plaintiff's transmission; and $1,300.00 for the

conversion of Plaintiff's exhaust system.”

While the district court did not provide a complete breakdown of the $11,350 figure awarded to Evelynmoe, the order suggests

that the court included the higher estimate of $8,000 for the vehicle with parts as provided by Fox's testimony, $2,600 for storage

fees charged by Silver Arrow, and $750 for the removal of Evelynmoe's vehicle from Metropolitan. Assuming this correctly

demonstrates the district court's award of damages to Evelynmoe, the court erred in awarding double recovery damages based

on Metropolitan's conversion of the components after they were already accounted for as part of the vehicle's value when it was

delivered to Metropolitan. See id. Further, the court may have erred in awarding an amount for the body of the vehicle, as it

appears that the body without the component parts was delivered to Silver Arrow Car Restoration and, therefore, returned to

Evelynmoe. For these reasons, we reverse and remand this matter to the district court to recalculate the conversion damages

awarded so as to not violate the double recovery doctrine based on the award of $11,350. See id.

The district court properly denied appellants’ unjust enrichment claim

*7 On appeal, appellants are seeking recovery of storage fees incurred as the result of storing Evelynmoe's vehicle under the

theory of unjust enrichment. “Whether a claimant has been unjustly enriched is a mixed question of law and fact.” See Desert

Miriah, Inc. v. B & L Auto, Inc., 12 P.3d 580, 582 (Utah 2000). Here, the district court after making factual findings declined

to award appellants’ damages for their storage fees based on unjust enrichment.

We review a district court's factual findings for clear error and will uphold such findings so long as they are supported by

substantial evidence. Vegas United Inv. Series 105, Inc. v. Celtic Bank Corp., 135 Nev. 456, 458-59, 453 P.3d 1229, 1231

(2019). “Unjust enrichment occurs whenever a person has and retains a benefit which in equity and good conscience belongs

to another.” Unionamerica Mortg. & Equity Tr., 97 Nev. at 212, 626 P.2d at 1273. A claim for unjust enrichment is unavailable

when there is an express, written contract. Leasepartners Corp. v. Robert L. Brooks Tr., 113 Nev. 747, 755, 942 P.2d 182, 187

(1997). “[Permitting] recovery by quasi-contract where a written agreement exists would constitute a subversion of contractual

principles.” Lipshie v. Tracy Inv. Co., 93 Nev. 370, 379, 566 P.2d 819, 824 (1977).

In this case, the district court determined that the written contract governed the duties of Metropolitan and Evelynmoe, and

therefore, the equitable remedy of unjust enrichment did not apply. See Leasepartners, 113 Nev. at 755, 942 P.2d at 187. The

district court further determined that Evelynmoe did not owe the storage fees to appellants because the “necessity for said storage

was caused by [appellants’] refusal to return [Evelynmoe]’s vehicle when requested on April 25, 2018 and not by [Evelynmoe]’s

lack of diligence in picking up his car upon completion of repairs.” This factual determination by the district court is supported

by substantial evidence in the record, including Evelynmoe's testimony, which the district court found credible throughout trial.

Therefore, appellants’ counterclaim for unjust enrichment as it relates to the storage fees for Evelynmoe's vehicle fails. Id. For

this reason, we conclude that the district court did not err in denying appellants’ counterclaim for unjust enrichment. 9

The contract's legal fees provision was unconscionable, and the district court did not err in refusing to enforce it

“Whether, given the trial court's factual findings, a contractual provision is unconscionable is a question of law subject to de

novo review.” D.R. Horton, Inc. v. Green, 120 Nev. 549, 553, 96 P.3d 1159, 1162 (2004), overruled on other grounds by U.S.

Horne Corp. v. Michael Ballesteros Tr., 134 Nev. 180, 415 P.3d 32 (2018). We will uphold a lower court's findings of fact

supporting a finding of unconscionability so long as they are supported by substantial evidence. Id.

*8 Generally, both procedural and substantive unconscionability are required before a court will render a contractual provision

unenforceable by reason of unconscionability. Burch v. Second Judicial Dist. Court, 118 Nev. 438, 443, 49 P.3d 647, 650

(2002). Procedural unconscionability is present where a contract is presented on a pre-printed, standardized form, which does

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not permit the weaker party to negotiate its terms. See id. at 442, 443-44, 49 P.3d at 649-50 (explaining that an application

form is procedurally unconscionable where the application is presented on a pre-printed, standardized form, which does not

allow the signee “a meaningful opportunity to decide if they [want] to agree” to its terms). On the other hand, “[t]he substantive

element of unconscionability focuses on the actual terms of the contract and assesses whether those terms are overly harsh or

one-sided.” See, e.g., Henderson v. Watson, Docket No. 64545, 2015 WL 2092073, at *2 (Nev. Apr. 29, 2015) (Order Affirming

in Part, Reversing in Part, and Remanding) (citing Armendariz v. Found. Health Psychcare Servs., Inc., 6 P.3d 669, 690 (Cal.

2000)). A contractual provision is not substantively unconscionable where the provision applies equally to both parties. Id. at

*2. Procedural and substantive unconscionability need not be present in the same magnitude, and less evidence of procedural

unconscionability is required where the presence of substantive unconscionability is so substantial. See Armendariz, 6 P.3d at

690.

Here, the contract provided by Metropolitan was a pre-printed, standardized form that Metropolitan utilizes when customers

appear inperson to finalize their agreements for repair and/or restoration work. The only portions of the contract that did not

contain a pre-printed term were blanks for consumers to fill out their personal information, as well as for the price of the repair

and restoration work sought. The legal fees provision in question states, “I agree to pay all legal fees associated with any and

all disputes.”

Because the work authorization contract was a pre-printed and standardized form, Evelynmoe did not appear to have the ability

to negotiate regarding the legal fees provision and was instead required to “take it or leave it.” See Burch, 118 Nev. at 442, 49

P.3d at 649. This demonstrates the presence of procedural unconscionability. Id. at 443-44, 49 P.3d at 650. Although appellants

suggest that Evelynmoe could have negotiated a different contract, no language in the contract suggests that this was an option.

Additionally, the presence of substantive unconscionability in the legal fees provision is significant. The contract's requirement

that Evelynmoe “pay all legal fees associated with any and all disputes” is entirely one-sided, as it does not require appellants

to pay legal fees under any circumstance. Appellants attempt to argue that a reversal of the district court's refusal to enforce

the legal fees provision is warranted because the district court relied on Horton in coming to its conclusion, which is no longer

good law. However, the principle in Horton that a provision is procedurally unconscionable where it is not more conspicuous

than other terms in a contract, was overruled only in its application to arbitration provisions, which is distinguishable from

the legal fees provision at issue here. U.S. Home Corp., 134 Nev. at 190, 415 P.3d at 41 (“Requiring an arbitration clause to

be more conspicuous than other contract provisions is exactly the type of law ... the FAA preempts ....” (citation omitted)).

The district court's findings still support the presence of procedural unconscionability. See Burch, 118 Nev. at 443-44, 49 P.3d

at 650. Further, the significant substantive unconscionability of the legal fees provision required less evidence of procedural

unconscionability for the court to refuse to enforce the provision. Armendariz, 6 P.3d at 690. For the foregoing reasons, we

conclude that the district court did not err in refusing to enforce the legal fees provision. 10

*9 In light of the foregoing, we affirm the district court's judgment as to appellants’ liability, but we reverse the judgment for

a partial recalculation of damages in accordance with our disposition.

It is so ORDERED.

All Citations

526 P.3d 1110 (Table), 2023 WL 2661524

Footnotes

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1 Metropolitan and Fox are hereinafter collectively referred to as appellants where appropriate.

2 We recount the facts only as necessary for our disposition.

3 We note that Evelynmoe's payments total $68,104.28, which is $600 short of the $68,704.28 price for the completed

repair and restoration work. However, we note that Metropolitan charged Evelynmoe a credit card fee of $600, which

is reflected in Metropolitan's invoice for the repair and restoration work and would account for this discrepancy.

4 Although this breakdown of damages does not reflect it, the district court stated in its conclusions of law that

“[Evelynmoe] sustained damages in the amount of $11,350.00 caused by Metropolitan's breach of the implied covenant

of good faith and fair dealing, because [Evelynmoe]’s justified expectations were denied.”

5 This court need not reach appellants’ argument that the district court abused its discretion by letting Evelynmoe testify

regarding the value of his vehicle and its components, as appellants fail to cite any relevant legal authority to support

that expert testimony was required to establish these values of which Evelynmoe had personal knowledge. See Edwards

v. Emperor's Garden Rest., 122 Nev. 317, 330 n.38, 130 P.3d 1280, 1288 n.38 (2006) (explaining that this court need

not consider an appellant's argument that is not cogently argued or lacks the support of relevant authority).

6 We reject appellants’ contention that Evelynmoe's testimony regarding the estimated completion date constituted

impermissible parol evidence. See State ex rel. List v. Courtesy Motors, 95 Nev. 103, 106, 590 P.2d 163, 165 (1979)

(providing that “parol or extrinsic evidence is not admissible to add to, subtract from, vary, or contradict ... written

instruments which ... are contractual in nature and which are valid, complete, [u]nambiguous, and unaffected by accident

or mistake” (first alteration in original) (internal quotation marks omitted)). The district court did not look to the

testimony to vary the terms of the parties’ agreement; rather, the court considered the testimony as evidence concerning

what constituted a reasonable time for performance by appellants under the contract. Because the contract was silent as

to time for performance and, therefore, there was no term in the contract for this extrinsic oral evidence to contradict, we

conclude that the district court did not abuse its discretion in admitting Evelynmoe's testimony regarding the estimated

completion date.

7 We note that, while the district court did not label Metropolitan's actions as “bad faith conduct,” such may be inferred

by their failure to conduct any work for nearly a year after Evelynmoe paid in full for the contracted work. See Pease

v. Taylor, 86 Nev. 195, 197, 467 P.2d 109, 110 (1970) (“[E]ven in the absence of express findings, if the record is clear

and will support the judgment, findings may be implied.”).

8 We note that the damages awarded to Evelynmoe pursuant to his conversion claim are applicable to both Fox and

Metropolitan, and to the extent these damages were or could have been awarded against Metropolitan under the breach

of the implied covenant of good faith and fair dealing, we note that the district court must avoid counting these damages

twice in recalculating Evelynmoe's appropriate award in accordance with our analysis below.

9 Even if Evelynmoe's failure to timely post the bond voided the preliminary injunction, the work authorization contract

supports that appellants still would not be entitled to the return of their storage fees. The work authorization contract

states, “PLEASE NOTE: A daily storage charge may be applied of up to $70.30 per day for motor vehicles that have

not been picked up after 3 working days from the date of notification that repairs have been complete.” (Emphasis

added.) The plain language of this provision suggests that the storage fees would only begin accruing three days after

Metropolitan's completion of the contracted repairs, which never occurred. Further, the preliminary injunction was only

related to the storage fees and was not required to preserve the title to the vehicle that remained in Evelynmoe's name

following the hearing on the preliminary injunction without the requirement of posting a bond.

10 Insofar as the parties have raised arguments that are not specifically addressed in this order, we have considered the same

and conclude that they either do not present a basis for relief or need not be reached given the disposition of this appeal.

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131 Nev. 1290

Unpublished Disposition

This is an unpublished disposition. See Nevada Rules of Appellate Procedure, Rule 36(c) before citing.

Supreme Court of Nevada.

Richard HENDERSON, M.D., An Individual; Emergency Physicians Medical Group, Inc.; Emergency

Medicine Physician Partners, LLC; Emergency Medicine Physicians Western Region; Emergency

Medicine Physicians Of Clark Saint Rose (MCCOURT) PLLC; and Thomas Zyniewicz, D.O., Appellants,

v.

David L. WATSON, M.D., Respondent.

No. 64545

|

April 29, 2015.

Synopsis

Background: Former employee brought conspiracy action against employer. The District Court, Clark County, Kerry L. Earley,

J., 2013 WL 10724684, denied employer's motion to compel arbitration, and it appealed.

Holdings: The Supreme Court held that:

provision of employment contract that delegated subject matter jurisdiction to arbitrator to determine the enforceability of the

agreement did not divest the District Court of subject matter jurisdiction;

evidence was insufficient to demonstrate that arbitration provision was procedurally unconscionable to the degree necessary to

render arbitration agreement unenforceable; and

evidence was insufficient to demonstrate that arbitration provision of employment contract was substantively unconscionable

to the degree necessary to render arbitration agreement unenforceable.

Affirmed in part, reversed in part, and remanded.

Procedural Posture(s): On Appeal.

Attorneys and Law Firms

Wilson, Elser, Moskowitz, Edelman & Dicker, LLP/Las Vegas

Fennemore Craig Jones Vargas/Las Vegas

ORDER AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

*1 This is an appeal from a district court order denying a motion to compel arbitration. Eighth Judicial District Court, Clark

County; Kerry Louise Earley, Judge.

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Respondent entered into an employment agreement with appellant Emergency Physicians Medical Group, Inc. (EPMG). The

agreement contained an article providing that all disputes would be resolved through binding arbitration. When respondent

was terminated, he filed an action in the district court and appellants filed a motion to dismiss and compel arbitration. The

district court denied the motion concluding that the arbitration article was unconscionable, and thus, unenforceable. This appeal

followed.

 Having considered the parties' briefs and the record on appeal, we conclude that the district court properly denied appellants'

motion to dismiss for lack of subject matter jurisdiction but erred in denying appellants' motion to compel arbitration. 1 As

a threshold matter, appellants assert for the first time on appeal that the district court lacked subject matter jurisdiction to

determine the enforceability of the employment agreement because the agreement contained a clause delegating such authority

to the arbitrator. We conclude that the existence of the delegation clause does not implicate the district court's subject matter

jurisdiction, and appellants have waived this argument by failing to raise the issue below. Cont'l Cas. Co. v. Am. Nat'l Ins. Co.,

417 F.3d 727, 732 n. 7 (7th Cir.2005) (recognizing that “the proper course of action when a party seeks to invoke an arbitration

clause is to stay the proceedings pending arbitration rather than to dismiss outright” (emphasis omitted)). Further, because the

district court was not divested of subject matter jurisdiction, the court did not err in denying appellants' request to dismiss the

action under NRCP 12(b)(1) and we affirm the district court's order in that regard.

The district court, however, erred in concluding that the arbitration article is unconscionable, and thus, unenforceable. Baker

v. Osborne Dev. Corp., 159 Cal.App.4th 884, 71 Cal.Rptr.3d 854, 860 (Ct.App.2008) (applying de novo review in determining

whether an arbitration agreement is unconscionable, but reviewing factual inferences relied on by the district court under the

substantial evidence standard). To conclude that a contract is unenforceable based on unconscionability, the contract must be

both procedurally and substantively unconscionable. Armendariz v. Found. Health Psychcare Servs., Inc., 24 Cal.4th 83, 99

Cal.Rptr.2d 745, 6 P.3d 669, 690 (Cal.2000). While both forms of unconscionability must be present for a contract to be deemed

unenforceable, they can be present on a sliding scale, meaning “the more substantively oppressive the contract term, the less

evidence of procedural unconscionability is required to come to the conclusion that the term is unenforceable, and vice versa.”

Id. Here, there is only a small degree of evidence demonstrating that the arbitration article is procedurally and substantively

unconscionable.

Procedural unconscionability

*2 In analyzing procedural unconscionability, the circumstances surrounding the formation and negotiation of the contract

are relevant, with a focus on whether there was “an inequality of bargaining power which results in no real negotiation and

an absence of meaningful choice” or whether a party may be surprised by the unconscionable term, meaning “the supposedly

agreed-upon terms of the bargain are hidden in a prolix printed form drafted by the party seeking to enforce the disputed terms.”

Bruni v. Didion, 160 Cal.App.4th 1272, 73 Cal.Rptr.3d 395, 409 (Ct.App.2008) (internal quotations omitted). While the fact

that the contract is an employment agreement lends some credence to the idea that the contract is a contract of adhesion, and

thus procedurally unconscionable, respondent did not present any evidence other than his own statement that he was unable

to negotiate the contract. See Mission Viejo Emergency Med. Assocs. v. Beta Healthcare Grp., 197 Cal.App.4th 1146, 128

Cal.Rptr.3d 330, 336 (Ct.App.2011) (providing that the party opposing enforcement of an arbitration agreement has the burden

of establishing that the agreement is unenforceable). Further, respondent signed the arbitration article independently from the

rest of the contract in an outlined box that provided in bold letters that he had the opportunity to have an attorney review the

provision. He also signed the contract a full month before EPMG's president, indicating that he had time for an attorney to

review the contract and time to negotiate the contract.

The district court relied upon EPMG's failure to provide respondent with copies of the American Arbitration Association (AAA)

rules, Federal Rules of Civil Procedure, and Federal Arbitration Act as evidence of procedural unconscionability because the

contract provided that certain provisions from each would be applicable. Trivedi v. Curexo Tech. Corp., 189 Cal.App.4th 387,

116 Cal.Rptr.3d 804, 808 (Ct.App.2010) (providing that “the failure to provide a copy of the arbitration rules to which the

employee would be bound, supported a finding of procedural unconscionability”). Because the AAA rules were applicable

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except for a few instances involving discovery and pre-hearing motions, EPMG's failure to provide respondent with copies

of these three documents only demonstrates procedural unconscionability to a small extent. See generally Lane v. Francis

Capital Mgmt. LLC, 224 Cal.App.4th 676, 168 Cal.Rptr.3d 800, 811–12 (Ct.App.2014) (providing that “the failure to attach the

arbitration rules could be a factor in support of a finding of procedural unconscionability, but [we] disagree that the failure, by

itself, is sufficient to sustain a finding of procedural unconscionability”). Thus, in considering all of the above, the arbitration

article is procedurally unconscionable but only to a small degree.

Substantive unconscionability

 The substantive element of unconscionability focuses on the actual terms of the contract and assesses whether those terms are

overly harsh or one-sided. Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 690. Neither the availability of preliminary injunctive

relief, see Cal. Civ. Pro.Code § 1281.8(b) (allowing a party to an arbitration agreement to seek preliminary injunctive relief

regardless of the arbitration agreement's language), nor the unavailability of an appeal from the arbitrator's decision demonstrates

substantive unconscionability because they apply equally to both parties. And EPMG's duty to pay the arbitration costs incurred

by both parties that would not be incurred if the matter proceeded in court does not demonstrate substantive unconscionability.

Further, because respondent did not argue that an adequate remedy would be unavailable to him in the chosen jurisdiction, the

choice-of-law and forum-selection provisions are not substantively unconscionable. See Olinick v. BMG Entm't, 138 Cal.App.4th

1286, 42 Cal.Rptr.3d 268, 283 (Ct.App.2006) (providing that “[a]n employer and an employee may validly agree to select a

forum other than California, and may validly select the substantive law of another jurisdiction, provided the employee has an

adequate remedy for his or her discrimination claim in the selected forum” (emphasis omitted)); see also Mission Viejo, 128

Cal.Rptr.3d at 335.

*3 Nevertheless, the presence of the confidentiality provision precluding the use or release of evidence outside of the arbitration

proceeding demonstrates substantive unconscionability. See Ting v. AT & T, 319 F.3d 1126, 1151–52 (9th Cir.2003) (recognizing

that “[c]onfidentiality provisions usually favor companies over individuals ... because companies continually arbitrate the same

claims,” and gag orders on those arbitrations prevent plaintiffs from accessing a body of knowledge regarding those companies).

Additionally, because respondent has a conspiracy claim pending in the district court and arising from the same facts and

circumstances as this matter, if he is unable to use the evidence discovered during arbitration, he will be forced to incur unfair

duplicative costs. 2 But the presence of the confidentiality provision alone is not sufficient to establish the high degree of

substantive unconscionability necessary to render the arbitration article unenforceable. 3

Thus, because there is only minimal evidence that the arbitration article is procedurally and substantively unconscionable,

the district court erred in concluding that the arbitration article is unenforceable and denying appellants' motion to compel

arbitration. Accordingly, we reverse the district court's denial of appellants' motion to compel arbitration and remand this matter

to the district court proceeding consistent with this order.

It is so ORDERED.

All Citations

Slip Copy, 131 Nev. 1290, 2015 WL 2092073 (Table)

Footnotes

1 We conclude that California law is applicable here as the employment agreement provides that California law will apply,

the agreement is not contrary to Nevada public policy, and California has a substantial relationship with this action

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because EPMG is a California corporation. See Progressive Gulf Ins. Co. v. Faehnrich, 130 Nev. Adv. Op. No. 19, 327

P.3d 1061, 1063–64 (2014) (providing that Nevada courts will honor choice of law provisions in contract actions when

the situs fixed by the agreement has a substantial relationship with the transaction and the agreement is not contrary

to the public policy of the forum); D.R. Horton, Inc. v. Green, 120 Nev. 549, 553–54, 96 P.3d 1159, 1162–63 (2004)

(demonstrating that Nevada applies the same standards in determining the enforceability of an arbitration agreement as

California); see also generally Nedlloyd Lines B.V. v. Superior Court of San Mateo Cnty., 3 Cal.4th 459, 11 Cal.Rptr.2d

330, 834 P.2d 1148, 1153 (Cal.1992) (explaining that “[a] party's incorporation in a state is a contact sufficient to allow

the parties to choose that state's law to govern their contract” (internal quotation marks omitted)).

2 While appellants argue that this court cannot consider the effect the conspiracy claim has on the enforceability of the

arbitration article because this court must review the article at the time it was made, in order to determine if the arbitration

article is sufficiently bilateral, this court may examine the actual effects of the challenged provisions. Acorn v. Household

Int'l, Inc., 211 F.Supp.2d 1160, 1169–71 (D.Cal.2002).

3 We note that on remand the confidentiality provision could be severed, allowing enforcement of the arbitration article

minus the confidentiality provision, because no other provision of the arbitration article is substantively unconscionable

and the contract provides that when one provision is held to be unenforceable, the remaining provisions shall continue

in full force. See Armendariz, 99 Cal.Rptr.2d 745, 6 P.3d at 695–96 (explaining that when one unconscionable provision

is present, it can be severed from an agreement to allow the majority of the agreement to be imposed); see also Woodside

Homes of Cal., Inc. v. Superior Court, 107 Cal.App.4th 723, 132 Cal.Rptr.2d 35, 42 (Ct.App.2003) (discussing severing

a confidentiality provision from the rest of the agreement).

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2018 WL 1964180

Only the Westlaw citation is currently available.

United States District Court, E.D. Texas, Sherman Division.

HUAWEI TECHNOLOGIES CO., LTD., and Futurewei Technologoies, Inc.

v.

YIREN Ronnie HUANG, and CNEX Labs, Inc.

Civil Action No. 4:17-CV-00893

|

Signed 04/25/2018

Attorneys and Law Firms

Andrew S. Boutros, Michael D. Wexler, Seyfarth Shaw LLP, Chicago, IL, Elizabeth Siebman Forrest, Siebman, Burg, Phillips

& Smith LLP, Plano, TX, Jesse M. Coleman, Seyfarth Shaw, LLP, Houston, TX, Clyde Moody Siebman, Siebman Burg Phillips

& Smith LLP, Sherman, TX, for Huawei Technologies Co., Ltd., and Futurewei Technologoies, Inc.

Bryan Alexander Kohm, Michael J. Sacksteder, Fenwick & West, San Francisco, CA, Christopher John Schwegmann, Lynn

Pinker Cox & Hurst LLP, Dallas, TX, Gabriel S. Gross, Latham & Watkins LLP, Menlo Park, CA, for Yiren Ronnie Huang,

and CNEX Labs, Inc.

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

*1 Pending before the Court are Defendants CNEX Labs, Inc. and Yiren “Ronnie” Huang’s Motion to Dismiss for Improper

Venue and for Failure to State a Claim Under Rule 12(b)(6) (Dkt. #14) (“Initial Motion to Dismiss”), Defendants CNEX Labs,

Inc. and Yiren “Ronnie” Huang’s Motion to Dismiss Plaintiffs' First Amended Complaint for Improper Venue and for Failure

to State a Claim Under Rule 12(b)(6) (“Motion to Dismiss”) (Dkt. #34), and Defendants CNEX Labs, Inc. and Yiren Ronnie

Huang’s Motion for Leave to Address Issues Raised at the April 2, 2018 Hearing (“Motion for Leave”) (Dkt. #56). Having

considered the motions and the relevant pleadings, the Court finds that Defendants' Initial Motion should be denied as moot,

Defendants' Motion to Dismiss as to Defendants' 12(b)(3) argument for improper venue should be denied, Defendants' 12(b)

(6) argument for failure to state a claim should be granted in part, and Defendants' Motion for Leave should be granted.

BACKGROUND

Plaintiff Huawei Technologies Co., Ltd. (“Huawei”) is a multinational networking and telecommunications equipment and

services company headquartered in China. Plaintiff Futurewei Technologies, Inc. (“Futurewei”) is a subsidiary of Huawei with

several offices throughout the United States, including Plano, Texas. In December 2010, Futurewei offered Yiren “Ronnie”

Huang (“Huang”) employment as a Principal Engineer for its solid-state drive (“SSD”) storage group, to assist in development

and implementation of Advance Computing Network (“ACN”), non-volatile memory express (“NVMe”), and SSD technology.

Huang accepted the offer in January 2011. Huang worked in the Santa Clara office and was domiciled in Santa Clara County,

California. At the Futurewei new hire orientation, Huang signed an employment contract (the “Employment Agreement”),

which contained the following forum-selection clause:

12. General Provisions.

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(a) Governing Law. This Agreement will be governed by and construed according to the laws of the State of Texas without

regard to conflicts of law principles.

(b) Exclusive Forum. I hereby irrevocably agree that the exclusive forum for any suit, action, or other proceeding arising

out of or in any way related to this Agreement shall be in the state or federal courts in Texas, and I agree to the exclusive

personal jurisdiction and venue to any court on Collin County Texas.

(Dkt. #34, Exhibit 1 at pp. 21–22). The Employment Agreement also contained provisions relating to non-disclosure, noncompetition, and non-solicitation.

Based on Huang’s job responsibilities, Plaintiffs contend that Huang had access to confidential, proprietary, and trade secret

information. On May 31, 2013, Huang ended his employment with Futurewei. On June 3, 2013, Huang, along with others,

incorporated CNEX Labs, Inc. (“CNEX”), a Delaware Corporation with its principal place of business in California. Plaintiffs

allege, among other things, that Huang incorporated CNEX to compete directly with Plaintiffs, Huang is using Plaintiffs'

confidential, proprietary, and trade secret information to develop and improve SSD technology and NVMe related technology

for CNEX, and further that Huang and CNEX are improperly soliciting employees away from Plaintiffs. Additionally, Plaintiffs

allege that Huang started to engage in this behavior informally prior to leaving Futurewei. Plaintiffs further contend that Huang

and CNEX began filing patent applications in June 2013, using the information that Huang obtained through his employment

with Futurewei.

*2 Plaintiffs filed suit in the Eastern District of Texas on December 28, 2017, against Defendants seeking declaratory

judgment and alleging a variety of causes of action including breach of contract, disclosure and misappropriation of confidential

information and trade secrets, tortious interference with contract and prospective contracts, conspiracy claims, Racketeer

Influence and Corrupt Organizations Act of 1970 (“RICO”) claims, breach of fiduciary duty, and unfair competition under

Lanham Act and Texas common and statuary law (Dkt. #1). On the same date, Defendants filed suit of a similar nature in the

Superior Court of California, County of Santa Clara (Dkt. #34, Exhibit 5 at p. 1). 1

In response to this Complaint, Defendants filed their Initial Motion to Dismiss on February 2, 2018 (Dkt. #14). Plaintiffs filed a

response (Dkt. #22), but also filed Plaintiffs' First Amended Complaint (Dkt. #27). In response to the First Amended Complaint,

on March 9, 2018, Defendants filed the present Motion to Dismiss (Dkt. #34). Plaintiffs filed a response (Dkt. #42), Defendants

filed a reply (Dkt. #46), and Plaintiffs filed a sur-reply (Dkt. #50). The Court held a hearing on the Motion to Dismiss on April

2, 2018. After the hearing, Defendants filed a Motion for Leave to Address Issues Raised at the April 2, 2018 Hearing (Dkt.

#56). Plaintiffs have not yet filed a response.

LEGAL STANDARD

I. Motion to Dismiss for Improper Venue Pursuant to Rule 12(b)(3)

Federal Rule of Civil Procedure 12(b)(3) allows a party the ability to move the Court to dismiss an action for “improper venue.”

The Court “must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff.” Mayfield v.

Sallyport Global Holdings, Inc., No. 6:16-CV-459, 2014 WL 978685, at *1 (E.D. Tex. Mar. 5, 2014) (citing Ambraco, Inc. v.

Bossclip, B.V., 570 F.3d 233, 237–38 (5th Cir. 2009) ). In determining whether venue is proper, “the [C]ourt is permitted to look

at evidence in the record beyond those facts alleged in the complaints and its proper attachments.” Ambraco, 570 F.3d at 238.

If venue is improper, the Court must dismiss it, “or if it be in the interest of justice, transfer such case to any district or division

in which it could have been brought.” 28 U.S.C. § 1406(a); accord FED. R. CIV. P. 12(b)(3).

II. Motion to Dismiss for Failure to State a Claim Pursuant to Rule 12(b)(6)

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The Federal Rules of Civil Procedure require that each claim in a complaint include a “short and plain statement ... showing

that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). Each claim must include enough factual allegations “to raise a

right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).

A Rule 12(b)(6) motion allows a party to move for dismissal of an action when the complaint fails to state a claim upon which

relief can be granted. FED. R. CIV. P. 12(b)(6). When considering a motion to dismiss under Rule 12(b)(6), the Court must accept

as true all well-pleaded facts in plaintiff’s complaint and view those facts in the light most favorable to the plaintiff. Bowlby v.

City of Aberdeen, 681 F.3d 215, 219 (5th Cir. 2012). The Court may consider “the complaint, any documents attached to the

complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint.”

Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). The Court must then determine whether

the complaint states a claim for relief that is plausible on its face. “ ‘A claim has facial plausibility when the plaintiff pleads

factual content that allows the [C]ourt to draw the reasonable inference that the defendant is liable for the misconduct alleged.’

” Gonzalez v. Kay, 577 F.3d 600, 603 (5th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) ). “But where the

well-pleaded facts do not permit the [C]ourt to infer more than the mere possibility of misconduct, the complaint has alleged—

but it has not ‘show[n]’—‘that the pleader is entitled to relief.’ ” Iqbal, 556 U.S. at 679 (alteration in original) (quoting FED.

R. CIV. P. 8(a)(2) ).

*3 In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of

a Rule 12(b)(6) motion. First, the Court should identify and disregard conclusory allegations, for they are “not entitled to the

assumption of truth.” Id. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they plausibly

suggest an entitlement to relief.” Id. at 681. “This standard ‘simply calls for enough facts to raise a reasonable expectation

that discovery will reveal evidence of the necessary claims or elements.’ ” Morgan v. Hubert, 335 Fed.Appx. 466, 470 (5th

Cir. 2009) (citation omitted). This evaluation will “be a context-specific task that requires the reviewing [C]ourt to draw on its

judicial experience and common sense.” Iqbal, 556 U.S. at 679.

Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to

relief that is plausible on its face.” ’ Id. at 678 (quoting Twombly, 550 U.S. at 570).

III. Federal Rule of Civil Procedure 9(b)

Rule 9(b) states, “[i]n alleging fraud or mistake, a party must state with particularity the circumstances constituting fraud or

mistake. Malice, intent, knowledge, and other conditions of a person’s mind may be alleged generally.” FED. R. CIV. P. 9(b).

Rule 9(b)’s particularity requirement generally means that the pleader must set forth the “who, what, when, where, and how” of

the fraud alleged. United States ex rel. Williams v. Bell Helicopter Textron, Inc., 417 F.3d 450, 453 (5th Cir. 2005). A plaintiff

pleading fraud must “specify the statements contended to be fraudulent, identify the speaker, state when and where the statements

were made, and explain why the statements were fraudulent.” Herrmann Holdings Ltd. v. Lucent Techs. Inc., 302 F.3d 552,

564–65 (5th Cir. 2002). The goals of Rule 9(b) are to “provide[ ] defendants with fair notice of the plaintiffs' claims, protect[ ]

defendants from harm to their reputation and goodwill, reduce[ ] the number of strike suits, and prevent[ ] plaintiffs from filing

baseless claims.” United States ex rel. Grubbs v. Kanneganti, 565 F.3d 180, 190 (5th Cir. 2009) (citing Melder v. Morris, 27 F.3d

1097, 1100 (5th Cir. 1994) ). Courts are to read Rule 9(b)’s heightened pleading requirement in conjunction with Rule 8(a)’s

insistence on simple, concise, and direct allegations. Williams v. WMX Techs., Inc., 112 F.3d 175, 178 (5th Cir. 1997). However,

this requirement “does not ‘reflect a subscription to fact pleading.’ ” Grubbs, 565 F.3d at 186. “Claims alleging violations of the

Texas Insurance Code and the DTPA and those asserting fraud, fraudulent inducement, fraudulent concealment, and negligent

misrepresentation are subject to the requirements of Rule 9(b).” Frith v. Guardian Life Ins. Co. of Am., 9 F. Supp. 2d 734, 742

(S.D. Tex. 1998); see Berry v. Indianapolis Life Ins. Co., No. 3:08-CV-0248-B, 2010 WL 3422873, at *14 (N.D. Tex. Aug. 26,

2010) (“ ‘[W]hen the parties have not urged a separate focus on the negligent misrepresentation claims,’ the Fifth Circuit has

found negligent misrepresentation claims subject to Rule 9(b) in the same manner as fraud claims.”). Failure to comply with

Rule 9(b)’s requirements authorizes the Court to dismiss the pleadings as it would for failure to state a claim under Rule 12(b)

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(6). United States ex rel. Williams v. McKesson Corp., No. 3:12-CV-0371-B, 2014 WL 3353247, at *3 (N.D. Tex. July 9, 2014)

(citing Lovelace v. Software Spectrum, Inc., 78 F.3d 1015, 1017 (5th Cir. 1996) ).

ANALYSIS

Defendants ask the Court to dismiss Plaintiffs' claims because the Eastern District of Texas is not the proper venue for the case

and because Plaintiffs failed to properly state a claim for which relief can be granted. Plaintiffs assert that venue is proper and

that the First Amended Complaint satisfies Federal Rules of Civil Procedure 8(a) and 9(b). The Court addresses each basis

for dismissal in turn.

I. Motion to Dismiss for Improper Venue Pursuant to 12(b)(3)

*4 Defendants argue that the Court should dismiss Plaintiffs' claims because the Eastern District of Texas is not a proper

venue pursuant to the federal venue statutes and the forum-selection clause does not make venue proper. Further, Defendants

maintain, that even if the forum-selection clause made venue proper in the Eastern District of Texas, venue is still improper

because CNEX is not bound by the agreement and is an indispensable party. The Court first addresses the enforceability and

effect of the forum-selection clause, then whether CNEX is properly bound by the forum-selection clause.

A. Forum-Selection Clause

Defendants ask the Court to dismiss the case arguing that venue is improper under the federal venue statutes and the forumselection clause does not affect the propriety of venue. Plaintiffs counter that the forum-selection clause contained in Huang’s

Employment Agreement makes venue proper in the Eastern District of Texas. 2

When analyzing the enforceability of forum-selection clauses “federal law applies ... in both diversity and federal question

cases.” Braspetro Oil Servs. Co. v. Modec (USA), Inc., 240 Fed.Appx. 612, 615 (5th Cir. 2007) (citing Scherk v. Alberto-Culver

Co., 417 U.S. 506, 516 (1974) ). Under federal law, forum-selection clauses “are prima facie valid and should be enforced unless

enforcement is shown by the resisting party to be ‘unreasonable’ under the circumstances.” M/S Bremen v. Zapata Off-Shore Co.,

407 U.S. 1, 10 (1972) (“The Bremen”). A forum-selection clause may be found unreasonable when the movant shows: (1) that it

is the product of fraud or overreaching; (2) that it violates a strong public policy of the forum; (3) that enforcement of the clause

effectively deprives plaintiff of his day in court; or (4) that the fundamental unfairness of the chosen law will deprive plaintiff of

a remedy. Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir. 1997) (citing Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585,

595 (1991) ). The resisting party asserting unreasonableness bears “ ‘a heavy burden of proof.’ ” Carnival Cruise Lines, Inc.,

499 U.S. at 592 (quoting The Bremen, 407 U.S. at 17). If the forum-selection clause is found to be reasonable, courts must then

determine whether the claims arise under the forum-selection clause. Ginter ex rel. Ballard v. Belcher, Predergrast & Laporte,

536 F.3d 439, 441 (5th Cir. 2008) (citing Marinechance Shipping Ltd. v. Sebastian, 143 F.3d 216, 222–23 (5th Cir. 1998) ).

Additionally, courts must also determine whether the forum-selection clause is mandatory or permissive. Caldas & Sons, Inc.

v. Willingham, 17 F.3d 123, 127 (5th Cir. 1994). “A party’s consent to jurisdiction in one forum does not necessarily waive that

party’s right to have an action heard in a different forum.” City of New Orleans v. Mun. Admin. Serv., Inc., 376 F.3d 501, 504 (5th

Cir. 2004); accord Caldas & Sons, 17 F.3d at 127. “For a forum[-]selection clause to be exclusive, it must go beyond establishing

that a particular forum will have jurisdiction and must clearly demonstrate the parties' intent to make that jurisdiction exclusive.”

City of New Orleans, 376 F.3d at 504 (citing Keaty v. Freeport Indon., Inc., 503 F.2d 955 (5th Cir. 1974) ).

*5 Here, the parties do not dispute that the clause is mandatory or that Plaintiffs' claims are within the scope of the forumselection clause. The forum-selection clause states “I hereby irrevocably agree that the exclusive forum for any suit, action, or

other proceeding arising out of or in any way related to this Agreement shall be in the state or federal courts in Texas, and I

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agree to the exclusive personal jurisdiction and venue to any court on Collin County Texas.” (Dkt. #34, Exhibit 1 at pp. 21–22)

(emphasis added). The clause contains clear language that venue is appropriate only in state or federal courts in Collin County,

Texas. As such, the only remaining issue is whether the forum-selection clause is reasonable. If so, then venue is proper in the

Eastern District of Texas.

In their reply, Defendants argue that the forum-selection clause is unreasonable and therefore unenforceable based on fraud and

overreaching. Defendants maintain that the forum-selection clause is the result of fraud and overreaching because (1) Futurewei

materially changed the terms of employment after Huang accepted employment and quit his prior job; (2) Huang was not

permitted to consult an attorney or otherwise investigate the legality of the terms; (3) the factual scenario created an inequality

of bargaining power; and (4) no one at Futurewei pointed out the terms of the “governing law” or “exclusive forum” section.

Plaintiffs contend that the argument is waived because Defendants raised it too late. 3

[U]nreasonable fraud or overreaching ‘does not mean that any time a dispute arising out of a transaction is based upon

an allegation of fraud[,] ... the clause is unenforceable. Rather, it means that an arbitration or forum-selection clause in a

contract is not enforceable if the inclusion of that clause in the contract was the product of fraud or coercion.’ Allegations

of such [fraudulent] conduct as to the contract as a whole—or portions of it other than the ... [forum-selection] clause—are

insufficient, the claims of fraud or overreaching must be aimed straight at the [forum-selection] clause in order to succeed.

Oxysure Therapeutics, Inc. v. Gemini Master Fund, Ltd., No. 4:15-cv-821-ALM-CAN, 2016 WL 4083241, at *4 (E.D. Tex.

July 8, 2016), report and recommendation adopted by, 2016 WL 4039226 (E.D. Tex. July 28, 2016) (emphasis in original)

(alterations in original) (quoting Haynsworth, 121 F.3d at 963); accord Safety-Kleen Sys., Inc. v. McCoy Freightliner, Inc., No.

4:10-cv-608, 2011 WL 665812, at *6 (E.D. Tex. Jan. 21, 2011), report and recommendation adopted by, 2011 WL 665854

(E.D. Tex. Feb. 14, 2011).

Here, regardless of whether Defendant waived the argument, the Court finds the argument unpersuasive. As to the first three

reasons Defendants provided to prove fraud and overreaching, they address the Employment Agreement as a whole, as opposed

to being specifically directed toward the forum-selection clause. As to Defendants' first argument—Futurewei materially

changed the terms of Huang’s employment after accepting his job and quitting his old job—Defendants argue that Huang

received an offer letter (the “Offer Letter”), which Huang believed contained all the material terms of employment. According

to Huang, the Offer Letter made “no mention that the [Employment Agreement] would include a forum-selection clause or

any clause requiring [him] to assign all of [his] inventions relating to Futurewei’s business for one year after [he] left the

company.” (Dkt. #46, Exhibit 2 at ¶ 5). 4 Both of these clauses are contained in the Employment Agreement. As such, there are

at least two provisions that Defendants contend Futurewei materially altered between what was contained in the Offer Letter

to what was contained in the Employment Agreement. This falls short of a specific challenge to the forum-selection clause.

See Haynsworth, 121 F.3d at 964.

*6 As to Defendants' second argument—Huang was not permitted to consult with an attorney—Huang’s declaration claims

that he “was not permitted nor encouraged to consult with an attorney before signing [the Employment Agreement].” (Dkt. #46,

Exhibit 2 at ¶ 8). This is not a specific challenge to the forum-selection clause, but challenges the entirety of the agreement.

Similarly, Defendants' third argument—the alleged inequality of bargaining power—is based on the circumstances surrounding

Huang’s signing of the Employment Agreement, stated differently, it is a challenge to the entirety of the Employment Agreement,

not specifically the forum-selection clause. As previously detailed, a challenge to the Employment Agreement as a whole is

insufficient to show that a forum-selection clause is unreasonable.

Finally, Defendants' fourth argument—Futurewei failed to point out the forum-selection clause—also fails to demonstrate fraud

or overreaching. “ ‘A person who signs a written instrument is presumed to know its contents and cannot avoid its obligations

by contending that he did not read it, or that it was not explained or that he did not understand it.’ ” 5 Haynsworth, 121 F.3d at

965 n.17 (quoting In re Cajun Elec. Power Coop. v. Riley Stoker Corp., 791 F.2d 353, 359 (5th Cir. 1986) ) (citing Bonny v. Soc'y

of Llyod’s, 3 F.3d 156, 160 n.10 (7th Cir. 1993) ); St. Petersburg Bank & Trust Co. v. Boutin, 445 F.2d 1028, 1032 (5th Cir. 1971)

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). Because all of Defendants' arguments fall short, the Court finds Defendants failed to meet their “heavy burden” to show the

forum-selection clause is unenforceable. As a result, the Court finds that it should enforce the mandatory forum-selection clause.

Defendants contend that even if the Court finds that the forum-selection clause is enforceable and mandatory, venue is still

improper pursuant to the Supreme Court of the United States' holding in Atlantic Marine. The Court is unpersuaded. The

Supreme Court in Atlantic Marine faced a different factual scenario and decided a wholly different issue. In Atlantic Marine,

the parties entered into a forum-selection clause, which required disputes to be brought in the “ ‘Circuit Court for the City of

Norfolk, Virginia, or the United States District Court for the Eastern District of Virginia, Norfolk Division.’ ” Atlantic Marine

Const. Co. v. U.S. Dist. Court for the W. Dist. of Tex., 571 U.S. 49, 53 (2013). However, when a dispute arose, the plaintiff filed

suit in the Western District of Texas, and the defendant subsequently moved to dismiss the suit, arguing that the forum-selection

clause made venue “wrong” or “improper” in the Western District of Texas. Id. Thus, “[t]he question in [Atlantic Marine]

concern[ed] the procedure that is available for a defendant in a civil case who seeks to enforce a forum-selection clause.” Id.

at 52. The Court decided that “[w]hether venue is ‘wrong’ or ‘improper’ depends exclusively on whether the court in which

the case was brought satisfies the requirements of federal venue laws, and those provisions say nothing about a forum-selection

clause.” Id. at 55. Accordingly, the Supreme Court held that the proper vehicle for a defendant to enforce a forum-selection

clause is § 1404 or forum non conveniens, if the forum-selection clause identified a state or foreign forum. Id. at 59–60.

The Supreme Court of the United States' holding in Atlantic Marine holding combatted concerns that enforcing a forum-selection

clause could flout congressional intent. “[T]he venue statutes reflect Congress' intent that venue should always lie in some

federal court whenever federal courts have personal jurisdiction over the defendant.” Atlantic Marine, 571 U.S. at 56 (emphasis

in original).

*7 “Congress does not in general intend to create venue gaps, which take away with one hand what Congress has given by

way of jurisdictional grant with the other.” Yet [the defendant’s] approach would mean that in some number of cases—those

in which the forum-selection clause points to a state or foreign court—venue would not lie in any federal district That would

not comport with the statute’s design, which contemplates that venue will always exist in some federal court.

Id. (quoting Smith v. United States, 507 U.S. 197, 203 (1993) ). Consequently, the Court held that “[i]f the federal venue statutes

establish that suit may be brought in a particular district, a contractual bar cannot render venue in that district ‘wrong,’ ” thereby

ensuring at least one federal court would have proper venue in every case upholding Congressional intent. Id. at 58.

While some courts throughout the country 6 have found this holding to be applicable to the current set of facts, the Court

respectfully finds Atlantic Marine is inapposite to the Court’s analysis in this case. Initially, the present case presents an entirely

different factual scenario. Here, Plaintiffs filed suit in the venue mandated by the forum-selection clause. Moreover, this set of

facts does not present the same risk of running afoul Congress' intent to have venue lie in at least one federal court. This set

of facts actually promotes the strong federal policy in favor of enforcing forum-selection clauses. Calix-Chacon v. Global Int'l

Marine, Inv., 493 F.3d 507, 513 (5th Cir. 2007) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 23 (1988) ). The Supreme

Court in Atlantic Marine identified the importance of enforcing the parties' agreement:

When parties have contracted in advance to litigate disputes in a particular forum, courts should not

unnecessarily disrupt the parties' settled expectations. A forum-selection clause, after all, may have

figured centrally in the parties' negotiations and may have affected how they set monetary and other

contractual terms; it may, in fact, have been a critical factor in their agreement to do business together

in the first place.

Atlantic Marine, 571 U.S. at 66.

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The general federal venue statute dictates that venue is proper in:

(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located;

(2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial

part of property that is the subject of the action is situated; or

(3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which

any defendant is subject to the court’s personal jurisdiction with respect to such action.

28 U.S.C. § 1391(b). The Court agrees with the holding in Atlantic Marine that “[w]hether the parties entered into a contract

containing a forum-selection clause has no bearing on whether a case falls into one of the categories of cases listed in § 1391(b).”

Atlantic Marine, 571 U.S. at 56.

*8 However, what the Court in Atlantic Marine did not need to address is that “[v]enue also ‘may be proper ... if consented

to by the parties in a forum[-]selection clause.” Healthcare Servs. Grp., Inc. v. Skyline Servs. Grp., No. 17-2703, 2018 WL

637773, at *5 (E.D. Pa. Jan. 30, 2018) (quoting AAMCO Transmissions, Inc. v. Romano, 42 F. Supp. 3d 700, 706 (E.D. Pa.

2014) ) (citing Carnival Cruise Lines, Inc., 499 U.S. at 591–94); accord Kevlin Servs., Inc. v. Lexington State Bank, 46 F.3d

13, 15 (5th Cir. 1995) (holding “we find that the choice of forum provision validly contracts for venue in Dallas County, Texas,

thereby granting the district court jurisdiction 7 over [the defendant].”). Several district courts across the country after Atlantic

Marine have agreed. 8See, e.g., Nymbus, Inc. v. Sharp, No. 3:17-cv-1113, 2018 WL 705003, at *6 (D. Conn. Feb. 5, 2018);

Healthcare Servs. Grp., No. 17-2703, 2018 WL 637773, at *5; Kamtel, Inc. v. Bore Tech Const., LLC, No. 16-cv-633-bbc, 2017

WL 532337, at *6 (W.D. Wis. Feb. 9, 2017); Javeler Marine Servs. LLC v. Cross, No. H-14-0670, 2014 WL 6886097, at *7

(S.D. Tex. Dec. 4, 2014); Mach 1 Air Servs., Inc. v. Mainfreight, Inc., No. CV-14-01444-PHX-SPL, 2015 WL 11181334, at

*4 (D. Ariz. Mar. 5, 2015).

Not only have courts found that venue is proper based on mandatory venue selection clauses, but also a permissive forumselection clauses make venue proper. A permissive clause “authorizes filing in a designated forum but does not foreclose other

fora.” TruGreen Landcare, L.L.C. v. Telfair Cmty. Ass'n, Inc., No. H–12–514, 2013 WL 2147471, at *1 (S.D. Tex. May 14,

2013) (citing Breakbulk Transp., Inc. v. M/V Renata, Civ. A. No. H–07–2985, 2008 WL 1883790, at *2 (S.D. Tex. Apr. 25,

2008); Caldas & Sons, Inc. v. Willingham, 17 F.3d 123, 127–28 (5th Cir. 1994); Keaty, 503 F.2d at 956–57). If a permissive

clause authorizes filing in the venue designated by the forum-selection clause, it necessarily follows that a mandatory clause

would also “authorize[ ] filing in [the] designated forum.” Id. (citations omitted).

Here, the Court found that the parties entered into a valid and enforceable mandatory forum-selection clause, in which the

parties consented to venue in the Eastern District of Texas. Accordingly, venue is proper in the Eastern District of Texas.

Moreover, even if a forum-selection clause does not make venue “proper,” dismissal based on improper venue would be

inappropriate because “[t]he venue statute ‘merely accords to the defendant a personal privilege respecting the venue, or place

of suit, which he may assert, or may waive, at his election.” Nymbus, 2018 WL 705003, at *6 (quoting Neribo Co. v. Bethlehem

Shipbuilding Corp., 308 U.S. 165, 168 (1939) ) (citing Leroy v. Great W. United Corp., 443 U.S. 173, 180 (1979) ). Indeed, the

personal privilege of proper venue, “may be waived by express agreement or by conduct.” Hunt v. Bankers Trust Co., 799 F.2d

1060, 1068 (5th Cir. 1986); accord City of New Orleans, 376 F.3d at 504; In re RFC & ResCap Liquidating Trust Lit., 2017

WL1483374, at *13 (D. Minn. Apr. 25, 2017). “A party may waive its rights by explicitly stating that it is doing so, by allowing

the other party the right to choose venue, or by establishing an exclusive venue within the contract.” City of New Orleans, 376

F.3d at 504. As previously noted, the parties established exclusive venue in the Employment Agreement. Accordingly, even

if venue is not “proper,” the parties waived their right to have their suit heard in a proper venue by contractually agreeing to

venue in the Eastern District of Texas.

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*9 Further, the Court’s holding today also makes practical sense in terms of judicial efficiency. Under Defendants' reasoning,

the Court would dismiss the case for improper venue allowing Plaintiffs to file in a place of a proper venue. However, once

filed in the proper venue, Plaintiffs could then, pursuant to the Supreme Court’s holding in Atlantic Marine, move to transfer

the case under 28 U.S.C. § 1404(a), which “permits transfer to any district where venue is proper ... or to any other district to

which the parties have agreed by contract or stipulation.” Atlantic Marine, 571 U.S. at 59. The Supreme Court of the United

States altered the analysis for transferring venue under § 1404(a) when a forum-selection clause is involved because “ ‘the

interest of justice’ is served by holding parties to their bargain.” Id. at 66. “Because [the adjusted transfer analysis] will rarely

defeat a transfer motion, the practical result is that forum-selection clauses should control except in unusual cases.” Id. at 64.

Therefore, the newly filed case in a court with proper venue would likely transfer the case back to the Eastern District of Texas.

This is an inefficient use of the parties' time and the Court’s time. This cannot be the result that the Supreme Court intended

based on its holding in Atlantic Marine.

Accordingly, because the Court found a valid and enforceable forum-selection clause, selecting the Eastern District of Texas

as the agreed to forum and venue for disputes arising out of Huang’s Employment Agreement, the Court finds that dismissal

based on improper venue inappropriate.

B. CNEX

Defendants maintain that even if venue is proper as to Huang based on the forum-selection clause, CNEX was not a party or a

signatory to the Employment Agreement. Defendants contend that CNEX is an indispensable party, and accordingly, the Court

must dismiss Plaintiffs' claims because venue is not proper as to CNEX. Plaintiffs maintain that CNEX is bound by the forumselection clause as a closely related party.

Several circuits have held that a nonsignatory may be bound to a forum-selection clause if the nonsignatory or alleged conduct

is closely related to the contractual relationship. See, e.g., Marano Enters. of Kan. v. Z-Teca Rests., L.P., 254 F.3d 753, 758 (8th

Cir. 2001); Lipcon v. Underwriters at Lloyd’s, London, 148 F.3d 1285, 1299 (11th Cir. 1998); Hugel v. The Corp. of Lloyd’s, 999

F.2d 206, 209–10 (7th Cir. 1993). The Fifth Circuit has not yet spoken to the issue; however, the Fifth Circuit has recognized

a non-exclusive number of theories through which a nonsignatory can be bound to a specialized forum-selection clause, an

arbitration clause. Hellenic Inv. Fund, Inc. v. Det Norske Veritas, 464 F.3d 514, 517 (5th Cir. 2006). Further, several district

courts within the Fifth Circuit have held that a nonsignatory can be bound by a forum-selection clause if the nonsignatory or

the alleged conduct is closely related to the contractual relationship. See, e.g., Red Barn Motors, Inc. v. Nextgear Capital, Inc.,

No. 13-0078-BAJ-RLB, 2014 WL 4986674, at *5–*6 (M.D. La. Sept. 29, 2014); Excel Mktg. Sols., Inc. v. Direct Fin. Sols.,

LLC, No. 3:11-cv-109-D, 2011 WL 1833022, at *6 (N.D. Tex. May 13, 2011); Alt. Delivery Sols., Inc. v. R.R. Donnelley &

Sons Co., No. Civ.SA05CA0172-XR, 2005 WL 1862631, at *15–*16 (W.D. Tex. July 8, 2005); Tex. Source Grp., Inc. v. CCH,

Inc., 967 F. Supp. 234, 237 (S.D. Tex. 1997). The Court joins these courts in finding this to be an appropriate means to bind

a nonsignatory to a forum-selection clause.

