Court Opinion

ID: 1033112
Source: CourtListenerOpinion
Date Created: 2013-07-09 19:30:51.158942+00
Date Added: 2024-06-11T09:18:22.384023
License: Public Domain

Appellants brought suit in district court against their
                homeowners' association, the association's board of directors (collectively,
                the Association), and Las Vegas Motorcoach Partners (Partners), an entity
                that extended a loan to the Association. Both groups of respondents
                moved to dismiss on the ground that appellants' lawsuit was subject to
                mandatory arbitration and that the district court was therefore the
                inappropriate forum to resolve the parties' dispute. See NRS 38.310(1)
                ("No civil action based upon a claim relating to. . . Nile interpretation,
                application or enforcement of any. . . bylaws, rules or regulations adopted
                by an association. . . may be commenced in any court in this State unless
                the action has been submitted to mediation or arbitration . . . .").
                            The district court agreed and granted respondents' motions.
                Thereafter, respondents requested attorney fees and costs, and the district
                court awarded both. On appeal, appellants contend that these awards
                were improper.' We address each award in turn.
                Appellants had a reasonable basis for believing that district court was the
                proper forum to resolve their dispute
                            The district court awarded attorney fees to respondents under
                NRS 18.010(2)(b), which permits such an award "when the court finds that
                the claim. . . was brought or maintained without reasonable ground or to
                harass the prevailing party." On appeal, appellants contend that the
                district court abused its discretion in basing the awards of attorney fees on
                this conclusion. See Semenza v. Caughlin Crafted Homes, 111 Nev. 1089,

                      'Because appellants did not appeal from the order of dismissal, we
                do not address the propriety of that order.

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                1095, 901 P.2d 684, 687 (1995) (reviewing a district court's award of
                attorney fees under NRS 18.010(2)(b) for an abuse of discretion).
                            We agree. "Although a district court has discretion to award
                attorney fees under NRS 18.010(2)(b), there must be evidence supporting
                the district court's finding that the claim or defense was unreasonable or
                brought to harass." Bower v. Harrah's Laughlin, 125 Nev. 470, 493, 215
                P.3d 709, 726 (2009). Here, the district court's order failed to identify any
                evidence that supported its finding, and our independent review of the
                record reveals no evidence that could do so.
                            To the contrary, the record demonstrates that appellants
                reasonably believed NRS 38.310 was inapplicable. As they explained
                when opposing respondents' motions to dismiss, appellants believed that
                their three causes of action could be established under principles of
                common law and without resort to the Association's bylaws, rules, or
                regulations. Namely, appellants' cause of action for declaratory relief
                sought to void the Association's loan agreement with Partners on the
                ground that it was unconscionable. Cf. Pacificare of Nevada v. Rogers, 127
                Nev.    , 266 P.3d 596, 598 (2011) (indicating that the doctrine of
                unconscionability derives from principles of common law). Likewise,
                appellants sought to establish their breach-of-fiduciary-duty cause of
                action against the Association's president by showing that he had engaged
                in self-dealing, thereby breaching his duty of loyalty. Cf. Shoen v. SAC
                Holding Corp,, 122 Nev. 621, 632, 137 P.3d 1171, 1178 (2006) ("[T]he duty
                of loyalty requires the board and its directors to maintain, in good faith,
                the corporation's and its shareholders' best interests over anyone else's
                interests."). Finally, appellants sought to establish their breach-of-
                fiduciary-duty cause of action against the Association's directors by
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                showing that some directors approved the loan agreement without
                knowing what the loan's material terms were, thereby breaching their
                duty of care. 2 Cf. id. ("[T]he duty of care consists of an obligation to act on
                an informed basis. . . .").
                             In our only published opinion discussing NRS 38.310's scope,
                we generally held that li]f parties dispute the interpretation and
                enforcement of CC&Rs [or governing documents], they must first submit
                to mediation or arbitration."    Hamm v. Arrowcreek Homeowners' Ass'n,
                124 Nev. 290, 301, 183 P.3d 895, 904 (2008). As explained above, the
                causes of action in appellants' complaint arguably do not implicate the
                Association's governing documents. While respondents may have been
                able to point to various bylaws, rules, or regulations in defending against
                appellants' claims, nothing in NRS 38.310 or Hamm necessarily should
                have alerted appellants of the need to anticipate respondents' theories of
                defense when deciding whether to file their complaint in district court.
                             Thus, although we need not decide whether appellants'
                complaint was subject to NRS 38.310's arbitration requirement,
                appellants at least had a reasonable basis for believing that the district
                court was the appropriate forum to resolve their dispute with respondents.
                Cf. Bobby Berosini, Ltd. v. PETA, 114 Nev. 1348, 1354-55, 971 P.2d 383,
                387 (1998) (reversing an award of attorney fees under NRS 18.010(2)(b)

                      2 We recognize that the exact basis for appellants' cause of action
                against the directors is less than clear and that certain allegations may
                implicate the Association's governing documents. Nonetheless, to the
                extent that the district court inferred an improper motive on appellants'
                part based solely on ambiguities in their pleadings, the district court
                abused its discretion.

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                when "the status of Nevada law was unclear" regarding the viability of the
                plaintiffs complaint).     Consequently, the district court abused its
                discretion in awarding attorney fees under NRS 18.010(2)(b), see
                Semenza, 111 Nev. at 1095, 901 P.2d at 687, and we reverse these
                awards. 3
                The district court impliedlv granted additional time for respondents to file
                and serve their memoranda of costs
                            Appellants contend that respondents failed to file and serve
                their memoranda of costs within five days of when the district court
                entered its dismissal order. See NRS 18.110(1) (stating that a party who
                requests costs "must file with the clerk, and serve a copy upon the adverse
                party, within 5 days after the entry of judgment, or such further time as
                the court or judge may grant, a memorandum of the items of the costs in
                the action or proceeding" (emphasis added)). Appellants acknowledge,
                however, that NRS 18.110(1)'s five-day requirement is not jurisdictional,
                and we have previously held that when the district court proceeds to
                award costs after the five-day window has elapsed, it has impliedly
                granted additional time. Eberle v. State ex rel. Redfield Trust, 108 Nev.

                      3 Contraryto the Association's contention, its award of attorney fees
                cannot be affirmed by treating the award as a sanction imposed under
                NRCP 11. For the district court to impose sanctions on its own initiative
                under NRCP 11(c), it would have needed to "enter an order describing the
                specific conduct" that it believed was sanction-worthy and afford
                appellants an opportunity to establish otherwise. NRCP 11(c)(1)(B).
                Nothing in the record suggests that the district court did this.

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                587, 590, 836 P.2d 67, 69 (1992). Consequently, respondents' requests for
                costs were timely and are therefore affirmed. 4
                            Consistent with the foregoing, we ORDER the judgment of the
                district court AFFIRMED IN PART AND REVERSED IN PART.

                                                            Gibbons

                                                            Douglas

                                                            Saitta

                cc: Hon. Kathy A. Hardcastle, District Judge
                     Robert F. Saint-Aubin, Settlement Judge
                     Adams Law Group
                     Leach Johnson Song & Gruchow
                     Carbajal & McNutt, LLP
                     Eighth District Court Clerk