“A nonparty can be bound to a forum[-]selection clause if the nonparty is ‘closely related to the dispute such that it becomes

foreseeable that it will be bound.’ ” Excel Mktgs. Sols., 2011 WL 1833022, at *6 (quoting Harrison v. Procter & Gamble Co.,

2007 WL 431085, at *2 (N.D. Tex. Feb. 8, 2007) ); accord Hugel, 999 F.2d at 209. A nonparty can be “closely related” to the

signatory or the alleged conduct can be “closely related” to the contractual relationship. Duncan v. Banks, No. SA-15-cv-148-

XR, 2015 WL 5511253, at *19 (W.D. Tex. Sept. 16, 2015) (citing Alt. Delivery Sols., 2005 WL 1862631, at *16). That is, if

the nonsignatory is so inextricably intertwined with the signatories that he should be the subject of the forum-selection clause,

it can be enforced against the nonsignatory. Tex. Source Grp., Inc., 967 F. Supp. at 237 (citing Manetti-Farrow, Inc. v. Gucci

Am., Inc., 858 F.2d 509, 514 n.5 (9th Cir. 1988); Graham Tech. Sols., Inc. v. Thinking Pictures, Inc., 949 F. Supp. 1427, 1434

(N.D. Cal. 1997) ).

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*10 A case from the Seventh Circuit with a similar set of facts found the requisite close relationship to bind a nonsignatory to

the forum-selection clause. Hugel, 99 F.2d at 209–10. In Hugel, the individual defendant entered into a “General Undertaking”

in order to be a member of a corporation, which included a forum-selection clause. Id. at 207. The district court found that

because the individual defendant was the president and chairman of the board for both corporate defendants and the individual

defendant owned 99% of the stock of one of the corporate defendants, which in turn owned 100% of the stock of the other

corporate defendant, the corporate defendants were “so closely related to the dispute that they are equally bound by the forum

selection clause....” Id. at 210. The United States Court of Appeals for the Seventh Circuit held that those “findings [were] not

clearly erroneous.” Id. at 210.

Similarly here, the Court, taking as true the allegations in Plaintiffs' First Amended Complaint, finds CNEX is closely related

to Huang and the alleged conduct against CNEX is closely related to Huang’s Employment Agreement. Huang incorporated

CNEX three days after ending his employment with Futurewei. Huang is the founder, promoter, agent, and officer of CNEX.

According to Plaintiffs, Huang began operating as the founder, promoter, agent, and officer of CNEX informally, prior to

CNEX’s formal incorporation on June 3, 2013. Further, Plaintiffs allege that both Huang and CNEX solicited employees to

leave Huawei and join CNEX. Accordingly, the Court concludes that CNEX is inextricably intertwined and closely related such

that it is foreseeable it would be bound to the terms of the forum-selection clause.

II. Motion to Dismiss for Failure to State a Claim Pursuant to 12(b)(6)

Defendants argue that the Court should dismiss Counts 7, 9, and 11–22 pursuant to Rule 12(b)(6). Defendants assert a variety

of arguments as to the different counts and the Court will address the arguments in turn.

As to Counts 7, 11–14, 17, 19–20, and 22, Defendants argue that they are time-barred. Plaintiffs counter that the discovery

rule, equitable estoppel, and fraudulent concealment all work to toll the applicable statute of limitations. The application of the

statute of limitations is an affirmative defense. KPMG Peat Marwick v. Harris Cty. Hous. Fin. Corp., 988 S.W.2d 746, 748

(Tex. 1999); Nogart v. The Upjohn Co., 981 P.2d 79, 87 (Cal. 1999).

9

 Accordingly, Defendants bear the burden of establishing

as a matter of law that the statute of limitations applies to Plaintiffs' claims. See KPMG Peat Marwick v. 988 S.W.2d at 748;

Nogart, 981 P.2d at 87. Where, as here, Plaintiffs assert the discovery rule, equitable estoppel, and fraudulent concealment,

Defendants bear the burden of disproving their application—or proving the applicability of the statute of limitations in spite

of the discovery rule, equitable estoppel, and fraudulent concealment—to prevail on a motion to dismiss. After reviewing the

First Amended Complaint, the motion to dismiss, the response, the reply, and the sur-reply, the Court finds that Defendants

have not met their burden of demonstrating the applicability to the statute of limitations in spite of the discovery rule, equitable

estoppel, and fraudulent concealment, as a matter of law and Plaintiffs have stated plausible claims for purposes of defeating

a Rule 12(b)(6) motion to dismiss.

Defendants maintain that the Court should dismiss Counts 9–11, Plaintiffs' claims under the Texas Uniform Trade Secrets Act,

because the alleged misappropriation began prior to the Texas Uniform Trade Secrets Act’s enactment. Plaintiffs counter that

they have alleged a variety of acts extending over the course of several years. Based on the current standard and the face of the

pleadings, the Court finds that Plaintiffs have adequately pleaded a cause of action under the Texas Uniform Trade Secrets Act;

however, the Court does not foreclose Defendants from raising this argument in a later motion for summary judgment.

*11 As to Counts 15–16 and Count 20, Defendants argue that Plaintiffs' claims for common law civil conspiracy and RICO

violations are not sufficiently pleaded under the heightened Rule 9(b) pleading standard. Further, Defendants aver that Plaintiffs

have not pleaded the existence of an enterprise with any degree of specificity. Moreover, as to the conspiracy to commit fraud

claim, Defendants claim that Plaintiffs' pleading falls far short of meeting the standards set out by Rule 9(b). Plaintiffs maintain

that they have adequately pleaded their RICO and conspiracy claims.

Plaintiffs assert a cause of action for common law civil conspiracy based on fraudulent activity. Further, Plaintiffs assert causes of

action under RICO based on fraudulent conduct, alleging violations of 18 U.S.C. § 1962(c) and conspiracy to commit unlawful

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acts under 18 U.S.C. § 1962(c) pursuant to 18 U.S.C. § 1962(d). Because Plaintiffs' claims are based on fraud, Plaintiffs' must

satisfy the heightened pleading standard contained in Rule 9(b). FED. R. CIV. P. 9(b).

“The elements of a common law civil conspiracy are: ‘(1) two or more persons; (2) an object to be accomplished; (3) a meeting

of the minds on the object or course of action; (4) one or more unlawful, overt acts; and (5) damages as the proximate result.’

” Hadnot v. City of Woodville, No. 9:10-cv-117, 2011 WL 13221060, at *2 (E.D. Tex. Feb. 11, 2011) (quoting Tri v. J.T.T., 162

S.W.3d 552, 556 (Tex. 2005); Massey v. Armco Steel Co., 652 S.W.2d 932, 934 (Tex. 1983) ).

Further, common elements required to prove a violation of a subsection of § 1962 include: “(1) a person who engages in (2)

a pattern of racketeering activity (3) connected to the acquisition, establishment, conduct or control of an enterprise.” Whelan

v. Winchester Prod. Co., 319 F.3d 225, 229 (5th Cir. 2003) (citing Delta Truck & Tractor, Inc. v. J.I. Case Co., 855 F.2d 241,

242 (5th Cir. 1988) ). “A RICO claim, 18 U.S.C. § 1962(c), ‘requires (1) conduct (2) of an enterprise (3) through a pattern (4)

of racketeering activity.’ ” Manax v. McNamara, 842 F.2d 808, 811 (5th Cir. 1988) (quoting Sedima, S.P.R.L. v. Imrex Co., 473

U.S. 479 (1985) ). “An enterprise is a group of persons or entities associating together for the common purpose of engaging

in a course of conduct.” Whelan, 319 F.3d at 229 (citing United States v. Turkette, 452 U.S. 576, 583 (1981) ). “The enterprise

may be a legal entity or ‘any group of individuals associated in fact although not a legal entity.’ ” Id. (emphasis in original)

(quoting 18 U.S.C. § 1961(4) ).

“An association-in-fact enterprise is simply a continuing unit that functions with a common purpose.” Boyle v. United States,

556 U.S. 938, 948 (2009). It “ ‘must have an ongoing organization or be a continuing unit, such that the enterprise has an

existence that can be defined apart from the commission of the predicate acts.’ ” Zastrow v. Houst. Auto Imports Greenway Ltd.,

789 F.3d 553, 562 (5th Cir. 2015) (quoting Montesano, 818 F.2d at 427). Stated differently, “[t]he enterprise is not a pattern of

racketeering activity, but must exist separate and apart from the pattern of racketeering activity in which it engages.” Whelan,

319 F.3d at 229 (citing Atkinson v. Anadarko Bank & Tr. Co., 808 F.2d 438, 441 (5th Cir. 1987) ); accord Manax, 842 F.2d

at 811. An association-in-fact enterprise, “need not have a hierarchical structure or a ‘chain of command’; decisions may be

made on an ad hoc basis and by any number of methods.” Boyle, 556 U.S. at 948. “Members of the group need not have fixed

roles; different members may perform different roles at different times.” Id. The plaintiff “must plead specific facts, not mere

conclusory allegations, which establishes the enterprise.” Montesano, 818 F.2d at 427.

*12 The Court agrees with Defendants that Plaintiffs have failed to plead with the requisite specificity an adequate claim

for relief for RICO violations and common law civil conspiracy. However, in their response, Plaintiffs request leave to amend

their complaint. Rule 15(a) of the Federal Rules of Civil Procedure provides that a party may amend its pleading once without

seeking leave of court or the consent of the adverse party at any time before a responsive pleading is served. FED. R. CIV. P.

15(a). After a responsive pleading is served, “a party may amend only with the opposing party’s written consent or the court’s

leave.” Id. Rule 15(a) instructs the court to “freely give leave when justice so requires.” Id. The rule “evinces a bias in favor

of granting leave to amend.” Jones v. Robinson Prop. Grp., L.P., 427 F.3d 987, 994 (5th Cir. 2005) (quoting Lyn–Lea Travel

Corp. v. Am. Airlines, Inc., 283 F.3d 282, 286 (5th Cir. 2002) ). But leave to amend “is not automatic.” Matagorda Ventures,

Inc. v. Travelers Lloyds Ins. Co., 203 F. Supp. 2d 704, 718 (S.D. Tex. 2000) (citing Dussouy v. Gulf Coast Inv. Corp., 660 F.2d

594, 598 (5th Cir. 1981) ). Whether to allow amendment “lies within the sound discretion of the district court.” Little v. Liquid

Air Corp., 952 F.2d 841, 845–46 (5th Cir. 1992). A district court reviewing a motion to amend pleadings under Rule 15(a)

may consider “whether there has been ‘undue delay, bad faith or dilatory motive, ... undue prejudice to the opposing party, and

futility of amendment.’ ” Jacobsen v. Osborne, 133 F.3d 315, 318 (5th Cir. 1998) (quoting In re Southmark Corp., 88 F.3d 311,

314–15 (5th Cir. 1996) ). The Court finds no undue delay, bad faith, or dilatory motive. Defendants have not argued that an

amendment would cause them any prejudice or that it would be futile. Accordingly, the Court grants Plaintiffs leave to amend

their complaint to fix the deficiencies identified by Defendants in their motion to dismiss.

As to Count 21, Defendants argue that “corporate raiding” is not a cause of action under either Texas or California law. Plaintiffs

respond that while it might not be an independent tort under Texas or California law, other courts have held the claim to be

viable and courts in Texas recognize corporate raiding as engaging in unfair competition. Because Plaintiffs acknowledge that

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“corporate raiding” is not its own independent tort under either California or Texas law, the Court dismisses the cause of action.

However, because the Court grants Plaintiffs leave to file an amended complaint, Plaintiffs may amend its complaint to include

this conduct as part of their cause of action for unfair competition.

As to Count 22, Defendants assert that Plaintiffs failed to properly state a claim for unfair competition under the Lanham Act.

Further, regarding Count 13, Defendants aver that Plaintiffs did not sufficiently allege a claim for international interference with

prospective business relations because they do not identify any third party with which they would have done business, do not

allege that there was a reasonable probability of entering into a contractual or business relationship with any third party, and

did not allege that the prospective business relationships were disrupted. The Court agrees that Plaintiffs' complaint regarding

unfair competition under the Lanham Act and tortious interference with prospective business relationships fall short of stating

a plausible claim. Nonetheless, Plaintiffs requested leave to amend their complaint, which the Court should freely grant. FED.

R. CIV. P. 15(a). Accordingly, the Court grants Plaintiffs leave to amend their complaint to fix the deficiencies identified by

Defendants in their motion to dismiss.

As to Count 17, Defendants argue that the Court should dismiss Plaintiffs' conversion claim under Texas law because conversion

does not include intellectual property and Plaintiffs have not alleged the conversion of any physical property. Plaintiffs maintain

that the First Amended Complaint also alleges that “[o]ne of Futurewei’s employees, a chief engineer who had worked with

Huang before his departure to CNEX on June 6, 2014, was caught downloading thousands of Plaintiffs' documents to his

personal computer without permission. This included hundreds of documents containing confidential, proprietary, and trade

secret information.” (Dkt. #27 at ¶ 54); accord (Dkt. #27 at ¶¶ 10, 197). Nevertheless, Plaintiffs did not allege that these

documents were within the possession, dominion, or control of Defendants. See Waisath v. Lack’s Stores, Inc., 474 S.W.2d

444, 447 (Tex. 1971) (explaining “[t]he unauthorized and wrongful assumption and exercise of dominion and control over the

personal property of another, to the exclusion of or inconsistent with the owner’s rights, is in law a conversion.”). As such, the

Court finds that this claim is not sufficiently pleaded; however, the Court grants Plaintiffs leave to file an amended complaint

to fix the deficiencies noted by the motion to dismiss and this Order.

CONCLUSION

*13 It is therefore ORDERED that Defendants CNEX Labs, Inc.’s and Yiren “Ronnie” Huang’s Motion to Dismiss for

Improper Venue and for Failure to State a Claim Under Rule 12(b)(6) (Dkt. #14) is hereby DENIED as moot, Defendants

CNEX Labs, Inc. and Yiren Ronnie Huang’s Motion for Leave to Address Issues Raised at the April 2, 2018 Hearing (Dkt.

#56) is hereby GRANTED, and Defendants CNEX Labs, Inc. and Yiren “Ronnie” Huang’s Motion to Dismiss Plaintiffs' First

Amended Complaint for Improper Venue and for Failure to State a Claim Under Rule 12(b)(6) (Dkt. #34) is hereby DENIED as

to the Motion to Dismiss for Improper Venue and hereby GRANTED in part as to the Motion to Dismiss for Failure to State a

Claim. The Motion to Dismiss for Failure to State a Claim is granted as to Count 21 and the Court hereby DISMISSES WITH

PREJUDICE corporate raiding as its own independent cause of action. However, Plaintiffs shall file an amended complaint to

address the deficiencies identified as to Counts 15–17, 20, and 22, and may also include the allegations of corporate raiding as

part of Plaintiffs' claim for unfair competition within fourteen (14) days of this Order. The motion is denied as to the remainder

of the grounds asserted.

All Citations

Not Reported in Fed. Supp., 2018 WL 1964180

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Footnotes

1 Neither party asked the Court to stay or dismiss this case based on Colorado River abstention. Thus, the Court does not

engage in an analysis of whether it should abstain from the “virtual unflagging obligation ... to exercise the jurisdiction

given to [it].’ ” Colo. River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) (quoting McClellan

v. Carland, 217 U.S. 268, 282 (1910) ).

2 Plaintiffs additionally argue that venue is proper under 28 U.S.C. § 1391(b)(2) because they claim a substantial part of

the events or omissions took place in the Eastern District of Texas. However, it is unnecessary for the Court to analyze

whether a substantial part of the events took place in the Eastern District of Texas because the Court finds the forumselection clause makes venue proper.

3 At the April 2, 2018 hearing, the Court also asked the parties whether Defendants waived this argument by not asserting

it in the opening brief for the Motion to Dismiss. After the hearing and the sur-reply, Defendants filed their Motion

for Leave arguing that the argument was not waived and maintained that Plaintiffs were not prejudiced by raising the

argument in the reply (Dkt. #56). The Court hereby grants the Motion for Leave; however, as the Court further discusses

whether or not Defendants raised the argument is immaterial to the Court’s analysis.

4 The Court notes that the Offer Letter did indicate that his offer of employment was contingent upon his signing the

Employment Agreement (Dkt. #47).

5 To the extent, if any, this is part of the argument as to why there was unequal bargaining power, it is similarly

unpersuasive.

6 See generally G4S Tech., LLC v. WCC Cable, Inc., No. 8:17cv182, 2017 WL 4564726 (D. Neb Oct. 10, 2017); Red

Mortgage Capital, LLC v. Shores, LLC, No. 2:16-cv-678, 2017 WL 1196170 (S.D. Oh. Mar. 31, 2017); Howmedica

Osteonics Corp. v. DJO Global, Inc., No. 16-2330, 2017 WL 1136671 (D.N.J. Mar. 27, 2017); CORT Bus. Servs. Corp.

v. Eleven23 Mktg., LLC, NO. 2:15-cv-2454-GMN-PAL, 2017 WL 701371 (D. Nev. Feb. 22, 2017); Sightpath Med.

Servs. LLC v. Terry, 4:14-cv-1488-JCH, 2015 WL 362662 (E.D. Mo. Jan. 27, 2015); Prosperity Bank v. Balboa Music

Festival, LLC, No. 4:13-cv-288, 2014 WL 1023935 (S.D. Tex. Mar. 13, 2014).

7 Venue selection clauses are treated similarly to forum selection clauses. Alliance Health Grp., LLC v. Bridging Health

Option, LLC, 553 F.3d 397, 399 (5th Cir. 2008) (citing Duffy & McGovern Accommodation Servs. v. QCI Marine

Offshore, Inc., 448 F.3d 825, 826 (5th Cir. 2006); Collin Cty. v. Siemens Bus. Servs., Inc., 250 Fed.Appx. 45 (5th Cir.

2007) ).

8 As previously mentioned, there are also several district courts across the country that have not agreed with this result.

9 Defendants argue that California law applies; however, both parties go back and forth between using Texas and California

law. Accordingly, the Court will analyze under both at this time.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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ILIESCU v. REG’L TRANSP. COMM’N Nev. 453

Cite as 522 P.3d 453 (Nev.App. 2022)

John ILIESCU, Jr., and Sonnia Iliescu,

TRUSTEEs OF the JOHN ILIESCU, JR.

AND SONNIA ILIESCU 1992 FAMILY

TRUST; John Iliescu, Jr., an Individual;

and Sonnia Iliescu, an Individual, Appellants,

v.

The REGIONAL TRANSPORTATION

COMMISSION OF WASHOE

COUNTY, Respondent.

John Iliescu, Jr., and Sonnia Iliescu, Trustees of the John Iliescu, Jr. and Sonnia

Iliescu 1992 Family Trust; John Iliescu,

Jr., an Individual; and Sonnia Iliescu, an

Individual, Appellants,

v.

Regional Transportation Commission

of Washoe County, Respondent.

No. 83212-COA, No. 83756-COA

Court of Appeals of Nevada.

Filed November 17, 2022

Background: Trust and its settlors asserted claims of waste, breach of contract,

and trespass against county regional transportation commission, alleging that commission and its contractors damaged a

trust-owned parking lot when, without permission, they drove work trucks over it

and parked on it while working on a public

utility easement. The District Court,

Washoe County, David A. Hardy, J.,

granted in part commission’s motion to

dismiss, and granted commission’s motion

for summary judgment. Trust appealed.

Holdings: The Court of Appeals, Gibbons,

C.J., held that:

(1) complaint was not sufficient to place

commission on notice that trust and

settlors sought to hold it liable for

waste;

(2) trust and settlors did not demonstrate

causal connection between any breach

of agreement and damage to parking

lot;

(3) fact issues existed as to whether commission’s conduct constituted an invasion of trust’s property rights; and

(4) stipulation to pursue compensatory and

punitive damages relating to parking

lot additionally preserved claim for

nominal damages.

Affirmed in part, reversed in part, vacated in

part, and remanded.

1. Counties O222

Complaint by trust and its settlors was

not sufficient to place county regional transportation commission on notice that trust and

settlors sought to hold commission liable for

waste that it allegedly committed when it

damaged a trust-owned parking lot by driving work trucks over it and parking on it

while working on a public utility easement,

absent any allegations that commission had a

legal right to use the parking lot. Nev. Rev.

St. § 40.150.

2. Pleading O48

Because Nevada is a notice-pleading jurisdiction, a complaint need only set forth

sufficient facts to demonstrate the necessary

elements of a claim for relief so that the

defending party has adequate notice of the

nature of the claim and relief sought.

3. Property O571

A cause of action for waste requires the

defendant to be in or have been in lawful

possession of the property on which the alleged waste occurred. Nev. Rev. St.

§ 40.150.

4. Injunction O1002

Injunctive relief is a remedy, not a separate cause of action.

5. Action O2

The question whether a litigant has a

cause of action is analytically distinct and

prior to the question of what relief, if any, a

litigant may be entitled to receive.

6. Counties O129

 Public Contracts O415(5)

Trust and its settlors did not demonstrate causal connection between any breach

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454 Nev. 522 PACIFIC REPORTER, 3d SERIES

of agreement that allegedly required county

regional transportation commission to cooperate with trust so as to minimize interference between construction of public utility

easement and trust property and damage to

trust-owned parking lot; while trust provided

photographs purporting to show state of

parking log prior to commission’s project,

trust did not provide any photographs depicting parking lot after commission completed

project, did not provide any deposition testimony stating that commission’s breach

caused damage, and did not provide any expert testimony regarding causation, scope of

repair, diminishment in value, or damages.

7. Contracts O326

To prevail on a claim for breach of contract, the plaintiff must establish (1) the existence of a valid contract, (2) that the plaintiff

performed, (3) that the defendant breached,

and (4 ) that the breach caused the plaintiff

damages.

8. Contracts O326

Relating to the damages element of a

claim for breach of contract, a plaintiff must

prove both (1) a causal connection between

the defendant’s breach and the damages asserted, and (2) the amount of those damages.

9. Damages O184

A plaintiff’s burden of proving the

amount of damages need not be met with

mathematical exactitude, but there must be

an evidentiary basis for determining a reasonably accurate amount of damages.

10. Stipulations O1

A written stipulation is a species of contract.

11. Contracts O312(1)

Where the terms of a contract are literally complied with but one party to the contract deliberately contravenes the intention

and spirit of the contract, that party can

incur liability for breach of the implied covenant of good faith and fair dealing.

12. Summary Judgment O250

 Trespass O67

Genuine issues of material fact existed

as to whether county regional transportation

commission’s conduct, in parking on trustowned parking lot without permission while

working on a public utility easement, constituted an invasion of trust’s property rights,

precluding summary judgment on trespass

claim by trust and its settlors.

13. Trespass O1

To maintain a trespass action, the plaintiff must demonstrate that the defendant invaded a property right.

14. Injunction O1217

 Trespass O47

Where the evidence supports a trespass,

an award of nominal damages is not improper, and an injunction is an appropriate remedy for the threat of continuing trespass.

15. Summary Judgment O304

A court may consider all evidence on file

when ruling on a motion for summary judgment. Nev. R. Civ. P. 56(c)(3).

16. Stipulations O14(12)

Landowners’ stipulation to pursue compensatory and punitive damages relating to

parking lot additionally preserved claim for

nominal damages, such that landowners’ failure to prove actual damages did not preclude

recovery on trespass claim for which landowners were seeking injunctive relief.

17. Trespass O47

Nominal damages are awarded by default on a trespass claim until the plaintiff

establishes entitlement to some other form of

damages, such as compensatory damages.

18. Trespass O47

Nominal damages are available to remedy a trespass where compensatory damages

are unavailable or unproven.

Consolidated appeals from district court

orders granting summary judgment and

awarding attorney fees and costs in a tort

and contract action. Second Judicial District

Court, Washoe County; David A. Hardy,

Judge.

Albright, Stoddard, Warnick & Albright

and D. Chris Albright, Las Vegas, for Appellants.

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ILIESCU v. REG’L TRANSP. COMM’N Nev. 455

Cite as 522 P.3d 453 (Nev.App. 2022)

Woodburn & Wedge and Dane W.

Anderson, Reno, for Respondent.

BEFORE THE COURT OF APPEALS,

GIBBONS, C.J., TAO and BULLA, JJ.

OPINION

By the Court, GIBBONS, C.J.:

In this appeal, we address the grants of

dismissal and summary judgment as to

claims of improper actions by the Regional

Transportation Commission of Washoe County that occurred during the completion of a

construction project on appellants’ property

after condemnation proceedings. In so doing,

we discuss actions in tort and contract law

that remain underdeveloped in Nevada law.

We conclude that the district court correctly

dismissed appellants’ claims for waste and

injunctive relief, and correctly granted summary judgment on their contract-based

claims. However, the district court erred in

granting summary judgment on appellants’

claims for trespass and declaratory relief.

For the reasons articulated herein, we affirm

in part, reverse in part, vacate in part, and

remand.

FACTS AND PROCEDURAL HISTORY

Although this is not an appeal from a

condemnation action, the facts underlying

this appeal began with one. Respondent Regional Transportation Commission of Washoe

County (RTC) filed a complaint in eminent

domain seeking to acquire a permanent easement, a public utility easement, and a temporary construction easement on commercial

property owned by the John Iliescu, Jr. and

Sonnia Iliescu 1992 Family Trust. Appellants

John Iliescu, Jr., and Sonnia Iliescu (collectively, the Iliescus) are trustees of the family

trust. The RTC sought the easements in

furtherance of its ‘‘4th Street/Prater Way

Complete Street and [Bus Rapid Transit]

Project’’ in Reno, which was intended to improve traffic flow along 4th Street and Prater

Way. Specifically, the project included ‘‘undergrounding of existing overhead utilities

within the [p]roject area, construction of

curbs, gutters, pedestrian ramps and sidewalks, and installation of new lighting fixtures and landscaping within the [p]roject

limits.’’ Eventually, the parties stipulated to,

and the district court ordered, the taking in

exchange for a payment of $11,065 to the

Iliescus as just compensation. The court also

ordered that the permanent easement and

the public utility easement were ‘‘perpetual

easements’’ for access to and maintenance of

the public utilities.

Ten months after the district court’s order

in the condemnation proceedings, the Iliescus

filed a complaint alleging 12 causes of action

against the RTC. According to the Iliescus,

during the previous project and despite their

objections, the RTC and its contractors drove

over and parked their vehicles (including 20-

ton work trucks) on the Iliescus’ ‘‘Remaining

Property’’—a parking lot on the parcel not

subject to condemnation. The Iliescus alleged

that the RTC’s conduct precluded them at

times from using any portion of the ‘‘Remaining Property,’’ caused physical damage to the

parking lot, and caused both John and Sonnia to suffer severe and ongoing ‘‘psychological and emotional anguish, pain and distress,

with physical manifestations.’’

The RTC filed a first motion to dismiss 8

of the complaint’s 12 causes of action. During

litigation, the parties stipulated that the Iliescus no longer wished to pursue damages

for emotional distress or personal injury. The

district court therefore dismissed their claim

for intentional and/or negligent infliction of

emotional distress.

The Iliescus filed an amended complaint

alleging 11 causes of action.1

 Thereafter, the

RTC filed a supplemental motion to dismiss

as to six of the causes of action. The district

court granted the RTC’s motion to dismiss as

to the Iliescus’ claims for injunctive relief,

breach of fiduciary duty, waste, conversion,

and tortious breach of the covenant of good

faith and fair dealing. The court denied the

1. The causes of action included breach of contract, breach of the covenant of good faith and

fair dealing (contract claim), breach of fiduciary

duty, waste, conversion, trespass, civil conspiracy, negligence, tortious breach of the covenant of

good faith and fair dealing, injunctive relief, and

declaratory relief.

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456 Nev. 522 PACIFIC REPORTER, 3d SERIES

motion to dismiss as to the Iliescus’ civil

conspiracy claim.

The RTC eventually moved for summary

judgment as to the Iliescus’ remaining

claims, which included breach of contract,

breach of the implied covenant of good faith

and fair dealing, trespass, civil conspiracy,

negligence, and declaratory relief. The Iliescus opposed the motion and supported their

opposition with various exhibits that had

previously been filed in the case. The district court ultimately granted the RTC’s

motion for summary judgment, ruling that

the Iliescus had failed to present any admissible evidence in support of their claims.2

 It

subsequently granted the RTC’s motion for

attorney fees, ruling that although the Iliescus appeared to have good faith bases for

bringing their claims, ‘‘their counsel failed

to produce discovery or dismiss the action if

discovery would be impossible due to hardship.’’3

 The district court awarded the RTC

$61,057.07 in attorney fees under NRS

18.010(2)(b) and $3,647.35 in costs as the

prevailing party under NRS 18.020. The Iliescus now raise multiple issues on appeal.

We address each in turn.

The district court did, not err in dismissing

the Iliescus’ claim, for waste

[1] The Iliescus argue the district court

erred in dismissing their claim for waste and

ruling that the RTC was not a guardian or

tenant as to their ‘‘Remaining Property’’ (the

parking lot) for the purposes of satisfying

NRS 40.150.4

 They argue the RTC ‘‘had been

granted entry rights onto certain portions of

[their] [p]roperty’’ and therefore was a tenant of the property and could commit waste

by damaging the surface of the lot with its

heavy equipment. The RTC counters that the

Iliescus’ complaint never alleged that the

RTC was a tenant as to their parking lot. It

argues that, indeed, the complaint made clear

that the RTC and its contractors used the

parking lot despite having no right to do so

and over the Iliescus’ frequent objections.

[2] A defendant’s motion to dismiss ‘‘under NRCP 12(b)(5) is subject to a rigorous

standard of review on appeal.’’ Buzz Stew,

LLC v. City of North Las Vegas, 124 Nev.

224, 227-28, 181 P.3d 670, 672 (2008) (internal

quotation marks omitted). In reviewing dismissal under NRCP 12(b)(5), we recognize all

factual allegations in the plaintiffs’ complaint

as true and draw all inferences in their favor.

Id. at 228, 181 P.3d at 672. A claim should be

dismissed under NRCP 12(b)(5) only if it

appears beyond a doubt that the plaintiffs

could prove no set of facts, which, if true,

would entitle them to relief. Id. Because Nevada is a ‘‘notice-pleading’’ jurisdiction, a

complaint need only set forth sufficient facts

to demonstrate the necessary elements of a

claim for relief so that the defending party

has ‘‘adequate notice of the nature of the

claim and relief sought.’’ W. States Constr.,

Inc. v. Michoff, 108 Nev. 931, 936, 840 P.2d

1220, 1223 (1992); see also Droge v. AAAA

Two Star Towing, Inc., 136 Nev. 291, 308-09,

468 P.3d 862, 878-79 (Ct. App. 2020) (discussing Nevada’s liberal notice-pleading standard).

[3] Nevada law provides for a cause of

action against a guardian or tenant of real

property who ‘‘commit[s] waste thereon.’’

NRS 40.150 (emphasis added). ‘‘Waste is

generally considered a tort defined as the

destruction, alteration, misuse, or neglect of

property by one in rightful possession to the

detriment of another’s interest in the same

property.’’ 8 Michael Allan Wolf, Powell on

Real Property § 56.01 (2021). A cause of

action for waste requires the defendant to be

in or have been in lawful possession of the

property on which the alleged waste occurred. See Stephenson v. Nat’l Bank of

2. On appeal, the Iliescus only challenge the district court’s rulings discussed herein.

3. We acknowledge that the Iliescus could have

done more to vigorously prosecute their claims

before the district court. During the proceedings

below, the RTC requested multiple times that the

court dismiss the Iliescus’ case for lack of prosecution. As pertinent to this appeal, the district

court denied each of those requests.

4. ‘‘If a guardian, tenant for life or years, joint

tenant or tenant in common of real property

commit waste thereon, any person aggrieved by

the waste may bring an action against the guardian or tenant who committed the waste, in which

action there may be judgment for treble damages.’’ NRS 40.150.

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Winter Haven, 92 Fla. 347, 109 So. 424, 425-

26 (1926) (‘‘[W]aste is an abuse or destructive

use of the property by one in rightful possession.’’); Hamilton v. Mercantile Bank of Cedar Rapids, 621 N.W.2d 401, 409 (Iowa 2001)

(‘‘A claim for waste is an action at law

brought by a remainderman against a tenant

in lawful possession of land TTTT’’); Mich. Oil

Co. v. Nat. Res. Comm’n, 406 Mich. 1, 276

N.W.2d 141, 147 (1979) (‘‘[T]he ordinary use

of the term ‘waste’ does not refer only to

waste of oil and gas, but includes any spoilation or destruction of the land, including flora

and fauna, by one lawfully in possession, to

the prejudice of the estate or interest of

another.’’); Meyer v. Hansen, 373 N.W.2d

392, 395 (N.D. 1985) (‘‘Waste may be defined

as an unreasonable or improper use, abuse,

mismanagement, or omission of duty touching real estate by one rightfully in possession, which results in a substantial injury.’’).

Not surprisingly, then, each type of tenancy

mentioned in NRS 40.150 includes an interest in real property. See NRS 40.150 (stating

that a waste action can be maintained against

a ‘‘tenant for life or years, joint tenant or

tenant in common of real property’’).

Here, the Iliescus alleged that, in completing its project, the RTC damaged their parking lot, which was on ‘‘that portion of [their]

[p]roperty not subject to the condemnation,

and not involved in whatsoever nature in the

[p]roject.’’ The Iliescus further alleged that

they frequently objected to this ‘‘unauthorized and illegal use’’ of their parking lot.

The Iliescus did not argue below, nor do they

argue on appeal, that the RTC had a legal

right to use their parking lot. Rather, both

below and on appeal, they argue that the

RTC was a tenant only as to the property

that was condemned.

Assuming the RTC was a tenant over the

Iliescus’ condemned property, under NRS

40.150, the RTC could only have committed

waste ‘‘thereon’’—on the condemned property, not on the Iliescus’ parking lot. And the

Iliescus have not alleged that the RTC committed waste as to the condemned portion of

their property. Therefore, even taking every

inference in the Iliescus’ favor, see Buzz

Stew, 124 Nev. at 228, 181 P.3d at 672, the

district court did not err by dismissing their

waste claim.

The district court did not err in dismissing

the Iliescus’ separate cause of action for

injunctive relief

[4] The Iliescus argue the district court

erred in dismissing their separate cause of

action for injunctive relief because ‘‘[i]t is

entirely possible and even plausible that the

RTC’’ may again ‘‘overstep [its] boundaries

in accessing and damaging the remaining

portions of [their] property’’ during some

future repairs to the RTC’s permanent easements.5

 As a threshold matter, injunctive relief is a remedy, not a separate cause of

action. See State Farm Mut. Auto. Ins. Co. v.

Jafbros Inc., 109 Nev. 926, 928, 860 P.2d 176,

178 (1993) (explaining that a violated right is

a prerequisite to granting injunctive relief

and an injunction is not appropriate ‘‘to restrain an act which does not give rise to a

cause of action’’ (internal quotation marks

omitted)); Knutson v. Vill. of Lakemoor, 932

F.3d 572, 576 n.4 (7th Cir. 2019) (‘‘With respect to injunctive relief, that is a remedy,

not a cause of action, and thus should not be

pleaded as a separate count.’’); Klay v. United Healthgrp., Inc., 376 F.3d 1092, 1100 (11th

Cir. 2004) (explaining that ‘‘traditional injunctions are predicated upon [a] cause of action’’); Shell Oil Co. v. Richter, 52 Cal.App.2d

164, 125 P.2d 930, 932 (1942) (explaining that

injunctive relief is a remedy, not a cause of

action, and thus, a cause of action must be

asserted against the party before injunctive

relief may be requested against that party);

Terlecki v. Stewart, 278 Mich.App. 644, 754

N.W.2d 899, 912 (2008) (‘‘It is well settled

that an injunction is an equitable remedy, not

an independent cause of action.’’). Therefore,

to the extent that the Iliescus pleaded injunctive relief as an independent cause of action,

the district court did not err in dismissing

that claim. See Knutson, 932 F.3d at 576 n.4.

5. The Iliescus also argue that the RTC could have

been enjoined to restore their property to the

state it was in before the RTC allegedly damaged

it. However, they did not make this argument

below, and we decline to consider it on appeal.

See Old Aztec Mine, Inc. v. Brown, 97 Nev. 49,

52, 623 P.2d 981, 983 (1981) (explaining that

issues not argued below are ‘‘deemed to have

been waived and will not be considered on appeal’’).

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[5] However, ‘‘the question whether a litigant has a ‘cause of action’ is analytically

distinct and prior to the question of what

relief, if any, a litigant may be entitled to

receive.’’ Davis v. Passman, 442 U.S. 228,

239, 99 S.Ct. 2264, 60 L.Ed.2d 846 (1979)

(emphasis added); see also State Farm, 109

Nev. at 928, 860 P.2d at 178 (‘‘It is axiomatic

that a court cannot provide a remedy unless

it has found a wrong.’’). Therefore, even

though we affirm the dismissal of the independent cause of action, as discussed below,

we reverse the grant of summary judgment

on the Iliescus’ trespass claim. Therefore, on

remand, they may seek permanent injunctive

relief as a remedy for that claim, should they

prevail on it.

The district court did not err in granting the

RTC’s motion for summary judgment as to

the Iliescus’ contract-based claims

[6] The Iliescus argue the district court

erred in granting summary judgment in favor of the RTC as to their breach-of-contract

claim because the parties had entered into a

contract by way of a stipulation in the prior

condemnation proceedings. They argue that,

at the very least, their evidence that a stipulation existed should have precluded summary judgment. The RTC counters that the

prior stipulation was not relevant to any

alleged use of or damage to the Iliescus’

parking lot. It further argues that summary

judgment was proper because the Iliescus

failed to provide any evidence of causation or

actual damages in support of their breach-ofcontract claim.

We review a district court’s order granting

summary judgment de novo. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026,

1029 (2005). Summary judgment is proper if

the pleadings and all other evidence on file

demonstrate that there exists no genuine

dispute of material fact ‘‘and that the moving

party is entitled to a judgment as a matter of

law.’’ Id. (internal quotation marks omitted);

see also NRCP 56(a). ‘‘A factual dispute is

genuine when the evidence is such that a

rational trier of fact could return a verdict

for the nonmoving party.’’ Wood, 121 Nev. at

731, 121 P.3d at 1031. In rendering a decision

on a motion for summary judgment, all evidence ‘‘must be viewed in a light most favorable to the nonmoving party.’’ Id. at 729, 121

P.3d at 1029. The party moving for summary

judgment must meet its initial burden of

production to show there exists no genuine

dispute of material fact. Cuzze v. Univ. &

Cmty. Coll. Sys. of Nev., 123 Nev. 598, 602,

172 P.3d 131, 134 (2007). The nonmoving

party must then ‘‘transcend the pleadings

and, by affidavit or other admissible evidence, introduce specific facts that show a

genuine [dispute] of material fact.’’ Id. at 603,

172 P.3d at 134.

[7–9] To prevail on a claim for breach of

contract, the plaintiff must establish (1) the

existence of a valid contract, (2) that the

plaintiff performed, (3) that the defendant

breached, and (4) that the breach caused the

plaintiff damages. Saini v. Int’l Game Tech.,

434 F. Supp. 2d 913, 919-20 (D. Nev. 2006);

Reichert v. Gen. Ins. Co. of Am., 68 Cal.2d

822, 69 Cal.Rptr. 321, 442 P.2d 377, 381

(1968). Relating to damages, a plaintiff must

prove both (1) a causal connection between

the defendant’s breach and the damages asserted, and (2) the amount of those damages.

See Mort Wallin of Lake Tahoe, Inc. v. Commercial Cabinet Co., 105 Nev. 855, 857, 784

P.2d 954, 955 (1989) (‘‘The party seeking

damages has the burden of proving both the

fact of damages and the amount thereof.’’);

Saks Fifth Ave., Inc. v. James, Ltd., 272 Va.

177, 630 S.E.2d 304, 311 (2006) (‘‘A plaintiff

thus must prove two primary factors relating

to damages. First, a plaintiff must show a

causal connection between the defendant’s

wrongful conduct and the damages asserted.

Second, a plaintiff must prove the amount of

those damages by using a proper method and

factual foundation for calculating damages.’’

(internal citations omitted)).6

 The burden of

6. See also Omaha Pub. Power Dist. v. Darin &

Armstrong, Inc., 205 Neb. 484, 288 N.W.2d 467,

474 (1980) (‘‘It is a basic concept that in any

damage action for breach of contract the claimant must prove that the breach of contract complained of was the proximate cause of the alleged

damages.’’); Florafax Int’l, Inc. v. GTE Mkt. Res.,

Inc., 933 P.2d 282, 296 (Okla. 1997) (‘‘In order

for damages to be recoverable for breach of

contract they must be clearly ascertainable TTT

and it must be made to appear they are the

natural and proximate consequence of the

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proving the amount of damages ‘‘need not be

met with mathematical exactitude, but there

must be an evidentiary basis for determining

a reasonably accurate amount of damages.’’

Mort Wallin, 105 Nev. at 857, 784 P.2d at

955.

Here, the Iliescus alleged that, during the

prior condemnation proceedings, they entered into a valid agreement by which the

RTC was entitled to complete its project in

exchange for compensating the Iliescus for

the condemnation. They further alleged that

the way in which the RTC carried out the

project constituted a breach of the parties’

agreement. The Iliescus supported these allegations with a portion of an order from the

condemnation proceedings that ordered the

parties to ‘‘cooperate so as to minimize interference between construction of the [p]roject

and [the Iliescus’] use of the remaining land

TTT on APN 008-244-15.’’ That order also

made multiple references to a stipulation to

which the parties had agreed. The Iliescus

further provided a detailed quote for services, from Desert Engineering, to repair the

parking lot for $84,550.

Below, the RTC met its initial summary

judgment burden by pointing out that there

was an absence of evidence to support the

Iliescus’ breach-of-contract claim as to damages. See Cuzze, 123 Nev. at 602-03, 172 P.3d

at 134 (explaining that where the nonmoving

party would bear the burden of persuasion at

trial, the party moving for summary judgment can satisfy its burden of production by

‘‘pointing out TTT that there is an absence of

evidence to support the nonmoving party’s

case’’ (omission and internal quotation marks

omitted)). Thus, the burden shifted to the

Iliescus to ‘‘transcend the pleadings’’ and

demonstrate there was a genuine dispute of

material fact as to damages. Id. at 603, 172

P.3d at 134.

In response, the Iliescus provided photographs purporting to show the state of the

parking lot prior to the RTC’s project. They

also provided photographs allegedly depicting the RTC’s workers during the completion

of the project, with their vehicles parked on

the Iliescus’ parking lot in the background.

However, although the Desert Engineering

quote may have served to demonstrate a

dispute as to the amount of their damages,

the Iliescus failed to present any evidence

demonstrating a causal connection between

the RTC’s alleged breach of contract and the

damage to the parking lot. They failed to

provide photographs depicting the parking

lot after the RTC completed its project; deposition testimony stating that the RTC’s

breach had caused the damage; expert testimony regarding causation, scope of repair,

diminishment in value, and damages;7

 or any

other evidence related to causation, only argument.

[10] Additionally, although the lliescus

provided evidence that the parties had entered into a contract previously,8

 it is unclear

how a breach of that contract could have

caused damage to the parking lot. Even assuming the RTC had agreed, as the prior

district court ordered, to ‘‘cooperate so as to

minimize interference between construction

of the [p]roject and [the lliescus’] use of

[their] remaining land,’’ the lliescus have not

explained how a breach of that agreement

could have caused physical damage to their

parking lot.9

 Accordingly, the lliescus did not

breach and not speculative and contingent.’’);

Logan v. Mirror Printing Co. of Altoona, 410

Pa.Super. 446, 600 A.2d 225, 226 (1991) (‘‘In

order to recover for damages pursuant to a

breach of contract, the plaintiff must show a

causal connection between the breach and the

loss.’’); Abraxas Petroleum Corp. v. Hamburg, 20

S.W.3d 741, 758 (Tex. App. 2000) (‘‘The absence

of [a] causal connection between the alleged

breach [of contract] and the alleged damages will

preclude recovery.’’).

7. The district court determined that expert evidence was needed on these matters. The Iliescus

do not argue that the district court erred in this

determination, so this issue is waived. See Powell

v. Liberty Mut. Fire Ins. Co., 127 Nev. 156, 161

n.3, 252 P.3d 668, 672 n.3 (2011) (providing that

issues not raised on appeal are deemed waived).

8. ‘‘A written stipulation is a species of contract.’’

DeChambeau v. Balkenbush, 134 Nev. 625, 628,

431 P.3d 359, 361 (Ct. App. 2018) (quoting Redrock Valley Ranch, LLC v. Washoe County, 127

Nev. 451, 460, 254 P.3d 641, 647 (2011)).

9. We note that, in their stipulation to dismiss

their personal injury claims, the lliescus agreed

that they would only pursue compensatory damages in this case as to physical damage to their

parking lot—presumably waiving any right to

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demonstrate that there existed evidence of

causation, an essential element of a breachof-contract claim, therefore failing to create a

genuine dispute as to damages.

[11] The Iliescus further summarily argue the district court erred in granting summary judgment against them as to their

claim for breach of the implied covenant of

good faith and fair dealing. ‘‘Where the terms

of a contract are literally complied with but

one party to the contract deliberately countervenes the intention and spirit of the contract, that party can incur liability for breach

of the implied covenant of good faith and fair

dealing.’’ Hilton Hotels Corp. v. Butch Lewis

Prods., Inc., 107 Nev. 226, 232, 808 P.2d 919,

922-23 (1991). However, here, the Iliescus

have not developed any argument or provided any relevant authority as to why the

district court erred in granting summary

judgment as to this claim. Therefore, we

need not consider it. See Edwards v. Emperor’s Garden Rest., 122 Nev. 317, 330 n.38, 130

P.3d 1280, 1288 n.38 (2006) (explaining that

this court need not consider an appellant’s

argument that is not cogently argued or

lacks the support of relevant authority). In

light of the foregoing, the district court did

not err in granting summary judgment in

favor of the RTC as to the Iliescus’ contractbased claims.

The district court erred in granting summary judgment in favor of the RTC as to the

Iliescus’ trespass claim and their request for

declaratory relief

[12–14] Finally, the Iliescus argue the

district court erred in granting summary

judgment in the RTC’s favor as to their

trespass claim. Nevada has long recognized

trespass as an action for injury to a plaintiff’s

possession of land. See Rivers v. Burbank, 13

Nev. 398, 408 (1878). To maintain a trespass

action, the plaintiff must demonstrate that

the defendant invaded a property right. Lied

v. Clark County, 94 Nev. 275, 279, 579 P.2d

171, 173-74 (1978). Where the evidence supports a trespass, an award of nominal damages is not improper. Parkinson v. Winniman, 75 Nev. 405, 408, 344 P.2d 677, 678

(1959); see also Droge, 136 Nev. at 312 n.17,

468 P.3d at 880 n.17 (stating that the plaintiffs could pursue nominal damages as to

their trespass claim). And ‘‘an injunction is

an appropriate remedy for the threat of continuing trespass.’’ S.O.C., Inc. v. Mirage Casino-Hotel, 117 Nev. 403, 416, 23 P.3d 243,

251 (2001).

To prevail on a claim for trespass, the

Iliescus would need to prove that the RTC’s

conduct constituted an invasion of a property right. See Lied, 94 Nev. at 279, 579 P.2d

at 173-74. Here, the Iliescus alleged the

RTC and its contractors parked vehicles on

their parking lot ‘‘on virtually every workday during the term of the [p]roject.’’ These

vehicles allegedly included the workers’ personal vehicles (‘‘pick-up trucks, SUV’s[,] and

automobiles’’) along with work trucks

weighing approximately 20 tons. According

to the Iliescus, this conduct occurred without their consent and despite their ‘‘frequent objections’’ to it. The Iliescus supported these allegations with photographs

depicting the vehicles parked on the portion

of their property not subject to condemnation (the ‘‘[r]emaining [p]roperty’’ or parking lot). The Iliescus also provided photographs appearing to depict workers working

on the RTC’s project, with trucks parked in

the parking lot in the background. In addition, John testified at his deposition without

objection that he assumed the trucks were

associated with the RTC because the workers who drove them were not associated

with him or Sonnia and ‘‘were doing RTC

work.’’ Similarly, at her deposition, Sonnia

testified that the trucks and equipment

parked on the Iliescus’ property belonged to

‘‘construction people working on the RTC

project.’’

[15] Considering the foregoing, the Iliescus introduced specific facts, using admissible evidence,10 that demonstrated a genuine

recover compensatory damages for any interference with their use of their land.

10. A court may consider all evidence on file

when ruling on a motion for summary judgment.

Wood, 121 Nev. at 729, 121 P.3d at 1029; see also

NRCP 56(c)(3). The RTC avers that the Iliescus

failed to present any admissible evidence for

their claims during the proceedings below, apparently only because the Iliescus ‘‘submitted no

declarations or deposition testimony’’ in their

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dispute of material fact as to their trespass

claim. See Cuzze, 123 Nev. at 603, 172 P.3d at

134. The RTC does not dispute that the

Iliescus owned the property where the easements and parking lot are located, nor does it

assert that it had permission or paid rent or

some form of remuneration to use the parking lot. The Iliescus’ photographs and deposition testimony are evidence such that a rational trier of fact could find that the RTC

trespassed on the Iliescus’ property and return a verdict in the Iliescus’ favor.11 See

Wood, 121 Nev. at 731, 121 P.3d at 1031.

[16] Below, the district court granted

summary judgment as to the Iliescus’ trespass claim by ruling that they had waived

their right to pursue nominal damages—in

stipulating to pursue only compensatory

damages relating to their parking lot and

punitive damages—and had then failed to

present evidence as to compensatory damages or punitive damages.12 In so doing, the

district court effectively imposed an element

of actual damages onto the trespass claim—

an element that has not previously been required to sustain a trespass action in Nevada.13 See Lied, 94 Nev. at 279, 579 P.2d at

173-74; Parkinson, 75 Nev. at 408, 344 P.2d

at 678; see also Restatement (Second) of

Torts § 158 (Am. Law Inst. 1965) (‘‘One is

subject to liability to another for trespass,

irrespective of whether [he or she] thereby

causes harm to any legally protected interest

of the other, if [he or she] intentionally (a)

enters land in the possession of the other, or

causes a thing or a third person to do so, or

(b) remains on the land, or (c) fails to remove

from the land a thing which he is under a

duty to remove.’’ (emphasis added)).

[17] Further, in lieu of compensatory

damages, nominal damages may still be

awarded. Nominal damages are ‘‘awarded by

default until the plaintiff establishes entitlement to some other form of damages, such as

compensatory TTT damages.’’ Uzuegbunam v.

Preczewski, 592 U.S. ––––, ––––, 141 S. Ct.

792, 801, 209 L.Ed.2d 94 (2021). Indeed, as

the United States Supreme Court recently

recognized in Uzuegbunam, ‘‘the prevailing

rule, ‘well established’ at common law, was

‘that a party whose rights are invaded can

always recover nominal damages without

furnishing any evidence of actual damages.’ ’’

Id. at ––––, 141 S. Ct. at 800 (emphasis

added) (internal citations omitted). Consistent with this approach, the Nevada appellate

courts have long recognized that nominal

damages are a proper remedy for trespass,

in cases where actual damages cannot be

proven. See Parkinson, 75 Nev. at 408, 344

P.2d at 678; Droge, 136 Nev. at 312 n.17, 468

P.3d at 880 n.17; see also Uzuegbunam, 592

U.S. at ––––, 141 S. Ct. at 798 (discussing the

importance of nominal damages to claims for

trespass).

[18] Given the relationship between nominal and compensatory damages, and the purpose behind an award of nominal damages,

we conclude that, by preserving their claim

opposition to the RTC’s motion for summary

judgment. The RTC does not cogently argue why

any failure on the Iliescus’ part to submit declarations or deposition testimony in opposition to

the RTC’s summary judgment motion would be

fatal to their claims where there existed substantial evidence elsewhere in the court file that was

presented for the court to consider regarding

trespass, nor does it provide relevant authority in

support of that argument. Therefore, we need not

consider it. See Edwards, 122 Nev. at 330 n.38,

130 P.3d at 1288 n.38.

11. Although we reverse summary judgment on

the trespass claim, we note that the damages

available to the Iliescus on this claim may be

limited, as the district court has already determined that expert testimony is required to prove

certain damages, and that the Iliescus failed to

timely identify an expert as required pursuant to

NRCP 16.1.

12. We note that the Iliescus have not pursued the

dismissal of their claim for punitive damages on

appeal, and therefore, we need not address the

propriety of the district court’s dismissal of the

same. See Greenlaw v. United States, 554 U.S.

237, 243, 128 S.Ct. 2559, 171 L.Ed.2d 399 (2008)

(‘‘[I]n both civil and criminal cases, in the first

instance and on appeal, we follow the principle

of party presentation. That is, we rely on the

parties to frame the issues for decisions and

assign to courts the role of neutral arbiter of

matters the parties present.’’).

13. The RTC does not argue on appeal that a

plaintiff must prove damages as an element of

trespass and therefore we do not further address

this issue. See Powell v. Liberty Mut. Fire Ins. Co.,

127 Nev. 156, 161 n.3, 252 P.3d 668, 672 n.3

(2011) (providing that issues not raised on appeal

are deemed waived).

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to compensatory damages, the Iliescus also

preserved nominal damages, as these damages are available to remedy a trespass

where compensatory damages are unavailable or unproven. Thus, the district court

erred in determining that the Iliescus waived

their right to recover nominal damages for

trespass.14 Further, proving damages is particularly unnecessary in this case because the

RTC had been granted perpetual easements

on the Iliescus’ property and the Iliescus

were seeking injunctive relief, an appropriate

remedy for the threat of continuing trespass.15 See S.O.C., Inc., 117 Nev. at 416, 23

P.3d at 251.

Accordingly, the district court erred in

granting summary judgment in favor of the

RTC as to the Iliescus’ trespass claim, and

thus we reverse the grant of summary judgment on this claim and remand for further

proceedings. To the extent that the district

court’s order granting summary judgment in

favor of the RTC as to the Iliescus’ request

for declaratory relief was predicated on its

ruling relating to their trespass claim, that

ruling is likewise reversed and remanded for

further proceedings.

CONCLUSION

The district court did not err in dismissing

the Iliescus’ waste claim because the RTC

had no possessory interest as to the Iliescus’

parking lot. The court also did not err in

dismissing their injunctive relief claim to the

extent that it was pleaded as a cause of

action. Additionally, the court did not err in

granting summary judgment in favor of the

RTC as to the Iliescus’ contract-based

claims.

The district court, however, erred in granting summary judgment as to the Iliescus’

trespass and declaratory relief claims. Because we reverse the district court’s order

granting summary judgment in favor of the

RTC as to these claims, the RTC might not

be the prevailing party and the district

court’s order awarding it attorney fees and

costs may no longer be appropriate under

NRS 18.010(2)(b) and NRS 18.020. That order, therefore, is necessarily vacated. See

Cain v. Price, 134 Nev. 193, 198, 415 P.3d 25,

30 (2018) (explaining that where a district

court’s order granting summary judgment is

reversed, it is no longer appropriate to consider the respondents the prevailing party,

and an award of attorney fees is inappropriate). Consistent with this opinion, we reverse

and remand for further proceedings as to the

Iliescus’ trespass and declaratory relief

claims, and if necessary, to determine if injunctive relief is appropriate.16

We concur:

Tao, J.

Bulla, J.

,

14. The parties disagree as to whether the Iliescus, by stipulation or otherwise, waived their

right to pursue nominal damages in this case

because nominal damages were not specifically

preserved in the stipulation. However, neither

was a claim for nominal damages specifically

waived. Further, the parties did not stipulate to

dismissal of the Iliescus’ trespass claim, nor any

damages specifically related to that claim. As

explained above, the Iliescus preserved their

claim to nominal damages by preserving their

claim to compensatory damages and because

nominal damages are inherently available for

certain types of claims such as trespass.

15. As explained above, while the district court

correctly dismissed the Iliescus’ separate cause

of action for injunctive relief, they are nevertheless permitted to seek injunctive relief as a remedy.

16. Insofar as the parties have raised arguments

that are not specifically addressed in this opinion, we have considered the same and conclude

that they either do not present a basis for relief

or need not be reached given the disposition of

this appeal.

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J.D. Fields, Inc. v. Independent Enterprises, Inc., Not Reported in F.Supp.2d (2012)

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Only the Westlaw citation is currently available.

United States District Court,

S.D. Texas,

Houston Division.

J.D. FIELDS, INC., Plaintiff,

v.

INDEPENDENT ENTERPRISES, INC., Defendant.

No. 4:12–cv–2605.

|

Nov. 13, 2012.

Attorneys and Law Firms

Daniela Oliveira, Steven P. Vangel, Hill Rivkins LLP, Houston, TX, for Plaintiff.

Steven Jon Knight, Chamberlain Hrdlicka et. al., Houston, TX, for Defendant.

MEMORANDUM AND ORDER

KEITH P. ELLISON, District Judge.

*1 Before the Court is Defendant's Motion to Dismiss for Lack of Personal Jurisdiction, for Improper Venue, and, in the

alternative, for Forum Non Conveniens. After reviewing the response, reply, and the applicable law, the Court finds that

Defendant's Motion must be GRANTED.

I. FACTS

Defendant Independent Enterprises, Inc. (“Defendant” or “Independent”) is a water main contractor for construction projects

in the United States. Plaintiff J.D. Fields, Inc. (“Plaintiff” or “Fields”) is a supplier of structural steel products. Defendant

contacted Plaintiff in February 2012 to obtain information about its sheet piling products for one of Defendant's Pennsylvania

construction projects. Plaintiff's Massachusetts-based East Coast Sales office provided pricing and other information concerning

Plaintiff's sheet piling products. (Doc. No. 2–2.) Independent issued its formal Purchase Order No. 51359 for Plaintiff's Hoesch

1205k interlocking sheet piling. (Doc. No. 2–3.) On the Purchase Order form, Defendant identified the Plaintiff as “JD Fields &

Company,” located at “2 Main Street, Suite 2B, Plymouth MA.” Fields shipped the sheet pilings from its Nazareth, Pennsylvania

office to Independent's job site in Pittsburgh, Pennsylvania.

When Defendant attempted to install the sheet pilings, Defendant alleges that it discovered significant latent defects. Defendant

alleges that, because of the defects, it incurred expenses that exceeded the jurisdictional limit of $75,000. Plaintiff alleges that

the sheet pilings in question met the appropriate “ASTM–A–527 Grade 50” specification provided for in the sales contract,

and thus Plaintiff tendered performance under its sales contract. Plaintiff claims that Defendant breached the contract by not

paying for the sheet pilings.

Defendant claims it notified Plaintiff of the defects, but after no action, Defendant filed a lawsuit against Plaintiff in the Court

of Common Pleas of Allegheny County, Pennsylvania. Plaintiff alleges that Defendant has failed to pay Plaintiff and filed a

lawsuit in Harris County, Texas. According to Plaintiff, Defendant is liable for $104,547.51, which exceeds the jurisdictional

limit of $75,000. Thus, Defendant removed the lawsuit to this court.

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II. LEGAL STANDARD

Defendant files this Motion to Dismiss for Lack of Personal Jurisdiction under Rule 12(b)(2), Motion to Dismiss for Improper

Venue under Rule 12(b)(3), and in the alternative, Motion to Dismiss or Transfer for Forum Non Conveniens. Because the Court

finds that it lacks jurisdiction over Defendant and that venue is not proper in this Court, the Court need not consider Defendant's

argument concerning forum non conveniens.

Federal Rule of Civil Procedure 12(b)(2) governs dismissal for “lack of personal jurisdiction.” Fed.R.Civ.P. 12(b)(2). “Where

a defendant challenges personal jurisdiction, the party seeking to invoke the power of the court bears the burden of proving

that jurisdiction exists. The plaintiff need not, however, establish jurisdiction by a preponderance of the evidence; a prima facie

showing suffices. This court must resolve all undisputed facts submitted by the plaintiff, as well as all facts contested in the

affidavits, in favor of jurisdiction.” Luv N' care, Ltd. v. Insta–Mix, Inc., 438 F.3d 465, 469 (5th Cir.2006) (internal citations

omitted). A federal district court sitting in diversity may exercise personal jurisdiction only to the extent permitted by a state

court under applicable state law. Cycles, Ltd. v. W.J. Digby, Inc., 889 F.2d 612, 616 (5th Cir.1989); Rittenhouse v. Mabry, 832

F.2d 1380, 1382 (5th Cir.1987). “The state court or federal court sitting in diversity may assert jurisdiction if: (1) the state's longarm statute applies, as interpreted by the state's courts; and (2) if due process is satisfied under the fourteenth amendment to the

United States Constitution.” Cycles, 889 F.2d at 616 (citing DeMelo v. Toche Marine, Inc., 711 F.2d 1260, 1265 (5th Cir.1983)).

*2 Texas' long-arm statute affords Texas courts' jurisdiction to the full extent permitted by the United States Constitution.

Televentures, Inc. v. Int'l Game Tech., 12 S.W.3d 900, 907 (Tex.App.2000). “Thus, the only limitations on Texas courts in

asserting personal jurisdiction over a nonresident defendant are those imposed by the due process clause of the Fourteenth

Amendment.” Id. (citing Helicopteros Nacionales de Columbia v. Hall, 466 U.S. 408, 413–14, 104 S.Ct. 1868, 80 L.Ed.2d

404 (1984)).

“Due process requires a showing that the nonresident defendant has purposefully established ‘minimum contacts' with Texas

and that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’ “ Id. (citing Int'l

Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 90 L.Ed. 95 (1945)). “Under the minimum contacts analysis, [courts]

must determine whether the nonresident defendant has purposely availed itself of the privilege of conducting activities within

the forum state, thus invoking the benefits and protections of the state's laws.” Experimental Aircraft Ass'n, Inc. v. Doctor, 76

S.W.3d 496, 504 (Tex.App.2002)).

Federal Rule 12(b)(3) allows defendants to move for dismissal based on improper venue. Fed.R.Civ.P. 12(b)(3); Bigham v.

Envirocare of Utah, Inc., 123 F.Supp.2d 1046, 1047–48 (S.D.Tex.2000). Once a defendant raises a 12(b)(3) motion to dismiss

for improper venue, the burden of sustaining venue lies with the plaintiff. Laserdynamics Inc. v. Acer America Corp., 209 F.R.D.

388, 390 (S.D.Tex.2002); Langton v. Cbeyond Commc'n, L.L.C., 282 F.Supp.2d 504, 508 (E.D.Tex.2003). On a Rule 12(b)(3)

motion to dismiss for improper venue, the court must accept as true all allegations in the complaint and resolve all conflicts in

favor of the plaintiff. Braspetro Oil Services Co. v. Modec (USA), Inc., 240 F. App'x 612, 615 (5th Cir.2007). Venue in this case

is based upon the general federal venue statute, 28 U.S .C. § 1391(a), which states:

A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise

provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants

reside in the same State, (2) a judicial district in which a substantial part of the events or omissions giving

rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or

(3) a judicial district in which any defendant is subject to personal jurisdiction at the time the action is

commenced, if there is no district in which the action may otherwise be brought.

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III. ANALYSIS

A. Specific Jurisdiction

The “minimum contacts” prong of the personal jurisdiction test has been further refined to determine two types of personal

jurisdiction: specific and general. Ruston Gas Turbines, Inc. v. Donaldson Co., Inc., 9 F.3d 415, 418 (5th Cir.1993). Specific

jurisdiction is established when the plaintiff's cause of action arises out of or relates to the defendant's contacts with the forum

state. See Helicopteros Nacionales, 466 U.S. at 414; Bearry v. Beech Aircraft Corp., 818 F.2d 370, 374 (5th Cir.1987). A single

act by the defendant directed at the forum state, therefore, can be enough to confer personal jurisdiction if that act gives rise to

the claim being asserted. Ham v. La Cienega Music Co., 4 F.3d 413, 415–16 (5th Cir.1993); Dalton v. R & W Marine, Inc., 897

F.2d 1359, 1361 (5th Cir.1990). Plaintiff does not dispute that it was Plaintiff's East Coast office that first communicated with

Defendant. However, Plaintiff does claim that on February 22, 2012, Mr. Cargnoni, President of Independent, filled out a credit

application bearing Plaintiff's Houston office address. The commercial invoice that Fields sent to Independent on March 8, 2012

also bears a Houston address, calling for payment to the Houston office. However, making payments, opening a line of credit,

and/or communicating with Plaintiff's Texas office are not sufficient actions to establish specific jurisdiction. Freudensprung

v. Offshore Technical Services, Inc., 379 F.3d 327, 344 (5th Cir.2004) (“combination of mailing payments to the forum state,

engaging in communications related to the ... contract, and the existence of a contract between the nonresident defendant and

a resident of the forum are insufficient to establish the minimum contacts”); Ranger Steel Services, L.P. v. Orleans Materials

& Equip. Co., Inc., CIV. A. H–09–3111, 2010 WL 173543 (S.D.Tex. Jan.14, 2010) (“mere obligation to make payments to

a Texas resident is not sufficient to establish proper venue”); Sysinformation, Inc. v. Prof'l Healthcare Billing Services, A–

09–CA–619–SS, 2009 WL 4640272 (W.D.Tex. Nov.30, 2009) (“mere mailing of payments is not sufficient to establish either

personal jurisdiction or proper venue”).

*3 Alternatively, Plaintiff alleges that specific jurisdiction over Defendant exists because of a forum selection clause in

Plaintiff's General Terms and Conditions (“GTCs”). (Doc. No. 2–6.) The forum selection clause reads:

All actions or proceedings arising directly or indirectly or otherwise in connection with, out of, related to

or from this contract shall be brought only in state or Federal Court in Harris County in the State of Texas,

and Buyer hereby consents and submits to the jurisdiction and venue of such courts for the purpose of

such actions or proceedings.

Forum-selection clauses are presumptively valid. M/S BREMEN v. Zapata Off–Shore co., 407 U.S. 1, 12–13, 92 S.Ct. 1907, 32

L.Ed.2d 513 (1972). Courts have routinely upheld similar forum selection clauses between business entities, and have declined

to hear disputes that the parties have agreed must be filed in another forum. Id., Afram Carreirs, Inc. v. Moeykens, 145 F.3d 298,

301 (5th Cir.1998). However, this is true only if the forum selection clause is a part of the contract. Plaintiff's GTCs were sent

to Defendant on March 6, 2012, separate from the shipment of steel pilings. The terms and conditions were attached to a letter

written by Mr. Pat Burk, Plaintiff's Executive Vice President, confirming that a credit account had been opened on Defendant's

behalf. Both the letter and GTCs were allegedly sent to Defendant on the same day Plaintiff shipped the sheet pilings, March 6,

2012. Plaintiff does not allege that Defendant expressly agreed to the GTCs, but rather that by sending the GTCs to Defendant,

who did not object, the forum-selection provision became a part of the contract.

Defendant makes three arguments regarding the forum selection clause: 1) Defendant argues it never received the letter, 2) the

GTCs were not a part of the offer and acceptance, and 3) the forum selection clause materially altered the contract. The Court

will address each argument separately.

1. No Receipt

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First, Defendant argues that it never received the GTCs because they were never mailed by Plaintiff. The mailbox rule is “well

settled that proof that a letter properly directed was placed in a post office creates a presumption that it reached its destination

in usual time and was actually received by the person to whom it was addressed.” Hagner v. United States, 285 U.S. 427, 430,

52 S.Ct. 417, 76 L.Ed. 861 (1932). A threshold question for the application of the mailbox rule is whether there is sufficient

evidence that the letter was actually mailed. Custer v. Murphy Oil USA, Inc., 503 F.3d 415, 419 (5th Cir.2007). Plaintiff provided

an affidavit from their executive vice-president, Pat Burk establishing customary business practices:

“On March 6, 2012, I sent a letter to Jack S. Cargnoni at Independent confirming that a credit account had been opened on

their behalf and attaching the applicable “Terms and Conditions” of sale for this transaction ... This letter was addressed to

Independent at “5020 Thoms Run Rd, Oakdale, PA 15701.” Per Fields' customary business practices, proper postage was

paid on this letter, and the letter was placed in the post office receptacle at our office for delivery. This letter was not returned

to us for any reason.”

*4 The Fifth Circuit has recognized that “[p]lacing letters in the mail may be proved by circumstantial evidence, including

customary mailing practices used in the sender's business.” Wells Fargo Business Credit v. Ben Kozlof, Inc., 695 F.2d 940,

944 (5th Cir.1983). Defendant argues that it did not receive the letter, and characterizes Mr. Burk's affidavit as filled with bare

assertions. Defendant provides an affidavit from Mr. Cargnoni, President of Independent, stating that Independent was never

sent the GTCs (Doc. No. 2–1):

“I never saw the letter or the attachment until Independent was served with the Harris County lawsuit.

To be certain, I have diligently searched Independent's business records and I interviewed Independent's

mail-intake personnel concerning Fields' contention that that letter was sent to Independent. Based on

my investigation, neither I nor anyone else at Independent received the March 6, 2012 letter or any

attachment to the letter.”

The two affidavits together raise a fact issue. When only one party provides a sworn affidavit confirming receipt (or lack or

receipt), such a fact issue is easy to resolve. See Duron v. Albertson's LLC, 560 F.3d 288, 291 (5th Cir.2009) (vacating summary

judgment where the sender had “submitted no affidavits in support of the mailing” and, in contrast, the recipient had “provided

a sworn affidavit that she did not receive” the document); Geico Ins. Co. v. White, 339 F. App'x 394, 397 (5th Cir.2009) (GEICO

provided circumstantial support for mailing in the form of an affidavit, but White provided no circumstantial evidence in support

of her claim that it was not received). Bare assertions of non-receipt are generally held insufficient to rebut the presumption of

receipt. The Fifth Circuit has found it insufficient for a president to merely aver that the company never received the document,

when others could have opened the mail at the company. United Student Aid Funds Inc. v. Muracombi Enterprises Inc., 330

F. App'x 453, 456 (5th Cir.2009). However, in this case, Mr. Cargnoni states that he interviewed the mail-intake person and

inspected Independent's business records.

This case presents an evenly balanced fact dispute, where both parties have provided affidavits that go beyond mere assertions.

The Fifth Circuit guides this Court to resolve “all facts contested in the affidavits in favor of jurisdiction.” Luv N' care, Ltd.,

438 F.3d at 469 (5th Cir.2006) (internal citations omitted). However, even assuming that Independent received the mailing,

Independent makes two further arguments against personal jurisdiction.

2. GTCs Not Part of Offer/Acceptance

Independent argues that the terms of the GTCs, including the forum selection clause, did not become a part of the contract

because it was not part of the acceptance. According to Fields, it shipped the sheet pilings from Pennsylvania and separately

mailed the GTCs to Independent from Texas on the same day—March 6, 2012. (Doc. No. 6, at 2.) Plaintiff thus reasons that it

accepted Independent's offer by both mailing the GTCs and shipping the requested sheet pilings. Defendant argues that these

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terms were not part of the contract, because the GTCs purported to alter a contract already formed upon delivery of the ordered

goods, and was therefore invalid under Section 2.207 of the Texas Uniform Commercial Code.

*5 Section 2.207(a) of the Code states: “A definite and seasonable expression of acceptance or a written confirmation which is

sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered

or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms.”

However, under the Texas UCC, Plaintiff accepted Independent's offer before the alleged letter could become part of the

agreement. The case In Enpro Sys., Ltd. v. Namasco Corp., 382 F.Supp.2d 874, 876–80 (S.D.Tex.2005) is apposite. Plaintiff

in that case ordered a steel plate from defendant, which was delivered in a timely manner to plaintiff. The defendant also sent

a delivery ticket with the order that disclaimed all warranties, and, after the delivery, an invoice confirming the terms of that

delivery ticket. Id. The defendant argued that the terms in those writings—including the limitation of liability clause—became

a part of the contract. The Court disagreed, concluding that “the contract formation occurred when [the defendant] accepted the

offer by shipping the steel plate, before [the plaintiff] had any opportunity to review the delivery ticket/invoice terms.” Id. at 880.

Indeed, the court stressed that “probably as early as the moment the steel left [defendant] for shipment to [plaintiff], and certainly

by the time it arrived at [plaintiff's] receiving department ... each party had an enforceable contract against the other.” Id.

This Court also considered Enpro to be persuasive authority in Contractor's Source Inc. v. Hanes Companies, Inc., CIV.A.09–

CV–0069, 2009 WL 6443116 (S.D.Tex. Dec.29, 2009). As in Enpro, the plaintiff in Contractor's Source submitted a purchased

order that functioned as an offer, which Defendant accepted upon delivery of the goods. This Court found that the invoice sent

after Defendant accepted the goods could not have constituted an acceptance because the enforceable contract had already come

into existence. Id. This Court distinguished Enpro from Permian Petroleum Co. v. Petroleos Mexicanos, 934 F.2d 635 (5th

Cir.1991). In Permian, the court decided the question of whether the plaintiff, the seller in that case, was entitled to contract

interest. The court examined whether a provision for interest included in the order invoices became part of the parties' contract.

The court concluded that this provision was part of the contract as either part of the offer or part of the acceptance under § 2.207,

noting that the seller “delivered the [goods] with invoices that were stamped by [defendant] upon receipt,” and that defendant

“never objected to invoice interest provision.” Id. at 654. This Court distinguished Contractor's Source from Permian because

the invoice with the extra terms in Permian were delivered with the goods, and were acknowledged and stamped upon receipt.

This Court found that the “Permian Petroleum decision explicitly addresses the situation wherein the additional contractual

terms accompany the goods in response to the order/offer, and therefore form part of the acceptance.” Contractor's Source Inc.,

2009 WL 6443116, at *8. Permian is factually distinct from Enpro, Contractor's Source, and this case. Specifically, Permian is

distinguishable from this case for two reasons; here the Defendant did not stamp or acknowledge the GTCs; rather, Defendant

states the GTCs were never received. Second, the GTCs did not accompany the goods. Thus, this Court finds that an enforceable

contract had already come into existence upon delivery of the goods.

*6 The holding that the GTCs are not part of the contract finds additional support in Texas law, interpreting what can constitute

a valid written confirmation under § 2.207. In Preston Farm & Ranch Supply, Inc. v. Bio–Zyme Enterprises, 625 S.W.2d 295

(Tex.1981) for example, the Texas Supreme Court noted that “[c]ourts and scholars have questioned whether [§ 2.207] can

apply at all to a sale in which the goods have already been shipped and accepted and a memorandum such as an invoice or

statement altering the terms is sent contemporaneously with or subsequent to the shipment of the goods.” Id. at 299. The court

found that a monthly statement sent after the goods had been shipped did not constitute an acceptance, even though plaintiff

had failed to object. Id. at 300; see also Tubelite v. Risica & Sons, Inc., 819 S.W.2d 801, 804 (Tex.1991) (noting that the offer

and acceptance occurred before the forms containing the additional terms were sent and holding that statements of account sent

after delivery of the goods were not confirmations within the meaning of § 2.207).

Furthermore, the Fifth Circuit has found that the written confirmation provided for in § 2.207 is recognized “primarily as

a writing necessary to satisfy the statute of frauds when the agreement reached is at least partially unenforceable....” Mid–

South Packer, Inc. v. Shoney's, Inc., 761 F.2d 1117, 1122 (5th Cir.1985). In so holding, the Mid–South Packer court found that

the invoice rendered enforceable a contract previously unenforceable under the statute of frauds. Id. at 1123. In contrast, the

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Contractor's Source court found that the purchase order, along with Defendant's shipment and Plaintiff's acceptance of the

goods, definitively satisfied the statute of frauds. Contractor's Source, 2009 WL 6443116, at *8; Tex. Bus. & Com.Code. §

2.201(c)(3). Similarly, Independent provided a purchase order, Plaintiff shipped the steel piling products to Independent, who

accepted the product. The GTCs, and accompanying letter, are not necessary to satisfy the statute of frauds. Thus, the Court finds

that the GTCs and letter sent by Plaintiff to Defendant on March 6 constitutes neither an acceptance nor a written confirmation

within the scope of Section 2.207.

3. GTCs Materially Altered the Contract

Even if the GTCs were considered a confirmation or a part of the acceptance, the forum selection clause is a material alteration to

the contract and would not be integrated under § 2.207. § 2.207 provides that “additional terms are to be construed as proposals

for addition to the contract. Between merchants such terms become part of the contract unless ... they materially alter it ...” Tex.

Bus. & Com.Code Ann. § 2.207 (West). A merchant is a person who “deals in goods of the kind or otherwise by his occupation

holds himself out as having knowledge or skill peculiar to the practices or goods involved in the transaction or to whom such

knowledge or skill may be attributed by his employment of an agent or broker or other intermediary who by his occupation

holds himself out as having such knowledge or skill.” Tex. Bus. & Com.Code Ann. § 2.104 (West). As Fields and Independent

are both merchants, even those terms not expressly agreed to by the parties can become part of the contract if the additional

terms are not material. An alteration is material “if a change to that document causes it to ‘fail to reflect the meaning and intent

of the parties to the agreement.’ ” Frost Nat'l Bank v. Burge, 29 S.W.3d 580, 588 (Tex.App.2000) (citing Associated Sawmills,

Inc. v. Peterson, 366 S.W.2d 844, 848 (Tex.Civ.App.1963).

*7 Forum selection clauses are typically considered material and therefore require express assent to become binding. CECG,

Inc. v. Magic Software Enters., Inc., 51 F. App'x 359, 364 (3d Cir.2002); Cunningham v. Fleetwood Homes of Ga., Inc., 253

F.3d 611, 621 n. 13 (11th Cir.2001) (noting that forum selection clauses are generally considered material terms under state law

variants of the UCC); Hugo Boss Fashions, Inc. v. Sam's European Tailoring, Inc., 293 A.D.2d 296, 742 N.Y.S.2d 1 (2002)

(finding that invoice containing forum selection clause and waiver of jury materially altered the parties' oral contract for sale

of goods); Product Components, Inc. v. Regency Door and Hardware, Inc., 568 F.Supp. 651 (S.D.Ind.1983) (“forum selection

clauses contained in seller's acknowledgment form and invoice materially altered the parties' contract”).

Cases that have found similar clauses, such as an arbitration clause, not to be material, were cases where parties had signed an

agreement with the clause, or such clause was present in parties' previous course of dealings. See, e.g., Schulze & Burch Biscuit

Co. v. Tree Top, Inc., 831 F.2d 709 (7th Cir.1987) (holding that an arbitration clause in a written confirmation was not a material

alteration because it was consistent with the parties' previous course of dealing); In re Cotton Yarn Antitrust Litigation, 505

F.3d 274 (4th Cir.2007) (holding that terms consistent with trade usage or course of dealing may represent additional terms but

generally do not materially alter a contract); Standard Bent Glass Corp. v. Glassrobots Oy, 333 F.3d 440, 446–48 (3rd Cir.2003)

(both incorporation by reference and lack of material alteration allows enforcement of arbitration clause; no material alteration

when prior course of dealing was consistent); cited by Oceanconnect.com, Inc. v. Chemoil Corp., CIV.A. H–07–1053, 2008 WL

194360 (S.D.Tex. Jan.23, 2008). Here Defendant has not signed any document acknowledging Plaintiff's GTCs, nor is there

any evidence that parties have dealt with each other before. Indeed, Defendant states that he had never seen Plaintiff's GTCs

before this lawsuit was filed. (Doc. No. 2–1.) Because the forum selection clause was never part of the contract, this Court finds

that it cannot assert specific jurisdiction over Defendant.

B. General Jurisdiction

Even where specific jurisdiction is lacking, however, a court may nevertheless exercise “general jurisdiction” based on a

defendant's contacts with the forum unrelated to the controversy. Helicopteros Nacionales, 104 S.Ct. at 1872. To exercise general

jurisdiction, the court must determine whether “the contacts are sufficiently systematic and continuous to support a reasonable

exercise of jurisdiction.” Stuart v. Spademan, 772 F.2d 1185, 1190 (5th Cir.1985). The minimum contacts inquiry is broader

and more demanding when general jurisdiction is alleged, requiring a showing of substantial activities in the forum state. Jones

v. Petty–Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1068 (5th Cir.1992).

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*8 The party seeking to assert jurisdiction must present sufficient facts as to make out a prima facie case supporting jurisdiction.

Alpine View Co. Ltd. v. Atlas Copco AB, 205 F.3d 208 (5th Cir.2000). To make a prima facie showing of general jurisdiction,

the plaintiff must produce evidence that affirmatively shows that defendant's contacts with forum that are unrelated to litigation

are sufficient to satisfy due process requirements; those unrelated contacts must be substantial, continuous and systematic. Id.

Plaintiff has failed to make a prima facie showing of Defendant's contacts with Texas. Mr. Cargnoni's affidavit demonstrates that

Independent's contacts are not continuous and systematic so as to support a finding of general jurisdiction. Mr. Cargnoni states

that Independent “is organized under Pennsylvania's laws and operates from its principal office in Oakdale, Pennsylvania ...

Further, Independent has no Texas offices and it has never continuously or systematically engaged in business in Texas.”

Plaintiff has not provided any evidence contradicting Mr. Cargnoni's affidavit. Thus, the Court does not find that it has general

jurisdiction, and must dismiss this case.

C. Venue

The Federal Rules of Civil Procedure authorize a court, upon suitable showing, to dismiss an action where venue in that court is

improper. See Fed.R.Civ.P. 12(b)(3). Once a defendant raises the issue of proper venue by motion, the burden of proof is placed

upon the plaintiff to sustain venue. See Seariver Maritime Fin. Holdings, Inc. v. Pena, 952 F.Supp. 455, 458 (S.D.Tex.1996).

The Court does not find venue to be proper in Texas. Defendants do not meet any of the requirements stated in the federal venue

statute, 28 U.S.C. § 1391(a). Section 1391(a)(1) provides for venue based upon the residence of the defendants. As this Court

has already discussed, Defendant does not reside in Texas. Section 1391(a)(2) sets forth the so-called “transactional” basis for

venue. This provision enables a Plaintiff to bring suit in the place where a “substantial part of the events or omissions giving

rise to the claim occurred.” 28 U.S.C. § 1391(a)(2). A substantial part of the events giving rise to the claim did not occur in

Texas. Aside from extending the credit line and asking for payment, Plaintiff's Houston office was not involved in the events

giving rise to the claim. Finally, this Court has found that Independent is not subject to personal jurisdiction in Texas. See 28

U.S.C. § 1391(a)(3). Thus, a dismissal based on a lack of personal jurisdiction, rather than a transfer of venue, is appropriate.

IV. CONCLUSION

Finding no basis for personal jurisdiction, the Court GRANTS Defendant's Motion and dismisses Plaintiff's claims without

prejudice.

IT IS SO ORDERED.

All Citations

Not Reported in F.Supp.2d, 2012 WL 5818229, 79 UCC Rep.Serv.2d 58

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2023 WL 2710178

Only the Westlaw citation is currently available.

United States District Court, E.D. New York.

Mary Grace MAGTOLES, Aira C. Tan, Ana Myrene Espinosa, and Ana Mervine

Espinosa, individually and on behalf of all others similarly situated, Plaintiffs,

v.

UNITED STAFFING REGISTRY, INC. d/b/a United Home Care and Benjamin H. Santos, Defendants.

21-CV-1850 (KAM) (PK)

|

Signed March 30, 2023

Synopsis

Background: Citizens of Republic of Philippines who worked as healthcare professionals in New York area brought putative

class action lawsuit against staffing company which employed them and its owner, president, and chief executive officer (CEO),

asserting claims under Trafficking Victims Protection Act (TVPA) and state law for breach of contract, unjust enrichment, and

fraud, and seeking declaratory and injunctive relief regarding liquidated damages and noncompete-clauses in their employment

contracts. Healthcare professionals moved for summary judgment.

Holdings: The District Court, Kiyo A. Matsumoto, J., held that:

liquidated damages clause in standard employment contract between healthcare professionals and staffing company was

unenforceable;

non-compete clause in standard employment contract between staffing company and nurses was unenforceable;

staffing company breached provision of standard employment contract stating that employer undertook and agreed to pay

employees prevailing wages based on location;

company was liable under TVPA provision creating liability for knowingly providing or obtaining labor by means of serious

harm or threats of serious harm;

CEO was liable under TVPA provision creating liability for knowingly benefiting from participation in venture engaged in

providing or obtaining of labor or services in violation of TVPA; and

fact issues precluded summary judgment on healthcare professional's claims for fraud and unjust enrichment.

Motion granted in part and denied in part.

Procedural Posture(s): Motion for Summary Judgment; Request for Declaratory Judgment; Motion for Permanent Injunction.

Attorneys and Law Firms

John J.P. Howley, The Howley Law Firm P.C., New York, NY, for Plaintiffs.

Felix Q. Vinluan, Law Office of Felix Q. Vinkuan, Woodside, NY, Manuel B. Quintal, New York, NY, for Defendants.

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MEMORANDUM & ORDER

KIYO A. MATSUMOTO, United States District Judge:

*1 Plaintiffs are citizens of the Republic of the Philippines who work as healthcare professionals in the New York area.

Plaintiffs bring this putative class action against Defendants United Staffing Registry, Inc. (“the company”), and its sole owner,

president, and chief executive officer, Benjamin H. Santos (collectively “Defendants”), for violations of the Trafficking Victims

Protection Act (“TVPA”), 18 U.S.C. § 1589 et seq. The complaint also asserts individual claims for breach of contract, unjust

enrichment, and fraud, and seeks declaratory and injunctive relief and damages as to specific aspects of Plaintiffs’ employment

contracts.

Presently before the Court is Plaintiffs’ motion for summary judgment. (ECF No. 54.) Plaintiffs request entry of summary

judgment: (1) declaring that the liquidated damages and non-compete clauses in their standard employment contracts are

unenforceable under both the Trafficking Victims Protection Act, 18 U.S.C. § 1589 et. seq., and under New York common law;

(2) permanently enjoining Defendants from threatening or attempting to enforce either the liquidated damages provision or the

non-compete clause; (3) finding both Defendants liable for breach of contract in amounts to be determined at trial or inquest,

including piercing the corporate veil of corporate Defendant United Staffing Registry, Inc. to hold individual Defendant Santos

personally liable; (4) finding both Defendants liable for violations of the TVPA in amounts to be determined at trial or inquest;

and (5) awarding Plaintiffs reasonable attorneys’ fees and the costs of this action as authorized by 18 U.S.C. § 1595(a). For the

reasons set forth below, the Court GRANTS in part and DENIES in part Plaintiffs’ motion for summary judgment.

BACKGROUND

The following facts are drawn from the parties’ submissions in connection with this motion, including the parties’ Local Civil

Rule 56.1 Statements of Facts, opposing 56.1 Statements, and reply 56.1 Statements. 1 Upon consideration of a motion for

summary judgment, the Court must construe the facts in the light most favorable to the non-moving party. See Capobianco v.

City of New York, 422 F.3d 47, 50 n.1 (2d Cir. 2005).

I. Factual Background

*2 The Court finds the following undisputed facts from the parties’ submissions, unless otherwise noted.

A. The Defendants

Defendant Benjamin Santos is the sole owner, president, and chief executive officer (“CEO”) of Defendant United Staffing

Registry, Inc. (“United Staffing”), a staffing company in the business of recruiting foreign-trained nurses and other healthcare

professionals, sponsoring them for lawful immigration status that will allow them to work in the United States, and employing

them in New York. (Pls. 56.1 at ¶ 9; Defs. Resp. 56.1 at ¶ 9; see also ECF No. 45-1 (“United Staffing Dep.”) at 17.) United

Staffing assigns nurses to work at nursing homes and medical clinics owned and operated by its clients. (Pls. 56.1 at ¶ 7; Defs.

Resp. 56.1 at ¶ 7.) Santos and United Staffing have been recruiting foreign nurses and employing them to work in New York

for more than 20 years. (Pls. 56.1 at ¶ 10; Defs. Resp. 56.1 at ¶ 10.) Most of the nurses employed by United Staffing are from

the Philippines. (Pls. 56.1 at ¶ 6; Defs. Resp. 56.1 at ¶ 6.)

United Staffing requires registered nurses (“RNs”) that it sponsors to sign an Employment Agreement, although the timing

may depend on whether the nurse was recruited from outside the United States or from within the United States. (ECF No.

45-5 (“Pascual Decl.”) at ¶ 6.) Before foreign recruits are sponsored through the immigration process, United Staffing requires

them to sign a three-year employment agreement with the company. (Pls. 56.1 at ¶ 11; Defs. Resp. 56.1 at ¶ 11; see also ECF

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No. 45-4 (“Santos Decl.”) at ¶¶ 6-7 (“Those we recruit from abroad are required, as a matter of company practice, to execute

an Employment Agreement, which they would present to the U.S. Embassy during their consular interview.”); Pascual Decl.

at ¶¶ 6-7 (“United Staffing generally requires [non-U.S. citizens and non-lawful permanent residents RNs] whom we recruit

and sponsor through the immigration process to sign a three-year Employment Agreement”; “United Staffing requires foreigntrained registered nurses recruited from outside the United States to sign our Employment Agreement before they are sponsored

through the Form I-140 immigrant worker petition process.”)). 2

B. The Nurse Plaintiffs and Their Employment Contracts

*3 In 2018 and 2019, Plaintiffs Mary Grace Magtoles, Aira C. Tan, and Ana Myrene Espinosa (collectively, the “Nurse

Plaintiffs”) each signed United Staffing's “Standard Contract” to work for the company as an RN. (Pls. 56.1 at ¶ 13; Defs. Resp.

56.1 at ¶ 13; see, e.g., ECF Nos. 28-2 (“Magtoles Contract”), 28-3 (“Tan Contract”), 28-4 (“Ana Myrene Espinosa Contract”).) 3

Four provisions of the contracts are relevant to the instant motion.

First, United Staffing's standard contract requires nurses to work a minimum number of hours during the three-year contract

period. (See, e.g., Magtoles Contract at 3; ECF No. 40-40, Ex. O at 3; ECF No. 40-45, Ex. T at 3.) Most of United Staffing's

foreign recruits — including the Nurse Plaintiffs and more than fifty others — signed a contract requiring 6,000 hours of work

over the three-year period. 4 (See, e.g., Magtoles Contract; Pascual Decl. ¶ 22.) If a nurse leaves United Staffing's employ before

working the specified number of hours, the contract requires the nurse to pay $15 in “liquidated damages” for each hour that

the nurse did not complete. 5 (See, e.g., Magtoles Contract at 3; ECF No. 40-40, Ex. O at 3; ECF No. 40-45, Ex. T at 3.) For

example, if a nurse signed a contract requiring 6,000 hours of work and then left United Staffing after completing 2,000 hours

of work over the course of one year, the nurse would owe $60,000 in “liquidated damages” for the 4,000 remaining hours. 6

*4 Second, the contracts include a three-year, nationwide non-compete clause. (Pls. 56.1 at ¶ 37; Defs. Resp. 56.1 at ¶ 37;

see, e.g., Magtoles Contract at 3.) If a nurse leaves United Staffing before completing the minimum number of hours over the

course of three years, the nurse cannot:

1. In any manner whatsoever, directly or indirectly, work as a nurse, practice nursing, work as a physician's assistant, or

otherwise practice the art of/science of nursing; or

2. Directly or indirectly operate, own, lease (as landlord or tenant), engage or participate in as an owner, partner, employee,

joint venturer, shareholder, director, assignor, seller, transferor, or as sales or marketing agent or otherwise, in, for or in

connection with any business which competes with [United Staffing] within the United States for a period of THREE (3)

YEARS after the EMPLOYEE severs his/her relationship with [United Staffing].

(See, e.g., Magtoles Contract at 3.)

Third, the contracts provide that United Staffing will pay the Nurse Plaintiffs “a salary or wage that complies with the laws,

rules, regulations and prevailing wages depending on the location of the hospital, health care facility” where the nurse works.

(See, e.g., Magtoles Contract at 4; ECF No. 40-40, Ex. O at 4; ECF No. 40-45, Ex. T at 4.)

Fourth, the contracts provide that, if the nurse breaches the contract, United Staffing “will report” a change in employment

status to “appropriate government authorities, including but not limited to the United States Citizenship and Immigration Service

(USCIS) and the Immigration and Customs enforcement (ICE).” (See, e.g., Magtoles Contract at 4.) The contracts also state

that “such report may lead to the termination of the Permanent Resident Card (Green Card) and deportation of EMPLOYEE

from the United States.” (See, e.g., Magtoles Contract at 4; ECF No. 40-40, Ex. O at 11; ECF No. 40-45, Ex. T at 4.)

C. Plaintiff Ana Mervine Espinosa

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Plaintiff Ana Mervine Espinosa (a/k/a “Bhyng Espinosa” 7) is a licensed physical therapy aide and a citizen of the Republic

of the Philippines. (Pls. 56.1 at ¶ 4; Defs. Resp. 56.1 at ¶ 4.)

II. Procedural History

Plaintiffs commenced this putative class action on April 6, 2021, bringing claims for violations of the TVPA, conspiracy to

violate the TVPA, and attempting to violate the TVPA. (ECF No. 1 (“Compl.”) ¶¶ 93-120.) The Nurse Plaintiffs also assert

claims for breach of contract and seek declaratory judgment and injunctive relief, and Plaintiff Bhyng Espinosa brings claims

for unjust enrichment and fraud. (Id. ¶¶ 121-47.)

On June 21, 2021, Defendants filed a letter requesting a pre-motion conference for their motion to dismiss the Complaint

for failure to state a claim. (ECF No. 15.) After considering the parties’ submissions, this Court issued a Memorandum &

Order on December 30, 2021, granting in part and denying in large part Defendants’ motion to dismiss. Magtoles v. United

Staffing Registry, No. 21-CV-1850 (KAM)(PK), 2021 WL 6197063 (E.D.N.Y. Dec. 30, 2021). Based on the liquidated damages

provision, non-compete clause, and the immigration notification provision in United Staffing's standard contract, the court

concluded that the Nurse Plaintiffs stated plausible claims for violations of the TVPA, breach of contract, and grounds for

declaratory judgment. Id. at *3-11. Although the Court concluded that Plaintiff Bhyng Espinosa could not assert claims under

Section 1589 of the TVPA — because the Complaint failed to allege that she ever started work for United Staffing — the Court

found that Ms. Bhyng Espinosa stated plausible claims for trafficking, conspiracy, and attempt under the TVPA, as well as for

fraud and unjust enrichment under New York law. Id. at *10, *12. On February 8, 2022, Magistrate Judge Kuo issued an order

certifying the close of all discovery. (2/8/22 Docket Order.) On May 25, 2022, this Court granted the Nurse Plaintiffs’ motion

for class certification and approved the notices to the putative class. Magtoles v. United Staffing Registry, Inc., No. 21-CV-1850

(KAM)(PK), 2022 WL 1667005 (E.D.N.Y. May 25, 2022).

*5 Finally, on August 30, 2022, less than a week before the opt-out deadline, Defendants sent an email — without seeking

leave from this Court — to United Staffing employees, including members of the certified class in this action, encouraging them

to opt out of the class. (ECF No. 57-2 (“8/30/22 Email”).) On September 2, 2022, class counsel moved by order to show cause,

pursuant to Federal Rule of Civil Procedure 23(d), for an order: (1) prohibiting Defendants and their attorneys, employees,

agents, and representatives from communicating with class members regarding this action and the claims asserted without prior

court approval; (2) directing Defendants to provide class counsel with the names and email addresses of all individuals who

received Defendants’ August 30, 2022 email; and (3) authorizing class counsel to send a curative notice to class members. (ECF

No. 57-4 at 1.) The Court held an Order to Show Cause Hearing on September 6, 2022. In a September 6, 2022 Memorandum

& Order granting class counsel's motion, the Court found:

As the employer of class members, Defendants sent an email warning class members that “United Staffing filed counterclaims

against the nurses for preterminating their contracts.” (8/30/22 Email at 1.) Viewed in context, this statement conveys an

implicit threat, by the Defendants to their employee class members, that they too will be sued if they choose to remain

in the class. This statement is also misleading because it suggests that nurses will face liability for “preterminating their

contracts” (id.), regardless of whether those contracts (as Plaintiffs contend) are unenforceable.

...

Most notably, Defendants’ email suggests that class members opt out with the following response: “I do not understand how

your clients are claiming United Staffing forced them to work, when all of us voluntarily signed and we all understood the

terms of our employment contract. I guess your clients just would like to get out of their 3-year contracts.” (8/30/22 Email

at 2.) Defendants’ suggested responses also contain several other one-sided statements that parrot Defendants’ defenses in

this action and encourage class members to opt out, including: “I was not forced to work by United Staffing,” “I signed my

contract voluntarily,” “The contract was clear,” and “I was paid correctly.” (Id.)

(ECF No. 61 at 10-11.)

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This Court held that Defendants’ unauthorized email was “misleading, coercive, and otherwise interfered with the proper

administration of this class action.” (Id. at 8.)

Plaintiffs now move for summary judgment as to: Defendants’ liability under the TVPA and on the breach of contract claim;

a declaration that the “liquidated damages” and “non-compete” clauses of the standard contract are invalid and unenforceable;

and an injunction against the actual or threatened enforcement of those clauses. Plaintiffs also seek summary judgment in favor

of Plaintiff Bhyng Espinosa on her claims for fraud and unjust enrichment, on the grounds that she paid Defendants $7,532.00

in connection with obtaining a labor certification, in violation of 20 C.F.R. § 656.12. (ECF No. 54-1 (“Pls. Mem.”) at 10.)

LEGAL STANDARD

Summary judgment shall be granted to a movant who demonstrates “that there is no genuine dispute as to any material fact

and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “A fact is ‘material’ for these purposes when

it ‘might affect the outcome of the suit under the governing law.’ ” Rojas v. Roman Catholic Diocese of Rochester, 660 F.3d

98, 104 (2d Cir. 2011) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

No genuine issue of material fact exists “unless there is sufficient evidence favoring the nonmoving party for a jury to return a

verdict for that party.” Anderson, 477 U.S. at 249, 106 S.Ct. 2505. “If the evidence is merely colorable, or is not significantly

probative, summary judgment may be granted.” Id. at 249-50, 106 S.Ct. 2505 (citations omitted).

When bringing a motion for summary judgment, the movant carries the burden of demonstrating the absence of any disputed

issues of material fact and entitlement to judgment as a matter of law. Rojas, 660 F.3d at 104. In deciding a summary judgment

motion, the court must resolve all ambiguities and draw all reasonable inferences against the moving party. Flanigan v. Gen.

Elec. Co., 242 F.3d 78, 83 (2d Cir. 2001) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106

S.Ct. 1348, 89 L.Ed.2d 538 (1986)). A moving party may indicate the absence of a factual dispute by “showing ... that an adverse

party cannot produce admissible evidence to support the fact.” Fed. R. Civ. P. 56(c)(1)(B). Once the moving party has met its

burden, the non-moving party “must come forward with admissible evidence sufficient to raise a genuine issue of fact for trial

in order to avoid summary judgment.” Jaramillo v. Weyerhaeuser Co., 536 F.3d 140, 145 (2d Cir. 2008) (citing Celotex Corp.

v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). Finally, the “mere existence of a scintilla of evidence

in support of the [non-movant's] position will be insufficient; there must be evidence on which the jury could reasonably find

for the [non-movant].” Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

DISCUSSION

I. Enforceability of the Liquidated Damages Provision

*6 Plaintiffs request a declaratory judgment finding the liquidated damages provision of the contracts unenforceable. They

also request that Defendants be enjoined from attempting or threatening to enforce the provision.

A. Legal Standard

Whether a liquidated damages provision is enforceable “is a question of law, giving due consideration to the nature of the

contract and the circumstances.” HLT Existing Franchise Holding LLC v. Worcester Hosp. Grp., LLC, 609 F. App'x 669, 672

(2d Cir. 2015) (summary order) (internal quotation marks omitted). Such a provision is, in effect, an estimate “made by the

parties at the time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of

the agreement.” Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424, 393 N.Y.S.2d 365, 361 N.E.2d 1015

(1977). A liquidated damages provision will not be enforced if it is contrary to public policy, “and public policy is firmly set

against the imposition of penalties or forfeitures for which there is no statutory authority.” Id. Accordingly, “[a] provision that

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does not serve the purpose of reasonably measuring the anticipated harm, but is instead punitive in nature, serving as a mere

‘added spur to performance,’ will not be enforced.” Agerbrink v. Model Serv. LLC, 196 F. Supp. 3d 412, 417 (S.D.N.Y. 2016)

(quoting Priebe & Sons v. United States, 332 U.S. 407, 413, 68 S.Ct. 123, 92 L.Ed. 32 (1947)).

To that end, “New York courts will construe a purported liquidated damages provision strictly.” Agerbrink, 196 F. Supp. 3d

at 417. Courts will uphold and enforce liquidated damages provisions where (1) actual damages may be difficult to determine

and (2) the damages amount awarded pursuant to the clause is not clearly disproportionate to the possible loss. See U.S. Fid. &

Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 70-71 (2d Cir. 2004). If the liquidated damages provision “does not satisfy

one or both of these factors then it is considered an impermissible penalty and will not be enforced by the courts.” Union Cap.

LLC v. Vape Holdings Inc., No. 16-CV-1343 (RJS), 2017 WL 1406278, at *7 (S.D.N.Y. Mar. 31, 2017).

Though the party challenging the liquidated damages provision bears the burden of demonstrating unenforceability, in doubtful

cases, courts tend “to favor the construction which makes the sum payable for breach of contract a penalty rather than liquidated

damages.” See Rattigan v. Commodore Int'l Ltd., 739 F. Supp. 167, 169-70 (S.D.N.Y. 1990) (citation omitted); see also Bristol

Inv. Fund, Inc. v. Carnegie Int'l Corp., 310 F. Supp. 2d 556, 566-67 (S.D.N.Y. 2003) (“[A]ny doubt with respect to whether

the relevant provision is an unenforceable penalty or a permissible liquidated damages clause should be resolved in favor of a

construction which holds that the provision is a penalty.”).

Finally, in determining whether one side is exacting an unconscionable penalty, courts should also consider factors such as the

sophistication of the parties, whether they were represented by counsel, and whether the contract was negotiated at arm's length.

See Rattigan, 739 F. Supp. at 172 (internal quotation marks omitted); Union Cap. LLC, 2017 WL 1406278, at *7.

B. Damages Disproportionate to Potential Loss

*7 Here, Section 3(b) of the liquidated damages provision provides that “[i]n the event of a breach,” a nurse must pay United

Staffing $15 for “each hour or part of an hour not performed” of the required 6,000 hours in the contract. (See, e.g., Magtoles

Contract at 3.) Section 3(a), in turn, states in relevant part “... that the EMPLOYEE breaches the contract by severing its

relationship with the EMPLOYER before completion of the term of THREE (3) YEARS[.]” (Id.)

Under these liquidated damages provisions, then, if a nurse pre-terminated his or her contract with United Staffing prior to

completing any of the 6,000 hours, the nurse would owe a total of $90,000 — $15 for each hour. As discussed supra note

6, Defendants inexplicably “object” to this simple arithmetic based on the contract provisions’ plain language, stating it is

somehow “not a statement of fact.” (Defs. Resp. 56.1 at ¶ 25; Pls. 56.1 at ¶ 25; see also supra, notes 5, 6.) The Court finds that

this factual calculation, based on Defendants’ own contract term, is undisputed.

In Paguirigan v. Prompt Nursing Employment Agency, LLC, the employment contracts between the class of Filipino nurses and

the employment agency included a liquidated damages provision stating that the employees would pay the “Employer and/or

its designee/assignee” $25,000 in the event that the nurses pre-terminated or otherwise breached the employment contract. See

No. 17-CV-1302 (NG), 2019 WL 4647648, at *2, *8 (E.D.N.Y. Sept. 24, 2019), aff'd in part, appeal dismissed in part, 827 F.

App'x 116 (2d Cir. 2020) (summary order). Judge Gershon found that the $25,000 was disproportionate to the contemplated

injury, and was an unenforceable penalty, because “[c]onsidering that plaintiff's payroll records indicate that she typically made

less than $700.00 per week after taxes, it would have taken her almost nine months to pay off the liquidated damages amount,

assuming she had no other expenditures such as food or housing.” Id. at *8.

Here, too, the liquidated damages provision in Plaintiffs’ contracts are unenforceable penalties because the damages awarded

pursuant to the liquidated damages clause are patently disproportionate to the potential loss. Indeed, the potential liquidated

damages that a nurse could be liable for, $90,000, is significantly larger than the amount in Paguirigan. Even if a nurse were to

pre-terminate her employment agreement with United Staffing after one year and completion of 2,000 hours — the minimum

number of hours required annually under Section 1(c) of the contract (see, e.g., Magtoles Contract at 3) — the nurse would still

owe $60,000 to United Staffing for the remaining 4,000 hours. Similarly, if a nurse were to cease working for United Staffing

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after two years and completion of 4,000 hours, the nurse would still owe $30,000 to United Staffing for the remaining 2,000

hours.

Here, Plaintiff Magtoles’ payroll records indicate that in a week where she worked 40.00 hours at her hourly rate of $31.00, her

net pay was $924.36 per week after taxes. (ECF No. 43-17 (“Magtoles Payroll Records”) at 19.) It would have taken Magtoles

approximately 97 weeks — almost two years — to pay off a liquidated damages amount of $90,000 had she quit United Staffing's

employ without completing any hours, provided she put every dollar she earned towards paying off the amount and provided

she “had no other expenditures such as food or housing,” or any other living expense — an impossibility. See Paguirigan, 2019

WL 4647648, at *8. This nearly two-year period of time necessary to pay liquidated damages would be more than double the

time (nine months) that constituted disproportionality in Paguirigan.

*8 Moreover, Paguirigan found that the nine months it would have taken the plaintiff to pay off the $25,000 liquidated damages

further supported “the conclusion that this provision is intended to operate as a means to compel performance, ensuring that

plaintiff and other nurses did not resign prior to the end of their contract terms.” Id. (internal quotation marks and citation

omitted) (emphasis added); see also Rattigan, 739 F. Supp. at 169 (“If [a liquidated damages clause] is intended to operate as

a means to compel performance, it will be deemed a penalty and will not be enforced.”) (citing Brecher v. Laikin, 430 F. Supp.

103, 106 (S.D.N.Y. 1977)). Accordingly, the Court follows the reasoning of Paguirigan to reach the same conclusion here: the

liquidated damages provision is an unenforceable penalty.

Defendants argue that because the liquidated damages provision amount could “diminish[ ] over time, as the employee continues

to perform under the agreement,” this is “another factor indicating that the amount of actual damages Defendants anticipated

resulting from a termination of the agreements prior to their execution was reasonably proportionate to the probable loss from

the breach.” (ECF No. 55 (“Defs. Mem.”) at 23.) This argument is unavailing. The liquidated damages provision in Paguirigan

also provided for a diminishing of liquidated damages to $16,666.67 or $8,333.34 if the plaintiff pre-terminated or breached

the contract in her second or third year, respectively. Paguirigan, 2019 WL 4647648, at *2. As in Paguirigan, the “diminishing

nature” of the liquidated damages amount does not impact the finding of disproportionate damages here.

Defendants also argue that unlike in Paguirigan, the standard contracts here do not contain (1) a confession of judgment that

Defendants could file in court “should a plaintiff or recruited nurse [terminate] his or her contract early,” or (2) language that

the provision was intended “to secure Employee's performance of the Employment Term.” (Defs. Mem. at 24); see Paguirigan,

2019 WL 4647648, at *7. Defendants then assert, in a conclusory fashion, that “[t]hus, the liquidated damages provision in

United Staffing's contracts is not a penalty.” (Defs. Mem. at 24.)

Defendants mention these distinctions without any accompanying legal authority or arguments as to their legal relevance.

Defendants notably fail to recognize that Judge Gershon noted both points only after stating that “it is immaterial that the parties

may describe the provision as a penalty.” Paguirigan, 2019 WL 4647648, at *7. The immateriality of a party's characterization

of a liquidated damages provision is a well-established principle of assessing the enforceability of liquidated damages clauses.

See, e.g., Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 393 N.Y.S.2d 365, 361 N.E.2d 1015, 1018 (1977)

(“In interpreting a provision fixing damages, it is not material whether the parties themselves have chosen to call the provision

one for ‘liquidated damages’ ... or have styled it as a penalty.”) Neither a confession of judgment nor language that the purpose

of a liquidated damages provision is “to secure Employee's performance of the Employment Term” ultimately speak to the crux

of the analysis, specifically, whether the liquidated damages provision is plainly disproportionate to the contemplated injury or

whether actual damages may be difficult to determine. See U.S. Fid. & Guar. Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 70

(2d Cir. 2004). Defendants fail to argue or cite contrary material facts or legal authority, and thus fail to present a triable issue

of material fact as to the provision's disproportionality to potential loss. The Court therefore finds that the liquidated damages

provision is an unenforceable penalty based on disproportionality.

C. Difficulty of Ascertaining Damages

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*9 Because the Court has found that the liquidated damages amount is plainly disproportionate to the contemplated injury, the

liquidated damages provision is an unenforceable penalty. The Court, however, also finds that the liquidated damages provision

is separately unenforceable because actual damages upon a nurse's pre-termination of or breach of the contract would not have

been difficult to ascertain when the parties entered into the standard contract.

First, Defendants argue that “the portion of the costs incurred by United Staffing recruitment team in recruiting a particular RN

would be unknown at the time the RN executed the agreement, because the total number of RNs that would be successfully

recruited on any given recruitment trip to the Philippines would be unknown at the time.” (Defs. Mem. at 21.) In affirming the

district court's holding that the liquidated damages provision in Paguirigan was an unenforceable penalty, the Second Circuit

rejected the defendants’ argument that the liquidated damages provision was necessary to account for recruiting costs:

[B]y their very nature, these costs had already been incurred by the time the parties signed the contract

— after all, Defendants no longer had to expend funds recruiting [plaintiff] once she had signed on the

dotted line. As a result, it would be eminently reasonable to expect that [defendant] could have reviewed

its expenses (averaging them to provide a per-nurse cost if necessary) so as to arrive at a figure for the

cost they incurred to recruit [plaintiff].

Paguirigan v. Prompt Nursing Emp. Agency, LLC, 827 Fed. App'x 116, 121 (2d Cir. 2020) (summary order) (emphasis added).

This Court arrives at the same conclusion here. By the time a nurse and United Staffing were entering into the standard contract

— in other words, the time at which liquidated damages would be estimated — recruiting costs would already have been

incurred by United Staffing, and could be averaged to ascertain a “per-nurse” cost if necessary, as the Second Circuit has noted.

Therefore, recruiting costs are not difficult to ascertain. Further, Defendants concede that reimbursements for “immigration

sponsorship costs, training and living orientation costs ... would have been easily ascertained, considering United Staffing has

indeed been in the business for about twenty years now.” (Defs. Mem. at 22.)

Defendants also argue that “the costs of replacing a recruited RN that terminated his or her employment prematurely also could

not be known at the time United Staffing entered into a contract with the nurse,” and, relatedly, that “United Staffing could not

know whether or when a nurse would leave his or her employment when hiring the nurse, which would render an amortization

of the recruitment costs impossible at the time the contract was entered into.” (Defs. Mem. at 21.) It is undisputed, however,

that: (1) Most of the nurses employed by United Staffing are from the Philippines, from which Defendants have recruited nurses

for years; (2) United Staffing has assigned nurses to work at twenty client facilities in New York City and on Long Island; and

(3) Defendants Santos and United Staffing have been recruiting foreign nurses and employing them to work in New York for

more than twenty years. (Pls. 56.1 at ¶¶ 6, 8, 10; Defs. Resp. 56.1 at ¶¶ 6, 8, 10.) Based on the undisputed facts before the Court

and the unambiguous liquidated damages formula in the contracts, the Court respectfully rejects Defendants’ argument that they

could not reasonably ascertain the costs of replacing a nurse with their over two decades of experience in recruiting, employing,

and assigning nurses, especially because multiple nurses have previously left Defendants’ employ. (See United Staffing Dep.

at 65:02-65:22 (discussing nurses terminating their contracts with United Staffing); at 26:24-27:03 (discussing United Staffing

maintaining a nurse's file for at least “six years” after the nurse left United Staffing's employ).) Therefore, far from such costs

being “incapable or difficult of precise estimation,” the sophistication and experience of United Staffing show otherwise.

*10 Defendants attempt to distinguish the standard contract here with that in Paguirigan, arguing that the Paguirigan contracts

list numerous costs encompassed in the liquidated damages amount: “recruiting the employee,” “sponsoring the Employee for

an Immigrant Visa,” “training the Employee in practice and procedures,” and “orienting the Employee to living in the New York

area” (Defs. Mem. at 21-22); see also Paguirigan, 2019 WL 4647648, at *2, whereas here, Defendants argue that the damages

“envisioned in United Staffing's contracts also include, in addition, estimates for lost profit or lost income.” (Defs. Mem. at 22.)

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To support their argument that damages are difficult to ascertain, Defendants point to Human Resources Manager Ferdinand

Pascual's “supplemental affidavit,” filed months after Defendants’ Responsive 56.1 Statement (ECF No. 44) was submitted.

As an initial matter, this “supplemental affidavit” contravenes this Court's Chambers Practices III.B.4(i), which states:

“Supplements to a 56.1 statement are not permitted absent leave of the Court and a showing of good cause.” See CIT Bank, N.A.

v. Donnatin, No. 17-CV-02167 (ADS), 2020 WL 248996, at *2 (E.D.N.Y. Jan. 16, 2020) (“The Court has broad discretion to

determine whether to overlook a party's failure to comply with its individual rules.” (citing Holtz v. Rockefeller & Co., 258 F.3d

62, 73 (2d Cir. 2001))) (cleaned up); cf. Perez v. U.S. Immigr. & Customs Enf't, No. 19-CV-3154 (PGG), 2020 WL 4557387, at

*3 (S.D.N.Y. Aug. 6, 2020), report and recommendation adopted, No. 19-CV-3154 (PGG), 2020 WL 5362356 (S.D.N.Y. Sept.

8, 2020) (“A court may enforce its rules and orders by striking noncompliant portions of a party's brief.”) (collecting cases).

Here, Defendants failed to request leave of the Court — let alone show good cause — prior to submitting Pascual's “supplemental

affidavit.” Defendants failed to request leave of the Court at any point after filing their Responsive 56.1 Statement and exhibits

on May 10, 2022, nor in the three full months prior to the motion being fully submitted on August 25, 2022. Belated supplements

to the record deprive a party of the opportunity to appropriately incorporate, respond to, or cite to any such “evidence” in their

56.1 Statements. 8

Moreover, even if the “supplemental affidavit” did not violate this Court's motion practices, the portions to which Defendants

cite in support of their lost profits argument would be inadmissible, to the extent Pascual relies on hearsay or lacks personal

knowledge, and because those portions are not relevant to the ascertainment of damages analysis under Fed. R. Evid. 401, 402.

Any consideration of lost profits or lost income here would be properly categorized as consequential damages that “must have

been brought within the contemplation of the parties as the probable result of a breach at the time of or prior to contracting.”

See Kenford Co. v. Cty. of Erie, 73 N.Y.2d 312, 319, 540 N.Y.S.2d 1, 537 N.E.2d 176 (1989). “Lost profits are consequential

damages when, as a result of the breach, the non-breaching party suffers loss of profits on collateral business arrangements.”

Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109 (2d Cir. 2007).

*11 Defendants argue:

The “lost income” or “lost profit” cannot be ascertained at the time of the execution of the contract

because there is no way of knowing when a RN would preterminate; because there is no way of knowing

where the RN would be assigned at, and because the future worksite facility is unknown, it cannot be

known at the execution of the contract how much said worksite facility would be paying United Staffing

for the services of its employees, as various healthcare facilities have different and varying pay schedules

and pay rates.

(Defs. Mem. at 22-23.)

Therefore, Defendants’ lost income and lost profit arguments are clearly based on “losses in relation to its nursing home clients,

and thus properly categorized as consequential damages.” See Paguirigan, 2019 WL 4647648, at *11 n.9. There is no admissible

evidence in the record that “any nurse contemplated, or should have contemplated lost profit damages at the time the contracts

were executed,” see id., nor is there any admissible evidence suggesting that Defendants themselves contemplated lost profit

damages at the time the standard contracts were executed. Cf. Shred-It USA, Inc. v. Bartscher, No. 02-CV-4082 (JO), 2005 WL

2367613, at *11 (E.D.N.Y. Sept. 27, 2005) (“Shred-It claims that it can recover its lost profits from the White & Case account.

Such a theory requires Shred-It to prove first that the allegedly lost profits constitute damages caused by Bartscher's breach,

second that such lost profits are capable of being proved with reasonable certainty, and third that such a measure of damages

was within the parties’ contemplation at the time they entered into the Agreement.”) (emphasis added).

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Finally, the standard contract's failure to list some or any of the costs contemplated by the liquidated damages provision in fact

lends more support to finding the provision unenforceable. Unlike in Paguirigan, the plain language of the liquidated damages

provision here reflects nothing of what costs may have been contemplated by the parties in including such a provision, let alone

how the provision is a “reasonable measure” of anticipated damages from breach. See U.S. Fid. & Guar. Co. v. Braspetro Oil

Servs. Co., 369 F.3d 34, 70-71 (2d Cir. 2004) (internal quotation marks and citation omitted) (“New York courts will sustain a

liquidated damages provision ‘only where the specified amount is a reasonable measure of the anticipated harm.’ ”); compare

Union Cap. LLC v. Vape Holdings Inc., No. 16-CV-1343 (RJS), 2017 WL 1406278, at *7 (S.D.N.Y. Mar. 31, 2017) (“Union

offers no explanation for how the daily payment is even conceivably linked to the damages Union suffered as a result of Vape's

failure to deliver its converted shares. Obviously, the provision serves only to encourage Vape to abide by the terms of the

contract, and it thus functions as the prototypical forbidden penalty — an invalid ‘added spur to performance.’ ”) (citation

omitted), with GFI Brokers, LLC v. Santana, Nos. 06-CV-3988 (GEL), 06-CV-4611 (GEL), 2009 WL 2482130, at *4 (S.D.N.Y.

Aug. 13, 2009) (in assessing enforceability of a liquidated damages provision, noting that testimony from the party seeking

enforcement “adequately explained the difficulties GFI prospectively anticipated”).

D. Attendant Circumstances

*12 The Court also concludes that the liquidated damages provision is an unenforceable penalty after “due consideration for

the nature of the contract and the attendant circumstances.” See U.S. Fid. & Guar. Co., 369 F.3d at 71 (citation omitted). The

parties’ respective bargaining power is also a factor when determining “if one side is exacting an unconscionable penalty.”

PacifiCorp Cap. Inc. v. Tano, Inc., 877 F. Supp. 180, 184 (S.D.N.Y. 1995); see also Glob. Crossing Bandwith, Inc. v. OLS, Inc.,

566 F. Supp. 2d 196, 202 (W.D.N.Y. 2008) (collecting cases).

Ferdinand Pascual is and was the Human Resources Manager at United Staffing, where he has been employed for more than 15

years. (Pls. 56.1 at ¶¶ 106-107; Defs. Resp. 56.1 at ¶¶ 106-107.) Pascual was responsible for making sure that the nurses signed

the standard contract. He was also responsible for explaining the standard contract to nurses and answering their questions.

(Pls. 56.1 at ¶¶ 108-10; Defs. Resp. 56.1 at ¶¶ 108-10.) Plaintiff Ana Myrene Espinosa testified that, on the date the contract

was presented to her, she “needed somebody to explain” the contract, had “to bring it back on that day, the same day,” “did not

have time to consult someone else,” and “didn't really get the chance to read thoroughly the contract, because [she] had to go

back before they closed the agency,” and “Mr. Ferdi Pasquale [sic] asked [her] to submit it right away.” She also testified: “I do

understand the contract. It's just at the time I was really eager to work. I read it, scanned it really fast, and then signed.” (ECF

No. 40-28 (“Ana Myrene Espinosa Dep.”) at 89:22-91:07 (emphasis added).) In addition, when asked if there came a point

when she complained to the United States embassy about the employment agreement, Plaintiff Magtoles testified: “No. I was

nervous.” (ECF No. 40-26 (“Magtoles Dep.”) at 106:15-106:18.)

Moreover, it is undisputed that Defendants were highly experienced in the practice of recruiting Filipino/Filipina nurses and in

the use of their contracts that included the liquidated damages provision, which Defendants inserted into dozens of standardized

contracts, in contrast to some nurses who relied on Defendants’ representatives (such as Pascual) to explain the standard contract.

Furthermore, nothing in the record before the Court suggests the parties engaged in any negotiations in the inclusion of the

provision, that Plaintiffs had any hand in drafting or including the liquidated damages provision, or that Plaintiffs had any

particular “familiarity with American contract law.” See Paguirigan, 2019 WL 4647648, at *8.

In short, from the undisputed facts, the Court finds that the parties’ respective bargaining power was grossly unequal. Under

these circumstances and based on the undisputed evidence in the record, the Court cannot find that the liquidated damages

provision was a valid and enforceable term of the contract “made by the parties at the time they enter[ed] into their agreement.”

See Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424, 393 N.Y.S.2d 365, 361 N.E.2d 1015 (1977). The

Court also reiterates that if there is “any doubt” as to whether a liquidated damages clause is an unenforceable penalty or a

permissible provision, courts should construe such a provision as a penalty. See, e.g., Bristol Inv. Fund, Inc. v. Carnegie Int'l

Corp., 310 F. Supp. 2d 556, 566-67 (S.D.N.Y. 2003) (collecting cases); see also Jordache Enter., Inc. v. Glob. Union Bank,

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688 F.Supp. 939, 944 (S.D.N.Y. 1988) (“Hostility to liquidated damages clauses reflects a concern that such clauses are often

unconscionably imposed by the stronger, or more sophisticated party on the weaker.”). 9

II. Enforceability of Non-Compete Clause

A. Declaratory Judgment

*13 As an initial matter, Defendants do not argue that the non-compete clause is, in fact, enforceable. Instead, Defendants

state only that Plaintiffs have “failed to show that there is a ‘substantial controversy’ ‘of sufficient immediacy and reality’ to

warrant the issuance of a declaratory judgment,” and that “there is nothing in the record of the case that will indicate Defendants

had threatened to enforce the ‘non-compete’ provisions of Plaintiffs’ employment agreements.” (Def. Mem. at 24, 26); see also

Niagara Mohawk Power v. Tonawanda Band of Seneca Indians, 94 F.3d 747, 752 (2d Cir. 1996).

Tellingly, Defendants have not represented that they will not seek enforcement, leaving nurses (and any of their potential

employers) “uncertain as to whether [the nurse] will be embroiled in a lawsuit if [the nurse] accepts a position with [a

competitor].” Arakelian v. Omnicare, Inc., 735 F. Supp. 2d 22, 41 (S.D.N.Y. 2010) (determining that employer's contention that

“Plaintiff has failed to identify any facts that indicate that Omnicare plans to enforce the covenant against her” was “facetious”).

It is well-established that where, as here, Plaintiffs are unsure whether they can pursue other employment to make a living,

clarification and resolution of the uncertain enforcement of the liquidated damages provision serves “one of the main purposes

of declaratory judgments.” See, e.g., id.; see also Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384, 389 (2d

Cir. 2005) (“In order to decide whether to entertain an action for declaratory judgment, we have instructed district courts to

ask: (1) whether the judgment will serve a useful purpose in clarifying or settling the legal issues involved; and (2) whether a

judgment would finalize the controversy and offer relief from uncertainty.”).

In sum, Defendants cannot have their cake and eat it too — they cannot argue that Plaintiffs have not shown that Defendants

intend to enforce the agreement, while simultaneously preserving the possibility of enforcement down the line. See Arakelian,

735 F. Supp. 2d at 41 (on summary judgment, holding that the employer “cannot move to dismiss [employee's] claim; refuse

to agree not to enforce the Restrictive Covenants Agreement; and at the same time claim that [employee] has not shown that

it intends to enforce the agreement”). The Court agrees with Plaintiffs that, “[h]aving created uncertainty by including the

nationwide non-compete clause in their Standard Contract, defendants should not be able to keep the nurses in a state of suspense

and apprehension.” (ECF No. 56 (“Pls. Reply”) at 6.)

B. Legal Standard of Enforceability

Non-compete provisions are enforceable under New York law only if they are (1) reasonable in duration and geographic

scope, (2) “necessary to protect the employer's legitimate interests,” (3) “not harmful to the general public,” and (4) “not

unreasonably burdensome to the employee.” Flatiron Health, Inc. v. Carson, No. 19-CV-8999 (VM), 2020 WL 1320867, at

*19 (S.D.N.Y. Mar. 20, 2020) (citing BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 690 N.Y.S.2d 854, 712 N.E.2d 1220, 1223

(1999) (citations omitted)). A violation of any prong renders the non-compete clause invalid. Id. Further, because restrictive

covenants in employment agreements may restrain competition, “impinge on individual agency,” and restrict “an employee's

ability to make a living,” New York courts subject such covenants to heightened judicial scrutiny. Id. (citing Oliver Wyman,

Inc. v. Eielson, 282 F. Supp. 3d 684, 693 (S.D.N.Y. 2017) (collecting cases)).

C. Application

*14 If a nurse employee were to leave United Staffing before completing the minimum number of hours over the course of

three years, the nurse would be prohibited from:

1. In any manner whatsoever, directly or indirectly, work as a nurse, practice nursing, work as a physician's assistant, or

otherwise practice the art of/science of nursing; or

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2. Directly or indirectly operate, own, lease (as landlord or tenant), engage or participate in as an owner, partner, employee,

joint venturer, shareholder, director, assignor, seller, transferor, or as sales or marketing agent or otherwise, in, for or in

connection with any business which competes with [United Staffing] within the United States for a period of THREE (3)

YEARS after the EMPLOYEE severs his/her relationship with [United Staffing].

(See, e.g., Magtoles Contract at 3.)

i. Reasonable in duration and geographic scope

Here, the sheer nationwide breadth of the geographic scope alone dooms the clause. Both subsections are unreasonable in

geographic scope. As this Court previously noted in denying Defendants’ motion to dismiss the action:

The limitation that a future employer be in competition with United Staffing in the United States – as

well as the three-year time limitation – appear to apply only to the clause's second subsection. The first

subsection, on its face, prohibits former employees from working as nurses without any limitation as to

duration, geography, or a future employer's status as a competitor.

See Magtoles v. United Staffing Registry, Inc., No. 21-CV-1850 (KAM)(PK), 2021 WL 6197063, at *6 (E.D.N.Y. Dec. 30, 2021).

It is undisputed that United Staffing places nurses only at facilities in New York City and on Long Island, and that United

Staffing has never placed a nurse anywhere outside the State of New York. (Pls. 56.1 at ¶¶ 35-36; Defs. Resp. 56.1 at ¶¶ 35-36.)

The ban that Nurse Plaintiffs cannot “operate, own, lease (as landlord or tenant), engage or participate in” any business in

competition with United Staffing within the United States is baldly unreasonable. See, e.g., Good Energy, L.P. v. Kosachuk,

49 A.D.3d 331, 332, 853 N.Y.S.2d 75 (1st Dep't 2008) (non-compete covenant was unreasonable because employer operated

in only eight states); compare Yedlin v. Lieberman, 102 A.D.3d 769, 770, 961 N.Y.S.2d 186 (2d Dep't 2013) (“The restrictive

covenant here applied to the entire United States, and would have precluded the plaintiff from merely ‘participating’ in projects

that involved the defendants’ present or former clients.”) (emphasis added), with Battenkill Veterinary Equine P.C. v. Cangelosi,

1 A.D.3d 856, 857-58, 768 N.Y.S.2d 504 (3d Dep't 2003) (finding a 35-mile restriction that was “narrower than [employer's]

service area” to be “reasonable”).

ii. Necessary to protect the employer's legitimate interests

Cognizable employer interests include the “(1) protection of trade secrets, (2) protection of confidential customer information,

(3) protection of the employer's client base, and (4) protection against irreparable harm where the employee's services are unique

or extraordinary.” Flatiron Health, Inc., 2020 WL 1320867, at *19. Nothing in the record comes even close to implicating any

of these, or any other, employer interests. Again, Defendants have simply made no arguments about what possible interest they

would have in such an overbroad non-compete provision and, as before, this Court “struggles to imagine how a nurse would

possess United Staffing's trade secrets, or how every nurse who signed United Staffing's ‘standard employment contract’ offered

unique or extraordinary services.” See Magtoles, 2021 WL 6197063, at *7.

iii. Not harmful to the general public

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*15 Although the Court recognizes that there are other nurses in the New York area, it would be plainly harmful to the

general public if dozens of licensed nurses and practitioners were prohibited from contributing their services to an industry as

valuable and important as nursing. See Flatiron Health, Inc., 2020 WL 1320867, at *22 (finding that “[p]reventing [employee]

from working at the job where he would be most productive and make the largest impact ... inflicts not only a private cost to

[employee] but also a social cost,” and recognizing that “[o]n that public policy ground, New York courts disfavor broad noncompetes”). Moreover, as Defendant Santos himself affirms, there is an “ever-growing need of healthcare professionals to take

care of our aging American population” and there are not “enough locally-produced registered nurses to take care of our own

people.” (Santos Decl. at ¶ 2.)

iv. Not unreasonably burdensome to the employee

A provision that either prevents Plaintiffs from being involved in any capacity in their industry anywhere in the United States,

or, even more broadly, simply anywhere that is not United Staffing, is patently unreasonable and unenforceable. See Good

Energy, L.P., 49 A.D.3d at 332, 853 N.Y.S.2d 75 (“[T]he covenant effectively excludes defendant from continued employment

in the industry.”); see also Brown & Brown, Inc. v. Johnson, 25 N.Y.3d 364, 12 N.Y.S.3d 606, 34 N.E.3d 357, 370 (2015) (“New

York law provides that covenants not to compete should be strictly construed because of the powerful considerations of public

policy which militate against sanctioning the loss of a person's livelihood.”) (collecting cases) (cleaned up).

For the foregoing reasons, the Court declares the non-compete clause in the employment contracts to be unenforceable and

enjoins Defendants from attempting or threatening to enforce it.

III. Breach of Contract

A. Legal Standard

To recover for breach of contract under New York law, “a plaintiff must prove (a) the existence of a contract between plaintiff

and defendant; (b) performance of the plaintiff's obligations under the contract; (c) breach of the contract by the defendant; and

(d) damages to the plaintiff caused by the defendant's breach.” See Javier v. Beck, No. 13-CV-2926 (WHP), 2014 WL 3058456,

at *9 (S.D.N.Y. July 3, 2014).

In order to decide if a contract's terms were breached, a court considers whether the contract at issue is clear or ambiguous, and

interprets the meaning of the contract language. “In a dispute over the meaning of a contract, the threshold question is whether

the contract is ambiguous.” Lockheed Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011). “Under New York

law ... the question of whether a written contract is ambiguous is a question of law for the court.” JA Apparel Corp. v. Abboud,

568 F.3d 390, 396 (2d Cir. 2009). “Ambiguity is determined by looking within the four corners of the document, not to outside

sources,” Kass v. Kass, 91 N.Y.2d 554, 566, 673 N.Y.S.2d 350, 696 N.E.2d 174 (1998), and if one party's interpretation of

the contract would “strain[ ] the contract language beyond its reasonable and ordinary meaning,” the court is not required to

find the language ambiguous. Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274, 1277 (2d Cir. 1989) (citing Bethlehem

Steel Co. v. Turner Const. Co., 2 N.Y.2d 456, 161 N.Y.S.2d 90, 141 N.E.2d 590, 593 (1957)). If the contract is not ambiguous,

then its meaning is likewise a question of law for the court to decide. JA Apparel Corp., 568 F.3d at 397. In interpreting an

unambiguous contract, the “court is to consider its ‘[p]articular words’ not in isolation ‘but in the light of the obligation as a

whole and the intention of the parties as manifested thereby,’ but the court is not to consider any extrinsic evidence as to the

parties’ intentions.” Id. (citations omitted).

B. Application

The relevant provision (“prevailing wages provision”) in the standard contract states:

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*16 The EMPLOYER undertakes and agrees to pay the EMPLOYEE a salary or wage that complies

with the laws, rules, regulations and prevailing wages depending on the location of the hospital, health

care facility where EMPLOYEE works, applicable to Registered Nurses (RNs) and health care givers.

(See, e.g., Magtoles Contract at 4.)

The only issue here is whether Defendants breached this provision of the contract. Plaintiffs argue that Defendants breached

this provision in several ways, each of which the Court shall address in turn. (See Pls. Mem. at 15-16.)

i. Failure to Pay All Hours Worked

Plaintiffs first argue that Defendants breached the prevailing wages provision by “failing to pay the Nurse Plaintiffs and other

class members for all the hours they worked.” (Pls. Mem. at 15-16, citing 56.1 Statements at ¶¶ 47-73.) Plaintiffs’ evidence

includes Defendants’ failure to pay all the hours when Plaintiffs worked overtime at their respective facilities or beyond the time

that their shifts were scheduled to end, or paying Plaintiffs less than the hours on their timesheet records. (See generally ECF

No. 40-27 (“Tan Dep.”); Pls. 56.1 at ¶¶ 63-71 and exhibits cited thereto; Defs. Resp. 56.1 at ¶¶ 63-71 and exhibits cited thereto.)

a. United Staffing's Billing and Payment System

The parties’ various purported disputes ultimately rest on one, overarching issue: Although timesheet and payroll records

demonstrate that some nurses were not paid for all of the hours their timesheets reflect, Defendants contend that they are not in

breach of the contracts because they “rely on the figures of work-hours computed and validated by the facilities” when payroll

is prepared. (ECF No. 40-33 (“Ofendo-Reyes Decl.”) at ¶ 9.)

Ofendo-Reyes, United Staffing's Financial Controller since 2005, described the billing and payment system, in part, as follows:

We at United Staffing do not have a hand or participation in the monitoring of our employees’ work-hours at the facilities,

in the computation or counting of our employees’ work-hours, and in the validation of our employees’ work-hours. Each

facility has its own procedures and policies on how they do these functions, and each facility has its own staff or employees

performing these functions.

...

We at United Staffing rely on the figures of work-hours computed and validated by the facilities when we prepare the payroll

of our company. If the time sheets reflect that an employee had worked thirty seven (37) hours for that week, then that's what

we prepare and process as the number of hours that our employee has to be paid.

...

We at United Staffing never make any deductions on our employees’ work-hours as validated by the facilities. We always

follow the computations of the healthcare facilities.

...

Our healthcare facility-clients have varied and different work-shifts, work schedules, and length of meal time or break periods.

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...

The number of validated work-hours by each of our RN-employees as evidenced by the time sheets or time records we receive

from each of our healthcare facility-clients is our basis for sending our invoices or for billing our healthcare facility-clients.

This means that if we paid our RN-employee so many hours for a particular work-week, that would also be the number of

hours that we would bill our facility-client.

*17 (Ofendo-Reyes Decl. at ¶¶ 5, 9, 12, 18.)

b. “Nurses’ Compensation”

Plaintiffs assert that “[t]he nurses’ compensation was not contingent on the amount paid to United Staffing by the facility

where the nurse was assigned.” (Pls. 56.1 at ¶ 20.) Defendants dispute Plaintiffs’ assertion and respond: “Nurses’ compensation

was contingent on the amount paid to United Staffing by the facility where the nurse was assigned, so long as the nurses’

compensation was at least, if not more than, the prevailing wage rates.” (Defs. Resp. 56.1 at ¶ 20.)

Defendants do not argue that the provision itself is ambiguous or that its meaning is not clear on its face. Defendants instead rely

(almost exclusively) on the extrinsic fact that the healthcare facilities were responsible for validating employee hours, which

determined the amount that Defendants paid their nurses and billed their healthcare-facility clients where Defendants assigned

their nurses to work. The Court, however, reiterates that Plaintiffs allege a claim for breach of the contract between Plaintiffs and

Defendants. Therefore, in assessing this purported dispute, the Court must first determine whether the contract is ambiguous.

The prevailing wages provision in the parties’ contract is not conditioned on the hours validated by Defendants’ third-party

healthcare-facility clients. The provision states that United Staffing “undertakes and agrees to pay” its nurse employees a salary

or wage “that complies with the laws, rules, regulations and prevailing wages depending on the location of the hospital, health

care facility[.]” (See, e.g., Magtoles Contract at 4.) The language of this provision is unambiguous. See, e.g., Abundance Partners

LP v. Quamtel, Inc., 840 F. Supp. 2d 758, 767 (S.D.N.Y. 2012) (“A contract is unambiguous if on its face it is reasonably

susceptible of only one meaning.”) (internal quotation marks and citation omitted) (cleaned up). Nowhere does the contract

(let alone the section governing payments to employees, entitled “Article II – Schedule/Rates of Wages”) state or even suggest

that Defendants’ contractual obligation to pay employees prevailing wages depends on the particular hours computed by or

the validation system of, Defendants’ respective facility clients. Defendants do not even bother arguing that the contract says

otherwise. See, e.g., Deutsche Bank Sec., Inc. v. Rhodes, 578 F. Supp. 2d 652, 662 (S.D.N.Y. 2008) (“If the agreement sets forth

the parties’ intent clearly and unambiguously, the Court need not look to extrinsic evidence to determine the parties’ obligations

under the contract.”) (collecting cases); see also Metro. Life Ins. Co. v. RJR Nabisco, Inc., 906 F.2d 884, 889 (2d Cir. 1990)

(holding that “parties’ rights under an unambiguous contract should be fathomed from the terms expressed in the instrument

itself rather than from extrinsic evidence as to terms that were not expressed”) (emphasis added).

Moreover, the parties to the contract are unambiguously United Staffing, through its sole owner, president, and CEO Santos,

and their nurse employees. Defendants, again, do not argue about the actual substance or interpretation of the contract. They

do not assert that there was, for example, an assignment of contract between Defendants and the healthcare facilities, or that

the facilities were otherwise a party to the contract at issue, thereby altering Defendants’ contractual obligations to Plaintiffs.

Accordingly, the Court finds that there is no genuine dispute of material fact as to whether the nurses’ compensation was to be

paid as specified in the contract, and was not contingent on the amount paid to United Staffing by the facility where the nurse

was assigned. See Major League Baseball Properties, Inc. v. Salvino, Inc., 542 F.3d 290, 312 (2d Cir. 2008) (“Under Rule 56,

it is the court's responsibility to determine whether the opposing party's response to the assertion of a material fact presents a

dispute that is genuine.”); cf. JA Apparel Corp., 568 F.3d at 396 (“Language whose meaning is otherwise plain does not become

ambiguous merely because the parties urge different interpretations in litigation.”).

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c. Timesheet and Payroll Records

*18 The undisputed record before the Court establishes that Defendants breached the contract's prevailing wages provision

by failing to pay multiple class members for all the hours they worked at Defendants’ respective client facilities.

When asked if there were times when she worked hours she was not paid for, Plaintiff Tan testified that although she was

scheduled to work “from 3:00 [p.m.] to 11:00 [p.m.],” she instead went home “by 2:00 or 3:00 in the morning,” and that she

was not paid for the hours between 11:00 p.m. and 2:00 a.m. or 3 a.m. 10 (Tan Dep. at 161:11-161:21.) Further, “Tan was

only paid up to the time her shift was scheduled to end. She was not paid for the extra hours.” (Pls. 56.1 at ¶ 54.) Defendants

“dispute” Tan's sworn factual assertion by responding that “Tan, like all other employees of Defendants, was paid according

to the validated number of work-hours given by her facility to Defendants.” (Defs. Resp. 56.1 at ¶ 54.) The Court finds that

Defendants’ contention fails to present a genuine dispute of material fact because it does not directly (or even, indirectly)

respond to the substance of the assertion — that Tan “was not paid for the extra hours” she worked past her shift, a violation of

the contract's clear language that Defendants pay their employees prevailing wages for this work.

Defendants also admit the following: Tan told Pascual that she was working more hours than United Staffing was paying her for;

Tan complained to Pascual that she was not being paid for the additional hours she worked when she worked past the scheduled

end of her shift; Plaintiff Magtoles complained to Pascual several times that her scheduled work hours were from 7 a.m. to 3

p.m., but she was actually working until 5 p.m. or 6 p.m.; and Plaintiff Ana Myrene Espinosa complained to Pascual that she

was not being paid properly. (Defs. Resp. 56.1 at ¶¶ 57-61.) In Defendants’ Responsive 56.1 Statements to Plaintiffs’ evidence

and assertions, Defendants assert only that “whenever [Pascual] received complaints about wages, such as from [nurse], [he]

would refer these to the Accounting Department and sometimes would try to address the concerns by calling the concerned

facility and ask them to investigate if the complaint was true and to help the nurses address their concerns.” (Id.) The portions

of Pascual's deposition that Defendants cite in support of this assertion do not address the outcome of their purported requests

for an investigation, and consequently, Tan's showing that she was not paid for some of the hours she worked is not disputed.

(See ECF No. 40-30 (“Pascual Dep.”) at 63:17-64:18.)

*19 Defendants also admit the following: “United Staffing received timeclock records from Adira at Riverside Rehab showing

that, on June 28, 2020, Nurse Ellaine Garduce clocked in at 7:06 a.m. and clocked out at 4:07 p.m. for a total of nine hours, but

United Staffing paid her for only seven hours.” (Pls. 56.1 at ¶ 63; Defs. Resp. at ¶ 63 (emphasis added).) Further, Defendants

“partially admit[ ] and partially dispute[ ]” Plaintiffs’ assertion by adding, “with the understanding that United Staffing paid the

validated number of hours, and that Adira, with its own policies and practices, might have deducted break time or meal period,

and sent the validated number of hours to United, which United did pay.” (Id.) In a substantively identical manner, Defendants

also admit the same factual assertion that seven other nurses (at their varying facilities that validated their timesheet records)

worked hours for which they were not paid. (Pls. 56.1 at ¶¶ 64-71; Defs. Resp. 56.1 at ¶¶ 64-71.) Finally, the Court notes that

Defendants drafted and signed the contract with dozens of nurses and had ample opportunity to include in the contracts any

explanation — or even mere reference — to the billing and payment process involving Defendants’ healthcare-facility clients

that Defendants now heavily rely on to dispute Plaintiffs’ breach of contract claim.

In sum, the Court finds that the plain language of the contract is unambiguous, again noting that Defendants do not argue

otherwise. Simply put, Defendants had a contractual obligation to pay prevailing wages to its nurses and it breached this

obligation in multiple ways, as outlined above, and cannot expect the Court to exceed the explicit terms by importing extrinsic

evidence. Courts may “not by construction add or excise terms, nor distort the meaning of those used and thereby make a new

contract for the parties under the guise of interpreting the writing.” Abundance Partners LP v. Quamtel, Inc., 840 F. Supp.

2d 758, 767 (S.D.N.Y. 2012) (citation omitted); see also Nycal Corp. v. Inoco PLC, 988 F. Supp. 296, 298 (S.D.N.Y. 1997)

(summary judgment “is clearly permissible when the language of the contract provision in question is unambiguous”). For the

foregoing reasons, the Court finds that Defendants have failed to raise a genuine issue of fact for trial as to Plaintiffs’ breach of

contract claim predicated on Defendants’ failure to pay Plaintiffs for all hours worked.

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ii. Deductions for meals or breaks not allowed or taken

Plaintiffs also argue that United Staffing breached the contracts’ prevailing wages provision by “deducting time for breaks that

were not allowed or taken.” (Pls. Mem. at 15.) Plaintiffs present evidence that: “The Nurse Plaintiffs were supposed to take

30-minute breaks when they worked an eight-hour shift, but they were not allowed or able to take breaks.” (Pls. 56.1 at ¶ 74;

see also, e.g., Tan Dep. at 62:15-63:20 (testifying that nurses were “not able to take” a break because “we couldn't even eat

because of the kind of the work that we have” at the facility, and that for “more than a year in Regal Heights,” she “only can

remember probably less than 10 breaks” that she took).)

Defendants dispute Plaintiffs’ assertion that “Nurse-Plaintiffs were not allowed or were not able to take breaks,” arguing that

“Nurse-Plaintiffs were given their meal breaks, depending upon the facility where they worked.” (Defs. Resp. 56.1 ¶ 74.)

Defendants also cite the following from Ofendo-Reyes’ Declaration: “Some facilities give the employees thirty minutes of meal

period only. Other facilities would give the employees one full hour of meal time. Most facility-clients follow the ‘no work, no

pay’ rule. So, during meal periods, which are always controlled and determined by the facilities themselves, they do not count

any compensable time to our employees.” (Ofendo-Reyes Decl. at ¶ 12; Defs. Resp. 56.1 at ¶ 74.) Notwithstanding that the

portion of Ofendo-Reyes’ Declaration cited is not based on personal knowledge, Defendants assert only that “some facilities”

gave breaks of varying lengths. Defendants fail to submit evidence creating a genuine dispute as to Plaintiffs’ showing that

Plaintiffs were not allowed or were too busy, to take breaks, and were not paid for work during breaks.

*20 The Court agrees with Plaintiffs that Defendants confuse the issue here. Plaintiffs are not claiming that they should have

been paid for breaks or meal periods that they actually took, nor are Plaintiffs disputing facilities’ “no work, no pay” rule.

Instead, Plaintiffs are claiming and submit evidence (which is not comprehensible, as explained infra) that Defendants deducted

time “for breaks that were not allowed or taken.” The Court notes that Ofendo-Reyes lacks personal knowledge as to whether the

facilities prohibited Plaintiffs from taking breaks but nonetheless deducted hours for breaks. Nonetheless, the Court cannot grant

summary judgment on those grounds because Plaintiffs have not submitted evidence that would allow the Court to conclude

that any disparity between the hours the Nurse Plaintiffs worked versus the hours United Staffing actually paid were attributable

to deductions for meal periods or breaks. Specifically, in support of their assertions, Plaintiffs vaguely cite, in part, to “Exhibits

15-17” (ECF Nos. 43-17, 43-18, 43-19), more than 400 pages of payroll and time records for Plaintiffs Magtoles, Tan, and Ana

Myrene Espinosa. Plaintiffs, however, provide no pin citations nor any other guidance or analysis of their voluminous records

to the Court to support their assertion that “Nurse Plaintiffs were paid for only 7.5 hours per day when they actually worked

eight hours during their regular shifts.” (Pls. 56.1 at ¶ 75.) It is well-established that a court has no obligation to sift through

hundreds of pages of records — in this case, extremely detailed records spanning days, weeks, and multiple years of payroll

and timesheet documents — to find support for a party's 56.1 Statement. See, e.g., Amnesty Am. v. Town of W. Hartford, 288

F.3d 467, 470 (2d Cir. 2002) (citing Guarino v. Brookfield Twp. Trs., 980 F.2d 399, 405–06 (6th Cir. 1992) (“Nothing in either

the Rules or case law supports an argument that the trial court must conduct its own probing investigation of the record .... What

concept of judicial economy is served when judges ... are required to do the work of a party's attorney?”)).

Therefore, the Court denies summary judgment on these grounds because Plaintiffs failed to present evidence in a useful manner

establishing that Defendants breached the prevailing wage provision by deducting time for meal periods or breaks Plaintiffs

did not actually take.

iii. Failure to give Plaintiffs 2,000 hours of work per year

Plaintiffs also argue that Defendants breached the contract by failing to give the Nurse Plaintiffs and other class members

sufficient full-time work to achieve the contract requirement of at least 2,000 hours per year (and at least 6,000 hours over three

years). (Pls. 56.1 at ¶¶ 81-89; see, e.g., Magtoles Contract at 2-4, Article I.1(c), Article I.4(a).) Defendants, in turn, ignore the

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contract requirements that Plaintiffs work at least 2,000 hours per year and 6,000 hours over three years, and argue that there

is nothing in “United Staffing's standard employment contracts with its employees that required it to give its employees ‘fulltime work’, much less ‘40 hours per week.’ ” (Defs. Mem. at 18.) Defendants also argue that even assuming, arguendo, that

such a provision existed, that “the term ‘full-time’ is subject to various interpretations, and may mean at least thirty (30) hours

per week.” 11 (Id. at 19.)

Defendants appear to misinterpret Plaintiffs’ assertion in Plaintiffs’ moving papers and 56.1 Statements. Plaintiffs’ arguments

about “full-time” work rely on the contract provision requiring at least 2,000 hours of work per year, and do not even mention

a specific number of hours a week. Nor do Plaintiffs’ moving papers argue that Defendants were obligated by contract to give

nurses “40 hours per week” of work. Plaintiffs’ 56.1 Statements focus “the lack of full-time work” claim on a six-week period

between October 5 to November 15, 2019, where Plaintiffs Magtoles and Tan were not assigned any work by United Staffing.

(Pls. 56.1 at ¶ 84; Defs. Resp. 56.1 at ¶ 84.) It is undisputed that United Staffing did not pay Magtoles and Tan any compensation

during those six weeks; that Magtoles and Tan had no income during those six weeks; that, during those six weeks, Magtoles and

Tan earned no credit towards the 6,000 hours requirement (and thereby, no credit towards the 2,000 hours per year requirement)

specified in their contracts; and that, during those six weeks, Magtoles and Tan had no ability to work anywhere else because

of the contractual provision requiring that they work exclusively for United Staffing. (See Pls. 56.1 at ¶¶ 85-88; Defs. Resp.

56.1 at ¶¶ 85-88.)

*21 Plaintiffs also state in their 56.1 Statement that, as a result, “United Staffing's failure to give nurses at least 2,000 hours of

work per year resulted in the Nurse Plaintiffs being paid less than the annual prevailing wage.” (Pls. 56.1 at ¶ 90.) Defendants

object to this assertion and respond that it is “not a statement of fact.” (Defs. Resp. 56.1 at ¶ 90.) The Court analyzes this claim

based on the contract provision requiring the employee to work at least 2,000 hours per year (and at least 6,000 hours over three

years). (See, e.g., Magtoles Contract at 2-4, Article I.1(c), Article I.4(a).) Defendants’ opposition cites to depositions of Plaintiffs

Magtoles and Tan to support Defendants’ assertion that they were “in-between jobs, as they resigned from Meadowbrook facility

without enough notice for United to find new assignments for them.” (Defs. Resp. 56.1 at ¶ 84.) As a result of this genuine dispute

of material fact, summary judgment on Plaintiffs’ breach of contract claim cannot be awarded on the grounds that Defendants

failed to give Nurse Plaintiffs and other class members sufficient work to achieve at least 2,000 hours of work per year.

iv. Failure to Pay the Prevailing Wage for All Hours Worked

Finally, Nurse Plaintiffs argue that Defendants failed to pay them the prevailing wage for all hours worked. (Pls. Mem. at 15,

citing 56.1 Statements at ¶¶ 91-105.) Plaintiffs’ assertions primarily involve Defendants paying nurses who worked at Regal

Heights Nursing & Rehabilitation Center (“Regal Heights”) less than the prevailing wage rate during the nurses’ orientation

periods. Defendants argue that “Magtoles, Tan and Espinosa each voluntarily signed an orientation wage rate agreement with

United Staffing, whereby each of them agreed to be paid $15.00 during their orientation period at Regal Heights.” (Defs. Mem.

at 15.)

The Orientation Agreement — a letter addressed to each nurse from Pascual — states in part:

Regal Heights Nursing & Rehabilitation Center, as per their policy, will not pay you/us with an RN rate

for the first week that you attend the orientation program. However, in fairness to you and out of our

benevolence, we will give you an allowance rate of $15/hour for the duration of [the] first week of the

orientation to cover your transportation, food allowance, and a little extra to tide you over during the

period of orientation. This is not a company policy and we consider your case as an exception.

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(See, e.g., ECF No. 40-51 (“Orientation Agreement”) at 3.)

It is undisputed that “[d]uring their first two weeks of work at the Regal Heights Rehabilitation and Care Center in Queens, New

York, the Nurse Plaintiffs were paid only $15.00 per hour.” (Pls. 56.1 at ¶ 93; Defs. Resp. 56.1 at ¶ 93; see also Defs. Mem. at

15 (“It is conceded that Plaintiffs Magtoles, Tan and Espinosa were paid $15.00 per hour during their orientation at the Regal

Heights facility sometime in November 2019.”)) This plainly breaches the prevailing wage provision of the standard contract,

which provides no exceptions or qualifications as to United Staffing's obligation to pay its employee “prevailing wages,” nor

does anything in the contract suggest that nurses would be paid less during their orientation periods.

Nowhere in the Orientation Agreement or the standard contract does it state that the Orientation Agreement supersedes the

standard contract, nor do Defendants even argue now that the Orientation Agreement should supersede the standard contract, or

be treated as part of the standard contract. Defendants merely assert that such agreements “were the law between the contracting

parties, and United Staffing abided with such agreements.” (Defs. Mem. at 15.) To the contrary, Section 2(a) of Article VI of

the standard contract states: “This Agreement constitutes the entire Agreement between the parties and shall as of the effective

date hereof supersede any and all other Agreements between the parties.” (See, e.g., Magtoles Contract at 6 (emphasis added).)

The effective dates of Magtoles’, Tan's, and Ana Myrene Espinosa's standard contracts were respectively November 22, 2018,

November [sic], 2018, and September 17, 2019 — all dates substantially preceding the orientation start date of November 13,

2019. (Magtoles Contract at 7-8; Tan Contract at 7-8; Ana Myrene Espinosa Contract at 7-8; Orientation Agreement at 2-4.)

It is also undisputed that the prevailing wage for an RN was $32.21 per hour in Queens County during 2019. (Pls. 56.1 at ¶

92; Defs. Resp. 56.1 at ¶ 92.)

*22 On these facts, considering that both the standard contract and the Orientation Agreement are unambiguous, liability has

been established against Defendants for breach of contract for class members who were required to sign the Regal Heights

Orientation Agreement and thus were paid below the prevailing wage during the orientation period. See, e.g., Lockheed Martin

Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011) (“When an agreement is unambiguous on its face, it must be

enforced according to the plain meaning of its terms.”) (citing South Rd. Assocs. LLC v. IBM, 4 N.Y.3d 272, 793 N.Y.S.2d 835,

826 N.E.2d 806, 809 (2005)).

IV. Piercing the Corporate Veil

Plaintiffs also seek to hold Defendant Santos individually liable for breach of contract by piercing the corporate veil of United

Staffing. (Pls. Mem. at 21-22.) Santos signed the standard contract in his corporate capacity as sole owner, president, and CEO

of United Staffing, rather than in his individual capacity.

As Defendants “do not specifically oppose, or otherwise address,” Plaintiffs’ summary judgment motion to pierce the corporate

veil as to Defendant Santos, they have “seemingly abandoned any defense to that claim.” See Alvarado v. GC Dealer Servs. Inc.,

511 F. Supp. 3d 321, 353-54 (E.D.N.Y. 2021) (granting a portion of plaintiffs’ motion for summary judgment on the grounds

that defendants had not addressed, and thus abandoned defense of, the issue); A.H. by Horowitz v. Precision Indus. Maint.

Inc., No. 19-CV-298 (FJS/CFH), 2021 WL 2417610, at *2 (N.D.N.Y. June 14, 2021) (holding that the defendants abandoned

affirmative defenses because they “fail[ed] to refute or even address these issues in either their opposition to Plaintiffs’ motion

[for summary judgment] or their cross-motion for summary judgment”); see also Azeez v. City of New York, No. 16-CV-342

(NGG) (SJB), 2018 WL 4017580, at *6 (E.D.N.Y. Aug. 22, 2018) (“Ordinarily, any issues not addressed in an opposition brief

are deemed abandoned by the party opposing the motion.”)

In Jackson v. Fed. Express, the Second Circuit held that, “[w]here abandonment by a counseled party is not explicit but such

an inference may be fairly drawn from the papers and circumstances viewed as a whole, district courts may conclude that

abandonment was intended.” 766 F.3d 189, 196 (2d Cir. 2014); see also Kovaco v. Rockbestos-Surprenant Cable Corp., 834

F.3d 128, 143-44 (2d Cir. 2016) (reiterating the Second Circuit's holding in Jackson). The Second Circuit's reasoning in Jackson

was as follows:

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[T]here is a relevant distinction to be drawn between fully unopposed and partially opposed motions

for summary judgment in counseled cases. While the opponent to such a motion is free to ignore it

completely, thereby risking the admission of key facts and leaving it to the court to determine the legal

merits of all claims or defenses on those admitted facts, a partial opposition may imply an abandonment

of some claims or defenses. Generally, but perhaps not always, a partial response reflects a decision by

a party's attorney to pursue some claims or defenses and to abandon others.

766 F.3d at 196 (emphasis added).

Here, the Court concludes that Defendants intended to and did abandon any defense to the portion of Plaintiffs’ motion seeking

a finding piercing the corporate veil as to Defendant Santos. (Pls. Mem. at 21-22.) The circumstances here reflect a “partial

response to a motion,” as discussed in Jackson. Id. at 197 (defining a “partial response to a motion” as one “referencing some

claims or defenses but not others”). “Preparation of a response to a motion for summary judgment is a particularly appropriate

time for a non-movant party to decide whether to pursue or abandon some claims or defenses. Indeed, Rule 56 is known as a

highly useful method of narrowing the issues for trial.” Id. at 196 (emphasis added).

*23 Defendants’ opposition brief — although addressing Plaintiffs’ other grounds for summary judgment and despite devoting

about a third of its pages to specifically defending against Plaintiffs’ breach of contract claim — makes no mention of piercing

the corporate veil, let alone any reference to Plaintiffs’ arguments in support. (See generally Defs. Mem. at 9-19); see also

Netherlands Ins. Co. v. Selective Ins. Co. of Am., No. 14-CV-7132 (KPF), 2016 WL 866348, at *7 (S.D.N.Y. Mar. 3, 2016)

(granting declaratory judgment on an issue in plaintiff's favor because “Defendant has abandoned any arguments regarding

[the issue] because it failed to discuss this issue in its response brief”); LPD New York, LLC v. Adidas Am. Inc., No. 15-

CV-6360 (MKB), 2022 WL 4450999, at *27 (E.D.N.Y. Sep. 24, 2022) (granting defendants’ summary judgment as to certain

counterclaims because plaintiff did not dispute or respond to the counterclaims “in its memorandum in opposition ... and

therefore has abandoned its defense of these claims”) (also collecting cases). Defendants also did not assert any additional facts

in opposition to piercing the corporate veil in their Responsive 56.1 Statements, even though those Statements span 53 pages

and contain 162 Statements, each of which Defendants responded to. (See generally Defs. Resp. 56.1.)

Moreover, Defendants here are counseled parties and thus, their lack of opposition to the corporate veil issue appropriately

reflects “a decision by a party's attorney to pursue some claims or defenses and to abandon others.” Jackson, 766 F.3d at 196.

Where a partial response to a motion is made—i.e., referencing some claims or defenses but not others

—a distinction between pro se and counseled responses is appropriate. In the case of a pro se, the district

court should examine every claim or defense with a view to determining whether summary judgment

is legally and factually appropriate. In contrast, in the case of a counseled party, a court may, when

appropriate, infer from a party's partial opposition that relevant claims or defenses that are not defended

have been abandoned.

Id. at 197-98 (emphasis added).

In addition, Defendants’ counsel Felix Vinluan “is an experienced New York lawyer who has represented United Staffing in

employment and immigration matters for at least 10 years.” (Pls. 56.1 at ¶ 154; Defs Resp. 56.1 at ¶ 154.) Thus, the Court finds

from the papers and circumstances viewed as a whole, as explained above, that Defendants have abandoned any defense or

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rebuttal against Plaintiffs’ summary judgment motion to pierce the corporate veil as to Defendant Santos and, consequently,

Plaintiffs’ motion on that issue is granted.

V. TVPA Claims

The TVPA provides a private right of action to persons who have been subjected to forced labor. 18 U.S.C. § 1595(a). A

defendant is liable for forced labor when he “knowingly provides or obtains the labor or services of a person” by any of the

following means:

(1) by means of force, threats of force, physical restraint, or threats of physical restraint to that person or another person;

(2) by means of serious harm or threats of serious harm to that person or another person;

(3) by means of the abuse or threatened abuse of law or legal process; or

(4) by means of any scheme, plan, or pattern intended to cause the person to believe that, if that person did not perform such

labor or services, that person or another person would suffer serious harm or physical restraint.

Id. § 1589(a).

Plaintiffs argue that Defendants are liable under the second, third, or fourth subsections of Section 1589(a).

A. § 1589(a)(2): Serious Harm or Threats of Serious Harm

TVPA § 1589(c)(2) defines “serious harm” as:

[A]ny harm, whether physical or nonphysical, including psychological, financial, or reputational harm,

that is sufficiently serious, under all the surrounding circumstances, to compel a reasonable person of the

same background and in the same circumstances to perform or to continue performing labor or services

in order to avoid incurring that harm.

TVPA § 1589(c)(2); see also Paguirigan, 2019 WL 4647648, at *16 (stating that § 1589(c)(2) “defines serious harm broadly

and includes financial harm as a means by which someone can be threatened under the TVPA”).

*24 Thus, “the relevant question” under § 1589(c)(2) as applied to § 1589(a)(2) is whether “defendants’ conduct constituted

a threat of harm serious enough to ‘compel a reasonable person of the same background and in the same circumstances to

perform or to continue performing labor or services in order to avoid incurring that harm.’ ” Paguirigan, 2019 WL 4647648

at *16. “This standard is a hybrid one,” and the inquiry may “consider the ‘particular vulnerabilities of a person in the victim's

position,’ but [must also] find that ‘her acquiescence be objectively reasonable under the circumstances.’ ” Id. (citing United

States v. Rivera, 799 F.3d 180, 186-87 (2d Cir. 2015)).

Defendants first recycle their arguments as to why the liquidated damages provision is enforceable. (See Defs. Mem. at 27-28.)

As this Court has already found, the liquidated damages provision specifying, inter alia, harsh financial consequences, is

“unenforceable as a penalty under New York law,” and therefore, “this argument fails.” See Paguirigan, 2019 WL 4647648

at *17. The liquidated damages provision therefore “constitutes a threat of sufficiently serious financial harm to compel a

reasonable person of the same background and in the same circumstances to perform or to continue performing labor or services

in order to avoid incurring that harm” under the TVPA. Id. at *18 (internal quotation marks omitted).

Defendants also argue without supporting evidence that:

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Plaintiffs’ TVPA claims ... fail because they rest on the factually unsupported assumption that all of

the recruited RNs subjectively felt compelled to provide labor or services to United Staffing due to

the terms of their employment contracts. It is beyond belief that each and every recruited RN has

continued to provide labor for United Staffing only because of the contractual obligations contained in

their employment contracts, and not out of a desire to continue working for United Staffing, after they had

applied for a position with United Staffing, obtained a visa, and moved thousands of miles to voluntarily

accept the position.

(Defs. Mem. at 30-31.) Defendants then argue that, in the alternative, “[e]ven if the terms of the contract are unenforceable,

Plaintiffs utterly fail to set out facts admissible in evidence which are sufficient to establish that United Staffing violated the

TVPA in a class action setting solely based on the terms of the employment contracts, because they fail to prove facts that would

show that each and every one of the recruited RNs” only rendered labor because of the contract provisions. (Id. at 31.)

Defendants’ arguments fail because they have a mistaken view of the law. As stated above, the language of the TVPA itself defines

“serious harm” as conduct that would compel “a reasonable person of the same background and in the same circumstances

to perform or to continue performing labor or services in order to avoid incurring that harm.” TVPA § 1589(c)(2) (emphasis

added). Further, “in the class action context, the inquiry will not look at how each Plaintiff perceived the Defendants’ actions

or whether he or she subjectively felt compelled to work. Instead, the inquiry will look at the Defendants’ actions and assess

how a reasonable person from the Plaintiffs’ background would respond to those actions.” See Paguirigan, 2019 WL 4647648,

at *16 (internal quotation marks and citation omitted). In addition, the TVPA also “applies to subtle, nonviolent threats that

may still effectively compel an individual to keep working.” Id. (citation omitted) (holding that testimony from several nurses

stating “they were never verbally threatened” was “insufficient to avoid TVPA liability”).

*25 Defendants next argue that to their knowledge, “there is not a single case where a court had held that a defendant could

be liable under the TVPA's forced labor provision solely because it entered into an employment contract containing a provision

that was found to be an unenforceable penalty.” (Defs. Mem. at 31.) Defendants again misunderstand the law. The inquiry under

the TVPA does not turn on such a specific issue. Rather, other considerations contribute to the finding of “serious harm” and

liability under § 1589(a)(2) here, including the Court's findings that Defendants breached the plain language of the employment

contract in multiple ways, and included an unenforceable non-compete clause into the contract prohibiting the nurses from

working in the nursing industry in the United States for three years. See Paguirigan, 2019 WL 4647648, at *18 (in finding

that employment agency had violated TVPA § 1589(a)(2), considering that the agency had breached the wages provision of the

employment contract); see also Dale Carmen v. Health Carousel, LLC, No. 20-CV-313, 2021 WL 2476882, at *7 (S.D. Ohio

June 17, 2021) (“[I]t is not the amount of liquidated damages, per se, that controls the analysis ... what matters is whether the

specified liquidated damages in a given case rise to the level of serious harm considering all of the surrounding circumstances

— such as the enforceability of the term, or the employee's pay rate, or other aspects of the arrangement.”).

Moreover, multiple nurses — some working through the catastrophic COVID-19 pandemic — testified in their depositions

that they were considerably overworked, that facilities were understaffed, and that the difficulties of their work caused neardaily emotional distress. Defendants offer no admissible contrary evidence on this point. In assessing TVPA liability, the Court

would be remiss not to take such considerations into account. See Paguirigan, 2019 WL 4647648, at *18 (in finding that

employment agency had violated TVPA § 1589(a)(2), considering, among other factors, that “[t]hree of the nurses who were

deposed complained of being overworked or that the nursing home was understaffed”). After all, “the relevant question” under

§ 1589(c)(2) is a “hybrid one.” Id. at *16 (the inquiry may “consider the ‘particular vulnerabilities of a person in the victim's

position,’ but [must also] find that ‘her acquiescence be objectively reasonable under the circumstances’ ”) (citing Rivera, 799

F.3d at 186-87).

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Plaintiff Magtoles testified in her deposition that while at Meadowbrook Facility, although she had been oriented as an “entry

level” registered nurse, she was given managerial responsibilities, noting “there was no written agreement between [Magtoles],

United Staffing, or the Meadowbrook that [she] will do some managerial work” such as “doing the nursing care plans,

[and] attending those managerial meetings.” (Magtoles Dep. at 126-27.) Magtoles also stated that, as a result, although her

“supposed[ ] work hours” were 7:00 a.m. to 3:00 p.m., most of the time she would end up working until 5:00 or 6:00 p.m., without

being paid for hours that she worked beyond her shift schedule. (See id.) Although Magtoles spoke with Pascual regarding

the issue “a few times,” she was told “it's still in the adjusting period.” (Id. at 127:23-128:03.) Magtoles further stated that

she experienced emotional distress every time she went to work, including insomnia and anxiety. (Id. at 162, 186-87.) She

ultimately resigned as a result, and because she was working “more than the regular working hours. Some are unpaid.” (Id.

at 181:09-181:12.)

Plaintiff Ana Myrene Espinosa testified that at the Regal Heights facility, she “worked with 40 patients and with just two

aides.” (Ana Myrene Espinosa Dep. at 34:19-34:24.) She also testified that her role was “to be a charge nurse, treatment nurse,

and med pass nurse all at the same time, which is impossible to take care of 40 patients,” and that it was “overwhelming” and

“we are overworked.” (Id. at 34:25-35:05.) Espinosa also stated that after contracting COVID-19 a second time, United Staffing

“said they are not going to pay me.” “I had to ask them. I had to beg because I have been out from work for two weeks and I

don't have any salary or anything.” (Id. at 56:09-56:20.) Espinosa also stated: “I had those moments when I felt depressed, and

it is like almost every day I feel the anxiety when I come to work, because I don't know if I'm going to have those patients and

I believe I made Mr. Pasquale [sic] aware of that.” (Id. at 70:20-70:24.)

*26 In explaining her reasons for her resignation, Espinosa testified:

Q: What were the reasons for your resignation?

A: Like I said, we were overworked and it is giving me almost every day anxiety whenever I go to work. It's not safe for the

patients. And I even question myself if I want to be a nurse because I cannot provide quality care for my patients. Taking

care of 40 patients is impossible. That is why I resigned and I was hoping to get a better job.

Q: Is it fair to say because of these issues you decided to resign?

A: For me it is fair because it is affecting my mental health. I believe it is really important for my profession to be mentally

stable. If you are not stable, how can you give quality care?

(Id. at 81:20-82:12.)

Finally, Section 1589(a) contains a scienter requirement (“[w]however knowingly provides or obtains the labor or services of

a person ...”). Defendants argue that the scienter requirement is not met here because, unlike in Paguirigan, “the record does

not establish that either Defendant has sued any of the four Plaintiffs” and that there is “not even a suggestion that Defendants’

standard employment contract has previously been found by any court to be unenforceable.” (Defs. Mem. at 35.) Defendants

have not cited nor has the Court found any authority suggesting that the § 1589(a) scienter analysis turns on such specific

grounds, nor does Paguirigan suggest that finding scienter requires such a particular finding.

The Court finds that there is sufficient and undisputed “evidence from which the jury could find that the employer intended to

cause the victim to believe that she would suffer serious harm — from the vantage point of the victim — if she did not continue

to work.” Paguirigan, 2019 WL 4647648, at *19 (quoting Muchira v. Al-Rawaf, 850 F.3d 605, 618 (4th Cir. 2017)) (emphasis

added). Scienter requires sufficient evidence to “find that the defendant knew that the circumstance existed.” United States v.

Calimlim, 538 F.3d 706, 711 (7th Cir. 2008).

As described above, the Court has already found that the liquidated damages provision constitutes a threat of sufficiently serious

harm. There is neither evidence nor any serious argument that Defendants, who were responsible for drafting and including

the liquidated damages provision in the first place, did not intend for the nurses to believe they would, in fact, have to pay

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the liquidated damages provision amount — in other words, suffer serious financial harm — if the nurse left United Staffing's

employ. The nurses’ reliance on Pascual and Vinluan to explain the contract terms, as discussed supra, also clearly demonstrates

that Defendants “knew that the circumstance existed,” see id., and that Defendants “knowingly ... obtain[ed] the labor or

services” of the nurses, with the understanding that the liquidated damages provision “would effectively coerce nurses into

continuing to work.” See Paguirigan, 2019 WL 4647648, at *19.

And effectively coerce it did. Despite the extremely fraught work circumstances and adverse impacts on her physical and

psychological health that Plaintiff Ana Myrene Espinosa testified to, as described above (including but not limiting to having to

“beg” United Staffing to pay her the second time she contracted the COVID-19 virus), Espinosa kept working for Defendants.

*27 Q: Were you forced to work by United Staffing?

A: I was not forced to work. I believe I have to fulfill my — I have a contract, so I have to finish it. I don't have a choice.

Even if I feel anxiety going to work, I still have to go to work, even though they don't force us.

(Ana Myrene Espinosa Dep. at 71:07-71:14.) (emphasis added).

Such testimony evokes the circumstances that Congress intended to reach and remedy with the TVPA's broad definition of

“harm” — instances “in which persons are held in a condition of servitude through nonviolent coercion.” See Javier v. Beck,

No. 13-CV-2926 (WHP), 2014 WL 3058456, at *6 (S.D.N.Y. July 3, 2014).

The inclusion of the liquidated damages provision was no accident. From the “vantage point of the victim,” the Court finds

there is sufficient “evidence from which the jury could find that the employer intended to cause the victim to believe that

she would suffer serious harm ... if she did not continue to work,” Paguirigan, 2019 WL 4647648, at *19 (citation omitted),

especially when, as the Second Circuit directed in Rivera, considered with the “particular vulnerabilities” of the class members

here. As discussed supra, such vulnerabilities include but are not limited to: Plaintiffs’ emotionally and physically difficult

work circumstances; reliance on Defendants’ representatives to understand the contract; reluctance to complain to the United

States embassy about the contract due to being “nervous”; Plaintiffs’ lack of negotiating or bargaining power as to the terms

of the contract, in comparison to the highly experienced Defendants; and the non-compete clause in the contract, which placed

unenforceable restrictions on Plaintiffs’ ability to work in the nursing industry should they leave Defendants’ employ.

Having found Defendants liable under § 1589(a)(2), the Court does not reach whether Defendants violated § 1589(a)(3) or §

1589(a)(4).

B. 18 U.S.C. § 1589(b)

Having found United Staffing liable under § 1589(a)(2), the Court also finds that Defendant Santos is liable under TVPA §

1589(b), which provides:

Whoever knowingly benefits, financially or by receiving anything of value, from participation in a

venture which has engaged in the providing or obtaining of labor or services by any of the means

described in subsection [1589](a), knowing or in reckless disregard of the fact that the venture has

engaged in the providing or obtaining of labor or services by any of such means, shall be punished as

provided in subsection (d).

§ 1589(b).

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As discussed above, Defendant Santos is the sole owner, president, and CEO of United Staffing. Santos clearly and undeniably

“played a role in this commercial enterprise, the purpose of which is to recruit Filipino nurses to the United States to work

at nursing homes affiliated with defendants,” and thus, “knowingly benefit[ed] financially from labor obtained in violation of

TVPA § 1589(a).” See Paguirigan, 2019 WL 4647648, at *19 (quotation marks omitted). Santos and United Staffing have been

recruiting foreign nurses and employing them to work in New York for more than 20 years. (Pls. 56.1 at ¶ 10; Defs. Resp.

56.1 at ¶ 10.) Furthermore, Santos acted with “ ‘know[ledge] or in reckless disregard of the fact that the venture ... engaged

in the providing or obtaining of labor or services’ through means prohibited by TVPA § 1589(a) — in this case, through the

contracts’ liquidated damages provisions.” See Paguirigan, 2019 WL 4647648, at *19. As in Paguirigan, individual Defendant

Santos “testified regarding [his] direct knowledge of the provision” and “signed the contract itself.” Id.; (see, e.g., Santos Dep.

at 90:07-90:17; United Staffing Dep. at 44:15-45:19.) Thus, Santos had clear knowledge of the provision.

VI. Plaintiff Bhyng Espinosa's Claims of Fraud and Unjust Enrichment

*28 Finally, Plaintiff Bhyng Espinosa seeks summary judgment on her claims for fraud and unjust enrichment. (Pls. Mem.

at 10.)

In relevant part, 20 C.F.R. § 656.12(b) provides that “[a]n employer must not seek or receive payment of any kind for any

activity related to obtaining permanent labor certification, including payment of the employer's attorneys’ fees, whether as an

incentive or inducement to filing, or as a reimbursement for costs incurred in preparing or filing a permanent labor certification

application[.]” Plaintiff Bhyng Espinosa argues that, “[i]t is undisputed that, relying on the defendants’ expertise in immigration

matters, [Bhyng] Espinosa paid the defendants $7,532.00” for the “costs and attorneys’ fees to obtain a labor certification used

in connection with the employer's sponsorship of an individual for an employment-based visa,” and that Defendants “should

not be permitted to retain those funds.” (Pls. Mem. at 10.)

In support, Plaintiff Bhyng Espinosa cites to Plaintiffs’ Rule 56.1 Statement ¶ 30, where Plaintiff asserts, in relevant part,

“Plaintiff Bhyng Espinosa paid United Staffing $7,532.00 to obtain a labor certification.” (Pls. 56.1 ¶ 30.) Defendants, in turn,

“object” to that assertion “to the extent that the alleged payments made as purportedly evidenced by Exhibit ‘9’ do not indicate

payments were made to ‘United Staffing’ ‘to obtain a labor certification.’ ” (Defs. Resp. 56.1 at ¶ 30.)

Upon review of “Exhibit 9” and other submitted evidence, the Court denies summary judgment as to Plaintiff Bhyng Espinosa's

fraud and unjust enrichment claims. (See generally ECF No. 43-11.) Although the receipts allegedly relate to Ms. Bhyng

Espinosa's payments for her “lawyer's and newspaper ad fees” (id. at 3), “her application” (id. at 4), “1/2 of [illegible] —

motion to reopen/L.C.” (id. at 5), and “her balance for the legal fees,” (id. at 6), none of these receipts clearly reference a labor

certification. As such, there is a genuine dispute of material fact as to the purpose of Plaintiff Bhyng Espinosa's payments to

Defendants and summary judgment is not appropriate.

CONCLUSION

For the foregoing reasons, the Court ORDERS as follows:

1. Plaintiffs’ requested declaratory and injunctive relief is GRANTED. The Clerk of Court is directed to enter judgment

declaring the liquidated damages provision and non-compete clauses in all plaintiffs’ contracts to be unenforceable and to

enter an injunction permanently enjoining Defendants from attempting or threatening to enforce either.

2. Plaintiffs’ summary judgment motion as to liability on the breach of contract claim is:

a. GRANTED on the following grounds:

i. failure to pay Plaintiffs for all hours worked;

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ii. failure to pay Plaintiffs the prevailing wage during Regal Heights Orientation.

b. DENIED on the following grounds:

i. deduction of time for meal periods or breaks that were not taken.

ii. failure to give Plaintiffs 2,000 hours of work per year.

c. GRANTED as to piercing the corporate veil of Defendant United Staffing to hold Defendant Santos individually liable

for breach of contract.

d. Damages to Plaintiff Magtoles and the class caused by Defendants’ breach of contract are to be determined at a later date.

*29 3. Plaintiffs’ summary judgment motion as to Defendants’ liability under the TVPA is GRANTED. Damages to Plaintiff

Magtoles and the class under the TVPA are to be determined at a later date.

4. Plaintiff Bhyng Espinosa's summary judgment motion for fraud and unjust enrichment claims against Defendants is

DENIED.

5. The class is also entitled to reasonable attorneys’ fees, which are to be determined at a later date.

6. No later than one week after the date of this Memorandum and Order, the parties shall contact Magistrate Judge Peggy

Kuo to schedule a settlement conference. Further, the parties are strongly encouraged to consent to Magistrate Judge Kuo's

jurisdiction in this case.

7. If the parties do not resolve or settle this case, they shall: (a) file a joint status report to the Court within two business

days to advise of their failure to settle, and to schedule a status conference to address: how damages are to be determined;

Defendants’ counterclaim for breach of contract as to Plaintiffs Magtoles, Tan, and Ana Myrene Espinosa; and Plaintiff

Bhyng Espinosa's claims for unjust enrichment and fraud, and (b) promptly meet and confer on these issues and present

a joint plan to the Court.

SO ORDERED.

All Citations

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Footnotes

1 (See ECF Nos. 43-1, Plaintiffs’ Rule 56.1 Statement (“Pls. 56.1”); 67, Defendants’ Response to Plaintiffs’ Rule 56.1

Statement (“Defs. Resp. 56.1”); 46, Plaintiffs’ Reply Rule 56.1 Statement (“Pls. Reply 56.1”); 43-2, Declaration of John

J.P. Howley (“Howley Decl.”) and exhibits attached thereto; 45, Declaration of Felix Vinluan (“Vinluan Decl.”) and

exhibits attached thereto; 46-1, Reply Declaration of John J.P. Howley (“Howley Reply Decl.”) and exhibit attached

thereto.

The Court notes that Defendants first submitted their Response to Plaintiffs’ Rule 56.1 Statement at ECF No. 44. That

document contravened this Court's Chambers Practices III.B.4(c) which states: “A party's 56.1 Counter Statement to

a 56.1 Statement must quote, verbatim, the 56.1 Statement, including all citations, and respond to the moving party's

statements of fact immediately beneath each statement.” The Court ordered Defendants to re-submit an identical version

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of ECF No. 44 with an inclusion of Plaintiffs’ corresponding paragraphs per III.B.4(c). (01/24/2023 Docket Entry).

Defendants filed their revised Response (ECF No. 67) on January 25, 2023 in accordance with the Court's Order, which

the Court cites in this Memorandum and Order.

The Court also incorporates certain documents submitted in connection to the motion to dismiss (ECF Nos. 27-31) and

the motion to certify class (ECF No. 40) previously filed in this case, which the parties rely upon in connection with

this motion for summary judgment but did not re-submit with the motion.

Finally, all pagination citations, except for citations to deposition transcripts, refer to the page number assigned by the

Court's CM/ECF system.

2 Defendants “dispute” Plaintiffs’ assertion that “United Staffing required that foreign nurses sign a contract before it

would file an immigration petition to sponsor them for permanent residence status or a ‘green card,’ ” (Pls. 56.1 at

¶ 11), arguing that “United Staffing does not have any uniform policy when to require its RN-beneficiaries to sign

an Employment Agreement.” (Defs. Resp. 56.1 at ¶ 11.) The Court has reviewed the Santos Declaration and Pascual

Declaration cited by Defendants, and concludes that Defendants’ asserted dispute as to the material fact regarding

Defendants’ required contract is not genuine. The portions of both Declarations that Defendants cite clearly state, inter

alia: “Those we recruit from abroad are required, as a matter of company practice, to execute an Employment Agreement,

which they would present to the U.S. Embassy during their consular interview” (Santos Decl. ¶ 6) (emphasis added),

and “United Staffing requires foreign-trained registered nurses recruited from outside the United States to sign our

Employment Agreement before they are sponsored through the Form I-140 immigrant worker petition process.” (Pascual

Decl. ¶ 7.) “Under Rule 56, it is the court's responsibility to determine whether the opposing party's response to the

assertion of a material fact presents a dispute that is genuine.” Major League Baseball Properties, Inc. v. Salvino, Inc.,

542 F.3d 290, 312 (2d Cir. 2008).

3 Defendants’ Responsive 56.1 Statements frequently respond: “Undisputed, to the extent that the ‘standard contract’

referred to is the ‘second version’ of the employment contract.” To the extent such Defendant Responses are attempting

to cabin “undisputed” factual assertions as only applying to a “second version,” the Court rejects any such attempt.

On May 25, 2022, this Court certified “a class of all Filipino nurses who were employed by Defendants at any time

since April 5, 2011 pursuant to an employment contract containing a liquidated damages provision, non-compete clause,

immigration notification provision, and a prevailing wage requirement.” See Magtoles v. United Staffing Registry, Inc.,

No. 21-CV-1850 (KAM) (PK), 2022 WL 1667005, at *11 (E.D.N.Y. May 25, 2022). Therefore, when appropriate, the

Court treats the “standard contract” in parties’ 56.1 Statements as the employment agreement with the four provisions at

issue, as previously certified. See Magtoles, 2022 WL 1667005, at *7 (“[T]he court concludes that the minor variations

in the minimum number of hours do not materially affect the TVPA claims or the claims for declaratory and injunctive

relief.”).

4 Thirteen nurses signed an employment contract requiring the completion of 5,100 hours over the three-year period,

rather than 6,000 hours. (Pascual Decl. ¶ 21; see ECF No. 40-40, Ex. O at 3.) Similarly, one nurse signed an employment

contract requiring the completion of 5,616 hours over the three-year period. (Pascual Decl. ¶ 23; see ECF No. 40-45,

Ex. T at 3.)

5 Defendants repeatedly dispute Plaintiff's factual statements, such as Pls. 56.1 Statement ¶ 26, without citing to supporting

admissible evidence, including by stating: “OBJECTED TO. This is not a statement of fact.” (See, e.g., Defs. Resp.

56.1 at ¶¶ 24-27.) Defendants have not stated nor cited to any grounds for “objecting” to the factual assertion: “If a

nurse stopped working before completing 6,000 hours of work, the ‘liquidated damages’ clause provided that she owed

United Staffing $15 ‘for each hour or part of an hour performed of the [6,000-hour] requirement.’ ” (See Pls. 56.1 at

¶ 24; Defs. Resp. 56.1 at ¶ 24.)

It is unclear if Defendants are objecting to whether the plain language of the liquidated damages provision states that the

nurse “agrees and binds her/himself to pay the Employer Fifteen Dollars ($15.00) for each hour or part of an hour not

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performed of the requirement of Six Thousand (6,000) Hours of work as a reasonable estimate of the damages suffered

by the Employer.” (See, e.g., Magtoles Contract at 3.) An identical provision is in the contracts requiring 5,100 hours,

(Ex. O at 3), and requiring 5,616 hours, (Ex. T).

In any event, because Defendants fail to submit admissible evidence to support their objections, Plaintiffs’ factual

statements that are supported by admissible evidence are considered undisputed. See Fed. R. Civ. P. 56(e)(2); Baity v.

Kralik, 51 F. Supp. 3d 414, 418 (S.D.N.Y. 2014) (collecting cases) (holding that “responses that do not point to any

evidence in the record that may create a genuine issue of material fact do not function as denials, and will be deemed

admissions of the stated fact.” (alteration, citation, and internal quotation marks omitted)); see also United States v.

Gentges, 531 F. Supp. 3d 731, 735 n.1 (S.D.N.Y. 2021) (“Any party's failure to provide record support for its challenge

to another party's factual statement could allow the Court to deem the challenged facts undisputed.”).

6 As discussed supra note 5, Defendants have not stated nor cited to any grounds for “objecting” to Plaintiffs’ factual

assertion that a nurse who was to work 6,000 hours would owe United Staffing for 4,000 remaining hours if the nurse

left United Staffing after completing 2,000 hours, based on simple math and the plain language of the contract: the

nurse “binds her/himself to pay the Employer Fifteen Dollars ($15.00) for each hour or part of an hour not performed

of the requirement of Six Thousand (6,000) Hours of work as a reasonable estimate of the damages suffered by the

Employer.” (See, e.g., Magtoles Contract at 3). An identical provision is in the contract requiring 5,100 hours, (Ex. O

at 3), and requiring 5,616 hours, (Ex. T).

7 Two of the plaintiffs in this action, Ana Myrene Espinosa and Ana Mervine Espinosa, have notably similar names. In

this Memorandum and Order, the Court refers to Ms. Ana Myrene Espinosa by her full name or as “Ms. Espinosa,” and

refers to Ms. Ana Mervine Espinosa as “Ms. Bhyng Espinosa,” as stated in Plaintiffs’ Rule 56.1 Statement ¶ 4.

8 In response to Defendants’ submission of the “supplemental affidavit,” Plaintiffs submitted a second Declaration from

counsel John J.P. Howley with an exhibit entitled “Defendants’ Response to Plaintiffs’ Interrogatory No. 3.” (ECF Nos.

56-1, 56-2.) As the Court is not considering the supplemental affidavit submitted by Defendants, the Court also will not

consider the Second Declaration nor the attached exhibit. (See Pls. Reply. at 5 n.1.)

9 The Court also notes the following, rather troublesome, facts. Felix Vinluan, one of Defendants’ counsel in the instant

action, was retained by Filipina nurse Ronariza Beltran (who is not a class member) to review her contract with United

Staffing. Beltran relied upon Vinluan for legal advice in connection with the contract. At the same time, Vinluan was

representing United Staffing in connection with Beltran's contract. (Pls. 56.1 at ¶¶ 117-19; Defs. Resp. 56.1 at ¶¶ 117-19.)

Although Vinluan informed Beltran that he was also United Staffing's lawyer, Beltran testified that she did not sign

anything waiving any conflicts of interest presented by Vinluan's dual representation of Defendants and their prospective

employee. (ECF No. 45-11 (“Beltran Dep.”) at 35:15-35:21.)

Defendants rhetorically dispute Plaintiffs’ assertion that “Vinluan did not request or obtain from Beltran a waiver of

conflicts of interest,” speculating that “said waiver could have been granted through a different manner,” but offer

no evidence of waiver. (Defs. Resp. 56.1 at ¶ 120.) Notably, Defendants’ speculation is distinct from any admissible

evidence that any such waiver was ever granted. Vinluan, an “experienced New York lawyer who has represented United

Staffing in employment and immigration matters for at least 10 years,” (Pls. 56.1 at ¶ 154; Defs. Resp. 56.1 at ¶ 154),

should have recognized the importance of a written waiver of a conflict so plain, but there is no record evidence that

he obtained any written conflict waiver.

10 Defendants dispute Plaintiffs’ assertion: “When Tan was scheduled to work the 3 p.m. to 11 p.m. shift, she usually ended

up working until 2 a.m. or 3 a.m.” but was not paid for hours worked past 11 p.m. Defendants respond that the statement

“generalizes Tan's work schedules, although the statement may be true only in [sic] few occasions while she worked at

the Regal Heights facility and only if it refers to her sometimes working until 2 am, but not until 3 am.” (Defs. Resp.

56.1 at ¶ 51.) The Court finds that Defendants’ failure to proffer admissible evidence fails to create a genuine dispute,

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because Defendants admit the relevant part of the assertion — that there were times when Tan worked multiple hours

past her scheduled shift hours, for which she was not paid.

11 The Court finds immaterial factual assertions regarding “full-time work” because this term does not appear in the

contract. The Court notes, however, that the 2,000 hours specified in the contract divided by 52 weeks per year is

approximately 38.46 hours per week, which could be considered “full time.”

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Paguirigan v. Prompt Nursing Employment Agency LLC, Not Reported in Fed. Supp....

2019 WL 4647648

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2019 WL 4647648

Only the Westlaw citation is currently available.

United States District Court, E.D. New York.

Rose Ann PAGUIRIGAN, individually and on behalf of all others similarly situated, Plaintiff,

v.

PROMPT NURSING EMPLOYMENT AGENCY LLC d/b/a/ Sentosa Services, Sentosacare LLC, Sentosa Nursing

Recruitment Agency, Benjamin Landa, Bent Philipson, Berish Rubenstein a/k/a Barry Rubenstein, Francis Luyun,

Golden Gate Rehabilitation & Health Care Center LLC, and Spring Creek Rehabilitation and Nursing Center, Defendants.

17-cv-1302 (NG) (JO)

|

Signed 09/23/2019

|

Filed 09/24/2019

Attorneys and Law Firms

Leandro Bolesa Lachica, John J.P. Howley, Law Offices of John Howley, New York, NY, for Plaintiff.

Elliot Hahn, Hahn Eisenberger PLLC, Seth Eisenberger, Law Office of Seth Eisenberger, Brooklyn, NY, Sheldon Eisenberger,

Alan M. Pollack, Robinson Brog Leinwand Greene Genovese & Gluck PC, New York, NY, for Defendants.

OPINION & ORDER

GERSHON, United States District Judge:

*1 Plaintiff Rose Ann Paguirigan brings claims, on behalf of herself and a class of similarly situated Filipino nurses, for

violations of the Trafficking Victims Protection Act (“TVPA”), 18 U.S.C. §§ 1589 et seq., against defendants Prompt Nursing

Employment Agency LLC (“Prompt Nursing”), Sentosacare LLC (“Sentosacare”), Sentosa Nursing Recruitment Agency

(“Sentosa Agency”), Benjamin Landa, Bent Philipson, Berish Rubenstein, Francis Luyun, Golden Gate Rehabilitation and

Health Care Center LLC (“Golden Gate”), and Spring Creek Rehabilitation and Nursing Center (“Spring Creek”). Plaintiffs also

seek damages for breach of contract against Prompt Nursing, Rubenstein, Landa, and Philipson, and a declaratory judgment

regarding certain aspects of their employment contracts.

All defendants previously moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss the TVPA claims and the declaratory

judgment claim, and defendants Landa, Philipson, and Rubenstein moved to dismiss the breach of contract claim as alleged

against them individually. I denied that motion in full. Paguirigan v. Prompt Nursing Emp't Agency LLC, 286 F. Supp. 3d

430 (E.D.N.Y. 2017). I subsequently granted the named plaintiff's motion to certify a class comprised of “all nurses who were

recruited by the defendants in the Philippines and were employed by the defendants in the United States at any time since

December 23, 2008,” and I appointed her counsel as class counsel under Rule 23(g). Paguirigan v. Prompt Nursing Emp't

Agency LLC, 2018 WL 4347799 (E.D.N.Y. Sept. 12, 2018). The records defendants produced at the class certification stage

establish that there are more than 200 known class members.

Defendants now move for summary judgment dismissing all of plaintiffs' claims, and granting Prompt Nursing's counterclaim

for breach of the named plaintiff's employment contract. Plaintiffs also move for summary judgment on all of their claims,

including a declaration that the liquidated damages provision and confessions of judgment are unenforceable, and a permanent

injunction preventing defendants from threatening or attempting to enforce either.

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I. Factual Background

Except as otherwise noted, the following facts are undisputed.

A. Defendants' Employment of the Named Plaintiff and their Legal Actions Against Her

In either 2006 or 2007, plaintiff, a Filipino citizen, attended a meeting in the Philippines regarding a nursing home job in New

York. The meeting was organized by defendant Sentosa Agency, a recruiting agency registered in the Philippines. Defendants

Luyun—who is the sole proprietor of Sentosa Agency—and Philipson were in attendance.

In 2007, defendant Golden Gate, a nursing home located in Staten Island, New York, submitted a visa application on plaintiff's

behalf. After plaintiff and Golden Gate agreed that a visa application would be submitted, the U.S. government issued a

Prevailing Wage Determination for plaintiff of $26.87 per hour. Eight years later, plaintiff was notified of a visa interview with

the United States Consulate in the Philippines. At the time of the interview, the United States Consulate required confirmation

that a job was still available. On April 15, 2015, defendant Landa, who is the CEO, managing partner, and one of the owners

of Golden Gate, 1 signed a letter addressed to the U.S. Consulate affirming that an employment position was still available and

stating that Golden Gate had offered plaintiff a position at $29.00 per hour. On that day, Landa also signed the last page of

plaintiff's employment contract with Golden Gate.

*2 On April 22, 2015, one week later, plaintiff herself signed the employment contract with defendant Golden Gate, which

was for a three-year term. When plaintiff signed the contract, Landa's letter to the U.S. Consulate was attached to the front of

the contract. Plaintiff's signature appears on each page of the contract, but does not appear on the letter. 2

The contract states the following regarding wages:

As of the Commencement Date, Employee will be paid a base salary in accordance with the prevailing

wage for the geographic area in which the employee is assigned to work, as determined by the National

Prevailing Wage and Helpdesk Center (NPWC) of the United States Department of Labor.

Contract IV (1). (The parties dispute the exact mechanism by which the National Prevailing Wage and Helpdesk Center

(“NPWC”) determines a prevailing wage, but it is agreed that in essence the NPWC determines prevailing wages at the request

of an employer for a particular employee as part of the visa process and also lists the prevailing wage by geographic area online

and elsewhere. NPWC determines prevailing wages on an hourly and annual salary basis.)

“Commencement Date” is defined as the “date when Employee first starts to provide direct nursing care to residents/patients

after completing the orientation and training as described in Article IV.” Contract III.

The contract further provides that:

Both the Employer and Employee agree that the Employer and/or its designee/assignee has or will incur

substantial expenses and has or will expend enormous resources and time in recruiting the Employee

for employment as contemplated herein, sponsoring the Employee for an Immigrant Visa, training the

Employee in practice and procedures, and orienting the Employee to living in the New York area. In

as much as the parties agree that damages would be difficult to calculate if the Employee willfully,

voluntarily, and without cause terminates the Agreement before the completion of the three (3) year term,

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and/or if the Employer terminated the Agreement pursuant to Article VI(2)(i) or (ii), 3 the parties agree

that such an act shall result in an obligation by the Employee to pay the Employer and/or its designee/

assignee Twenty Five Thousand Dollars ($25,000) as liquidated damages (the “Liquidated Damage”).

Contract VII (4). Section VII (4)(a) states that the liquidated damages are reduced to $16,666.67 should plaintiff pre-terminate

or breach the employment contract in her second year, and are reduced to $8,333.34 should she do so in her third year. Contract

VII (4)(a).

*3 Finally, “in order to secure Employee's performance of the Employment Term,” Section VII (4) of the contract requires

plaintiff to execute a confession of judgment for the amount of liquidated damages, which may be filed in court in the event that

she fails “to complete the employment term.” Plaintiff is also required to “pay upon demand all reasonable costs and expenses

(including attorney's fees), and disbursements[ ] incurred by the Employer and/or its designee/assignee to enforce any of [the]

rights of the Employer and/or its designee/assignee hereunder and/or collect the aforementioned liquidated damages.” Contract

VII (4).

In a separate document dated April 22, 2015, plaintiff signed an acknowledgment of costs related to her recruitment. This

document is titled “Declaration and Undertaking” and states that Sentosacare expended $3,685 for attorneys' fees, filing fees,

visa fees, airfare, and miscellaneous fees in connection with plaintiff's hiring and travel to the United States. Sentosacare is a

company co-owned by defendants Landa and Philipson that provides consultants to nursing homes.

Once plaintiff arrived in the United States, Golden Gate verbally assigned her contract to defendant Prompt Nursing, a staffing

agency owned by defendant Rubenstein that provides nurses to nursing homes. On June 22, 2015, plaintiff began working at

defendant Spring Creek, a nursing home located in Brooklyn, New York. Landa is a managing partner and owner of Spring

Creek. 4 On or about June 22, 2015, plaintiff signed an “Employer and Wage Acknowledgment” form, which states that her

employer is Prompt Nursing and that her pay is $29.00 per hour.

Plaintiff quit her job on March 7, 2016. Defendant Prompt Nursing then sued plaintiff and two other Filipino nurses to enforce

the $25,000 liquidated damages provision in their contracts and for $250,000 from each for tortious interference with contract

and prospective business relations, and an additional $250,000 from each in punitive damages. Those lawsuits were voluntarily

dismissed after plaintiff filed this action.

B. Legal Actions Directed at Other Nurses

Plaintiff has presented evidence concerning past legal actions taken by defendants against Filipino nurses. Defendants

acknowledge that these actions occurred, but they dispute their responsibility. The events are recounted in detail in other judicial

opinions, including one case—Anilao v. Spota, 774 F. Supp. 2d 457 (E.D.N.Y. 2011)—which is ongoing in this district. See

Matter of Vinluan v. Doyle, 60 A.D.3d 237, 240 (2d Dep't 2009); SentosaCare LLC v. Anilao, Index No. 6079/2006 (Sup. Ct.

Nassau Cty. May 20, 2010) (hereafter “Anilao, Order”).

Briefly, in April 2006, ten nurses recruited by Sentosa Agency in the Philippines resigned from their jobs at nursing homes in

New York. Following these resignations, an administrator at one of the nursing homes alerted the New York State Education

Department (“Education Department”) that the nurses had abandoned their patients by simultaneously resigning without

adequate notice. After an investigation, the Education Department took no action against the nurses.

Subsequently, defendants Philipson and Landa met with the Suffolk County District Attorney on May 31, 2006. In March

2007, a Suffolk County grand jury indicted the ten nurses and their attorney for conspiracy to endanger the welfare of a child

and endangering the welfare of a physically disabled person. The nurses and the attorney sought a writ of prohibition to stop

the criminal proceeding. The Appellate Division, Second Department, granted the writ, declining to find that “this is such

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an ‘extreme case’ that the State's interest in prosecuting the petitioners for misdemeanor offenses based upon the speculative

possibility that the nurses' conduct could have harmed the pediatric patients at Avalon Gardens justifies abridging the nurses'

Thirteenth Amendment rights by criminalizing their resignations from the service of their private employer.” Vinluan, 60 A.D.3d

at 249. The court further held that “the prosecution impermissibly violates [the attorney's] constitutionally protected rights of

expression and association in violation of the First and Fourteenth Amendments.” Id. at 250.

*4 During the period from 2006 through 2008, defendants Sentosacare, Sentosa Agency, Prompt Nursing, Philipson,

Rubenstein, Luyun, Golden Gate, and other nursing homes owned by defendants brought a series of civil suits against more than

30 Filipino nurses in attempts to enforce the liquidated damages provision. In one decision related to those lawsuits, the New

York State Supreme Court, Nassau County, found that “the liquidated damages provision at issue is unenforceable as damages

flowing from any proven breach by defendant Nurses will easily be ascertained at trial.” Anilao, Order at 6.

Additional relevant undisputed facts not discussed here will be addressed in the discussion section below.

II. Discussion

A. Legal Standard

A party is entitled to summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Only disputes relating

to material facts—i.e., “facts that might affect the outcome of the suit under the governing law”—will properly preclude the

entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). An issue of fact is “genuine” if “the

evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.

The moving party bears the burden of demonstrating “the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 323.

Once the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the nonmoving party must

“come forward with specific facts showing that there is a genuine issue for trial.” Matsushita Electric Ind. Co., Ltd. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986) (internal quotation marks omitted).

In determining whether to grant summary judgment, the court must “construe all evidence in the light most favorable to the

nonmoving party, drawing all inferences and resolving all ambiguities in its favor.” Dickerson v. Napolitano, 604 F.3d 732, 740

(2d Cir. 2010). However, the mere existence of a scintilla of evidence in support of the non-moving party's position will be

insufficient; there must be evidence on which the jury could reasonably find for the non-moving party. Anderson, 477 U.S. at

252. Where, as here, both parties move for summary judgment, the court need not “grant judgment as a matter of law for one

side or the other.” Schwabenbauer v. Bd. of Ed. of City Sch. Dist. of City of Olean, 667 F.2d 305, 313 (2d Cir. 1981). “Rather,

the court must evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences

against the party whose motion is under consideration.” Id.

B. Plaintiffs' Breach of Contract Claim

Both sides move for summary judgment on plaintiffs' breach of contract claim against defendants Prompt Nursing, Rubenstein,

Landa, and Philipson. The named plaintiff claims she was owed more than $29.00 per hour under the contract and that she was

to be paid a base salary as opposed to an hourly wage. In order to recover for breach of contract, “a plaintiff must prove (a)

the existence of a contract between plaintiff and defendant; (b) performance of the plaintiff's obligations under the contract;

(c) breach of the contract by the defendant; and (d) damages to the plaintiff caused by the defendant's breach.” Javier v. Beck,

2014 WL 3058456, at *9 (S.D.N.Y. July 3, 2014).

“In a dispute over the meaning of a contract, the threshold question is whether the contract is ambiguous.” Lockheed Martin

Corp. v. Retail Holdings, N. V., 639 F.3d 63, 69 (2d Cir. 2011). “Under New York law ... the question of whether a written contract

is ambiguous is a question of law for the court.” JA Apparel Corp. v. Abboud, 568 F.3d 390, 396 (2d Cir. 2009). “Ambiguity

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is determined by looking within the four corners of the document, not to outside sources,” Kass v. Kass, 91 N.Y.2d 554, 566

(1998), and if one party's interpretation of the contract would “strain[ ] the contract language beyond its reasonable and ordinary

meaning,” the court is not required to find the language ambiguous, Hunt Ltd. v. Lifschultz Fast Freight, Inc., 889 F.2d 1274,

1277 (2d Cir. 1989) (citing Bethlehem Steel Co. v. Turner Const. Co., 2 N.Y.2d 456, 459 (1957)).

*5 If the contract is not ambiguous, then its meaning is likewise a question of law for the court to decide. JA Apparel Corp.,

568 F.3d at 397. In interpreting an unambiguous contract, the “court is to consider its ‘[p]articular words’ not in isolation ‘but

in the light of the obligation as a whole and the intention of the parties as manifested thereby,’ but the court is not to consider

any extrinsic evidence as to the parties' intentions....” Id. (citations omitted).

As stated above, the contract's relevant wage provision provides:

As of the Commencement Date, Employee will be paid a base salary in accordance with the prevailing

wage for the geographic area in which the employee is assigned to work, as determined by the National

Prevailing Wage and Helpdesk Center (NPWC) of the United States Department of Labor.

Contract IV (1). “Commencement Date” is defined as the “date when Employee first starts to provide direct nursing care to

residents/patients after completing the orientation and training as provided in Article IV.” Contract III.

Neither party argues that the contract is ambiguous. Defendants urge me to find that the phrase “as determined by National

Prevailing Wage and Helpdesk Center” refers to the prevailing wage determination provided to plaintiff in 2007. They also note

that, under the contract, plaintiff was entitled to only $12.00 per hour for her first four weeks of employment and argue that the

contract's inclusion of the phrase “[a]s of the Commencement Date” is meant only to indicate when this initial four-week period

ends. Plaintiff argues that defendants' interpretation is contrary to the contract's plain language and that the contract requires

that plaintiff be paid the prevailing wage as of the Commencement Date. In 2007, the hourly prevailing wage was $26.87. The

parties agree that, when plaintiff began working for Prompt Nursing in 2015, the prevailing wage exceeded this amount.

The contract is unambiguous. I also find that defendants' interpretation is at odds with the contract's plain language and must

be rejected. The phrase “prevailing wage” refers to the prevailing wage as of the Commencement Date. There is nothing in

the text of the contract to suggest that the phrase “as determined by National Prevailing Wage and Helpdesk Center” is meant

to refer to the prevailing wage determination that was made almost a decade prior to the Commencement Date. Even if one

purpose for the inclusion of the phrase “[a]s of the Commencement Date” was to indicate when the initial four-week period

ends, the meaning of the text is unchanged.

Defendants argue that the holding in Rosales v. Hispanic Emp. Leasing Program, LLC, 2008 U.S. Dist. LEXIS 96417, at *4–6,

2008 WL 5083507 (W.D. Mich. Nov. 26, 2008), must be treated “as part of the contract ‘as though it were expressed or referred

to therein.’ ” Defs.' Reply at 11. That decision, of course, is not binding on this court, and there is no sound basis for treating it

as part of the contract. Moreover, the Rosales court was not addressing the issue presented here. In Rosales, the court held that

the employer was obligated to pay the prevailing wage previously calculated by the government and not the prevailing wage in

effect when the employees began working. There is no indication that the Rosales court was asked to interpret a contract that

provides for payment of the prevailing wage as of the employee's Commencement Date.

Alternatively, defendants argue that I should reject plaintiff's interpretation because it undermines the protections given United

States workers under 8 U.S.C. § 1182(a)(5)(A) and 20 C.F.R. § 656.21. But defendants have failed to convince me that an

interpretation that requires defendants to pay their employees the prevailing wage “[a]s of the Commencement Date” undermines

the policies underlying these provisions.

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*6 Defendants also make much of the letter affixed to plaintiff's contract, which states that she was to be paid $29.00 per hour;

they argue that it should be treated as the “first page” of the contract. Whether multiple writings should be construed as one

agreement depends on the intent of the parties. See TVT Records v. Island Def Jam Music Grp., 412 F.3d 82, 89 (2d Cir. 2005).

“Under New York law, ‘all writings which form part of a single transaction and are designed to effectuate the same purpose

[must] be read together, even though they were executed on different dates and were not all between the same parties.’ ” Id.

Here, the letter is plainly not part of the contract. According to Philipson, the letter was created for the purpose of confirming

that a job was still available. Philipson Declaration, ¶ 9. Therefore, it did not share the “same purpose” as the contract. TVT

Records, 412 F.3d at 89. The letter is from Landa to the U.S. Embassy in Manila, was signed by Landa a week prior to the

contract's execution and, unlike each of the 10 pages of the contract, was not signed by plaintiff. Although “the fact that the

two documents at issue here were not executed at the same time or by the same parties is not dispositive, this fact does weigh

against a conclusion that the documents were intended to be read together as a single contract.” In re Lehman Bros. Holdings

Inc., 479 B.R. 268, 279 (S.D.N.Y. 2012), aff'd, 513 F. App'x 75 (2d Cir. 2013) (citations omitted). While it is typically a fact

issue whether multiple writings should be construed as one agreement, the question is a matter of law if, as here, “the documents

in question reflect no ambiguity as to whether they should be read as a single contract.” TVT Records, 412 F.3d at 89.

Defendants contend that Hallmark Synthetics Corp. v. Sumitomo Shoji New York, Inc., 26 A.D.2d 481, 484 (1st Dep't 1966),

aff'd, 20 N.Y.2d 871 (1967), requires me to treat the letter as part of the contract because “letters and other instruments may be

construed as part of a contract where they are referred to therein or annexed thereto.” Id. However, that case held that “[t]he

purpose of a written agreement must be ascertained from the instrument itself, if it is possible to do so....” Id. (internal quotation

marks omitted). Here, I can do just that: the contract is straightforward, and defendants may not introduce parol evidence, such

as the letter, to “create an ambiguity in the agreement” that is otherwise unambiguous. W. W. W. Assocs., Inc. v. Giancontieri,

77 N.Y.2d 157, 163 (1990) (emphasis in original).

Notably, the contract's integration clause provides that the contract “supersedes all previous employment contracts and

constitutes the entire agreement between the parties,” Contract VIII (7) (emphasis added), and Section VIII (3) states that any

amendments are to be “in writing and executed in multiple copies.” In sum, I decline to treat the letter as part of the contract.

I further reject defendants' argument that plaintiff ratified the contents of the April 15 letter through her subsequent conduct.

In support of this argument, defendants rely on a wage acknowledgment form that plaintiff signed, which states that her hourly

pay is $29.00 per hour, as well as plaintiff's deposition testimony, where she stated that she understood that the letter was an

offer to be paid $29.00 per hour pursuant to the contract, and that the contract was for $29.00 when she signed it.

The cases that defendants rely on discuss whether a party has ratified the contract such that it may no longer assert claims for

fraud and fraudulent inducement, Sotheby's Fin. Servs., Inc. v. Baran, 2003 WL 21756126, at *5–6 (S.D.N.Y. July 29, 2003),

aff'd, 107 F. App'x 235 (2d Cir. 2004), or that a deed was forged, Cashel v. Cashel, 94 A.D.3d 684, 686–687 (2d Dep't 2012),

or that the principal did not authorize its agent to enter into the contract, Cologne Life Reinsurance Co. v. Zurich Reinsurance

(N. Am.), Inc., 286 A.D.2d 118, 126–129 (1st Dep't 2001). In other words, these cases focus on parties' attempts to be relieved

from contractual obligations.

*7 Here, plaintiff is not attempting to disavow or dispute the contract. Rather, relying on the contract's clear language, she

asserts that the defendants breached by failing to pay her the prevailing wage and a base salary. Plaintiff should not be faulted for

initially accepting defendants' representation that the $29.00 hourly rate was in fact the prevailing wage. Indeed, she testified that

she learned the prevailing wage was higher than $29.00 per hour only after she came to New York and spoke to her colleagues,

which was after she had signed the wage acknowledgment form.

Finally, defendants assert that plaintiff has provided no basis for her claim that she was to be paid a base salary as opposed

to an hourly wage. To the contrary, plaintiff has provided a basis: the contract's clear language. As noted above, the contract

states that, “[a]s of the Commencement Date, Employee will be paid a base salary in accordance with the prevailing wage for

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the geographic area in which the employee is assigned to work....” Contract IV (1) (emphasis added). In light of the contract's

unambiguous text, no further support is needed. Defendants also assert that plaintiff has failed to satisfy the damages element

of her breach of contract claim and argue that she was actually overpaid. Plaintiff has submitted a summary pursuant to Federal

Rule of Evidence 1006 depicting the difference between what each class member was paid and what each is owed if paid the

prevailing wage as of their Commencement Date and a base salary. This document is sufficient to show that damages accrued,

and, because plaintiff was owed a base salary, it is apparent that her damages exceed the amount by which defendants claim

she was overpaid.

Based on these undisputed facts, I find that plaintiff has met the elements for her breach of contract claim. She has proven

that a contract existed between her and defendant Prompt Nursing; that she performed under the contract; that Prompt Nursing

breached the contract by failing to pay her the prevailing wage as of her Commencement Date and by failing to pay her a base

salary; and that she was damaged. See Javier, 2014 WL 3058456, at *9.

As for the rest of the class, the provisions specifying the wage and defining “Commencement Date” are identical in each contract

defendants produced at the class certification stage. Each contract references a base salary, and each was assigned to Prompt

Nursing. It is undisputed that none of the class members was paid a base salary commensurate with the prevailing wage in

effect as of his or her “Commencement Date.” There is therefore no meaningful difference between the named plaintiff and the

class as to each element of the breach of contract claim. Accordingly, class-wide liability has been established against Prompt

Nursing for breach of contract.

C. Plaintiffs' Application to Find the Liquidated Damages Provision Unenforceable

Plaintiffs request a declaratory judgment finding the liquidated damages provision unenforceable. They also request that

defendants be enjoined from attempting or threatening to enforce the liquidated damages provision or the confessions of

judgment.

The question of whether a liquidated damages provision is enforceable “is a question of law, giving due consideration to the

nature of the contract and the circumstances.” HLT Existing Franchise Holding LLC v. Worcester Hosp. Grp., LLC, 609 F. App'x

669, 672 (2d Cir. 2015) (internal quotation marks omitted). Such a provision is, in effect, an estimate “made by the parties at the

time they enter into their agreement, of the extent of the injury that would be sustained as a result of breach of the agreement”;

it will not be enforced if it is contrary to public policy, “and public policy is firmly set against the imposition of penalties or

forfeitures for which there is no statutory authority.” Truck Rent-A-Ctr., Inc. v. Puritan Farms 2nd, Inc., 41 N.Y.2d 420, 424

(1977). Accordingly, “[a] provision that does not serve the purpose of reasonably measuring the anticipated harm, but is instead

punitive in nature, serving as a mere ‘added spur to performance,’ will not be enforced.” Agerbrink v. Model Serv. LLC, 196 F.

Supp. 3d 412, 417 (S.D.N.Y. 2016) (quoting Priebe & Sons v. United States, 332 U.S. 407, 413 (1947)).

*8 “ ‘New York courts will construe a purported liquidated damages provision strictly,’ and ‘where the damages flowing from

a breach of a contract are easily ascertainable, or the damages fixed are plainly disproportionate to the contemplated injury, the

stipulated sum will be treated as a penalty and disallowed.’ ” Agerbrink, 196 F. Supp. 3d at 417 (quoting U.S. Fid. & Guar.

Co. v. Braspetro Oil Servs. Co., 369 F.3d 34, 71 (2d Cir. 2004)). While the New York Court of Appeals has cautioned courts

against interfering with liquidated damages provisions, if either of these factors is not satisfied, the provision will be deemed

unenforceable. Union Capital LLC v. Vape Holdings Inc., 2017 WL 1406278, at *7 (S.D.N.Y. Mar. 31, 2017). In doubtful cases,

courts tend “to favor the construction which makes the sum payable for breach of contract a penalty rather than liquidated

damages,” and the party challenging the liquidated damages provision bears the burden of proving its unenforceability. Rattigan

v. Commodore Int'l Ltd., 739 F. Supp. 167, 169–170 (S.D.N.Y. 1990) (internal quotation marks omitted). Courts also often

consider the sophistication of the parties, whether they were represented by counsel, and whether the contract was negotiated at

arms length “in determining whether one side is not exacting an unconscionable penalty.” Id. at 172 (internal quotation marks

omitted).

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Here, the liquidated damages provision is a penalty. The contract required plaintiff to submit a confession of judgment, for

an amount of $25,000 if she quit in her first year, that would be held by defendants during her employment term, and could

be filed in the event that plaintiff terminated her contract early. Contract VII (4). Considering that plaintiff's payroll records

indicate that she typically made less than $700.00 per week after taxes, it would have taken her almost nine months to pay off the

liquidated damages amount, assuming she had no other expenditures such as food or housing. This supports the conclusion that

this provision is “intended to operate as a means to compel performance,” ensuring that plaintiff and other nurses did not resign

prior to the end of their contract terms. Rattigan, 739 F. Supp. at 169; see Perthou v. Stewart, 243 F. Supp. 655, 658 (D. Or. 1965).

Indeed, even though it is immaterial that the parties may describe the provision as a penalty, Truck Rent–A–Ctr., 41 N.Y.2d

at 425, the confession of judgment provision goes much further and outright states that its purpose is to “secure Employee's

performance of the Employment Term,” Contract VII (4). Furthermore, although New York courts are hesitant to invalidate

such provisions when they are negotiated at arms length, here I agree with the Nassau County Supreme Court's assessment

that the parties were of “unequal bargaining power” and that the contract was “not achieved through arms length negotiation.”

Anilao, Order at 6. Plaintiff was not represented by counsel when she executed the contract, and there is no evidence she had

any familiarity with American contract law. 5

Turning to the question of ascertainability, I agree with the Nassau County Supreme Court's conclusion that the liquidated

damages provision is unenforceable because defendants' damages were ascertainable. See Anilao, Order at 6. 6 The contract

states that the liquidated damages provision was implemented to reimburse defendants for several types of costs:

the Employer and/or its designee/assignee has or will incur substantial expenses and has or will expend

enormous resources and time in recruiting the employee for employment as contemplated herein,

sponsoring the Employee for an Immigrant Visa, training the Employee in practice and procedures, and

orienting the Employee to living in the New York area.

Contract VII (4).

*9 Plaintiff signed a Declaration and Undertaking indicating that $3,685.50 in costs were incurred on her behalf for lawyer's

fees, filing fees, visa fees, ICHP visa screening fees, miscellaneous expenses, and airfare. As demonstrated by this form, many

of the costs listed in Section VII (4) of the contract were tracked, easy to determine, and could be ascertained at the time

the contract was entered into. Upon arrival in New York, defendants gave plaintiff temporary housing for two months. The

apartment's monthly rent was $1,500 per month, totaling $375 per nurse living there. Thus, the total cost of plaintiff's housing

was $750—one could not reasonably argue that this was unascertainable. Finally, the contract permitted defendants to recoup

“further orientation and ‘hands on’ training costs” 7 by initially only paying plaintiff $12 per hour for her first four weeks on

the job, which invites the question why liquidated damages would be needed to account for training and orientation costs in the

first place. Contract IV (2). In light of defendants' extensive experience in this business, it is simply not possible that any of

these costs would be difficult or impossible to determine from one nursing contract to the next. See, e.g., Philipson Deposition

(“Dep.”) at 9–10 (stating that he first went to the Philippines to recruit nurses around 2000 and has been there “many” times).

In order to demonstrate that the liquidated damages provision is proportional to their probable loss, defendants offer the expert

testimony of Michael Kupka. Kupka is the Managing Director of the Forensic Accounting and Dispute Resolution Department

of Mazars USA LLP's New York location. He has more than 17 years of experience in public and forensic accounting. He

is a certified public accountant, accredited in business evaluation and financial forensics, a certified fraud examiner, and a

certified valuation analyst. Kupka concludes that, as to the named plaintiff, Golden Gate's potential damages are up to $26,182

in recruiting costs and up to $114,114 in increased operating costs, and that Prompt Nursing's damages can be measured as

either $26,182 in recruiting costs or $35,951 in lost profits. Kupka Report (“Rep.”) at 13.

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Rule 56(e) requires that affidavits submitted on summary judgment “set forth such facts as would be admissible in evidence.”

“Therefore ‘it is appropriate for district courts to decide questions regarding the admissibility of evidence on summary

judgment,’ and the trial court need only consider admissible evidence in ruling on a summary judgment motion.” Cibbarelli

v. Bombardier, Inc., 2004 WL 3090594, at *3 (E.D.N.Y. Sept. 3, 2004) (quoting Raskin v. Wyatt Co., 125 F.3d 55, 66 (2d Cir.

1997)). The admissibility of expert testimony is governed by Rule 702 of the Federal Rules of Evidence, which provides:

A witness who is qualified as an expert by knowledge, skill, experience, training, or education may

testify in the form of an opinion or otherwise if: (a) the expert's scientific, technical, or other specialized

knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; (b) the

testimony is based on sufficient facts or data; (c) the testimony is the product of reliable principles and

methods; and (d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702; see Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579, 588 (1993). “[W]hen an expert opinion

is based on data, a methodology, or studies that are simply inadequate to support the conclusions reached, Daubert and Rule

702 mandate the exclusion of that unreliable opinion testimony.” Amorgianos v. Nat'l R.R. Passenger Corp., 303 F.3d 256,

266 (2d Cir. 2002). An expert's assumptions “based on conclusory statements of the expert's client, rather than on the expert's

independent evaluation are not reasonable.” Supply & Bldg. Co. v. Estee Lauder Int'l, Inc., 2001 WL 1602976, at *4 (S.D.N.Y.

Dec. 14, 2001). Here, Kupka's opinion lacks a proper evidentiary basis and is therefore unreliable.

*10 First, Kupka assumed that Golden Gate incurred direct recruiting costs, and used that as a basis for calculating Golden

Gate's potential damages of $26,182. Kupka Rep. at 3; Kupka Dep. at 15. This assumption, however, is belied by Philipson's

testimony that the nursing home does not pay anything towards the cost of recruiting. Defendants argue that Golden Gate,

and Prompt Nursing, once it was assigned the contract, were responsible for paying recruitments costs that were expended

by other entities. But when asked about the costs listed in the Declaration and Undertaking, Kupka admitted that he did not

see any documents stating that “Golden Gate was responsible for any of” those expenses and that his basis for believing that

Golden Gate paid for or was responsible for these costs “was communicated to [him] as part of the underlying facts of this

case” by counsel. Kupka Dep. at 18–20. Similarly, Kupka stated that his assumption that Golden Gate was responsible for costs

associated with sponsoring nurses' visa status was based on “discussions with the counsel” and “[a]n employment agreement

that was signed by Golden Gate,” but admitted that he has not “seen any evidence that Golden Gate actually paid any” of these

costs. Id. at 21–23. Nor does the “Documents and Information Considered” page in Kupka's report reference any documents

purporting to show that Golden Gate reimbursed other entities for recruitment costs. Kupka Rep., Attachment 3; see Supply &

Bldg. Co., 2001 WL 1602976, at *5 (excluding expert testimony when expert's opinion was based on client's assurances that

were contradicted by other evidence).

Furthermore, Kupka reached the $26,182 recruiting costs figure by assuming that Prompt Nursing incurred a variety of costs

related to recruitment in 2015, including but not limited to, $388,510 for office expenses, $105,225 for auto and travel expenses,

and $97,352 for licenses and permits, for a total of $864,373. Kupka Dep. at 50–57. Kupka determined the average cost of

recruiting a nurse in 2015 was $26,182 by rounding down the recruiting costs to $864,000, and then dividing by 33, the number

of nurses that were recruited in that year. Kupka Rep. at 11. The figures Kupka relied on, however, were solely derived from a

one-page summary that was provided by defendants' counsel that Kupka refers to as a “Profit and Loss Statement” for Prompt

Nursing. 8

Kupka, at his deposition, revealed that he knew little about the numbers listed in this one-page summary. Kupka did not know

where the numbers came from, who created the document, when it was created, or why it was created. For the “general and

administrative” expenses, Kupka did not know the specifics of what is included in each number listed (such as what is included

in office expenses). Kupka Dep. at 50–89. Kupka did not know whether the summary was created in the ordinary course

of business or whether it was created specifically for this lawsuit. Id. at 48. When asked whether a specific cost, such as

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“Maintenance” costs, constituted all of Prompt Nursing's “Maintenance” costs (as it seems), or just its “Maintenance” costs

allocated to recruitment, Kupka either stated that he did not know, or that he assumed the cost was only related to recruitment

because the document's header says recruitment costs and because that is what defendants' attorneys told him. Id. at 50–89.

Other than defendant Rubenstein, Kupka never spoke with anyone at Prompt Nursing about its recruitment costs. Id. at 10.

Similarly, regarding Golden Gate's increased operating costs of up to $114,114, Kupka determined that number by assuming

that Golden Gate would have to pay $52.20 per hour for a permanent replacement nurse from a third-party staffing agency

for the remainder of plaintiff's contract term, or approximately 27 months. Kupka Report at 3; Kupka Dep. at 32, 36–37. The

$52.20 figure is based solely on a redacted invoice provided to Kupka by defendants' counsel for a staffing agency nurse in

2015 addressed to Sentosacare. Kupka's assumption that “defendants could not simply replace one sponsored nurse from the

Philippines with another” was based on his understanding of the facts of the case presented to him by counsel for defendants

and “[his] understanding of the overall industry.” Kupka Dep. at 28–32. When asked about the sources that informed his

understanding of the industry, Kupka referenced only “articles I have read, just to familiarize myself with the overall state of

the industry,” and stated that he did not list these in his report because “[i]t's general information that I obtained with no specific

documents that I could list as part of the research.” Id.

*11 Like the recruiting cost summary, Kupka knew little about this invoice and the nurse referenced in it. For example, he did

not know how many years of experience she had, whether she was assigned to work at Golden Gate, whether she worked on a

temporary or permanent basis, whether she was a staff or supervising nurse, what shift she worked, and whether she was paid a

shift differential. Id. at 37–40. He did not know why the invoice says Sentosacare on it or whether Sentosacare or Golden Gate

paid the amount owed. Id. at 40. Kupka also did not know, and did not ask, who actually replaced plaintiff at Spring Creek when

she resigned from Prompt Nursing, what Spring Creek did to find a replacement for her, how long it took Spring Creek and

Prompt Nursing to find a replacement, whether Prompt Nursing ever found a replacement for her, whether she was replaced

with a sponsored nurse, a nurse from an agency, or a nurse from Prompt Nursing. Id. at 33–36. Kupka never reviewed any

Golden Gate documents. Id. at 16. Kupka never asked anyone from Golden Gate whether they would in fact need to find a

permanent replacement for plaintiff from a staffing agency; his assumption that Golden Gate would face increased operating

costs was based on his “discussions with the counsel.” Id. at 11, 32.

Courts have excluded expert testimony when it is based “on the conclusory statements of [the expert's client], and not on his

independent evaluation of the facts.” CIT Grp./Bus. Credit, Inc. v. Graco Fishing & Rental Tools, Inc., 815 F. Supp. 2d 673, 677

(S.D.N.Y. 2011) (quoting Argus, Inc. v. Eastman Kodak Co., 612 F. Supp. 904, 926 (S.D.N.Y. 1985), aff'd, 801 F.2d 38 (2d Cir.

1986)). “[A]ny expert should be aware that a party and counsel in a litigation have an interest in the outcome and that an expert

study should not be dependent on the information they supply.” Rowe Entm't, Inc. v. William Morris Agency, Inc., 2003 WL

22124991, at *3 (S.D.N.Y. Sept. 15, 2003). Moreover, “[a]n expert who simply repeats the hearsay of the client who retained

him, without any independent investigation or analysis, does not assist the trier of fact in understanding matters that require

specialized knowledge.” Arista Records LLC v. Usenet.com, Inc., 608 F. Supp. 2d 409, 429 (S.D.N.Y. 2009). Here, Kupka's

failure to base his recruiting costs and increased operating costs analysis on his own “independent evaluation,” but rather on a

one-page summary, an invoice, untested and contradicted facts provided by defense counsel, and a discussion with one of the

defendants in this action, makes his testimony unreliable and does not assist the trier of fact. CIT Grp, 815 F. Supp. 2d at 677

(quoting Argus, 612 F. Supp. at 926). Kupka's expert opinion is therefore inadmissible. 9

For this reason, I decline to consider the damages provided in defendants' expert report in my assessment of the liquidated

damages provision, which is present in each class member's contract. I also decline to consider defendants' declarations

concerning these damages, all of one of which was submitted on reply, that essentially restate and comment upon the analysis

provided in the Kupka report, and fail to provide a sufficient evidentiary basis for concluding what their costs were. Given that

the record contains admissible evidence of only $4,435.50 10 in damages, which plaintiff has demonstrated were ascertainable

at the time of the contract, it is evident that the liquidated damages provision does not bear “a reasonable proportion to the

probable loss” and is an unenforceable penalty. Truck Rent-A-Ctr., Inc., 41 N.Y.2d at 425. Because each class member's contract

contains the same liquidated damages provision, this conclusion applies across all contracts.

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*12 Prompt Nursing's counterclaim for breach of contract against the named plaintiff is therefore limited to “actual damages

proven.” JMD Holding Corp. v. Cong. Fin. Corp., 4 N.Y.3d 373, 380 (2005) (internal quotation marks omitted).

D. Plaintiffs' Requested Declaratory and Injunctive Relief

In order to be entitled to a declaratory judgment, a plaintiff must demonstrate that there is “a substantial controversy, between

the parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”

Niagara Mohawk Power Corp. v. Tonawanda Band of Seneca Indians, 94 F.3d 747, 752 (2d Cir. 1996) (internal quotation

marks omitted). Further, in deciding whether to entertain a declaratory judgment action, district courts should ask: “(1) whether

the judgment will serve a useful purpose in clarifying or settling the legal issues involved; and (2) whether a judgment would

finalize the controversy and offer relief from uncertainty.” Duane Reade, Inc. v. St. Paul Fire & Marine Ins. Co., 411 F.3d 384,

389 (2d Cir. 2005). Here, there is a substantial controversy concerning whether plaintiff and the other class members may be

sued under their contracts' liquidated damages provisions for resigning prior to the end of their contract terms. And a decision

regarding plaintiffs' requested declaratory relief will serve the useful purpose of finalizing this aspect of the parties' dispute.

Having found the provision to be a penalty, I therefore grant plaintiffs' requested declaratory relief. The liquidated damages

provision and confessions of judgment will be declared unenforceable, and defendants will be enjoined from attempting or

threatening to enforce either.

E. Piercing the Corporate Veil

Because defendants Rubenstein, Philipson, and Landa 11 were not signatories to the contract, plaintiffs seek to hold these

individual defendants liable for breach of contract by piercing the corporate veil of Prompt Nursing. 12 Under New York law, a

non-signatory to the contract may be held liable for breach of contract where the plaintiff demonstrates “that the non-signatory

was the ‘alter ego’ of one or more of the signatories to the contract.” Kaliner v. Mt. Vernon Monetary Mgmt. Corp., 2008 WL

4127767, at *2 (S.D.N.Y. Sept. 3, 2008). In order to pierce the corporate veil, plaintiff must demonstrate “(i) that the owner

exercised complete domination over the corporation with respect to the transaction at issue; and (ii) that such domination was

used to commit a fraud or wrong that injured the party seeking to pierce the veil.” Thrift Drug, Inc. v. Universal Prescription

Adm'rs, 131 F.3d 95, 97 (2d Cir. 1997) (internal quotation marks omitted). In determining whether complete control exists,

courts have considered the following factors, none of which is decisive:

(1) disregard of corporate formalities; (2) inadequate capitalization; (3) intermingling of funds; (4)

overlap in ownership, officers, directors, and personnel; (5) common office space, address and telephone

numbers of corporate entities; (6) the degree of discretion shown by the allegedly dominated corporation;

(7) whether the dealings between the entities are at arms length; (8) whether the corporations are treated

as independent profit centers; (9) payment or guarantee of the corporation's debts by the dominating

entity, and (10) intermingling of property between the entities.

*13 Freeman v. Complex Computing Co., 119 F.3d 1044, 1053 (2d Cir. 1997).

Plaintiffs argue that Prompt Nursing is a corporate shell used by defendants to harm Filipino nurses, including by paying them

less than what is owed under their contracts, using an unenforceable liquidated damages provision to secure their employment,

and suing them for the liquidated damages amount. Prompt Nursing does business as Sentosa Services and the other nonindividual defendants (other than the nursing homes Golden Gate and Spring Creek) all bear the same Sentosa name. Plaintiffs

argue that this arrangement was created so that nurses would view the Sentosa companies as a single, integrated corporate

enterprise. When the nurses want to pursue legal action against defendants, however, defendants insist that Prompt Nursing is

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an entirely separate entity. Plaintiffs contend that this arrangement benefited defendants Rubenstein, Philipson, and Landa and

nursing homes, such as Spring Creek and Golden Gate, owned by Philipson, Landa, or Philipson's wife.

The deposition testimony supports the conclusion that Prompt Nursing, which is owned by Rubenstein, did not adhere to

corporate formalities and that dealings between Prompt Nursing and its nursing home clients were not conducted at arms length.

Philipson travels to the Philippines to recruit nurses. When asked who pays for his trips to the Philippines to recruit nurses,

Philipson stated that “[s]ometimes the nursing homes would pay for it, at times Prompt Nursing recruitment -- I don't recall,

Prompt something, would have paid for it.” Philipson Dep. at 14. He later clarified that initially the nursing homes paid for

his trips, but once Prompt Nursing came into existence, only Prompt Nursing would. Id. When asked how Prompt Nursing

would pay for his travel expenses, Philipson said that there was “no set specific way,” and that he may be reimbursed by Prompt

Nursing, or Prompt Nursing would pay his expenses in advance. Id. at 15.

Rubenstein testified that Prompt Nursing pays Sentosa Agency for all “expenses for the recruitment [of the nurse]” as part of

the responsibilities it takes on when it assumes the nurse's contract. Rubenstein Dep. at 86. He also stated that Prompt Nursing

reimburses Sentosa Agency for its personnel and office expenses. Id. at 89–90. Prompt Nursing pays Sentosa Agency by wire

after it receives an invoice, but only sometimes keeps a record of the payment. Id. Similarly, Prompt Nursing's nursing home

clients pay Prompt Nursing for its services, but there is no written agreement “on what those payments are.” Id. at 91. Rather,

the amount Prompt Nursing will charge is negotiated between Philipson and Rubenstein, and nothing is put in writing. Id.

Rubenstein stated that Prompt Nursing does not engage in any nurse recruiting, but did not know why his email address appears

on letters to the U.S. Embassy. Id. at 12, 92.

*14 Rubenstein testified that ail of the nursing contracts produced by defendants in this action were assigned to Prompt

Nursing. Id. at 27–83. He also testified that, for ail but one of the contracts, 13 assignment negotiations occurred between him,

negotiating on behalf of Prompt Nursing, and Philipson, negotiating on behalf of the nursing home. Id. at 27–83. Landa is also

authorized to enter into a general agreement to assign nurse contracts to Prompt Nursing. Philipson Dep. at 16–17. When asked

if there were any contracts with Filipino nurses that Golden Gate did not assign to Prompt Nursing, Philipson stated that “I

would have to check my records,” and “I wouldn't know. Sitting here, I would not be able to tell you.” Id. at 18. No evidence

has been presented that Prompt Nursing provides nurses to nursing homes other than those affiliated with defendants, or that

the nursing homes affiliated with defendants assign contracts to staffing agencies other than Prompt Nursing.

When it receives a nurse's contract by assignment, Prompt Nursing never pays anything for the assignment. Id. at 18–19. There

is never a written record of the assignment, and Philipson testified that he did not think there is ever a record of the date of

the assignment. Id. at 19.

Rubenstein's deposition also indicates that he directed Prompt Nursing's wrongful conduct. Regarding the unenforceable penalty

provision that Prompt Nursing used to secure nurses' employment, Rubenstein stated that he selected 14 the liquidated damages

amounts himself based on “costs of business,” stating that “I went over the numbers and it made sense,” and “[i]t costs Prompt

Nursing a lot of money to run the business, and based on my calculations, this is an estimated number that's what I feel is

the damages.” Rubenstein Dep. at 37–39. Rubenstein does not recall whether any nurses ever directly paid him the liquidated

damages amount after resigning, and he does not know whether Prompt Nursing has records of any of those payments. Id. at

92–94. When asked how Prompt Nursing determined what to pay a particular nurse under her employment contract, Rubenstein

stated that “we based” the wage on the prevailing wage determination that was issued in 2007, and that Prompt Nursing did not

calculate what the appropriate prevailing wage was for the contract. Id. at 41–42. As for the lawsuits Prompt Nursing brought

against the nurses who resigned in 2016, Rubenstein testified to the facts that he believes support Prompt Nursing's tortious

interference claims: he discussed how the nurses were threatening to leave, and, “being in the business for a while,” he could

tell that “this was a coordinated effort” that was being instigated by the three nurses who resigned. Id. at 95–101.

Defendants have offered no evidence to rebut plaintiff's claim that Prompt Nursing's corporate veil should be pierced. They

merely make a conclusory statement that each corporate defendant operates separately and maintains corporate formalities. Most

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importantly, defendants have offered no explanation as to why the nurses' contracts were assigned, seemingly gratuitously, 15

to Prompt Nursing without any documentation or payment. Freeman, 119 F.3d at 1053 (listing corporations' failure to deal at

arms length as a corporate control factor).

*15 The critical question in any veil piercing analysis is “whether the corporation is a ‘shell’ being used by the individual

shareowners to advance their own ‘purely personal rather than corporate ends.’ ” Wm. Passalacqua Builders, Inc. v. Resnick

Developers S., Inc., 933 F.2d 131, 138 (2d Cir. 1991). Here, I am satisfied that Prompt Nursing is just that, a shell used to carry

out defendants' scheme of paying nurses less than they are owed, using an unenforceable liquidated damages provision to secure

the nurses employment, and suing those nurses who quit for the liquidated damages amount. By assigning the nurses' contracts

to Prompt Nursing, defendants were able to carry out this scheme while simultaneously protecting themselves, and the other

nursing homes affiliated with defendants, from liability arising from these activities.

While it is apparent that this scheme benefitted all defendants, I find that only Rubenstein, as the owner of Prompt Nursing,

exercised sufficient control over the company to be held liable. As for Philipson and Landa—who assign and have the authority

to assign nurse contracts to Prompt Nursing—it is apparent that they participated in this scheme. But they are unaffiliated with

Prompt Nursing 16 and their dealings with Prompt Nursing were on behalf of other corporate entities. Plaintiffs have failed to

prove that Philipson and Landa sufficiently dominated Prompt Nursing such that they may be held liable as “equitable owners”

of the company. Freeman, 119 F.3d at 1051. Therefore, Prompt Nursing's veil may be pierced only to reach Rubenstein, the

actual owner of the company.

Based on the undisputed facts, plaintiffs' summary judgment motion to pierce the corporate veil is granted as to Rubenstein but

denied as to the other individual defendants. Defendants' summary judgment motion on the veil piercing issue is denied as to

Rubenstein but granted as to Philipson and Landa. In light of my finding class-wide liability on the breach of contract claim,

both Prompt Nursing and Rubenstein are liable for breach of contract damages owed to the class.

F. TVPA Claims

Both sides move for summary judgment on plaintiffs' claims brought under 18 U.S.C. §§ 1589 et seq.

1. 18 U.S.C. § 1589(a)

TVPA § 1589 prohibits obtaining the labor or services of a person by using:

(1) “force, threats of force, physical restraint, or threats of physical restraint,” (2) “serious harm or threats of serious harm,” (3)

“the abuse or threatened abuse of law or legal process,” or (4) “any scheme, plan, or pattern intended to cause the person to

believe that, if that person did not perform such labor or services, that person would suffer serious harm or physical restraint.”

18 U.S.C. § 1589(a). Congress enacted § 1589 in response to the Supreme Court's holding in United States v. Kozminski, 487

U.S. 931 (1988), which limited the definition of involuntary servitude to “physical” or “legal” coercion. United States v. Dann,

652 F.3d 1160, 1169 (9th Cir. 2011) (quoting Kozminski, 487 U.S. at 952). Through § 1589, Congress “intended to provide

federal prosecutors with the tools to combat severe forms of worker exploitation” and to address situations in which “traffickers

threaten harm to third persons” or “restrain their victims without physical violence,” all while taking into account “the individual

circumstances of [the] victim[ ] ... including [ ] age and background.” Paguirigan, 286 F. Supp. 3d at 438–439 (quoting H.R.

Conf. Rep. No. 106–939, at 101) (internal quotation marks omitted).

Here, plaintiffs contend that defendants violated § 1589(a) in two ways. First, plaintiffs argue that defendants' conduct

constituted a threat of “serious harm” under § 1589(a)(2). TVPA § 1589(c)(2), which defines serious harm broadly and includes

financial harm as a means by which someone can be threatened under the TVPA, states:

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*16 any harm, whether physical or nonphysical, including psychological, financial, or reputational

harm, that is sufficiently serious, under all the surrounding circumstances, to compel a reasonable person

of the same background and in the same circumstances to perform or to continue performing labor or

services in order to avoid incurring that harm.

Thus, the relevant question under § 1589(a)(2) is whether defendants' conduct constituted a threat of harm serious enough to

“compel a reasonable person of the same background and in the same circumstances to perform or to continue performing labor

or services in order to avoid incurring that harm.” As articulated by the Second Circuit in United States v. Rivera, 799 F.3d 180

(2d Cir. 2015), this standard is a hybrid one. The factfinder is permitted to consider the “particular vulnerabilities of a person

in the victim's position,” but is required to find that “her acquiescence be objectively reasonable under the circumstances.” Id.

at 186–187; see Hongxia Wang v. Enlander, 2018 WL 1276854, at *5 (S.D.N.Y. Mar. 6, 2018). In the class action context, “the

inquiry will not look at how each Plaintiff perceived the Defendants' actions or whether he or she subjectively felt compelled to

work. Instead, the inquiry will look at the Defendants' actions and assess how a reasonable person from the Plaintiffs' background

would respond to those actions.” Tanedo v. E. Baton Rouge Par. Sch. Bd., 2011 WL 7095434, at *8 (C.D. Cal. Dec. 12, 2011).

Second, plaintiff argues that defendants' actions constituted “abuse or threatened abuse of law or legal process” under § 1589(a)

(3). That phrase is further defined as “the use or threatened use of a law or legal process, whether administrative, civil, or

criminal, in any manner or for any purpose for which the law was not designed, in order to exert pressure on another person to

cause that person to take some action or refrain from taking some action.” § 1589(c)(1).

Plaintiff relies on the following actions by defendants to support her claims under TVPA §§ 1589(a)(2) and (a)(3): The

inclusion of a $25,000 liquidated damages provision in each contract; defendants' filing of lawsuits to enforce the $25,000

liquidated damages provision against nurses who resigned, including lawsuits in 2016 that included claims for $250,000 in

tortious interference with contract and business relations damages, despite the liquidated damages provision having been found

unenforceable by the Nassau County Supreme Court in 2010; the filing of a professional disciplinary complaint against 10

nurses who resigned in 2006 that resulted in no action against the nurses; Philipson and Landa's meeting with the Suffolk County

District Attorney, followed by the prosecution of those same 10 nurses and their attorney. Defendants make multiple arguments

as to why the TVPA's prohibitions are inapposite here. Each will be discussed in turn.

Defendants first correctly note that plaintiff, as well as several other nurses, testified that they were never verbally threatened

by defendants. Paguirigan Dep. at 26–31, 404; Valdez Dep. at 83, 104–105; Bane Dep. at 61–62, 99; Padernal Dep. at 74. That

fact alone, however, is insufficient to avoid TVPA liability, as the statute applies to subtle, nonviolent threats that may still

effectively compel an individual to keep working. See Dann, 652 F.3d at 1169.

*17 Second, defendants argue that, because the liquidated damages provision is not a penalty, their efforts to enforce the

provision constituted a valid exercise of their contractual rights, and therefore cannot give rise to liability under the TVPA.

In support, defendants rely on Panwar v. Access Therapies, Inc., 2015 U.S. Dist. LEXIS 38117, at *8–15, 2015 WL 1396599

(S.D. Ind. Mar. 25, 2015), which found that defendants' efforts to enforce a liquidated damages provision that was valid under

Indiana law did not give rise to TVPA liability. Since I have already found the provision to be unenforceable as a penalty under

New York law, this argument fails.

In a similar vein, defendants argue that plaintiff is essentially claiming that her labor was obtained through economic duress,

and they make several arguments as to why economic duress is not applicable in this context. But plaintiff is not arguing that

she was subjected to economic duress. Economic duress is typically used to void a contract on the ground that “the complaining

party was compelled to agree to its terms by means of a wrongful threat which precluded the exercise of its free will.” Stewart

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M. Muller Constr. Co. v. New York Tel. Co., 40 N.Y.2d 955, 956 (1976). Here, plaintiff is not seeking to void or disavow the

contract. Economic duress is simply not in issue.

Defendants' reference to 20 C.F.R. § 655.731(c)(10)(i)(B), which states that “the employer is permitted to receive bona fide

liquidated damages from the H–1B nonimmigrant who ceases employment with the employer prior to an agreed date,” is

similarly misplaced. First, the visas at issue in this lawsuit are not H-1B visas, but EB-3 visas. Second, of course, there is

no prohibition against defendants placing a valid liquidated damages provision in their contracts. The provision at issue here,

however, is a penalty under New York law, and 20 C.F.R. § 655.731(c)(10)(i)(A) explicitly provides that the “employer is not

permitted to require (directly or indirectly) that the nonimmigrant pay a penalty for ceasing employment with the employer

prior to an agreed date.”

Defendants also make much of the named plaintiff's and other class members' deposition testimony, and argue that it supports

their argument that the liquidated damages provision did not amount to a “threat of serious harm.” For example, class member

Padernal testified that she entered into the contract with the intent to work only for the first two years of her contract because

the remaining payment of $8,000 was “affordable to [her],” Padernal Dep. 58, and Paguirigan testified that she entered into the

contract knowing she would have to pay a penalty if she terminated her contract early, Paguirigan Dep. at 166–167. Padernal

also stated that she viewed working for Sentosa as a stepping-stone; class member Bane stated that his ultimate goal was to

come to America. Padernal Dep. at 94–95; Bane Dep. at 32.

Defendants misapprehend the serious harm requirement. As noted above, the serious harm requirement asks whether a

reasonable person “of the same background and in the same circumstances” would “perform or ... continue performing labor or

services in order to avoid incurring that harm.” One nurse's testimony that she could afford $8,000 by no means establishes how

a reasonable person would respond to the $25,000 penalty during the first year of work. Section 1589 was designed to combat

“severe forms of worker exploitation” that do not amount to actual involuntary servitude. Paguirigan, 286 F. Supp. 3d at 437.

An employee's prior awareness of the harm does not make a defendant's actions, if indeed in violation of the TVPA, any less

exploitative. Nor does a nurse's desire to come to the United States, or that he or she viewed the job as a stepping stone, give

an employer license to subject him or her to unlawful work conditions in violation of the TVPA. 17

*18 Moreover, defendants' references to the record omit several notable statements by plaintiff. Plaintiff stated during her

deposition that the liquidated damages provision “is the reason why we were not able to leave or we are scared. We have that

fear because we don't have that ability to pay the $25,000.” Paguirigan Dep. at 354. She also stated that she quit because she was

working “in the unsafe environment” due to understaffing, such that she felt she was putting “my professional license at stake ...

if I continue working,” and because of fear she felt from being “trapped because I'm thinking about the contract which says that

there's the provision of the $25,000 to be paid or I will be penalized with the $25,000 if I just leave.” Paguirigan Dep. at 26–30.

Finally, defendants contend that plaintiff has not provided evidence of damages resulting specifically from the TVPA violations,

so her TVPA claims must be dismissed. TVPA § 1595(a) provides that “an individual who is a victim of a violation of this chapter

may bring a civil action against the perpetrator ... and may recover damages and reasonable attorneys fees.” The statute has

been interpreted to provide both compensatory damages, including compensation for emotional distress, and punitive damages.

See Ditullio v. Boehm, 662 F.3d 1091, 1096–1098 (9th Cir. 2011); Lagasan v. Al-Ghasel, 92 F. Supp. 3d 445, 457–458 (E.D. Va.

2015). Defendants offer no persuasive authority that a finding of TVPA liability requires a finding of damages. In any event,

the record here sufficiently supports the existence of damages under the TVPA, and this argument therefore fails.

Having reviewed the record and considered the parties' arguments, I find on the undisputed facts that defendant Prompt Nursing

violated TVPA § 1589(a)(2).

18 The nurses in this lawsuit were all recent arrivals from the Philippines. They were not paid

the prevailing wage and a base salary, despite the terms of their contracts. Three of the nurses who were deposed complained

of being overworked or that the nursing home was understaffed, and the fourth stated that he was unjustifiably suspended.

Padernal Dep. at 51; Bane Dep. at 60–61; Paguirigan Dep. at 29; Valdez Dep. at 83. Paguirigan testified that “[w]e were just ...

fed the good side, but they never told us that you're going to work 16-hour shift, with less staff....” Paguirigan Dep. at 146.

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Critically, if she or any nurse wanted to stop working for defendants during the first year of the contract, he or she would have

had to pay the employer $25,000 pursuant to the liquidated damages provision. This provision constitutes a threat of sufficiently

serious financial harm “to compel a reasonable person of the same background and in the same circumstances to perform or

to continue performing labor or services in order to avoid incurring that harm.” TVPA § 1589(c)(2). Indeed, the confession of

judgment requirement, which is part of the liquidated damages provision, explicitly states that it is meant to “[s]ecure Employee's

performance of the Employment Term.” Contract VII (4). I also note that the $25,000 figure is larger than any sum threatened

in the TVPA cases referenced by the parties. See Dann, 652 F.3d 1160 at 1171 (threat of $8,000 payment); Javier, 2014 WL

3058456, at *6 (threatened enforcement of $15,000 confession of judgment); Nunag–Tanedo, 790 F.Supp.2d 1134, 1144 (C.D.

Cal. 2011) (threatened payment of $10,000); Macolor v. Libiran, 2016 WL 1488121, at *4 (S.D.N.Y. Mar. 25, 2016), report and

recommendation adopted, 2016 WL 1453039 (S.D.N.Y. Apr. 13, 2016) ($20,000 liquidated damages provision that applied if

plaintiff stopped working). In reaching my conclusion, I have considered the “particular vulnerabilities” of plaintiff and other

class members—all of them recent immigrants to the United States—and have also focused on whether it would be objectively

reasonable for them to continue working under the circumstances. Rivera, 799 F.3d at 186–187.

*19 Regarding TVPA § 1589(a)’s scienter requirement, the statute contains an express scienter requirement, (“[w]hoever

knowingly provides or obtains the labor or services of a person....”), and one of its subsections, TVPA § 1589(a)(4), contains

a second scienter requirement (“by means of any scheme, plan, or pattern intended to cause the person to believe that, if that

person did not perform such labor or services, that person or another person would suffer serious harm or physical restraint....”).

18 U.S.C. § 1589(a)(4) (emphasis added); United States v. Calimlim, 538 F.3d 706, 710–711 (7th Cir. 2008). As stated in

Muchira v. Al–Rawaf,

There must be evidence from which the jury could find that the employer intended to cause the victim

to believe that she would suffer serious harm—from the vantage point of the victim—if she did not

continue to work. The linchpin of the serious harm analysis under § 1589 is not just that serious harm

was threatened but that the employer intended the victim to believe that such harm would befall her if

she left her employment.

850 F.3d 605, 618 (4th Cir. 2017) (internal quotation marks and citations omitted). Here, the contract, of which Prompt Nursing

was the assignee, explicitly states that the confession of judgment provision was meant “to secure Employee's performance of

the Employment Term.” Prompt Nursing also attempted to enforce the liquidated damages provision against plaintiff and two

other nurses in 2016—in addition to suing for $250,000 in tortious interference damages—even though the liquidated damages

provision had been found unenforceable in 2010 by the Nassau County Supreme Court. On these undisputed facts, it is apparent

that Prompt Nursing acted with knowledge and intent that the liquidated damages provision would effectively coerce nurses

into continuing to work.

2. 18 U.S.C. § 1589(b)

Having found that Prompt Nursing violated TVPA § 1589(a), I also find on the undisputed facts that the remaining defendants

are liable under TVPA § 1589(b). Section 1589(b) provides that “[w]hoever knowingly benefits, financially or by receiving

anything of value, from participation in a venture which has engaged in the providing or obtaining of labor or services by any

of the means described in subsection [1589](a), knowing or in reckless disregard of the fact that the venture has engaged in the

providing or obtaining of labor or services by any of such means, shall be punished as provided in subsection (d).” As discussed

above, Rubenstein is the owner of Prompt Nursing; Luyun is the sole proprietor of Sentosa Agency; Landa and Philipson coown Sentosacare; Landa is an owner of Spring Creek and Golden Gate; and Philipson or his wife is an owner of Spring Creek. 19

Therefore, each defendant played a role in this commercial enterprise, the purpose of which is to recruit Filipino nurses to the

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United States to work at nursing homes affiliated with defendants. Thus, each defendant “knowingly benefit[ed]” financially

from labor obtained in violation of TVPA § 1589(a).

Moreover, each defendant acted with “know[ledge] or in reckless disregard of the fact that the venture ... engaged in the providing

or obtaining of labor or services” through means prohibited by TVPA § 1589(a)—in this case, through the contracts' liquidated

damages provisions. Indeed, defendants Philipson, Luyun, and Rubenstein all testified regarding their direct knowledge of the

provision, and Landa signed the contract itself. Philipson Dep. at 43–44; Luyun Dep. at 55–60; Rubenstein Dep. at 36–40; Hahn

Dec. Exh. H. The standard Golden Gate contract and the standard Spring Creek contract both contain the liquidated damages

provision—as do all the contracts defendants produced. Thus, Golden Gate and Spring Creek knew of the provision.

*20 As for Sentosa Agency, Luyun is the sole proprietor of Sentosa Agency, and the latter therefore has “no separate existence,

but rather exists as the so-called ‘alter ego’ of the owner.” United Parcel Serv. of Am., Inc. v. Net, Inc., 225 F.R.D. 416, 421

(E.D.N.Y. 2005). As for Sentosacare, Landa and Philipson are the owners of the company, with each retaining a 50 percent

ownership share. Philipson Dep. at 6–7. “As a general matter, knowledge that an agent acquires in the scope of his agency

is imputed to the principal, meaning that the latter is bound by that information even if he never actually received it.” J.J J.

Properties Inc. v. Travelers Indem. Co., 2008 WL 2735865, at *3 (S.D.N.Y. July 7, 2008).

20 Because there is no evidence that

Landa or Philipson acted outside the scope of his agency, their knowledge as Sentosacare's sole owners may therefore be imputed

to the company itself. See also Baker v. Latham Sparrowbush Assocs., 72 F.3d 246, 255 (2d Cir. 1995) (“The knowledge of a

director, officer, sole shareholder or controlling person of a corporation is imputable to that corporation.”) (internal quotation

marks omitted). In any event, both Sentosa Agency and Sentosacare operated with at least “reckless disregard” of the liquidated

damages provision in light of their involvement in bringing nurses to the United States. 18 U.S.C. § 1589(b).

3. 18 U.S.C. § 1590(a)

TVPA § 1590(a) extends liability to “any person who knowingly recruits, harbors, transports, provides, or obtains by any means,

any person for labor or services in violation of this chapter....” Defendants Luyun, Philipson, and Sentosa Agency “knowingly

recruit[ed]” nurses to work in nursing homes; defendants Prompt Nursing, Sentosacare, Rubenstein, and Landa knowingly

“provid[ed]” nurses to work in nursing homes 21 ; and defendants Spring Creek and Golden Gate knowingly “obtain[ed]” nurses.

Thus, each defendant knowingly recruited, provided, or obtained persons “for labor or services in violation of this chapter.” 18

U.S.C. § 1590(a). The same undisputed facts regarding each defendant's role in this enterprise therefore support their liability

under TVPA § 1590(a).

4. 18 U.S.C. § 1594(b)

Defendants have also violated TVPA § 1594(b), the conspiracy provision, which extends liability to whoever conspires with

another to violate, inter alia, TVPA §§ 1589 and 1590.

22 For there to be a conspiracy, there must be an agreement to violate

the prohibition on forced labor. Stein v. World-Wide Plumbing Supply Inc., 71 F. Supp. 3d 320, 330 (E.D.N.Y. 2014). There

need not be proof of an explicit agreement, but the “evidence must be sufficient to permit the jury to infer that the defendant

and other alleged coconspirators entered into a joint enterprise with consciousness of its general nature and extent.” United

States v. Svoboda, 347 F.3d 471, 477 (2d Cir. 2003) (internal quotation marks omitted). As detailed above, on the undisputed

facts, defendants “entered into a joint enterprise” for purposes of bringing nurses to the United States to work at nursing homes,

including at defendants Spring Creek and Golden Gate, and violated TVPA §§ 1589 and 1590 in doing so. Id. Defendants acted

with “consciousness of [the conspiracy's] general nature and extent,” as each defendant was aware of the liquidated damages

provision. Id. Thus, each defendant is liable under TVPA § 1594(b).

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G. Damages and Attorneys' Fees Under TVPA § 1595(a)

*21 TVPA § 1595(a) provides that “[a]n individual who is a victim of a violation of this chapter may bring a civil action ... in an

appropriate district court of the United States and may recover damages and reasonable attorneys fees.” Because the liquidated

damages provision is in each contract, plaintiff has established class-wide liability under the TVPA against all defendants. And

having found that the plaintiff and the rest of the class are entitled to damages under the TVPA, I also find that they are entitled

to reasonable attorneys' fees. Class counsel may file a motion for fees at the conclusion of the case. Damages under the TVPA

will be determined at a later time.

H. Prompt Nursing's Breach of Contract Counterclaim Against the Named Plaintiff

The only remaining claim is Prompt Nursing's counterclaim against the named plaintiff for breach of her employment contract

and attorneys' fees under the contract, which as discussed above, is limited to “actual damages proven.” JMD Holding Corp.,

4 N.Y.3d at 380. Resolution of this claim also will be determined at a later time.

III. Conclusion

For the reasons set forth above, the Clerk of Court is directed to enter partial summary judgment as follows:

1. Defendants' summary judgment motion regarding plaintiff's breach of contract claim is granted as to Landa and Philipson.

Except for Prompt Nursing's counterclaim for breach of contract against the named plaintiff, which remains undecided,

the rest of defendants' summary judgment motion is denied.

2. Plaintiffs' summary judgment motion as to liability on the breach of contract claim is granted against Prompt Nursing

and Rubenstein. Damages to the plaintiff and the class caused by defendants' breach of contract are to be determined at

a later time.

3. Plaintiffs' requested declaratory and injunctive relief is granted. The Clerk of Court is directed to enter judgment declaring

the liquidated damages provision in all plaintiffs' contracts, and the confessions of judgment, to be unenforceable and to

enter an injunction permanently enjoining defendants from attempting or threatening to enforce either.

4. Plaintiffs' summary judgment motion as to liability on the TVPA claims is granted against all defendants. Damages to the

plaintiff and the class under the TVPA are to be determined. The class is also entitled to reasonable attorneys' fees, which

are to be determined at a later date.

5. The parties are directed to appear for a status conference on November 4, 2019, at 2:00 PM to address how damages are to

be determined and to address Prompt Nursing's counterclaim for breach of contract as to the named plaintiff. The parties

are further directed to promptly meet and confer on these issues and attempt to present a joint plan to the court. By October

17, 2019 the parties should submit written proposals to the court.

SO ORDERED.

All Citations

Not Reported in Fed. Supp., 2019 WL 4647648

Footnotes

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1 Landa owns approximately 55 percent of Golden Gate. Philipson's wife also has an ownership interest in Golden Gate

of approximately 25 percent.

2 This appears to have been a standard practice for defendants. Each of the contracts produced at the class certification

stage has a letter attached to it. Like plaintiff's contract, each page of the contract is signed by the employee, but none

of the attached letters is signed by the employee.

3 Under Article VI (2)(i) and (ii), the employer may terminate the agreement under the following conditions:

i. Employee willfully or intentionally undertakes or commits any conduct that is harmful to Employer's practice

or reputation;

ii. Breach of any term or condition of this Agreement as determined by Employer and/or its designee/assignee,

which shall include, but not be limited to, Employee's failure or refusal to comply with the reasonable directions,

policies, standards and regulations that Employer and/or its designee/assignee may establish from time to time.

4 Landa owns approximately 48 percent of Spring Creek, and Philipson, or his wife, owns approximately 38 percent.

5 Other class members who were deposed indicated they were not represented by counsel when they signed their contracts

or did not show the contract to a lawyer before signing.

6 Defendants argue that the Anilao decision does not have res judicata effect because the case settled before trial, and in

the same decision, the court denied the nurses' motion for summary judgment. Plaintiff has not argued that the decision

constitutes res judicata, and I do not rely on it as such.

7 Although the contract refers to “further” orientation and training, there is no evidence, and defendants do not argue,

that any training or orientation occurred prior to the nurse beginning work in the United States. As with each provision

discussed above, the provision concerning “further” orientation and training is in each contract, but several contracts

specify that the applicable minimum wage would be paid as opposed to $12.00 per hour.

8 Kupka, however, admitted that this document does not show income or losses and that it could be argued that Profit and

Loss Statement is “not the best description of this document.” Kupka Dep. at 47–49.

9 In addition, the section of Kupka's report concerning lost profits is irrelevant. “Lost profits are consequential damages

when, as a result of the breach, the non-breaching party suffers loss of profits on collateral business arrangements.”

Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109 (2d Cir. 2007). Here, Kupka's analysis is based

on Prompt Nursing's losses in relation to its nursing home clients, and is therefore properly categorized as consequential

damages that “must have been brought within the contemplation of the parties as the probable result of a breach at the

time of or prior to contracting.” Kenford Co. v. Cty. of Erie, 73 N.Y.2d 312, 319 (1989). There is no evidence that any

nurse contemplated, or should have contemplated lost profit damages at the time the contracts were executed. Id.; see

also Valentine Dolls, Inc. v. McMillan, 25 Misc. 2d 551 (Sup. Ct. Kings Cty. 1960) (holding that lost profits are not

recoverable in a breach of contract action against an employee). Therefore, even if Kupka's testimony were admissible,

I would still not consider his lost profits analysis.

10 This figure is comprised of the amounts listed in the Declaration and Undertaking together with plaintiff's rent.

11 Landa signed the contract as a representative of Golden Gate, and not in his personal capacity.

12 LLC veil-piercing is permitted under New York law. Retropolis, Inc. v. 14th St. Dev. LLC, 17 A.D.3d 209, 210 (N.Y.

2005).

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13 As to this one contract, which was between nurse Robin Ancheta and Immediate Home Care, Rubenstein could not

recall who negotiated on behalf of the nursing home. At the time this contract was assigned, Rubenstein was a managing

partner of Immediate Home Care. Rubenstein Dep. at 56–57.

14 Philipson testified that he was also involved in calculating the liquidated damages amounts. Philipson Dep. at 43–44.

15 Defendants argue that there was consideration for these assignments because Prompt Nursing assumed all liabilities and

responsibilities under the contract. Defs.' Mot. at 7. This does not explain the purpose of this arrangement and why its

existence was never documented.

16 No evidence has been presented indicating that either Philipson or Landa have an ownership interest in Prompt Nursing.

17 Defendants also point out that several nurses were aware of the “2007 incident,” presumably referring to the

administrative complaint, the attempted prosecution, or the civil suits for breach of contract defendants filed against the

nurses, through news reports in the Philippines, yet entered into their contracts anyway. Defs.' Mot. at 12. This argument

fails for the same reasons as the others addressed above.

18 Having found liability under § 1589(a)(2), I do not reach whether any defendant violated § 1589(a)(3).

19 For several of the nursing homes that Philipson was asked about in his deposition, he could not recall whether he or his

wife has an ownership interest. Philipson Dep. at 9, 37.

20 This general rule does not apply when the agent has “totally abandoned” the interests of the principal, an exception that

is inapplicable here. In re Mediators, Inc., 105 F.3d 822, 827 (2d Cir. 1997).

21 Prompt Nursing is a staffing agency that “provides” nursing homes with nurses. Landa is involved in the visa application

process—he provided the letter addressed to the embassy for plaintiff's visa—and thus he also “provides” nursing homes

with nurses. Sentosacare paid the costs listed on the Declaration and Undertaking that plaintiff signed, and thus it is also

involved in “provid[ing]” nursing homes with nurses. Rubenstein, in addition to being the owner of Prompt Nursing,

testified to his personal involvement in Prompt Nursing's business, as described earlier. He is therefore also involved

in “provid[ing]” nursing homes with nurses.

22 Having found that defendants violated §§ 1589 and 1590, there is no need to consider whether they are liable for attempt

under § 1594(a).

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Phillipps v. Wells Fargo Bank, N.A., Not Reported in Fed. Supp. (2016)

2016 WL 4703067

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2016 WL 4703067

Only the Westlaw citation is currently available.

United States District Court, E.D. Texas, Sherman Division.

Tyson PHILLIPPS, as Trustee for 1401 Trail View Trust Jenny L. Sanchez

v.

WELLS FARGO BANK, N.A.

CASE NO. 4:16-CV-420

|

Signed 09/08/2016

Attorneys and Law Firms

Wade Travis Kricken, Dallas, TX, for Tyson Phillipps.

Robert T. Mowrey, Jason Levi Sanders, Vincent J. Hess, Locke Lord LLP, Dallas, TX, for Wells Fargo Bank, N.A.

MEMORANDUM OPINION

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

*1 Pending before the Court is Defendant's Motion to Dismiss (Dkt. #8). The Court, having considered the relevant pleadings,

finds that Defendant's motion should be granted.

BACKGROUND

Plaintiff commenced this lawsuit against Defendant in state court. After Defendant removed this case, the Court entered its Order

and Advisory, giving Plaintiff an opportunity to file an amended complaint. Plaintiff did not file filed an amended complaint.

On August 11, 2016, Defendant filed a motion to dismiss (Dkt. #8). No response was filed. However, in the Rule 26(f) report,

it was noted that Plaintiff is not opposed to the motion to dismiss.

LEGAL STANDARD

Defendant moves for dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure, which authorizes certain defenses

to be presented via pretrial motions. A Rule 12(b)(6) motion to dismiss argues that, irrespective of jurisdiction, the complaint

fails to assert facts that give rise to legal liability of the defendant. The Federal Rules of Civil Procedure require that each claim

in a complaint include “a short and plain statement ... showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2).

The claims must include enough factual allegations “to raise a right to relief above the speculative level.” Bell Atl. Corp. v.

Twombly, 550 U.S. 544, 555 (2007). Thus, “[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter,

accepted as true, to ‘state a claim to relief that is plausible on its face.’ ” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting

Twombly, 550 U.S. at 570).

Rule 12(b)(6) provides that a party may move for dismissal of an action for failure to state a claim upon which relief can be

granted. FED. R. CIV. P. 12(b)(6). The Court must accept as true all well-pleaded facts contained in the plaintiff's complaint and

view them in the light most favorable to the plaintiff. Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996). In deciding a Rule 12(b)

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(6) motion, “[f]actual allegations must be enough to raise a right to relief above the speculative level.” Gonzalez v. Kay, 577

F.3d 600, 603 (5th Cir. 2009) (quoting Twombly, 550 U.S. at 555). “The Supreme Court recently expounded upon the Twombly

standard, explaining that ‘[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true,

to state a claim to relief that is plausible on its face.’ ” Gonzalez, 577 F.3d at 603 (quotingIqbal, 556 U.S. at 678). “A claim

has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the

defendant is liable for the misconduct alleged.” Id. “It follows, that ‘where the well-pleaded facts do not permit the court to

infer more than the mere possibility of misconduct, the complaint has alleged – but it has not ‘shown’ – ‘that the pleader is

entitled to relief.’ ” Id.

In Iqbal, the Supreme Court established a two-step approach for assessing the sufficiency of a complaint in the context of a Rule

12(b)(6) motion. First, the Court should identify and disregard conclusory allegations for they are “not entitled to the assumption

of truth.” Iqbal, 556 U.S. at 664. Second, the Court “consider[s] the factual allegations in [the complaint] to determine if they

plausibly suggest an entitlement to relief.” Id. “This standard ‘simply calls for enough facts to raise a reasonable expectation

that discovery will reveal evidence of’ the necessary claims or elements.” Morgan v. Hubert, 335 Fed.Appx. 466, 470 (5th Cir.

2009). This evaluation will “be a context-specific task that requires the reviewing court to draw on its judicial experience and

common sense.” Iqbal, 556 U.S. at 679.

*2 In determining whether to grant a motion to dismiss, a district court may generally not “go outside the pleadings.” Scanlan

v. Tex. A&M Univ., 343 F.3d 533, 536 (5th Cir. 2003). When ruling on a motion to dismiss a pro se complaint, however, a

district court is “required to look beyond the [plaintiff's] formal complaint and to consider as amendments to the complaint those

materials subsequently filed.” Howard v. King, 707 F.2d 215, 220 (5th Cir. 1983);Clark v. Huntleigh Corp., 119 Fed.Appx. 666,

667 (5th Cir. 2005) (finding that because of plaintiff's pro se status, “precedent compels us to examine all of his complaint,

including the attachments”); FED. R. CIV. P. 8(e) (“Pleadings must be construed so as to do justice.”). Furthermore, a district

court may consider documents attached to a motion to dismiss if they are referred to in the plaintiff's complaint and are central

to the plaintiff's claim. Scanlan, 343 F.3d at 536.

DISCUSSION AND ANALYSIS

Plaintiff is unopposed to the granting of the motion to dismiss. A review of Defendant's motion also illustrates that Plaintiff

has no plausible claims against Defendant.

It is therefore ORDERED that Defendant's Motion to Dismiss (Dkt. #8) is hereby GRANTED and Plaintiff's claims against

Defendant are DISMISSED with prejudice.

All motions not previously granted are hereby DENIED.

The Clerk is directed to CLOSE this civil case.

SIGNED this 8th day of September, 2016.

All Citations

Not Reported in Fed. Supp., 2016 WL 4703067

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Phillips v. Valley View Surgical, LLC, 498 P.3d 1290 (2021)

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498 P.3d 1290 (Table)

Unpublished Disposition

This is an unpublished disposition. See Nevada Rules of Appellate Procedure, Rule 36(c) before citing.

Court of Appeals of Nevada.

David Lee PHILLIPS, an Individual; and Arthur Icke, an Individual, Appellants,

v.

VALLEY VIEW SURGICAL, LLC, a Nevada Limited Liability Company, Respondent.

David Lee Phillips, an Individual; and Arthur Icke, an Individual, Appellants,

v.

Valley View Surgical, LLC, a Nevada Limited Liability Company, Respondent.

No. 81592-COA, No. 81793-COA

|

FILED NOVEMBER 17, 2021

David Lee Phillips and Arthur Icke appeal from the district court's findings of facts and conclusions of law following a bench

trial and a later order awarding plaintiff attorney fees. Eighth Judicial District Court, Clark County; Richard Scotti, Judge.

Attorneys and Law Firms

Christopherson Law Offices

Royal & Miles, LLP

ORDER OF AFFIRMANCE

**1 Icke suffered a shoulder injury in a 2015 car accident, and he maintained a personal injury action to recover damage

from the accident. 1 He retained co-appellant Phillips as his personal injury attorney. Concerned that Icke's insurance would

not cover the surgery, Phillips and Icke entertained alternative funding options. Specifically, Phillips and Icke contacted Valley

View Surgical, LLC, about funding Icke's shoulder surgery.

Valley View does not perform surgeries; it is a medical financing company. In some cases, Valley View pays for a patient's

operation upfront so long as the patient signs a lien giving Valley View an interest in the patient's subsequent personal injury

proceeds. Before entering these arrangements, Valley View investigates the patient's claim to evaluate the risk involved with

paying for the surgery upfront. Relatedly, Valley View only provides this service if the injured party has retained counsel. Valley

View then gives the patient and his attorney a rough estimate of the final cost before proceeding to fund the surgery.

After the medical services are performed, the medical providers issue an itemized accounting to Valley View, and Valley View

issues a comprehensive invoice to the patient. Valley View has a relationship with the medical providers, so the rates billed

to Valley View by the medical providers are sometimes less than the amount billed to standard consumers. Nevertheless, to

make its profit, the amount in this invoice is greater than the total amount billed to Valley View by the medical providers. The

formula used to calculate this mark-up is proprietary, so the forms supporting the agreement are vague with respect to how

Valley View reaches the figure in its comprehensive invoice. That invoice is then satisfied via the lien against the patient's

eventual personal injury proceeds.

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Phillips, Icke, and Valley View followed that business model here. Valley View investigated Icke's claim and gave Phillips a

general quote for the operation. In the end. Valley View determined that the relevant car insurance policies provided sufficient

coverage to provide upfront funding for Icke's shoulder surgery.

On the morning of his surgery, Icke reported to Affinity Surgery Center. After arriving, and shortly before the operation, Affinity

personnel gave Icke three documents, all of which were from Valley View, not Affinity Surgery Center. The documents included

the lien agreement, a waiver of private medical insurance, and a disclosure that stated Valley View was not a medical provider.

In the disclosure, Icke agreed to pay a usual and customary amount to be set by Valley View. Icke signed all the forms and had

the shoulder surgery. After the surgery, Phillips, Icke's attorney, received the same lien agreement (but not the other two forms),

and he signed the lien agreement under language that provided “[t]he undersigned attorney of record acknowledges this lien

and agrees to observe the above terms for the protection of said medical provider.”

**2 With the surgery complete, Valley View received the bills from the medical provider, composed the comprehensive invoice

for Icke and Phillips, sent the invoice to Phillips, and started following Icke's case. Primarily, Valley View followed Icke's case by

way of updates from Phillips's law firm. In the months after the surgery, Valley View representative Stefanie Hass communicated

with a woman named Tiffany in Phillips's office. After some time, Tiffany left Phillips's office and Hass communicated directly

with Phillips. Despite Hass's diligent efforts, communication was sparse as many of her requests for an update went unanswered.

Occasionally, and as late as December 2017, Phillips responded to Hass's inquiry by saying Icke's claim was still open. Based

on these representations, Valley View waited for a resolution. During this period, Hass kept a communication log as she does

with all cases after Valley View pays for the medical services.

That December 2017 message was the last between Phillips and Valley View. In June 2018, after several more requests for

information, Hass notified Phillips that she was going to involve Valley View's legal counsel because Phillips had stopped

responding. After counsel for Valley View was involved, Valley View learned that Icke's claim had actually settled in 2016.

The claim had settled for the policy limits on two applicable insurance policies, and Phillips had used Valley View's invoice

to help secure $150,000 in total insurance proceeds.

Valley View sued both Icke and Phillips to enforce its lien contract. In December 2018, Valley View extended an offer of

judgment under NRCP 68 to Phillips and Icke, offering to settle the case for $49,999. Phillips and Icke did not accept this offer.

The case eventually went to a two-day bench trial where Valley View called two witnesses: Stefanie Hass and David Phillips.

The parties submitted closing arguments in writing, and the district court issued its findings of fact and conclusions of law in

July 2020. The district court found the lien contract enforceable and entered a judgment against Phillips and Icke. Subsequently,

Valley View filed a motion for attorney fees based on NRCP 68. Phillips and Icke timely appealed the district court's findings

and conclusions. Afterward, the district court granted the motion for attorney fees in the amount of $42,185 and for costs in the

amount of $7,126.45. Phillips and Icke timely appealed the fees order as well. We now address these consolidated appeals.

Foremost is Phillips and Icke's challenge to the enforceability of the lien contract. Contract enforceability prompts a dual

standard of review; we review questions of law de novo while giving deference to the district court's factual determinations.

Whitemaine v. Aniskovich, 124 Nev. 302, 308, 183 P.3d 137, 141 (2008).

Phillips and Icke offer numerous theories, arguing each is sufficient to preclude enforcement of the lien contract here. Namely,

they argue Valley View did not prove that it was entitled to Phillips and Icke's performance, that Valley View's practices are

deceptive, that the agreement offends public policy, and that the agreement is unconscionable. We address each point in turn

below.

First, Phillips and Icke assert they did not owe Valley View, a medical financing company, any duties because Phillips and Icke

signed a lien with the “medical provider” while Valley View is a medical financier, not a medical provider. 2 In other words,

Phillips and Icke argue that their misunderstanding regarding the nature of Valley View's business renders the lien agreement

unenforceable. We disagree.

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**3 A unilateral mistake makes a contract voidable only if the mistake is material. Home Savers, Inc. v. United Sec. Co., 103

Nev. 357, 358-59, 741 P.2d 1355, 1356 (1987). Further, a “contract should be construed, if logically and legally permissible,

so as to effectuate valid contractual relations, rather than in a manner which would render the agreement invalid, or render

performance impossible.” Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 111, 424 P.2d 101, 104 (1967).

Here, it is undisputed that Phillips, Icke, and Valley View agreed to a contractual relationship wherein Icke would receive

a shoulder surgery and Phillips would ensure Valley View received compensation via a lien on Icke's later personal injury

recovery. The sole dispute on this point deals with a slight incongruity between the language on the lien and the nature of

Valley View's business. 3 Despite Phillips and Icke initially contacting Valley View, Valley View's investigation into Icke's

personal injury claim, and the quote from Valley View to Phillips and Icke, they assert language discrepancy renders the entire

agreement unenforceable notwithstanding the parties’ understanding of the relationship before Icke underwent surgery. Phillips

and Icke agreed to a lien on Icke's personal injury recovery with Valley View; their only arguable mistake is with respect to

their interpretations of Valley View's business. This lien contract can be logically construed as a valid agreement, and because

any mistake on the part of the parties was immaterial, we elect to construe it as an enforceable agreement.

In all, we disagree that the use of the “medical provider” language in Valley View's lien can invalidate an otherwise understood

and agreed-to lien contract.

After challenging the language of the lien, Phillips and Icke assert the agreement should not be enforced because Valley View's

business is a deceptive trade practice. While we acknowledge some understandable confusion we agree with the district court

that no deceptive practice occurred.

Under the Nevada Deceptive Trade Practices Act (NDTPA), a business may not knowingly make a false representation as to

its affiliation with another entity, NRS 598.0915(3), or any other element of the transaction, NRS 598.0915(15). “Knowingly”

is “the intent to do that which the law prohibits.” Poole v. Nev. Auto Dealership Invs., LLC, 135 Nev. 280, 283-84, 449 P.3d

479, 483 (Ct. App. 2019) (internal quotation marks omitted). And finally, the commercial entity's misrepresentation must relate

to a material fact, meaning either (a) a reasonable person would attach importance to the fact, or (b) the representing party has

reason to know the recipient will find the fact important. Id. at 287-90, 449 P.3d at 485-87.

Here, and similar to the discussion above, any mistake or alleged deception falls to an inconsequential fact. Phillips and Icke

sought alternative funding solutions for Icke's shoulder surgery, and they started the process with Valley View. In the end,

the parties agreed to a lien on Icke's recovery in exchange for upfront surgery funding. The nature of Valley View's business

is immaterial. Moreover, Phillips and Icke cite NRS 598.0915(3) and (15), but they fail to show Valley View knowingly

misrepresented any affiliation. Phillips and Icke merely demonstrate that Valley View's full name (Valley View Surgical) is

similar to another entity in the area (Valley View Surgery Center).

**4 Thus, Phillips and Icke have failed to show that Valley View acted with the requisite intent to violate the NDTPA, and

the district court did not err on this point when it enforced the lien contract.

Next, Phillips and Icke assert the lien should not be enforced because it offends public policy. We disagree.

Any contract that tends to operate to the detriment of the public interest is void. Clark County v. Bonanza No. 1, 96 Nev. 643,

652, 615 P.2d 939, 945 (1980). A contract operates to the detriment of the public interest when the interest in the contract's

enforcement is clearly outweighed by a public policy against enforcement. Sylver v. Regents Bank, N.A., 129 Nev. 282, 290,

300 P.3d 718, 723 (2013). For example, the Nevada Supreme Court has refused to enforce contracts that deter whistleblowing.

Clark v. Columbia/HCA Info. Servs., Inc., 117 Nev. 468, 480-81, 25 P.3d 215, 223-24 (2001) (noting whistleblowing was one

of two justifications for denying enforceability). Thus, to refuse enforcement under public policy, the effects of the contract

must have implications for the public at large.

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Here, the lien contract does not threaten the public at large. Unlike agreements that deter whistleblowing, the public is, on

an individual scale, helped by lien contracts such as the one in this case. Phillips and Icke entertained alternative funding

solutions because they were concerned that Icke's insurance would not cover the operation. After Valley View agreed to fund

the operation, Icke proceeded with the surgery to repair his shoulder. We acknowledge Phillips and Icke's arguments regarding

Valley View's proprietary formula for cost calculation and the fact that paying for an operation through Valley View may be

more expensive than it would be otherwise. At the same time, however, we recognize that Icke may not have received the

surgery without Valley View.

Thus, the district court did not err when it enforced the contract despite Phillips and Icke's public policy challenges. 4

Finally, Phillips and Icke ask this court to refuse enforcement of the lien because it is unconscionable. Again, we not persuaded.

This court may refuse to enforce a contract upon a determination that the contract is unconscionable. Burch v. Second Judicial

Dist. Court, 118 Nev. 438, 441, 49 P.3d 647, 649 (2002). To prevent enforcement, the party arguing unconscionability must

establish both procedural and substantive unconscionability. D.R. Horton, Inc. v. Green, 120 Nev. 549, 553-54, 96 P.3d 1159,

1162 (2004), overruled on other grounds by U.S. Home Corp. v. Michael Ballesteros Tr., 134 Nev. 180, 192, 415 P.3d 32, 42

(2018). Procedural unconscionability occurs when a party lacks an opportunity to meaningfully review the terms or the meaning

of those terms are not readily apparent from the face of the agreement. Id. at 554, 96 P.3d at 1162. Put another way, procedural

unconscionability generally involves one party's failure to reasonably inform the other. U.S. Home Corp., 134 Nev. at 190, 415

P.3d at 40-41. Substantive unconscionability refers more to the one-sidedness of the terms. D.R. Horton, 120 Nev. at 554, 96

P.3d at 1162-63.

**5 The documents here are not unconscionable and do not warrant this court's intervention. Procedurally, Icke was in a

challenging position where he was presented with the forms at the medical center shortly before his surgery. However, the

procedural concerns on this agreement end there. The forms themselves do not contain any fine print or hidden clauses, they are

not overwhelmingly long, and they are not difficult to understand. Moreover, the documents are clearly titled and affiliated with

Valley View. Substantively, Phillips and Icke concede in their briefing that this half of the analysis is the weaker of the two. The

terms here are not especially one-sided. Icke receives a shoulder surgery without any upfront payment. Valley View receives a

profitable return at a later date after bearing the risk of Icke receiving a personal injury recovery and in a sufficient amount.

Accordingly, the agreement here is neither procedurally nor substantively unconscionable, and we decline to intervene on these

grounds.

Having determined the lien contract is enforceable, we turn now to the district court's award of attorney fees under NRCP 68.

We will not disturb a fee award under NRCP 68 absent an abuse of discretion by the district court. O'Connell v. Wynn Las Vegas,

LLC, 134 Nev. 550, 555-56, 429 P.3d 664, 669 (Ct. App. 2018).

NRCP 68 governs offers of judgment and the concomitant penalties. It applies to multiple defendants if (1) there is a single

common theory of liability against the defendants, and (2) the same plaintiff entity is authorized to settle the case against the

defendants. NRCP 68(c)(2). This rule was amended in 1999; the rule now permits un-apportioned offers to multiple defendants.

Under NRCP 68(f), if defendants reject a qualifying offer, the defendants-offerees “must pay the offeror's post-offer costs and

expenses.” To assist in future analyses, the Nevada Supreme Court issued factors in the Beattie decision:

(1) whether the plaintiffs claim was brought in good faith; (2) whether the defendants’ offer of judgment

was reasonable and in good faith in both its timing and amount; (3) whether the plaintiffs decision to

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reject the offer and proceed to trial was grossly unreasonable or in bad faith; and (4) whether the fees

sought by the offeror are reasonable and justified in amount.

Beattie v. Thomas, 99 Nev. 579, 588-89, 668 P.2d 268, 274 (1983). These are factors for the district court to weigh; they are

not elements. Id. at 589, 668 P.2d at 274. The district court must consider these factors before awarding the full amount of

fees requested. Id.

Here, the fact that Valley View made the offer to multiple defendants without apportioning the offer is immaterial due to the

1999 NRCP 68 amendments. Next, the district court considered all the factors under Beattie on the way to granting fees under

the offer of judgment rule. The district court couched its Beattie analysis in the fact that the offer of judgment, $49,999, was

reasonable compared to Valley View's actual recovery of over $60,000.

Thus, Phillips and Icke's arguments on the un-apportioned offer are misplaced based on outdated court rules, and the district

court considered the Beattie factors before awarding fees. We discern no abuse of discretion here.

In addition to the propriety of the award, Phillips and Icke also challenge its amount as outrageous for a two-day trial. When

determining the reasonableness of an award, a district court must consider the Brunzell factors:

(1) the qualities of the advocate: his ability, his training, education, experience, professional standing and

skill; (2) the character of the work to be done: its difficulty, its intricacy, its importance, time and skill

required, the responsibility imposed and the prominence and character of the parties where they affect the

importance of the litigation; (3) the work actually performed by the lawyer: the skill, time and attention

given to the work; (4) the result: whether the attorney was successful and what benefits were derived.

**6 Brunzell v. Golden Gate Nat'l Bank, 85 Nev. 345, 349, 455 P.2d 31, 33 (1969).

Here, Phillips and Icke's argument misconstrues the nature of the fee award. As an award issued under NRCP 68, this award

does not compensate Valley View for the trial; it compensates Valley View for fees incurred between Phillips and Icke's rejection

of the Rule 68 offer and the case's final resolution. From this perspective, the attorney fees are understandable as Valley View

issued the offer in December 2018 and the trial concluded in March 2020.

Without more, there is insufficient evidence the district court abused its discretion here. Accordingly, we

ORDER the judgment of the district court *1291 AFFIRMED. 5

All Citations

498 P.3d 1290 (Table), 2021 WL 5370984

Footnotes

1 We recount the facts only as necessary for our disposition.

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2 Phillips and Icke also challenge the lien because it does not fit any of the statutory lien categories under NRS Chapter

108; however, they do not offer any authority to support the proposition that all liens must come from NRS Chapter 108

and in fact argue this case as a lien contract. Accordingly, we reject this argument. Edwards v. Emperor's Garden Rest.,

122 Nev. 317, 330 n.38, 130 P.3d 1280, 1288 n.38 (2006) (explaining that this court need not consider an appellant's

argument that is not cogently argued or lacks the support of relevant authority).

3 As an aside, we note that this argument only applies to Phillips because Icke signed a separate acknowledgement that

explained the nature of Valley View's business.

4 Further, a contract may be void for public policy if its formation represents a violation of a statute. See Sylver, 129 Nev.

at 290-91, 300 P.3d at 724. We considered the statutes cited by Phillips and Icke and conclude they are inapplicable. E.g.,

NRS Chapter 604C (passed in 2019 and not retroactive); NRS 645E.920 (repealed statute governing mortgage bankers).

5 Insofar as the parties raise arguments that are not specifically addressed in this order, we have considered the same and

conclude that they either do not present a basis for relief or need not be reached given the disposition of this appeal.

End of Document © 2023 Thomson Reuters. No claim to original U.S. Government Works.

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Only the Westlaw citation is currently available.

United States District Court, D. Nevada.

PROTHERA, INC., d\b\a SFI USA, Plaintiff,

v.

ZHOU J. YE, Defendant.

Case No. 3:18-cv-00410-MMD-CLB

|

Signed 06/10/2020

Attorneys and Law Firms

Glenn Mark Azzinari, Pro Hac Vice, A.Y. Strauss, New York, NY, Frank C. Gilmore, Robison, Sharp, Sullivan & Brust, Reno,

NV, for Plaintiff.

W. West Allen, Ryan T. O'Malley, Howard & Howard Attorneys PLLC, Las Vegas, NV, for Defendant.

ORDER

MIRANDA M. DU, CHIEF UNITED STATES DISTRICT JUDGE

I. SUMMARY

*1 Plaintiff Prothera, Inc., doing business as SFI USA, sued Defendant Zhou J. Ye for trademark infringement, breach of

contract, and related causes of action, for pretending to be a doctor in order to purchase Plaintiff's nutraceuticals, and then

selling them—without permission and at a profit—on Amazon's online marketplace. (ECF No. 1.) Before the Court is Plaintiff's

motion for partial summary judgment on only its breach of contract claim (“Motion”). 1 (ECF No. 43.) Because the Court is

persuaded by the only argument Defendant raised in opposition to the Motion, that the liquidated damages clause in the contract

between the parties upon which Plaintiff relies in its Motion is unenforceable—and as further explained below—the Court will

deny the Motion.

II. BACKGROUND

Notably, there are no factual disputes pertinent to the Motion. (ECF Nos. 43 at 3-7, 47 at 1-5, 51 at 2.) Defendant instead makes

the single, and purely legal, argument that the Motion should be denied because the liquidated damages clause in the operative

contract is unenforceable, and Plaintiff seeks to establish its damages in the Motion via that liquidated damages clause. (ECF

No. 47 at 5-13.)

Plaintiff seeks to sell its products only through healthcare providers. (ECF No. 51 at 2.) Defendant is not a healthcare provider.

(Id.) To get Plaintiff's products for resale, Defendant pretended to be a healthcare provider, specifically by finding healthcare

providers' names and credentials on the internet, and using those assumed identities to enter into a contract with Plaintiff to

resell Plaintiff's products. (Id.) More specifically, to obtain Plaintiff's products for unauthorized resale, Defendant executed the

ProThera Inc. d/b/a SFI USA HCP Product Purchase Terms and Conditions (the “Agreement”). (Id.; see also ECF No. 47-1

(Agreement).) The Agreement prohibits advertising, listing, offering for sale, selling, or distributing Plaintiff's products online,

including through Amazon. (ECF No. 51 at 2.) Nonetheless, Defendant did. (Id.)

The Agreement contains a liquidated damages clause. (Id.) It reads:

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Liquidated Damages. HCP acknowledges that the Sections are necessary and proper in order to protect

SFI's brand reputation and goodwill, and to preserve authorized health care practitioners' (including

HCP's) ability to make a reasonable margin on Product sales. HCP agrees that if it violates the Sections,

SFI will be damaged in an amount that will be difficult or impossible to ascertain. Accordingly, HCP

agrees to pay liquidated damages to compensate SFI for damages resulting from HCP's breach of the

Sections (the “Liquidated Damages”). The parties have made advance provision for Liquidated Damages

to avoid controversy, delay and expense in the event of any breach of the Sections. Liquidated Damages

shall be an amount equal to $500.00 for each separate breach for each day of breach. Each breach with

respect to a Product shall be considered a separate breach for the purposes of this Section. For example,

if HCP is in breach with respect to three different Product for a period of 10 days, HCP will be deemed

to have committed 30 breaches and be subject to Liquidated Damages of $6,000.00. The Liquidated

Damages are estimated based on the various damages that SFI expects to suffer upon any breach of

the Sections, including lost sales; infringement of SFI's trademarks and other intellectual property;

irreparable harm to SFI's business, customer relationships, goodwill and quality control procedures; and

costs of investigating breaches. HCP agrees that the Liquidated Damages are not a penalty and are

reasonably estimated in light of the anticipated or actual harm that would be caused by a breach and

the difficulty of proving the amount of loss and otherwise providing an adequate remedy to SFI and

other affected health care providers. HCP hereby waives any defense to SFI's right to obtain liquidated

damages on the basis that actual damages are calculable or that the liquidated damages do not represent

a reasonable determination of damages or otherwise constitute a penalty.

*2 (ECF No. 47-1 at 3.) There is no dispute here that Defendant is “HCP,” and Plaintiff is “SFI,” as those terms are used in

the liquidated damages clause.

As Plaintiff explains, the only dispute as to the Motion is about this liquidated damages clause. (ECF No. 51 at 2.) Plaintiff

relies on the liquidated damages clause for the damages element of its prima facie breach of contract claim. (ECF No. 43 at

10-13.) Using this clause, Plaintiff calculated that Defendant breached the Agreement 300 times because Defendant made 300

unauthorized sales of Plaintiff's products, and thus Plaintiff is entitled to $150,000 in damages, or $500 per breach multiplied by

the 300 breaches. (Id. at 12-13.) As noted, Defendant counters that Plaintiff has not shown it is entitled to summary judgment

because its breach of contract claim depends in part on the liquidated damages clause, which Defendant argues is unenforceable.

(ECF No. 47.)

III. LEGAL STANDARD

“The purpose of summary judgment is to avoid unnecessary trials when there is no dispute as to the facts before the court.”

Nw. Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1471 (9th Cir. 1994). Summary judgment is appropriate when the

pleadings, the discovery and disclosure materials on file, and any affidavits “show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317,

322 (1986). An issue is “genuine” if there is a sufficient evidentiary basis on which a reasonable fact-finder could find for the

nonmoving party and a dispute is “material” if it could affect the outcome of the suit under the governing law. Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). Where reasonable minds could differ on the material facts at issue, however,

summary judgment is not appropriate. See id. at 250-51. “The amount of evidence necessary to raise a genuine issue of material

fact is enough ‘to require a jury or judge to resolve the parties' differing versions of the truth at trial.’ ” Aydin Corp. v. Loral

Corp., 718 F.2d 897, 902 (9th Cir. 1983) (quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288-89 (1968)). In evaluating

a summary judgment motion, a court views all facts and draws all inferences in the light most favorable to the nonmoving party.

See Kaiser Cement Corp. v. Fishbach & Moore, Inc., 793 F.2d 1100, 1103 (9th Cir. 1986).

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The moving party bears the burden of showing that there are no genuine issues of material fact. See Zoslaw v. MCA Distrib.

Corp., 693 F.2d 870, 883 (9th Cir. 1982). Once the moving party satisfies Rule 56's requirements, the burden shifts to the party

resisting the motion to “set forth specific facts showing that there is a genuine issue for trial.” Anderson, 477 U.S. at 256. The

nonmoving party “may not rely on denials in the pleadings but must produce specific evidence, through affidavits or admissible

discovery material, to show that the dispute exists,” Bhan v. NME Hosps., Inc., 929 F.2d 1404, 1409 (9th Cir. 1991), and “must

do more than simply show that there is some metaphysical doubt as to the material facts.” Orr v. Bank of Am., NT & SA, 285

F.3d 764, 783 (9th Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986)). “The mere

existence of a scintilla of evidence in support of the plaintiff's position will be insufficient.” Anderson, 477 U.S. at 252.

IV. DISCUSSION

*3 Defendant argues the liquidated damages clause in the Agreement is unenforceable because it imposes a penalty for breach

that does not reasonably approximate the actual damages Plaintiff will suffer in the event of breach—nor did it here. (ECF

No. 47 at 7.) Plaintiff counters that liquidated damages clauses are presumed valid in Nevada, and the clause is enforceable

as written despite Defendant's contrary interpretation, which Plaintiff argues is unreasonable. (ECF No. 51 at 5-8.) The Court

agrees with Defendant. The Court will first discuss the governing law, and then analyze the liquidated damages clause in the

context of the parties' arguments.

To start, “[a] plaintiff in a breach of contract action must ‘show (1) the existence of a valid contract, (2) a breach by the defendant,

and (3) damage as a result of the breach.’ ” Brown v. Kinross Gold U.S.A., Inc., 531 F. Supp. 2d 1234, 1240 (D. Nev. 2008)

(quoting Saini v. Int'l Game Tech., 434 F. Supp. 2d 913, 920-21 (D. Nev. 2006)). 2

 The parties' arguments about the liquidated

damages clause are situated within the damages element of Plaintiff's breach of contract claim, as Plaintiff moved for summary

judgment on its breach of contract claim only. (ECF Nos. 43, 47.)

Next, the parties' arguments about the liquidated damages clause require the Court to interpret that clause in light of the

Agreement. Interpretation of a contract is a question of law. See Shelton v. Shelton, 78 P.3d 507, 510 (Nev. 2003).

3

 “A basic

rule of contract interpretation is that ‘[e]very word must be given effect if at all possible.’ ” Musser v. Bank of Am., 964 P.2d 51,

54 (Nev. 1998) (alteration in original) (quoting Royal Indem. Co. v. Special Serv. Supply Co., 413 P.2d 500, 502 (Nev. 1966)).

Additionally, when construing a contract, a court should consider the contract as a whole and “should not interpret a contract so

as to make meaningless its provisions.” Phillips v. Mercer, 579 P.2d 174, 176 (Nev. 1978). Under contract law generally, when a

term is unambiguous, a court must construe it from the language contained within it. See Chwialkowski v. Sachs, 834 P.2d 405,

406 (Nev. 1992). A contract is unambiguous if it is not susceptible to more than one reasonable interpretation. See Margrave v.

Dermody Props., 878 P.2d 291, 293 (Nev. 1994). “The usual rule of interpretation of contracts is to read provisions so that they

harmonize with each other, not contradict each other. That task of construction is for the court.” Peterson v. Minidoka Cty. Sch.

Dist. No. 331, 118 F.3d 1351, 1359 (9th Cir.), amended by 132 F.3d 1258 (9th Cir. 1997).

*4 But most importantly here, whether the liquidated damages clause is enforceable turns on whether it is a penalty. Liquidated

damages provisions are presumed valid in Nevada. See Khan v. Bakhsh, 306 P.3d 411, 414 (Nev. 2013). Their purpose is to

“serve as a good-faith effort to fix the amount of damages when contractual damages are uncertain or immeasurable.” Id.

(citation omitted). To successfully argue a liquidated damages provision is unenforceable, the party challenging its application

must establish that it amounts to a penalty. See Haromy v. Sawyer, 654 P.2d 1022, 1023 (Nev. 1982). “In order to prove a

liquidated damage clause constitutes a penalty, the challenging party must persuade the court that the liquidated damages are

disproportionate to the actual damages sustained by the injured party.” Id. (citation omitted). The “distinction between a penalty

and liquidated damages is that a penalty is for the purpose of securing performance, while liquidated damages is the sum to be

paid in the event of non-performance.” Mason v. Fakhimi, 865 P.2d 333, 335 (1993) (citation omitted).

In the Agreement, Plaintiff is entitled to liquidated damages if the other party (here, Defendant) breaches any of the Sections.

(ECF No. 47-1 at 3, § 11.) The Sections are elsewhere defined as sections 2, 5, 6, 7, 8, 9, and 13 of the Agreement. (Id. at §

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10.) Section 2 requires Defendant to represent that he would only purchase Plaintiff's products to resell to patients under his

direct professional care, 4 and that Defendant would not sell them on the internet. (Id. at 2 § 2.) Section 5 restricts Defendant

to only selling Plaintiff's products to his patients for their personal use, in reasonable quantities. (Id. at § 5.) Section 6 prohibits

Defendant from reselling Plaintiff's products online without first getting Plaintiff's written permission, specifically including

on Amazon, and from advertising online, though resale on certain online dispensaries is permitted. (Id. at § 6.) Section 6 also

specifically prohibits certain acts, stating that Defendant: “shall not advertise, list, offer for sale, sell or distribute” Plaintiff's

products online. (Id.) Section 7 prohibits resale to other resellers. (Id. at § 7.) Section 8 provides that Defendant may only market

Plaintiff's products at Defendant's physical place of business, subject to certain further restrictions. (Id. at 2-3, § 8.) Section

9 imposes certain quality assurance obligations on Defendant, and requires that he immediately report any adverse events to

Plaintiff. (Id. at 3, § 9.) Section 13 specifies that Plaintiff continues to own its intellectual property, and gives Defendant a

license to use that intellectual property to sell and market Plaintiff's products. (Id. at 3-4, § 13.) Thus, violation of any of these

sections, including engaging in any of the acts they prohibit, or failing to comply with any of the obligations they impose,

entitles Plaintiff to liquidated damages.

As Plaintiff repeatedly emphasizes in its briefing (ECF No. 43 at 11, 51 at 7-8), much of the liquidated damages clause is

devoted to explaining why it should not be construed as a penalty. (ECF No. 47-1 at 3, § 11.) But the key portion, which actually

specifies how liquidated damages must be calculated, provides:

Liquidated Damages shall be an amount equal to $500.00 for each separate breach for each day of breach.

Each breach with respect to a Product shall be considered a separate breach for the purposes of this

Section. For example, if HCP is in breach with respect to three different Product for a period of 10 days,

HCP will be deemed to have committed 30 breaches and be subject to Liquidated Damages of $6,000.00.

*5 (Id.) Product is elsewhere defined as any of Plaintiff's products that Defendant purchases. (Id. at 2.) Thus, reading the

liquidated damages provision in light of the rest of the Agreement, Defendant must pay Plaintiff $500 for each and every breach

of sections 2, 5, 6, 7, 8, 9, and 13 of the Agreement, per day that Plaintiff is in breach.

As Defendant argues, calculating the amount Defendant owes Plaintiff in line with the plain meaning of this liquidated damages

provision leads to staggering liability—much more than the $150,000 Plaintiff seeks here. (ECF No. 47 at 8-10.) Plaintiff

calculated the $150,000 it seeks using a spreadsheet that showed Defendant's actual sales, and then multiplied those sales by

$500. (ECF No. 43 at 12-13, 51 at 6.) But this approach does not follow from the liquidated damages clause, or even from

Plaintiff's own argument. Immediately before laying out this calculation, Plaintiff correctly argues that “the liquidated damages

clause is triggered by any breaches of sections 2, 5, 6, 7, 8, 9, or 13” of the agreement. (ECF No. 42 at 12.) Thus, breach cannot

be limited merely to sales, as those sections prohibit many acts and omissions beyond sales. And in this case, there is no dispute

that Defendant committed myriad breaches—many more than the 300 sales Plaintiff seeks to hold him liable for. Plaintiff's

calculation of damages therefore does not align with the language of the Agreement.

There are also other reasons why Plaintiff's calculation is incorrect given the terms of the Agreement. First, Plaintiff's calculation

does not account for the ‘each day of breach’ concept. (ECF No. 47-1 at 3, § 11.) Construing only a sale as a breach means you

can only have one breach per product. But the Agreement must have intended to treat more than just sales as a breach, because,

logically, it is unlikely you could have a sale of Plaintiff's product across multiple days. 5 The ‘each day of breach’ concept

appears more likely an attempt to capture the “advertise, list, offer for sale” concepts that are also prohibited by Section 6. (Id.

at 2, § 6.) Thus, limiting breach to individual sales, without also going after the advertising, listing, and offering also prohibited

by the Agreement does not align with the language of the Agreement. Second, Plaintiff's calculation does not align with the

example offered in the liquidated damages provision, which expressly relies on the ‘each day of breach’ concept. (ECF No.

47-1 at 3, § 11.) The example assumes breach as to three different products over 10 days, and arrives at 30 breaches. (Id.) If

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Plaintiff used the same formula to calculate Defendant's damages liability here, it would have arrived at a much higher number

than it did in its Motion. Third, Plaintiff's calculation does not account for the ‘each breach with respect to a Product will be

considered a separate breach’ concept. That concept contemplates liability for at least products offered for sale, but not actually

sold—but Plaintiff's calculation does not.

To the contrary, Defendant's absurd 6 argument he should be on the hook for approximately $2.8 million instead of the $150,000

Plaintiff seeks is actually more persuasive—as it algins better with the language of the Agreement. (ECF No. 47 at 8-10.) As

described supra, the liquidated damages clause of the Agreement makes a number of different actions or omissions a breach

—well beyond mere sales—and then multiplies liability for those breaches by product, and by day of breach. (ECF No. 47-1

at 3, § 11.) Given Defendant's myriad breaches of the Agreement, his interpretation of the liquidated damages clause matches

the plain language of the Agreement.

*6 This finding does not mean the Agreement is ambiguous. Quite to the contrary. It is instead unambiguous that the liquidated

damages clause was intended as a penalty. It seeks to impose massive liability for breaching the contract—evidencing its intent

to secure compliance. See Mason, 865 P.2d at 335 (explaining that a liquidated damages clause constitutes a penalty, and is

thus unenforceable, when its purpose is to secure compliance and not reasonably estimate damages). Moreover, the damages

Plaintiff could recover under the liquidated damages clause as written are entirely untethered from, and greatly exceed, actual

damages. See Am. Fire & Safety, Inc. v. City of N. Las Vegas, 849 P.2d 352, 355 (Nev. 1993) (“[a] penalty is a sum named,

which is disproportionate to the damage which could have been anticipated from breach of the contract”) (citing 5 Williston on

Contracts § 776). This case is a good example, where Defendant argues he only made some $25,000 in profit reselling Plaintiff's

products (ECF No. 47 at 8), and Plaintiff argues Defendant made some $87,000 in revenue (ECF No. 43 at 7). Both amounts are

significantly lower than both the amount Defendant persuasively argues he should be required to pay if Plaintiff enforced the

liquidated damage as written, and even the amount Plaintiff seeks. See Khan, 306 P.3d at 414 (invalidating liquidated damages

clause when, by its terms, it sought 150% of actual damages). In sum, the liquidated damages clause is unenforceable because

it was intended as a penalty.

And while the Court does not condone Defendant's wanton disregard for the Agreement, and appreciates Plaintiff's restraint

in not seeking the overwhelming damages it could seek against Defendant under the liquidated damages clause, the Court's

findings here are actually informed by a different set of considerations. That is Nevada's prohibition on ‘blue penciling,’ or rewriting unenforceable contract provisions to make them enforceable. See Golden Rd. Motor Inn, Inc. v. Islam, 376 P.3d 151, 156

(Nev. 2016) (invalidating overbroad noncompete provision in employment contract, and also stating the general principle that,

“[r]ightfully, we have long refrained from reforming or ‘blue penciling’ private parties' contracts.”) (footnote omitted). 7 As

explained supra, Plaintiff's proposed interpretation of the liquidated damages clause does just that. By narrowing the definition

of breach to only unauthorized sales to arrive at a damages amount closer to actual damages, Plaintiff's approach attempts to

reform the liquidated damages clause to make it enforceable—which the Court cannot do.

In addition, the Court agrees with Defendant that liquidated damages clauses should be interpreted based on their effect, not

based on disclaimer language added by the drafter stating the liquidated damages clause is not a penalty. (ECF No. 47 at 12.)

If the converse were true, parties would—as Plaintiff did here (ECF No. 47-1 at 3)—include language explaining why their

liquidated damages provision was not a penalty, and thus be free to impose punitive liquidated damages clauses on counterparties

to their agreements. Plaintiff's approach of relying on disclaimer language in a liquidated damages clause (ECF No. 43 at 11,

51 at 7-8) would also render the analysis as to whether the liquidated damages clause constituted a penalty unnecessary. But,

again as discussed supra, Nevada law is clear that is the analysis the Court must undertake. Thus, the Court accords no weight

to the disclaimer language in the Agreement's liquidated damages clause.

Plaintiff also argues that the Court should not find for Defendant here because Plaintiff has presented evidence, and Defendant

has presented none. (ECF No. 51 at 1, 3-6, 8.) But the applicable standard does not require Defendant to present any evidence.

See, e.g., Mason, 865 P.2d at 335 (“In order to prove that such a provision constitutes a penalty, the challenging party must

persuade the court that the liquidated damages are disproportionate to the actual damages sustained by the injured party.”).

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Defendant is merely required to persuade the Court. And here, Defendant has persuaded the Court the liquidated damages clause

of the Agreement constitutes a penalty. The liquidated damages clause is therefore unenforceable.

*7 Because the liquidated damages clause is unenforceable, Plaintiff has not satisfied its initial burden to make out a prima

facie breach of contract claim. See, e.g., Brown, 531 F. Supp. 2d at 1240 (stating that damages are an element of a breach of

contract claim). The Court must therefore deny Plaintiff's Motion.

V. CONCLUSION

The Court notes that the parties made several arguments and cited to several cases not discussed above. The Court has reviewed

these arguments and cases and determines that they do not warrant discussion as they do not affect the outcome of the Motion

before the Court.

It is therefore ordered that Defendant's motion for summary judgment (ECF No. 43) is denied.

All Citations

Slip Copy, 2020 WL 3073345

Footnotes

1 Defendant filed a response (ECF No. 47), and Plaintiff filed a reply (ECF No. 51). Both parties filed declarations with

exhibits in support of their briefing. (ECF Nos. 44, 48.)

2 Some courts characterize a breach of contract claim under Nevada law as having four elements. See, e.g., Padilla Constr.

Co. of Nevada v. Big-D Constr. Corp., 386 P.3d 982 (Table), 2016 WL 6837851, at *1 (Nev. 2016) (“there are four

elements to a claim for breach of contract in Nevada[:] ‘(1) formation of a valid contract; (2) performance or excuse

of performance by plaintiff; (3) material breach by the defendant; and (4) damages’ ”) (quoting Laguerre v. Nev. Sys.

of Higher Educ., 837 F. Supp. 2d 1176, 1180 (D. Nev. 2011)). In this case, Plaintiff characterized it as having three

elements. (ECF No. 43 at 8.) Regardless, to the extent there is a fourth element, it is immaterial here—for two reasons.

First, the parties' dispute centers on the damages prong, which is present in either the three or four element formulation.

Second, there is no dispute here that Plaintiff performed its obligations under the Agreement.

3 This makes the parties' arguments as to whether the liquidated damages clause is enforceable suitable for resolution

by the Court at summary judgment. In addition, and separately, the Court notes neither party disputes that Nevada law

governs the Court's analysis.

4 Of course, all the references to patients here do not really apply to these circumstances, because Defendant is not a

healthcare provider. But the fact that Defendant clearly breached many provisions of the Agreement is not particularly

relevant to the parties' arguments, so the Court will not repeatedly mention the many ways in which Defendant breached

the Agreement in reselling Plaintiff's products on Amazon.

5 Installment payments and financing are of course common for many types of sales, but there is no evidence before the

Court this is how end customers pay for Plaintiff's products, which are, for example, bottles of Vitamin C tablets.

6 At first blush, because he is asking to be held significantly more liable than Plaintiffs asked for him to be. But this

strategy is merely an effective rhetorical device.

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7 In Golden Road, the Nevada Supreme Court explained this doctrine is supported by public policy considerations. See 376

P.3d at 156. The Golden Road court specifically explained that allowing blue-pencilling would virtually allow a court

to write a new contract for the parties, which impermissibly tramples on the contracting parties' intent. See id. at 157.

The prohibition on blue-pencilling also preserves judicial resources (see id. at 157-58), and protects less sophisticated

parties who may comply with a particularly punitive or onerous contractual term simply because they are unaware the

clause is unenforceable (see id. at 157).

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527 P.3d 973 (Table)

Unpublished Disposition

This is an unpublished disposition. See Nevada Rules of Appellate Procedure, Rule 36(c) before citing.

Court of Appeals of Nevada.

Richard L. SHERMAN, an Individual, Appellant,

v.

Larry SMEAD, an Individual, Respondent.

Richard L. Sherman, an Individual, Appellant,

v.

Larry Smead, an Individual, Respondent.

No. 83603-COA, No. 84071-COA

|

Filed April 14, 2023

Richard L. Sherman appeals from both a district court order granting partial summary judgment, certified as final under NRCP

54(b), Docket No. 83603-COA, and an order granting a motion for attorney fees and costs, Docket No. 84701-COA, which

have been consolidated for this appeal. Eighth Judicial District Court, Clark County; Carli Lynn Kierny, Judge.

Attorneys and Law Firms

Olson, Cannon, Gormley, & Stoberski

Maier Gutierrez & Associates

ORDER OF REVERSAL AND REMAND

Facts and Procedural History

*1 In this case, former employees of respondent Larry Smead, who is a private electrical contractor and the owner of SASCO

and related entities, retained Sherman to represent them in employment matters against Smead. 1 In November 2011, one of

the former employees reached a settlement agreement with Smead to resolve the employment dispute between them. This 2011

settlement agreement contained the following Covenants clause pertaining to Sherman and the lawyers in his firm:

6. Covenants of Magpiong's Attorneys. Magpiong's Attorneys, and each member of their respective firms,

each further covenant and agree that he/she/it shall not publish any of the Smead Released Parties names

in any manner in association with their law practice or in any way publish, promote, advertise or reference

their participation in any action against any of the Smead Released Parties, inclusive of this Action.

The 2011 settlement agreement also generally allowed for an award of attorney fees and costs to be awarded to the nonbreaching

party in the event of a breach of the agreement:

e. Attorneys’ Fees. In the event of the bringing of any action, arbitration or suit by a Party hereto against

another Party hereunder by reason of any breach of any of the covenants, agreements or provisions on

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the part of the other Party arising out of this Agreement, then in that event, the prevailing Party will be

entitled to have recovery of and from the other Party all costs and expenses of the action, arbitration or

suit, reasonable attorneys’ fees and any other professional fees resulting therefrom.

Subsequently, in 2018, Sherman was retained by two other former employees of Smead, Richard Rivetti and Jeffrey Hicks, to

represent them in separate employment matters against Smead. Sherman sent a prelitigation letter to Smead on behalf of Rivetti

—attempting to foster early settlement negotiations—and in doing so, alluded to prior litigation against Smead without stating

any specific names. In the letter, Sherman stated the following:

[a]s you may recall, our office previously asserted claims on behalf of not less than five (5) high-level employees of yours in

the past. Mr. Rivetti's claims are strikingly similar to the claims previously filed against you, and the stories we have heard

countless times from your former employees.

...

As was the case in the five previous cases filed by our office (each of which settled, but only after you had paid your lawyers

sums that could have been avoided had you not rejected our offers to engage in early settlement discussions), we are willing

to discuss the scheduling of a mediation or settlement meeting ....

*2 Further, in a footnote, Sherman added:

[w]e note here the Motion for Terminating Sanctions, which was filed against you and your companies in

one of the previous cases we handled, based upon attempts to hide relevant documents in that case. You

may recall that Motion was filed shortly before that matter settled and after the initial hearing thereon,

but before an order was issued by the Court.

In 2019, Sherman sent a similar prelitigation letter to Smead on behalf of Hicks. In a footnote, Sherman specifically referenced

the prior 2011 litigation against Smead:

[w]e are especially dismayed that Larry would continue to destroy emails and insist they not exist after

we filed a Motion for Terminating Sanctions against him in the Magpiong case for this very misconduct,

where he attempted to defraud the Court by deleting the key emails in the case.

In the body of the letter, Sherman also emphasized Smead's conduct in the case involving Hicks to that in the Magpiong litigation:

Larry instructed Mr. Hicks to [engage in conduct] (which you may recall was similar to the illegal misconduct that Mr.

Magpiong had observed and objected to, leading to his own wrongful terminations and his lawsuit in California);

...

[W]e know this is because Larry uses the “forgiving” of these notes as a weapon against employees whom he wishes to

retaliate against, as we experienced first-hand with Mr. Magpiong ....

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In response to receiving these prelitigation letters, Smead filed a complaint in district court, asserting claims for breach of

contract, breach of the implied covenant of good faith and fair dealing, declaratory relief, and requesting attorney fees and costs.

Smead alleged that Sherman breached the 2011 settlement agreement by disparaging Smead and referencing the 2011 litigation

in Sherman's letters to him. Smead also sought a judicial declaration “that the [s]ettlement [a]greement is valid and binding

and that Sherman's failure to comply with the terms of the [s]ettlement [a]greement is a breach thereof. Smead has sustained

damages in excess of $15,000.00 as a direct and proximate result of Sherman's breach of the [s]ettlement [a]greement.”

In July 2021, Smead filed a motion for partial summary judgment alleging that there were no genuine disputes of material fact

as to Sherman's breach of the 2011 settlement agreement by referencing the 2011 litigation in the letters, and that Smead was

entitled to declaratory relief to establish the validity of the settlement agreement and to an award of attorney fees and costs.

In turn, Sherman filed his own motion for summary judgment arguing that he did not breach the 2011 settlement agreement

and later arguing that Smead's opposition failed to counter Sherman's motion with genuine disputes of material fact to support

such a breach, and therefore, Sherman was entitled to summary judgment. After conducting a hearing, the district court granted

Smead's motion for partial summary judgment in August 2021 and denied Sherman's motion. 2

*3 In its order, the district court found that Sherman breached the terms of the 2011 settlement agreement by referencing the

prior litigation in the prelitigation letters sent on behalf of Rivetti and Hicks, and that the breach of contract claim damages were

proven as evidenced by the attorney fees and costs incurred by Smead in having to litigate the claims. The district court further

granted Smead's request for declaratory relief, finding that (1) the 2011 settlement agreement was valid and enforceable; (2)

Sherman breached the agreement; and (3) an award to Smead of monetary damages in the form of attorney fees and costs was

appropriate. Sherman appealed that decision. After Smead filed his memorandum for attorney fees and costs, the court awarded

him the amount of $60,266.96. Subsequently, Sherman also appealed the award of attorney fees and costs. In February 2022,

the district court entered the parties’ stipulation and order to certify the court's August 2021 order granting Smead's motion for

partial summary judgment as a final judgment, pursuant to NRCP 54(b).

3

 The appeals were consolidated.

On appeal, Sherman argues that the district court erred in granting summary judgment because (1) its interpretation of the 2011

settlement agreement in Smead's favor was incorrect, (2) Smead did not present evidence in support of the element of damages

for his breach of contract claim, (3) declaratory relief should not have been granted for the purpose of awarding monetary

damages, and (4) the award of attorney fees and costs was not justified.

Conversely, Smead argues that the district court properly granted his claim for declaratory relief, and any error in granting

summary judgment on the breach of contract claim and awarding attorney fees as damages was harmless because the grant of

declaratory relief allowed the district court to award such damages. Nevertheless, Smead also argues that Sherman breached the

2011 settlement agreement, and that the award of attorney fees permitted under the settlement agreement qualifies as special

damages to support his breach of contract claim. Alternatively, Smead contends that the award of attorney fees and costs was

warranted as he was the prevailing party. We agree with Sherman and therefore necessarily reverse and remand.

Standard of Review and Relevant Authority

As a preliminary matter, we review a district court's grant of summary judgment de novo. Iliescu, Tr. of John Iliescu, Jr. & Sonnia

Iliescu 1992 Family Tr. v. Reg'l Transp. Comm'n of Washoe Cty., 138 Nev., Adv. Op. 72, 522 P.3d 453, 458 (Ct. App. 2022).

Summary judgment is proper if the pleadings and all other evidence on file demonstrate that there exists no genuine dispute of

material fact “and that the moving party is entitled to a judgment as a matter of law.” Id. (internal quotation marks omitted); see

also NRCP 56(a). “A factual dispute is genuine when the evidence is such that a rational trier of fact could return a verdict for the

nonmoving party.” Wood v. Safeway, Inc., 121 Nev. 724, 731, 121 P.3d 1026, 1031 (2005). In rendering a decision on a motion

for summary judgment, all evidence “must be viewed in a light most favorable to the nonmoving party.” Id. at 729, 121 P.3d at

1029. Additionally, while we generally review an award of attorney fees for an abuse of discretion, Albios v. Horizon Cmtys.,

Inc., 122 Nev. 409, 417, 132 P.3d 1022, 1027-28 (2006), whether attorney fees constitute special damages for the purpose of

satisfying a breach of contract claim is subject to de novo review because this issue involves a question of law, Pardee Homes of

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Nev. v. Wolfram, 135 Nev. 173, 176, 444 P.3d 423, 426 (2019). Furthermore, whether a determination in an action for declaratory

judgment is proper is a matter for the district court's discretion and will not be disturbed on appeal unless the district court

abused that discretion. Cty. of Clark, ex rel. Univ. Med. Ctr. v. Upchurch, 114 Nev. 749, 752, 961 P.2d 754, 756 (1998).

*4 Relevant here, “[a] settlement agreement is a contract governed by general principles of contract law.” Power Co. v. Henry,

130 Nev. 182, 189, 321 P.3d 858, 863 (2014). To prove a breach of contract, a plaintiff must demonstrate that a valid contract

exists, there was a breach of the contract, and that damages occurred. See Iliescu, 138 Nev., Adv. Op. 72, 522 P.3d at 458. Breach

of contract is the material failure to perform “a duty arising under or imposed by agreement.” Bernard v. Rockhill Dev. Co., 103

Nev. 132, 135, 734 P.2d 1238, 1240 (1987) (internal quotation marks omitted).

This court also reviews contract interpretation de novo by looking to the language of the contract and surrounding circumstances.

Redrock Valley Ranch, LLC v. Washoe County, 127 Nev. 451, 460, 254 P.3d 641, 647-48 (2011). When reviewing a contract,

the objective “is to discern the intent of the contracting parties.” Davis v. Beling, 128 Nev. 301, 321, 278 P.3d 501, 515 (2012)

(internal quotation marks omitted). In doing so, we will enforce the contract as written, so long as it is clear and unambiguous.

Id.; see also Canfora v. Coast Hotels & Casinos, Inc., 121 Nev. 771, 776, 121 P.3d 599, 603 (2005) (noting that the appellate

court interprets unambiguous contracts according to the plain language of their written terms). However, “[a]n interpretation

which results in a fair and reasonable contract is preferable to one that results in a harsh and unreasonable contract.” Dickenson

v. State, Dep't of Wildlife, 110 Nev. 934, 937, 877 P.2d 1059, 1061 (1994). And we will not construe a contract “so as to lead

to an absurd result.” Reno Club, Inc. v. Young Inv. Co., 64 Nev. 312, 325, 182 P.2d 1011, 1017 (1947). We now address each

of Sherman's arguments.

The district court erred in its interpretation of the Covenants clause

Sherman argues that the district court erred in its interpretation of the Covenants clause to find that he breached the 2011

settlement agreement by merely referencing the Magpiong litigation in subsequent prelitigation letters sent to Smead. We agree.

By interpreting the Covenants clause to prohibit the mere “reference” to the parties’ prior litigation, the district court failed

to consider the context of how the word reference is used in the agreement. “The doctrine of noscitur a sociis teaches us that

‘words are known by—acquire meaning from—the company they keep.’ ” Bldg. Energetix Corp. v. EHE, LP, 129 Nev. 78, 85,

294 P.3d 1228, 1234 (2013) (quoting Ford v. State, 127 Nev. 608, 622 n.8, 262 P.3d 1123, 1132 n.8 (2011)). “When several

nouns or verbs or adjectives or adverbs—any words—are associated in a context suggesting that the words have something in

common, they should be assigned a permissible meaning that makes them similar.” Antonin Scalia & Bryan A. Garner, Reading

Law: The Interpretation of Legal Texts 195 (2012).

In this case, the Covenants clause contained a list of similar words that were associated with one another: “publish, promote,

advertise or reference.” 4 The district court erred by assigning an overly broad meaning to the word “reference” that did not

comport with the meaning of the related terms, all of which contemplated some form of communication to a third party in an

effort to solicit business. Thus, it was unreasonable for the district court to interpret the contract to preclude Sherman from

merely referencing the prior litigation in discussions with Smead, as Smead could not be considered a third party as he was

already aware of the Magpiong litigation, and could not be surprised by the information, nor harmed by it. See Dickenson, 110

Nev. at 937, 877 P.2d at 1061. Instead, based on our review of the plain language of the contract, the Covenants clause was

designed to ensure that Sherman would not publicize the prior litigation or use it for advertising purposes, such as to solicit

new clients against Smead. There is no indication in the record, at this point in the litigation, that either of the letters or the

information related to the Magpiong litigation was used to advertise or solicit further business for Sherman, as the prelitigation

letters were specifically sent to Smead to foster early settlement negotiations after Sherman had already been retained by Rivetti

and Hicks. Thus, based on the principles of statutory construction, we conclude that the district court erred, without more, in

finding that mere references to the Magpiong litigation in subsequent prelitigation letters was sufficient to demonstrate a breach.

Smead's breach of contract claim currently fails for lack of damages

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*5 Sherman argues that even if there was a breach of the settlement agreement, Smead failed to set forth the element of damages

required for a breach of contract claim, and therefore his claim fails as a matter of law. See Richardson v. Jones & Denton, 1

Nev. 405, 408 (1865) (“It is necessary to establish actual damages resulting from [a claimed] breach [of contract]).” Conversely,

Smead argues that the attorney fees he incurred in litigating his case constitute such damages. We agree with Sherman and

address this argument in the alternative.

Attorney fees may be awarded as either (1) “fees as a cost of litigation” or (2) “fees as an element of damage[s].” Sandy Valley

Assocs. v. Sky Ranch Estates Owners Ass'n, 117 Nev. 948, 955, 35 P.3d 964, 968-69 (2001), receded from on other grounds by

Morgan v. Felton, 123 Nev. 577, 586, 170 P.3d 982, 988 (2007); see generally Liu v. Christopher Homes, LLC, 130 Nev. 147,

321 P.3d 875 (2014) (clarifying the extent to which Horgan receded from Sandy Valley). While attorney fees are not awarded

“unless there is a statute, rule or contract providing for such an award,” the Nevada Supreme Court has allowed for attorney

fees to constitute special damages 5 in limited circumstances. Pardee, 135 Nev. at 174, 444 P.3d at 424.

In Sandy Valley, the supreme court concluded that attorney fees are only to be considered special damages “when a party

claims it has incurred attorney fees as foreseeable damages arising from tortious conduct or a breach of contract.” 117 Nev.

at 956, 35 P.3d at 969. However, the supreme court also indicated that “[b]ecause parties always know lawsuits are possible

when disputes arise, the mere fact that a party was forced to file or defend a lawsuit is insufficient to support an award of

attorney fees as damages.” Id. at 957, 35 P.3.d at 969. Further, the supreme court has specifically stated that special damages

are inappropriate where “a plaintiff merely seeks to recover fees incurred for prosecuting a breach-of-contract action against a

breaching defendant.” Pardee, 135 Nev. at 178, 444 P.3d at 426.

The supreme court outlined the necessary steps to properly plead a claim for attorney fees as special damages and defined three

limited circumstances in which a party can request such fees as special damages. Sandy Valley, 117 Nev. at 956-58, 35 P.3d at

969-70. To properly plead and potentially receive an award of fees, (1) the attorney fees “must be pleaded as special damages in

the complaint pursuant to NRCP 9(g)”; (2) the attorney fees must be “proved by competent evidence just as any other element

of damages”; and (3) the attorney fees “must be the natural and proximate consequence of the injurious conduct.” Id. at 956-57,

35 P.3d at 969. The three limited circumstances to recover attorney fees as special damages are when (1) the fees are “an element

of damage in cases when a plaintiff becomes involved in a third-party legal dispute as a result of a breach of contract or tortious

conduct by the defendant”; (2) the fees are incurred while recovering real or personal property taken because of the wrongful

conduct of the defendant or when clarifying or removing a cloud upon the title of the property; and (3) in actions for declaratory

or injunctive relief when “the actions were necessitated by the opposing party's bad faith conduct.” Id. at 957-58, 35 P.3d at 970.

*6 In this case, at this point in time, the only damages Smead has alleged for his breach of contract claim are in the form of

attorney fees and costs incurred as a result of bringing a civil suit against Sherman for allegedly breaching the 2011 settlement

agreement. 6 As noted above, Sandy Valley and Pardee Homes prohibit an award of attorney fees as special damages incurred

simply by commencing an action based on the injurious conduct of another. See Pardee Homes, 135 Nev. at 178, 444 P.3d at

427 (“[U]nder [the respondents’] theory, any breach-of-contract suit would warrant attorney fees as special damages because it

would be foreseeable that an aggrieved party would retain the services of an attorney to remedy a breach. This conflicts with

our caselaw.”). Further, merely bringing a lawsuit which results in fees and costs being incurred does not support that such fees

and costs are the “natural and proximate consequence” of Sherman's conduct. See Sandy Valley, 117 Nev. at 957, 35 P.3d at

969-70 (“As a practical matter, attorney fees are rarely awarded as [special] damages simply because parties have a difficult

time demonstrating that the fees were proximately and necessarily caused by the actions of the opposing party and that the fees

were a reasonably foreseeable consequence of the breach or conduct.”).

Therefore, we conclude that Smead has failed to prove the element of damages required for breach of contract, thereby

precluding the grant of summary judgment. See Mort Wallin of Lake Tahoe, Inc. v. Commercial Cabinet Co., 105 Nev. 855,

857, 784 P.2d 954, 955 (1989) (“The party seeking damages has the burden of proving both the fact of damages and the amount

thereof.”); see also Nev. Cap. Ins. Co. v. Farmers Ins. Exch., No. 70572, 2018 WL 4614152, at *2 (Nev. Sept. 21, 2018) (stating

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that “a failure to establish ‘the existence or cause of damage’ will bar recovery” (quoting Knier v. Azores Constr. Co., 78 Nev.

20, 24, 368 P.2d 673, 675 (1962))).

Further, we are also not persuaded by Smead's allegation that he was disparaged by the reminder of the litigation in the letters

and that this was sufficient to satisfy the damages element for a breach of contract claim. We note that the Rivetti letter did

not specifically refer to any former employees by name or identify the litigation by party name. And to the extent the Hicks

letter referenced Magpiong by name, this information was directed to Smead, who was already in possession of it, thus the

mere reference to it in the letter could not have given rise to money damages necessary to recover on a breach of contract claim.

Cf. Rd. & Highway Builders, LLC v. N. Nev. Rebar, Inc., 128 Nev. 384, 392, 284 P.3d 377, 382 (2012) (stating that money

damages ordinarily “make the aggrieved party whole and ... place the plaintiff in the position he would have been in had the

contract not been breached” (internal quotation marks omitted)). Smead also fails to disclose any damages he sustained as a

result of the disclosure for the purpose of settlement negotiations that was directed to him and not to a third party. Cf. Pegasus

v. Reno Newspapers, Inc., 118 Nev. 706, 718, 57 P.3d 82, 91 (2002) (holding that to establish defamation a false statement must

be published to a third party without privilege); Nev. Ind. Broadcasting v. Allen, 99 Nev. 404, 418, 664 P.2d 337, 346 (1983)

(concluding that a political candidate was entitled to recover under defamation per se for comments that were publicly made

and thus injured his professional reputation).

*7 Accordingly, Smead has not demonstrated any breach of contract damages incurred as a result of receiving the prelitigation

letters from Sherman. And as noted above, the district court erred by finding that the attorney fees Smead incurred merely as

the cost of litigation constituted special damages in contravention of Sandy Valley. Thus, even assuming there was a breach of

the settlement agreement, Smead has failed at this juncture to establish the element of damages necessary to support his claim

for breach of contract as a matter of law and, therefore, the district court erred in granting Smead summary judgment on his

breach of contract claim.

The district court abused its discretion in resolving the declaratory relief claim

Sherman argues that the district court abused its discretion in granting declaratory relief to award attorney fees and costs as

special damages. The Nevada Supreme Court has held that “declaratory relief determines [the parties’] legal rights without

undertaking to compel either party to pay money or to take some other action to satisfy such rights as are determined to exist by

the declaratory judgment.” Aronoff v. Katleman, 75 Nev. 424, 432, 345 P.2d 221, 225 (1959) (emphasis added). To the extent

the district court granted declaratory relief in its entirety for the purpose of awarding Smead his attorney fees and costs as

monetary damages to satisfy a breach of the 2011 settlement agreement, not to determine a legal right, the district court abused

its discretion in awarding declaratory relief.

In reaching this decision, we are mindful that a court is permitted to award attorney fees and costs as special damages under

the limited declaratory relief exception stated in Sandy Valley, 117 Nev. at 957-58, 35 P.3d at 970. Even assuming, without

deciding, that this exception applies, the district court failed to make findings as to whether Sherman's conduct constituted bad

faith to properly award Smead his attorney fees and costs based on the declaratory relief exception set forth in Sandy Valley.

Further, whether Sherman engaged in bad faith conduct is typically a decision for the jury or trier of fact, and therefore, summary

judgment is inappropriate where genuine disputes remain as to Sherman's intent in referencing the prior litigation. See Lee v.

GNLV Corp., 117 Nev. 291, 296, 22 P.3d 209, 212 (2001) (“Whether a defendant's conduct was ‘reasonable’ under a given set of

facts is generally an issue for the jury to decide.”); see also Myers v. Miller, No. 81189, 2021 WL 4238033, at *1 (Nev. Sept. 16,

2021) (Order of Reversal and Remand) (concluding that the district court erred when it found that the appellant's conduct was

unreasonable and constituted bad faith at the summary judgment stage on a breach of contract claim, because that is a question

for the jury); cf. Armentrout v. Mead, No. 83858-COA, 2022 WL 17185094, at *9 (Nev. Ct. App. Nov. 23, 2022) (Order of

Affirmance) (concluding, in the alternative, that attorney fees as special damages were incurred when the district court found

that a party acted in bad faith). Thus, the district court abused its discretion in granting declaratory relief for the purpose of

awarding attorney fees and costs as special damages without making the requisite findings necessary under Sandy Valley.

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Therefore, we reverse the district court's order granting partial summary judgment because mere references to the prior litigation

did not, in and of themselves, constitute a breach of the Covenants clause, and because Smead has failed to demonstrate the

element of damages necessary to state a claim for breach of contract, and further failed to establish a claim for declaratory relief

at this time. We also necessarily reverse the order granting attorney fees and costs. See, e.g., Cain v. Price, 134 Nev. 193, 198,

415 P.3d 25, 30 (2018) (explaining that where a district court's order granting summary judgment is reversed, it is no longer

appropriate to consider the respondents the prevailing party, and an award of attorney fees is inappropriate).

*8 Accordingly, we

ORDER the judgments of the district court REVERSED AND REMAND this matter to the district court for proceedings

consistent with this order. 7

All Citations

527 P.3d 973 (Table), 2023 WL 2960921

Footnotes

1 We do not recount the facts except as necessary to our disposition.

2 We note that Sherman did not appeal the district court's denial of his motion for summary judgment. Our order should

not be taken as an opinion as to the merits of that denial.

3 We note that NRCP 54(b) certification was required as the district court did not resolve all claims pending below.

4 In interpreting the contract, we look to the plain language contained in the Covenants clause. Black's Law Dictionary

defines “publish” as “to communicate (defamatory words) to someone other than the person defamed.” Publish, Black's

Law Dictionary (11th ed. 2019). An advertisement or to advertise is defined as “[a] commercial solicitation; an item

of published or transmitted matter made with the intention of attracting clients or customers.” Advertisement, Black's

Law Dictionary (11th ed. 2019). To reference is defined as “the act of referring or consulting.” See Reference, MerriamWebster's Collegiate Dictionary (11th ed. 2020). Further, to promote is to “move forward” and “contribute to the growth

or prosperity of.” Promote, Merriam-Webster's Collegiate Dictionary (11th ed. 2020).

5 Special damages are actual pecuniary losses that can be determined with relative certainty. 25 C.J.S Damages § 4 (2022).

6 To the extent Smead contends that the attorney fees and costs incurred in pursuing his claim of breach of contract can

satisfy the element of contractual damages via the settlement agreement's “prevailing party” language, this argument

fails in light of our disposition. As discussed above, pursuant to Sandy Valley, attorney fees incurred in pursuing a lawsuit

do not satisfy the required element of contract damages, but assuming there are quantifiable contract damages, attorney

fees and costs may be recoverable by the prevailing party where a contract so provides. Miller v. Wilfong, 121 Nev. 619,

623, 119 P.3d 727, 730 (2005) (noting that attorney fees are recoverable if “allowed by express or implied agreement or

when authorized by statute or rule” (internal quotation marks omitted)); cf. Golightly & Vannah, PLLC v. TJ Allen, LLC,

132 Nev. 416, 422, 373 P.3d 103, 107 (2016) (stating that where judgment in favor of the respondent must be reversed,

the respondent is no longer the prevailing party and the award of fees and costs is reversed).

7 Insofar as the parties have raised arguments that are not specifically addressed in this order, we have considered the same

and conclude that they either do not present a basis for relief or need not be reached given the disposition of this appeal.

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2018 WL 7291458

Only the Westlaw citation is currently available.

United States District Court, S.D. Texas, Brownsville Division.

Sesha Sai VORREY, Plaintiff,

v.

CITY OF BROWNSVILLE, TEXAS, Defendant.

Civil Action No. B: 17-cv-222

|

Signed 10/05/2018

Attorneys and Law Firms

Anthony P. Troiani, Brownsville, TX, for Plaintiff.

John-Michael Wyman Hayward, Ricardo J. Navarro, Robert Lee Drinkard, Denton Navarro Rocha Bernal & Zech, P.C.,

Harlingen, TX, for, Defendant.

REPORT AND RECOMMENDATION OF THE MAGISTRATE JUDGE

Ronald G. Morgan, United States Magistrate Judge

*1 On July 16, 2018, Defendant – City of Brownsville, Texas (“the City”) – filed a motion to dismiss, pursuant to FED. R.

CIV. P. 12(b)(1) and 12(b)(6). Dkt. No. 18.

On August 7, 2018, Plaintiff – Sesha Sai Vorrey (“Vorrey”) – filed a response. Dkt. No. 27.

On August 10, 2018, the City filed a reply, as well as a motion to strike the exhibits that Vorrey attached to his response. Dkt.

No. 28. On August 30, 2018, Vorrey filed a surreply. Dkt. No. 29.

The motion to dismiss has been referred to the undersigned, pursuant to 28 U.S.C. § 636(b)(1)(B). After reviewing the record

and the relevant caselaw, it is recommended that the motion to dismiss be granted, for the reasons set out below. 1

I. Background

A. Factual Background

In April 2004, Vorrey was hired as the airport operations director for the Brownsville/South Padre Island International Airport.

Dkt. No. 16, pp. 3-4; Dkt. No. 16-1, p. 1. Vorrey is a native of India and was authorized to work in the United States as the

result of a H-1B non-resident visa. Id.

“To obtain an H-1B visa, an employer must first obtain approval from the U.S. Department of Labor (“DoL”) by filing a Labor

Condition Application (“LCA”). The LCA requires an employer to represent that it intends to employ a particular foreign worker

for a specific position for a given period of time.” U.S. v. Nanda, 867 F.3d 522, 525 (5th Cir. 2017), cert. denied, 138 S. Ct.

1578, 200 L.Ed. 2d 765 (2018). Once the visa is issued, “the worker possesses lawful nonimmigrant status and may reside in

the United States and work for the sponsoring employer until either the visa expires or her employment with the sponsoring

employer is terminated.” Id.

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In June 2008, Vorrey was promoted to Chief Operations Officer at the airport. Dkt. No. 16-1, p. 1.

Vorrey's H-1B visa “was extended without issue in 2007, 2010 and 2013.” Dkt. No. 16, p. 4. Vorrey served as the acting interim

director of the airport from August 2015 until April 2016. Id.

Vorrey applied for the permanent airport director position, but in April 2016, the City hired Bryant Walker for that position.

Dkt. No. 16, pp. 4-5. Vorrey was chosen, instead, to be the assistant airport director. Id.

On April 12, 2016, Vorrey attended a meeting with the City Manager, the City External Auditor, an airport consultant and the

interim Director of Aviation for the airport. Dkt. No. 16, p. 5. During a lunch, the City Manager stated that Vorrey looked like

a “Pakistani” and that Vorrey “needed to wear a tag to let everyone know that he is Indian and not Pakistani.” Id. Vorrey claims

to have been “deeply offended” by these remarks, but, at the time, took no action. Id.

On August 25, 2016, “the City of Brownsville scheduled a meeting between the airport staff and a local advertising agency.”

Dkt. No. 16, p. 5. Vorrey was not invited to the meeting or made aware of its existence. Id. Walker took an intern to the meeting

instead. Id.

*2 The next day, Walker “allegedly submitted” another H-1B visa extension request to USCIS; the request was returned by

USCIS, seeking additional information. Dkt. No. 16, p. 6. USCIS sought “a job description and percentage of the time worked”

and requested a response by December 24, 2016. Id.

On September 22, 2016, Walker assigned Vorrey the task of estimating the new airport terminal expenses and requested a

response by the close of business that day. Dkt. No. 16, p. 6. A similar request was made to the maintenance supervisor, who

is not Indian, but the maintenance supervisor was given more time to complete the task. Id.

On September 23, 2016, Federal Aviation Officials met with airport officials. Dkt. No. 16, p. 6. Despite the importance of the

meeting, Vorrey, again, was not invited or informed about the meeting and Walker, again, took an intern to the meeting instead

of Vorrey. Id.

On September 28, 2016, Vorrey's immigration attorney asked the City and Walker to provide “a job description and percentage of

the time worked,” in response to USCIS's request for additional information. Dkt. No. 16, p. 6. Walker never responded. Id, p. 7.

In October 2016, Walker informed USCIS that he believed that Vorrey had forged his, i.e. Walker's, signature on the LCA

documentation. Dkt. No. 16-3, p. 2.

On November 29, 2016, the City Manager notified Vorrey that he was suspended and that an investigation was being undertaken

as to whether Vorrey had forged Walker's signature on the LCA. Dkt. No. 16, p. 7.

On that same day, Walker emailed Terry Damman, a USCIS official, asking if there was “any requirement or obligation” that

the City respond to the request for information and what the result would be if the City chose not to respond. Dkt. No. 16-3, p. 1.

On November 30, 2016, Damman responded to Walker that if a response was not provided by the deadline – December 24,

2016 – then the H-1B visa application would be “automatically denied for failure to respond.” Dkt. No. 16-3, p. 1.

On January 31, 2017, USCIS formally denied Vorrey's H-1B visa extension application. Dkt. No. 16, p. 7.

On February 6, 2017, Ms. Wendy Carlson – a handwriting expert hired by Vorrey – determined that neither Vorrey nor Walker

were the person who signed Walker's name on the disputed LCA form. Dkt. No. 16, p. 8. The complaint does not state if Carlson

ever identified the person who signed Walker's name.

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On February 10, 2017, Walker issued a formal termination letter to Vorrey. Dkt. No. 16-4. In justifying the decision, Walker

cited the denial of the visa application, “as well as ... my loss of confidence in your credibility and your ability to carry out the

duties and functions of the position you held at the airport.” Id.

On April 27, 2017, Vorrey filed a claim with the Equal Employment Opportunity Commission, claiming employment

discrimination. Dkt. No. 16, p. 10. On June 9, 2017, Vorrey received a “right to sue letter.” Id.

B. Procedural Background

On September 8, 2017, Vorrey filed a complaint in the 197th District Court in Cameron County, Texas. Dkt. No. 1-1. Vorrey

pled claims of discrimination based on race, color and national origin, libel, quantum meruit, retaliation, and slander against

the City. Id.

On September 22, 2017, Vorrey served the City with a copy of his complaint. Dkt. No. 1.

*3 On October 23, 2017, the City timely 2 removed the case to this Court, alleging that the state court complaint raised claims

under federal law. Dkt. No. 1. Vorrey agrees that the Court has subject matter jurisdiction over his claims. Dkt. No. 3, p. 2.

On February 23, 2018, the City filed a motion to dismiss pursuant to FED. R. CIV. P. 12(b)(1) and 12(b)(6). Dkt. No. 6.

On March 16, 2018, Vorrey timely filed his first amended petition, which he was permitted to file as a matter of right under

FED. R. CIV. P. 15(a). Dkt. No. 7. On March 23, 2018, the Court denied the City's motion to dismiss as moot, based on the

amended complaint. Dkt. No. 8.

On March 28, 2018, the City filed a renewed motion to dismiss. Dkt. No. 9. On May 1, 2018, Vorrey filed an opposed motion

for leave to file a second amended complaint. Dkt. No. 12. The City never filed a response in opposition to the motion for leave.

On July 5, 2018, the Court granted the motion for leave to file the second amended complaint, making that complaint the

operative complaint in this case. Dkt. No. 15.

In the second amended complaint, Vorrey alleged that (1) the City discriminated against him based on his “race, color and

national origin”; and, (2) the City did not reimburse him for the fees and costs associated with his unsuccessful H-1B visa

application, as required by federal law. Dkt. No. 16. As to the first claim, Vorrey alleges that the City discriminated against him

by: (1) not hiring him as the airport director; (2) falsely accusing him of forging Walker's signature; (3) refusing to complete

the LCA form; and (4) terminating his employment. Id. Vorrey abandoned his claims of libel, quantum meruit, retaliation, and

slander against the City. Id.

On July 16, 2018, the City filed a renewed motion to dismiss the second amended complaint. Dkt. No. 18. In that motion, the

City argues that, as to the alleged discriminatory acts, the failure to promote claim is untimely filed and that Vorrey has not pled

a prima facie case of discrimination as to the remaining three claims. Regarding the failure to reimburse claim, the City argues

that there is no private right of action for such a failure and any claim must first be pursued administratively. Id.

On August 7, 2018, Vorrey timely filed a response to the motion to dismiss. Dkt. No. 27. Vorrey argues that the entire series of

events – “a string of adverse actions” – create an adverse employment action, so he has made a prima facie case of discrimination.

He also reasserts his argument that the failure to reimburse Vorrey violated federal law. Id. Vorrey attached exhibits to his

response, including documents that he provided to the City regarding his immigration status, immigration applications and his

proof that he did not forge Walker's signature.

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On August 10, 2018, the City filed a reply brief and a motion to strike the exhibits that Vorrey attached to his response. Dkt.

No. 28. The City argued that the Court cannot consider those documents in deciding a motion to dismiss. Id.

3

*4 On August 30, 2018, Vorrey filed a surreply. Dkt. No. 29.

II. Applicable Law

A. Motion to Dismiss For Lack of Jurisdiction

The threshold question, before considering the substance of any claim, is whether the court possesses jurisdiction over the claim.

This is the case, because federal courts are courts of limited jurisdiction, whose authority exists only within the boundaries

established by Congress and the United States Constitution. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 583-84 (1999). A

plaintiff bears the burden of proving jurisdiction. Choice Inc. of Tex. v. Greenstein, 691 F.3d 710, 714 (5th Cir. 2012).

In determining whether jurisdiction exists, the Court may consider: “(1) the complaint alone; (2) the complaint supplemented

by undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court's resolution of

disputed facts.” Ramming v. U.S., 281 F.3d 158, 161 (5th Cir. 2001). Conclusory allegations or “legal conclusions masquerading

as factual conclusions will not suffice to prevent a motion to dismiss.” Wells v. Ali, 304 Fed. App'x. 292, 293 (5th Cir. 2008)

(quoting Fernandez–Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993) ).

B. Motion to Dismiss For Failure To State A Claim

“A motion to dismiss under Rule 12(b)(6) tests only the formal sufficiency of the statements of the claims for relief. It is not

a procedure for resolving contests about the facts or merits of the case .... [T]he Court must take the plaintiffs’ allegations as

true, view them in a light most favorable to plaintiffs, and draw all inferences in favor of the plaintiffs.” Askanase v. Fatjo, 828

F. Supp. 465, 469 (S.D. Tex. 1993) (citing Scheuer v. Rhodes, 416 U.S. 232, 236 (1974) ); Garrett v. Commonwealth Mortgage

Corp. of Am., 938 F.2d 591, 593 (5th Cir. 1991) ).

The plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.

544, 570 (2007). Consistent with this requirement, “plaintiffs must allege facts that support the elements of the cause of action

in order to make out a valid claim.” City of Clinton v. Pilgrim's Pride Corp., 632 F.3d 148, 152-53 (5th Cir. 2010). “Factual

allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the

complaint are true (even if doubtful in fact).” Twombly, 550 U.S. at 589. “[R]egardless of whether the plaintiff is proceeding

pro se or is represented by counsel, conclusory allegations or legal conclusions masquerading as factual conclusions will not

suffice to prevent a motion to dismiss.” McConathy v. Dr.Pepper/Seven Up Corp., 131 F.3d 558, 561 (5th Cir. 1998).

Whether a complaint states a plausible claim for relief is a context-specific task that requires the reviewing court to draw on

its judicial experience and common sense. Iqbal v. Ashcroft, 556 U.S. 662, 678 (2009). “A claim has facial plausibility when

the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the

misconduct alleged.” Id. It follows that, “where the well-pleaded facts do not permit the court to infer more than the mere

possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the pleader is entitled to relief.’ ”Id. at

1950 (quoting Fed. R. Civ. P. 8(a)(2) ).

C. Employment Discrimination

*5 It is not entirely clear from the second amended complaint whether Vorrey is making his employment discrimination claims

under state or federal law, so the Court will consider it under both. Both state and federal law, however, utilize the three-part,

burden-shifting test, known as the McDonnell Douglas 4

 test, to judge claims of employment discrimination. Goudeau v. Nat'l

Oilwell Varco, L.P., 793 F.3d 470, 474 (5th Cir. 2015).

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“Under the McDonnell Douglas analysis, a plaintiff is entitled to a presumption of discrimination if he can meet the minimal

initial burden of establishing a prima facie case.” Reed v. Neopost USA, Inc., 701 F.3d 434, 439 (5th Cir. 2012). The standards

for whether a plaintiff has pled a prima facie case of discrimination are identical under both state and federal law. Goudeau,

793 F.3d at 474.

The elements of a prima facie case of employment discrimination are that the plaintiff: (1) is a member of a legally-protected

class; (2) was qualified to hold the position; (3) suffered an adverse employment action; and (4) was treated less favorably than

those outside of the protected class. Mission Consol. Independent School Dist. v. Garcia, 372 S.W.3d 629, 634 (Tex. 2012);

Malcolm v. Vicksburg Warren Sch. Dist. Bd. of Trustees, 709 F. App'x 243, 247 (5th Cir. 2017). The plaintiff must meet “every

element of a prima facie case.” Cherry v. CCA Properties of Am. Liab. Corp., 438 F. App'x 348, 352 (5th Cir. 2011). The

defendant is entitled to dismissal if the plaintiff fails to show any single element of the prima facie case. McCoy v. Texas

Instruments, Inc., 183 S.W.3d 548, 555 (Tex. App. 2006).

“After the plaintiff establishes a prima facie case, the burden shifts to the employer to show a legitimate, nonretaliatory reason

for the adverse employment action.” Black v. Pan Am. Labs., L.L.C., 646 F.3d 254, 259 (5th Cir. 2011). The Court does not

reach this step unless the plaintiff has first demonstrated every element of a prima facie case. Byers v. Dallas Morning News,

Inc., 209 F.3d 419, 429 (5th Cir. 2000).

If the defendant meets its burden at the second step, then “the presumption of discrimination created by the plaintiff's prima

facie case disappears and the plaintiff must meet its ultimate burden of persuasion on the issue of intentional discrimination.”

Machinchick v. PB Power, Inc., 398 F.3d 345, 350 (5th Cir. 2005). “A plaintiff may meet this burden by producing evidence

tending to show that the reason offered by the defendant is pretext for discrimination.” Id.

III. Analysis

In the operative complaint, Vorrey has asserted five separate claims. The first four claims are based on four distinct actions of

employment discrimination: (1) not hiring him as the airport director; (2) falsely accusing him of forging Walker's signature;

(3) refusing to complete the LCA form; and (4) terminating his employment. As to the first claim, it was not timely filed under

federal or state law, depriving the Court of subject matter jurisdiction under state law and failing to state a claim to relief under

federal law. As to the second, third, and fourth claims, each claim fails to establish a prima facie case under McDonnell-Douglas,

albeit for a different reason on each claim.

The fifth claim made by Vorrey is that the City did not reimburse him for the fees and costs associated with his unsuccessful

H-1B visa application, as required by federal law. The Court lacks subject matter jurisdiction over this claim.

*6 With this summary in mind, the Court turns to the examination of each claim.

A. Employment Discrimination

1. Failure to Promote

Vorrey asserts that the City discriminated against him when it failed to promote him to the position of airport director. This

claim is untimely filed.

In April 2016, the City hired Bryant Walker for the position of airport director. Dkt. No. 16, pp. 4-5. It wasn't until April 27,

2017, that Vorrey filed a claim with the EEOC, claiming employment discrimination. Dkt. No. 16, p. 10.

Whether considered under state or federal law, Vorrey's claim was not timely filed. Under state law, “[a]n aggrieved employee

must file his formal complaint with the EEOC or [Texas Commission on Human Rights] no later than 180 days after the date

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of the alleged unlawful employment practice.” Harris v. BASF Corp., 81 F. App'x 495, 496 (5th Cir. 2003). Even if the Court

assumes that Walker was hired on April 30, 2016, then the complaint had to be filed no later than October 27, 2016, which is 180

days later. Under state law, the failure to timely file a complaint is jurisdictional. Manuel v. Sanderson Farms Inc., Processing

Div., 90 F. App'x 714, 717 (5th Cir. 2004) (citing Jones v. Grinnell Corp., 235 F.3d 972, 974 (5th Cir. 2001) ). Thus, the Court

lacks jurisdiction as to this claim under state law.

Under federal law, Vorrey had 300 days from the date that Walker was hired to file a claim with the EEOC. 42 U.S.C. §

2000e-5(e); Tillison v. Trinity Valley Elec. Co-op. Inc., 204 F. App'x 346, 348 (5th Cir. 2006) (“a claimant must file a charge

of discrimination within 300 days of the alleged discriminatory action.”). Thus, if Walker was hired on April 30, 2016, then

Vorrey had until February 24, 2017, to timely file his claim with the EEOC. Again, Vorrey did not file his complaint until April

27, 2017, which makes it untimely filed.

Unlike state law, where the failure to timely file is jurisdictional, Manuel, 90 F. App'x at 717, under federal law, the failure to

timely exhaust is not jurisdictional, but, instead constitutes an affirmative defense. Davis v. Fort Bend Cty., 893 F.3d 300, 307

(5th Cir. 2018). Such claims are subject to equitable tolling. “Under the equitable-tolling doctrine, failure to [timely file] may be

excused, particularly (although not exclusively) in three circumstances: (1) a pending action between the parties in the incorrect

forum; (2) the claimant's unawareness of facts supporting her claim because the defendant intentionally concealed them; and

(3) the claimant's being misled by the EEOC about her rights.” Tillison, 204 F. App'x at 348. The plaintiff has the burden to

establish that equitable tolling is appropriate. Id. In any event, such tolling should be applied “sparingly.” Id.

At the time of filing, the limitations period had already passed. Vorrey has pled no facts showing that equitable tolling is

appropriate and none are evident from the record, even if the Court goes beyond the instances expressly listed in Tillison. This

claim should be dismissed for failure to state a claim upon which relief can be granted.

2. False Accusation & Investigation

*7 Vorrey alleges that the City discriminated against him when it investigated him for allegedly forging Walker's signature on

the LCA paperwork. Despite the allegation, Vorrey does not state a prima facie case of employment discrimination.

One of the prongs of a prima facie case of discrimination, under both state and federal law, is that Vorrey must have suffered an

adverse employment action. Mission Consol. Independent School Dist., 372 S.W.3d at 634; Malcolm, 709 F. App'x at 247. The

allegation of forging Walker's signature – regardless of the truth of the claim – and the ensuing investigation, do not constitute

an adverse employment action.

The Fifth Circuit “has analyzed the ‘adverse employment action’ element in a stricter sense than some other circuits.” Burger

v. Cent. Apartment Mgmt., Inc., 168 F.3d 875, 878 (5th Cir. 1999). Under Fifth Circuit precedent, only “ultimate” employment

decisions – “such as hiring, granting leave, discharging, promoting, and compensating” – are considered adverse employment

actions. Id.

The Fifth Circuit has consistently held that interlocutory decisions – even if they lead to an eventual termination – are not

adverse employment actions. Wakefield v. State Farm Ins., 229 F.3d 1148 (5th Cir. 2000). This is because the intermediate

decision did not have the immediate effect of altering the terms and conditions of employment. Wakefield, 229 F.3d at 1148

(failure to be recommended for a promotion not sufficiently adverse); Clayton v. Rumsfeld, 106 F. App'x 268, 270 (5th Cir.

2004) (“possible spying, a non-promotable rating, scrutinization, a letter of warning, rejection of [plaintiff's] request to have

a third person of her choosing present at weekly meetings with her supervisors” not adverse); Cothran v. Potter, No. 3:08-

CV-0785-O, 2010 WL 1062564, at *3 (N.D. Tex. Mar. 22, 2010), aff'd, 398 F. App'x 71 (5th Cir. 2010) (increased supervision

of employee not adverse); Julian v. City of Houston, No. 4:12-CV-2973, 2014 WL 3795580, at *23 (S.D. Tex. July 31, 2014),

aff'd, 618 F. App'x 211 (5th Cir. 2015) (“unfavorable performance ratings” not adverse); Garcia v. Potter, No. SA-09-CV-973-

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XR, 2010 WL 2025068, at *4 (W.D. Tex. May 18, 2010) (“letters of warning” in personnel file not adverse). Thus, in each case,

a decision was made that did not necessarily have to result in the eventual termination or demotion of the employee and that

decision was not an adverse employment action.

In short, an investigation that does not result in a change in pay, benefits, responsibility, or prospects for promotion is not

an adverse employment action. Mora v. Ashcroft, 142 F. App'x 206, 207 n. 2 (5th Cir. 2005) (unpubl.); see Hockman v.

Westward Commc'ns, LLC, 407 F.3d 317, 331 (5th Cir. 2004) (holding that a claim that the employer instituted a “baseless

racial harassment investigation” against the employee was not an adverse employment action).

Thus, the decision to investigate Vorrey and the apparent forgery of Walker's signature on the LCA form was not an adverse

employment action. The failure to plead facts as to any single prong of the prima facie case is fatal to Vorrey's claim. Cherry,

438 F. App'x at 352. Given this failure, this claim should be denied for failure to state a claim upon which relief can be granted.

3. Failure to Complete the LCA Form

*8 Vorrey alleges that the City discriminated against him when it chose not to return the LCA Form, constructively denying

him his H-1B visa. Again, Vorrey's complaint fails to state a claim upon which relief can be granted.

As previously noted, the four elements of an employment discrimination claim are that the plaintiff: (1) is a member of a legallyprotected class; (2) was qualified to hold the position; (3) suffered an adverse employment action; and (4) was treated less

favorably than similarly situated employees, who are not members of the protected class. Malcolm, 709 F. App'x at 247. Vorrey

has pled that he is a member of a legally protected class. Furthermore, at the time that the LCA form was due, Vorrey still had

a legally valid H-1B visa and has pled that he was qualified to remain in his position. Thus, at the time that Walker chose not

to return the LCA form, the first two elements of the prima facie case were satisfied. Accordingly, the Court will assume these

well-pled facts to be true and construe them in Vorrey's favor. Villarreal v. Wells Fargo Bank, N.A., 814 F.3d 763, 766 (5th Cir.

2016). Given this conclusion, the Court will focus upon the third and fourth elements.

When analyzing whether the failure to file the LCA form was an adverse employment action, “[a] determining factor in

the analysis is whether [the Plaintiff's] employment status [was] significantly altered” by the employer's decision. McFall v.

Gonzales, 143 F. App'x 604, 608 (5th Cir. 2005). “For example, a decision made by an employer that only limits an employee's

opportunities for promotion or lateral transfer does not qualify as an adverse employment action.” Banks v. E. Baton Rouge

Par. Sch. Bd., 320 F.3d 570, 575 (5th Cir. 2003).

As previously discussed, an employer's action, that does not immediately alter the terms or conditions of employment, is not

an adverse employment action. Wakefield, 229 F.3d 1148. But this claim differs in one key respect from the cases where an

employer instituted an investigation or put an employee under increased supervision or issued a negative performance review.

Unlike those cases, the decision not to complete the LCA resulted in Vorrey losing his authorization to work for the City as a

matter of law. See 20 C.F.R. § 655.730(b) (“Incomplete or obviously inaccurate LCAs will not be certified by [DOL]”). The

failure to complete the LCA had the practical effect of terminating Vorrey's employment with the City, which Walker knew when

he refused to complete the form. Dkt. No. 16-3, p. 1. This decision terminated Vorrey's legal authorization to work for the City

at the expiration of his visa. Indeed, it was a discharge in all but name. As such, it constituted an ultimate employment decision

and was an adverse employment action. That finding, however, does not end the analysis. As noted earlier, each element must

be present to state a claim. Here the failure lies as to the last element.

As to the fourth element, Vorrey has failed to plead facts showing that he was treated less favorably than similarly situated

employees who are not members of the protected class. “There must be ‘nearly identical’ circumstances for employees to be

considered similarly situated.” Maestas v. Apple, Inc., 546 F. App'x 422, 427 (5th Cir. 2013). Vorrey, then, must be compared

to other H-1B visa holders working for the City. Vorrey has pled no facts showing that the City completed LCA applications

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for workers who were not Indian, or who were younger than he was. In fact, Vorrey has not pled any facts as to any other City

workers who held H-1B visas. Given this failure, Vorrey has failed to plead a prima facie case of discrimination as to this claim

and it should be dismissed.

4. Termination

*9 Vorrey asserts that he was discriminated against when the City formally terminated his employment. Once again, he has

failed to state a claim upon which relief can be granted.

One of the prongs of a prima facie case is that the employee was qualified for the position. It is undisputed that Vorrey is an

Indian national. For aliens, “being ‘qualified’ for the position is not determined by the applicant's capacity to perform the jobrather, it is determined by whether the applicant was an alien authorized for employment in the United States at the time in

question.” Egbuna v. Time-Life Libraries, Inc., 153 F.3d 184, 187 (4th Cir. 1998) (en banc). Vorrey's work authorization expired

on January 31, 2017. Dkt. No. 16, p. 7. Vorrey's employment was terminated on February 10, 2017. Dkt. No. 16-4. Thus, at the

time of termination, Vorrey was no longer authorized to work for the City. In short, he was no longer qualified for the position.

Thus, Vorrey has failed to pled facts showing a prima facie case of discrimination and this claim should be dismissed.

B. Fees

Vorrey claims that the City was required to reimburse him for his fees and costs in connection with his H-1B visa. The Court

lacks jurisdiction over this claim.

Under federal regulations, an employer may not “recoup a business expense(s) of the employer (including attorney fees and

other costs connected to the performance of H-1B program functions which are required to be performed by the employer, e.g.,

preparation and filing of LCA and H-1B petition).” 20 C.F.R. § 655.731(b)(9)(ii). If an employer does recoup these expenses,

the Department of Labor “will consider the amount to be an unauthorized deduction from wages even if the matter is not shown

in the employer's payroll records as a deduction.” 20 C.F.R. § 655.731(b)(12).

The proper remedy, in the event that an employer unlawfully deducts H-1B fees and costs, is to file a complaint with the

Administrator of the Wage and Hour Division, Employment Standards Administration in the Department of Labor (“the

Administrator”). 20 C.F.R. § 655.731(d). If the Administrator finds that a violation has occurred, the Administrator will seek a

prevailing wage determination from the Employment and Training Administration (“ETA”), asking the ETA to determine any

violations and to compute any necessary back wages from the unauthorized deduction. Id.

Any appeals from a determination by the ETA go to an administrative law judge, and then to the Department of Labor's

Administrative Review Board (“ARB”). Kutty v. U.S. Dep't of Labor, 764 F.3d 540, 543 (6th Cir. 2014). A party may appeal

the ARB's decision as a final agency action under the Administrative Procedures Act. Dongsheng Huang v. Admin. Review

Bd., U.S. Dep't of Labor, 579 F. App'x 228, 231 (5th Cir. 2014).

Vorrey has alleged that the City “unlawfully required him to pay the application fees for his H-1B visa.” Dkt. No. 16, p. 13.

There is, however, “no private right of action” to recover the costs of filing an H-1B visa. Watson v. Bank of Am., 196 F. App'x

306, 307 (5th Cir. 2006)

There is no evidence in the record that Vorrey ever filed a claim with the Department of Labor making these allegations. Absent

making such a claim – and following the administrative process to completion – the Court lacks jurisdiction over the claim.

Shah v. Wilco Sys., Inc., 126 F. Supp. 2d 641, 648 (S.D.N.Y. 2000) (noting that judicial review can only happen “once the

administrative procedure has been exhausted.”).

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*10 The absence of any administrative process deprives the Court of jurisdiction over this claim. Shah, 126 F. Supp. 2d at

647-48. Accordingly, this claim should be dismissed for lack of jurisdiction.

IV. Recommendation

It is recommended that the motion to dismiss filed by the City of Brownsville be granted. Dkt. No. 18. 5

It is further recommended that:

– Any claim of employment discrimination under the Texas Commission on Human Rights Act, relating to the failure to promote

Vorrey to airport director, be dismissed without prejudice for lack of jurisdiction.

– Any remaining claims of employment discrimination under the Texas Commission on Human Rights Act, be dismissed with

prejudice for failure to state a claim upon which relief can be granted.

– All claims of employment discrimination under either Title VII or the Age Discrimination in Employment Act, be dismissed

with prejudice for failure to state a claim upon which relief can be granted.

– Any claims for unreimbursed fees and costs relating to the H-1B visa process be dismissed without prejudice for lack of

jurisdiction.

The parties have fourteen (14) days from the date of being served with a copy of this Report and Recommendation within which

to file written objections, if any, with the Honorable Fernando Rodriguez, Jr., United States District Judge. 28 U.S.C. § 636(b)

(1) (eff. Dec. 1, 2009). Failure to file timely objections shall bar the parties from a de novo determination by the District Judge

of an issue covered in the report and shall bar the parties from attacking on appeal factual findings accepted or adopted by

the district court except upon grounds of plain error or manifest injustice. See § 636(b)(1); Thomas v Arn, 474 U.S. 140, 149

(1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1428-29 (5th Cir. 1996) superseded by statute on other grounds,

28 U.S.C. § 636(b)(1) (extending the time to file objections from ten to fourteen days).

DONE at Brownsville, Texas, on October 5, 2018.

All Citations

Not Reported in Fed. Supp., 2018 WL 7291458

Footnotes

1 As discussed later, the Court recommends that the motion to strike the exhibits, attached to Vorrey's response, be

dismissed as moot.

2 The 30th day for service was on October 22, 2017, which was a Sunday. Pursuant to FED. R. CIV. P. 6(a)(1)(C), the

following day, October 23, 2017, became the deadline to timely remove the case.

3 The Court is typically not permitted to consider matters outside of the pleadings when deciding a motion to dismiss.

LeBeouf v. Manning, 575 F. App'x 374, 375 (5th Cir. 2014) (citing Leal v. McHugh, 731 F.3d 405, 410 (5th Cir. 2013)

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). Even if the Court considers the exhibits provided by Vorrey, it does not alter the Court's analysis and the outcome

remains the same. Accordingly, the motion to strike the exhibits should be denied as moot.

4 McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973).

5 Vorrey has sought the opportunity to amend and replead his complaint in the event that the Court is inclined to grant the

motion to dismiss. Dkt. No. 27, p. 9. The Court should not permit another amendment. Vorrey has already amended his

complaint twice, giving him ample opportunity to put forward his best-pled complaint. “[P]laintiffs cannot be allowed to

continue to amend or supplement their pleadings until they stumble upon a formula that carries them over the threshold.”.

Jacquez v. Procunier, 801 F.2d 789, 792 (5th Cir. 1986).

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Only the Westlaw citation is currently available.

United States District Court, W.D. Texas, Midland-Odessa Division.

Donna WHITE, Plaintiff,

v.

HEALTH CAROUSEL, LLC, Defendant.

MO:19-CV-00066-DC

|

Signed 10/18/2019

Attorneys and Law Firms

Ben C. Martin, Thomas Wm. Arbon, Law Offices of Ben C. Martin, LLP, Kristi Elizabeth Wood, Martin Baughman, Dallas,

TX, for Plaintiff.

ORDER GRANTING DEFENDANT'S MOTION TO TRANSFER

DAVID COUNTS, UNITED STATES DISTRICT JUDGE

*1 BEFORE THE COURT is Defendant Health Carousel, LLC's Motion to Transfer Venue filed on May 8, 2019. (Doc. 8).

Plaintiff Donna White filed a timely Response on June 6, 2019. 1 (Doc. 18). Defendant filed a Reply in support of the Motion

on June 12, 2019. (Doc. 25). After due consideration of the parties' filings, 2 the record, and the applicable law, the Court

GRANTS Defendant's Motion to Transfer Venue. (Doc. 8).

I. BACKGROUND

This case stems from the parties' employer-employee relationship. (Doc. 1). Defendant, a staffing company, employed Plaintiff

from roughly November 23, 2015 to August 21, 2017, as a traveling registered nurse. Id. at 3. Plaintiff was assigned to work

at Ector County Hospital District d/b/a Medical Center Hospital and Medical Center Health System (the Hospital) in Odessa,

Texas, on June 6, 2016. (Doc. 13 at 2). Plaintiff worked as a registered nurse at the Hospital until August 21, 2017, the day

she was terminated. Id. at 4.

On March 8, 2019, Plaintiff filed the instant lawsuit against Defendant Health Carousel, LLC, and the Hospital. (Docs. 1,

13). Plaintiff raised the following causes of action, (1) violation of Title VII and the Texas Commission on Human Rights

Act (TCHRA), (2) violation under 42 U.S.C. § 1981, et seq., (3) Family and Medical Leave Act (FMLA) discrimination and

retaliation, and (4) discrimination under the Americans with Disabilities Act (ADA) and the TCHRA. Id. at 7–13.

Defendant filed the instant Motion on May 8, 2019, arguing that the parties executed an Employment Agreement (the

Agreement) that contains a forum-selection clause (FSC) and that the FSC controls for venue purposes. (Doc. 8 at 2). Thus,

Defendant contends that per the FSC, the case should be transferred to the United States District Court for the Southern District

of Ohio, Western Division. Id. Plaintiff filed a Response opposing the Motion on June 6, 2019. (Doc. 18). Likewise, the Hospital

filed a Response opposing a transfer of venue to Ohio. (Docs. 17, 29). Defendant filed a Reply to each response on June 12,

2019. (Doc. 25, 26). Finally, the Hospital filed a Sur-reply, with leave of court, on June 28, 2019. (Doc. 29).

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On October 10, 2019, Plaintiff and the Hospital filed a joint stipulation of dismissal with prejudice. (Doc. 33). The Court issued

a final order of dismissal with prejudice as to the Hospital on October 11, 2019. (Doc. 34). Consequently, the dispute before the

Court regarding venue is solely between Plaintiff and Defendant Health Carousel, LLC.

II. LEGAL STANDARD

*2 An FSC may be enforced through a motion to transfer under 28 U.S.C. § 1404(a), which provides that “for the convenience

of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division

where it might have been brought.” 28 U.S.C. § 1404(a). A district court has “broad discretion in deciding whether to order a

transfer.” Balawajder v. Scott, 160 F.3d 1066, 1067 (5th Cir. 1998) (quoting Caldwell v. Palmetto State Sav. Bank, 811 F.2d 916,

919 (5th Cir. 1987)). “But this discretion has limitations imposed by the text of § 1404(a) and by the precedents of the Supreme

Court and [the Fifth Circuit] that interpret and apply the text of § 1404(a).” In re Volkswagen of America, Inc., 545 F.3d 304,

311 (5th Cir. 2008) [hereinafter In re Volkswagen II]. In the typical § 1404(a) analysis, district courts consider (1) whether the

proposed transfer venue is a forum in which the suit could originally have been brought, (2) party and witness convenience, and

(3) the interests of justice. Broussard v. State Farm Fire and Cas. Co., 523 F.3d 618 (5th Cir. 2008). Further, the Fifth Circuit

has adopted the private and public interest factors first enunciated in Gulf Oil Corp. v. Gilbert, 330 U.S. 501 (1947), a forum non

conveniens case, as appropriate for the determination of whether a § 1404(a) venue transfer is for the convenience of parties and

witnesses and in the interest of justice. See Humble Oil & Refining Co. v. Bell Marine Serv., Inc., 321 F.2d 53, 56 (5th Cir. 1963).

However, “[t]he existence of a mandatory, enforceable FSC dramatically alters this analysis.” Weber v. PACT XPP Techs., AG,

811 F.3d 758, 767 (5th Cir. 2016). The legal framework for enforcing FSCs is outlined in Atl. Marine Constr. Co. v. U.S. Dist.

Court for W. Dist. of Texas, 571 U.S. 49 (2013). Id. Under Atlantic Marine, “the plaintiff's choice of forum ‘merits no weight’;

instead[, plaintiff] has the burden of establishing that § 1404(a) transfer or [forum non conveniens] dismissal is unwarranted.”

Id. (citation omitted). Moreover, district courts should not consider the private-interest factors. Id. This is primarily because the

parties contracted for a specific forum; thus, “they ‘waive the right to challenge their preselected forum as inconvenient....’ ”

Id. (citation omitted). Courts should, however, consider the public-interest factors. Id. The public interest factors are: “(1) the

administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3)

the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of

laws [or in] the application of foreign law.” In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004) [hereinafter In re Volkswagen

I] (citing Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241 (1981)).

Finally, “when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a

§ 1404(a) transfer of venue will not carry with it the original venue's choice-of-law rules—a factor that in some circumstances

may affect public-interest considerations.” Atl. Marine, 571 U.S. at 64. Instead, the court in the contractually selected venue

should apply its own law. Id. at 65.

III. DISCUSSION

Plaintiff claims that “mandatory venue laws require that the case be adjudicated in the Midland-Odessa Division of the Western

District of Texas.” (Doc. 18 at 1–2). Moreover, Plaintiff argues that the FSC in the Agreement executed by the parties “should

not be applied because it is overreaching, hinders Plaintiff's day in court, and [because it is] against the public interest.” Id.

at 2. Plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted. Atl.

Marine, 571 U.S. at 63.

A. Mandatory Venue Laws

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Plaintiff first argues that Texas venue law mandates the Court retain jurisdiction over her claims despite Defendant's instant

Motion to Transfer Venue. (Doc. 18). However, “venue in the federal courts is a matter governed by federal law.” Taylor v. Titan

Midwest Constr. Corp., 474 F. Supp. 145, 147 (N.D. Tex. 1979). Thus, the Texas Civil Practice and Remedies Code (TCPRC)

mandatory venue statute on which Plaintiff relies is irrelevant to deciding proper venue. Id.

*3 Even if state law applied, § 15.0151 of the TCPRC, on which Plaintiff's argument regarding political subdivision is

premised, is not applicable. Specifically, Plaintiff argues that under § 15.0151, which provides that an action against a political

subdivision “shall be brought in the county in which the political subdivision is located,” Plaintiff properly filed the case in Ector

County because that is where the Hospital is located. Tex. Civ. Prac. & Rem. Code § 15.0151. As previously noted, however,

the Hospital and Plaintiff settled. Accordingly, the TCPRC mandatory venue statute is not relevant.

For these reasons, the Court finds Plaintiff's argument unpersuasive.

B. Enforceability of the FSC 3

Plaintiff next argues that the inclusion of the FSC in the Agreement was a product of overreaching, that Plaintiff would be

deprived of her day in Court if the FSC is enforced, and that the public-interest factors weigh against transferring the case to

Ohio. (Doc. 18 at 4–7).

“When analyzing the enforceability of [FSCs] ‘federal law applies ... in both diversity and federal question cases.’ ” Liverpool

FC Am. Mktg. Grp., Inc. v. Red Slopes Soccer Found., No. 4:17-CV-00756, 2018 WL 2298388, at *5 (E.D. Tex. May 21, 2018)

(quoting Braspetro Oil Servs. Co. v. Modec (USA) Inc., 240 F. App'x 612, 615 (5th Cir. 2007)). The FSC is presumed enforceable

unless there is a clear showing that the clause is “ ‘unreasonable’ under the circumstances.” M/S Bremen v. Zapata Off-Shore

Co., 407 U.S. 1, 10 (1972). As noted by Plaintiff, an FSC is considered unreasonable “where (1) the incorporation of the forum

selection clause into the agreement was the product of fraud or overreaching; (2) the party seeking to escape enforcement ‘will

for all practical purposes be deprived of his day in court’ because of the grave inconvenience or unfairness of the selected forum;

(3) the fundamental unfairness of the chosen law will deprive the plaintiff of a remedy; or (4) enforcement of the forum selection

clause would contravene a strong public policy of the forum state.” Haynsworth v. The Corp., 121 F.3d 956, 963 (5th Cir. 1997).

The party resisting the FSC bears “a heavy burden of proof.” Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595 (1991).

1. Overreaching

Plaintiff claims that the FSC in the Agreement was a product of overreaching and the result of disparity of bargaining power.

(Doc. 18 at 4). Plaintiff contends that because Plaintiff was an employee “from a different country,” she had no bargaining

power with Defendant. Id. at 5. For comparison, Plaintiff points to a contract executed by Defendant and the Hospital in which

Defendant “agreed to litigate cases in Texas,” arguing that in that scenario both Defendant and the Hospital had “the same

bargaining power.” Id. Based on those facts, Plaintiff asks the Court to find that Defendant forced a forum “that is completely

overreaching and unfair to an employee” when the facts of the case do not relate to the selected forum. Id.

“Fraud and overreaching must be specific to a forum selection clause in order to invalidate it.” Haynsworth, 121 F.3d at 963.

That is, the FSC in the Agreement is not enforceable only “if the inclusion of that clause in the contract was the product of fraud

or coercion.” Scherk v. Alberto-Culver Co., 417 U.S. 506, 519 n.14 (1974) (emphasis in original) (citing Prima Paint Corp. v.

Flood & Conklin Mfg. Co., 388 U.S. 395 (1967)). Accordingly, allegations that do not concern the FSC are not sufficient. Id.

*4 Plaintiff's allegations regarding the contract between Defendant and the Hospital do not concern the FSC in the Agreement.

Thus, Plaintiff's contention is insufficient to invalidate the FSC. Id. Moreover, Plaintiff's argument regarding the parties'

bargaining power is an attack on the contract generally, not the FSC itself. See Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 749 n.3

(5th Cir. 1996) (finding an employee's claims based upon inequality of bargaining power “support [the court's] conclusion that

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her attack is directed at the entire agreement”). In fact, in Carnival Cruise Lines, Inc. v. Shute, the Supreme Court “enforced a

forum selection clause against an unsophisticated cruise ship passenger, notwithstanding the disparity in the parties' bargaining

power and the fact that the contract had not been subject to negotiation.” Haynsworth, 121 F.3d at 965 (citing Carnival Cruise

Lines, 499 U.S. at 593–95) (explaining the holding in Carnival Cruise Lines).

In summary, the Court finds that Plaintiff's contention that the FSC is unenforceable because it was a product of overreaching

is without merit.

2. Deprivation of Day in Court

Plaintiff argues that she would be deprived of her day in court if the Court grants Defendant's Motion. (Doc. 18 at 5–6). Plaintiff

then points to the private-interest factors—the relative ease of access to sources of proof; the availability of compulsory process

to secure the attendance of witnesses; the cost of attendance for willing witnesses; and all other practical problems that make

trial of a case easy, expeditious and inexpensive—and argues that they do not support transfer to Ohio. (Doc. 18 at 5–6).

The court first notes that other courts have rejected the claim that an FSC should not be enforced because litigation in a particular

forum would be so “gravely difficult and inconvenient as to deprive [the party] of their day in court.” Haynsworth, 121 F.3d

at 960 (citing Hugel v. Corp. of Lloyd's, 999 F.2d 206, 210–11 (7th Cir. 1993)). Moreover, as noted previously in this Order,

the existence of a mandatory FSC changes the § 1404(a) analysis. See Weber, 811 F.3d at 767. Specifically, the Court cannot

consider the private-interest factors. See id. Consequently, Plaintiff's argument that she would be deprived of her day in Court

is unsupported, and thus fails.

* * *

The Court finds that Plaintiff failed to meet her “heavy burden” to show that the FSC is unenforceable. Because the FSC in

the Agreement is mandatory and enforceable, the private-interest factors strongly favor transfer. Weber, 811 F.3d at 775. The

Court next determines “whether this is one of the rare cases in which the public-interest [forum non conveniens] factors favor

keeping a case despite the existence of a valid and enforceable FSC.” Id.

C. Public-Interest Factors

Finally, Plaintiff contends that the public-interest factors weigh against transferring the case to the Southern District of Ohio,

Western Division. (Doc. 18 at 6–7). The public interest factors are: “(1) the administrative difficulties flowing from court

congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that

will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws [or in] the application of foreign law.”

In re Volkswagen I, 371 F.3d at 203 (citing Piper Aircraft, 454 U.S. at 241). These factors “will rarely defeat a transfer motion,

the practical result is that [FSCs] should control except in unusual cases.” Atl. Marine, 571 U.S. at 64. This suggests “a high

burden of persuasion on the party seeking to avoid enforcement of the FSC.” Weber, 811 F.3d at 776.

Plaintiff only addresses two factors: the local interest in having localized interests decided at home and the familiarity of the

forum with the law that will govern the case. (Doc. 18 at 6–7). Specifically, Plaintiff argues that Texas is the “more convenient

forum” and that Texas has a local interest in having localized interests decided at home because the events giving rise to the

lawsuit took place in Texas. Id. In a regular § 1404(a) analysis, when the events take place in one location, the second public

interest factor weighs in favor of transfer to the forum in which the events took place. See Cortez v. Brad Drake Constr., LLC,

No. EP-15-CV-346-KC, 2016 WL 1312636, at *3 (W.D. Tex. Apr. 4, 2016) (finding the second factor weighed in favor of

transfer because the allegedly discriminatory acts occurred in the transferee forum). However, the Fifth Circuit has explained

that where an FSC is involved, although a forum may have a particular interest in protecting its citizens, that is not the sort

of “exceptional circumstance that justifies disregarding the parties' agreement on public-interest factor grounds.” Weber, 811

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F.3d at 776. Thus, the Court similarly finds that although Texas has a particular interest in having localized interests decided at

home, that is not so exceptional as to allow the Court to disregard the parties' agreement.

*5 Plaintiff also contends that Texas law will apply to this case and thus the familiarity of the forum with the law that will

govern in the case weighs in favor of maintaining the case in the Western District of Texas as opposed to the Southern District

of Ohio. (Doc. 18 at 7). The Court notes that the FSC in the Agreement provides that the Agreement's validity, interpretation,

performance, and enforcement will be governed by the laws of the State of Ohio. (Doc. 8-1 at 5). Moreover, “a plaintiff

who files suit in violation of a [FSC] enjoys no [venue] ‘privilege’ with respect to its choice of forum, and therefore it is

entitled to no concomitant ‘state-law advantages.’ ” Atl. Marine, 571 U.S. at 65. This is so because it would be inequitable and

encourage gamesmanship “to allow the plaintiff to fasten its choice of substantive law to the venue transfer.” Id. Consequently,

the contractually selected court “should not apply the law of the transferor venue to which the parties waived their right.” Id.

For this reason, the federal court sitting in Ohio would be more familiar with the law that will govern the case, and thus this

factor weighs in favor of transferring the case to the Southern District of Ohio.

Finally, even if Ohio choice-of-law rules point to Texas discrimination law, 4 that alone is insufficient to retain the case in this

Court because the Ohio court will not be required to apply Texas choice-of-law rules for the reasons stated above. Atl. Marine,

571 U.S. at 67. This “reduces whatever weight the [d]istrict [c]ourt might have given to the public-interest factor that looks to

the familiarity of the transferee court with the applicable law.” Id. Moreover, “federal judges routinely apply the law of the State

other than the State in which they sit” and Plaintiff does not point to any “exceptionally arcane features” of Texas discrimination

law “that are likely to defy comprehension by a federal judge sitting in [Ohio].” Id. at 67–68.

The Court thus concludes that the public-interest factors do not justify retaining the case in the Western District of Texas.

IV. CONCLUSION

Based on the foregoing, the Court GRANTS Defendant's Motion to Transfer Venue. (Doc. 8).

The Court ORDERS that the case be TRANSFERRED to the United States District Court for the Southern District of Ohio,

Western Division.

Finally, the Court ORDERS that all pending motions be DENIED WITHOUT PREJUDICE TO REFILING if proper in

the new venue.

It is so ORDERED.

All Citations

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Footnotes

1 On May 20, 2019, the Court granted Plaintiff's Motion for Extension of Time to File Answer to Motion to Transfer

Venue. (Text Order Only Entry, May 20, 2019). The Court allowed Plaintiff to file a response on or before June 7, 2019.

Id. Consequently, Plaintiff's Response was filed in a timely manner.

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2 Now terminated Defendant Ector County Hospital District (the Hospital) also filed a Response and a Sur-reply to the

instant Motion. (Docs. 17, 29). Additionally, Defendant Health Carousel, LLC, filed a Reply to the Hospital's filings.

(Doc. 26). However, the Hospital is no longer a party in this lawsuit. (Docs. 33, 34). Accordingly, said filings are not

relevant to the Court's ruling on the pending Motion to Transfer Venue.

3 The Court notes that neither party disputes that the FSC in the Agreement is mandatory.

4 Plaintiff raises two claims under the TCHRA. (Docs. 1, 13).

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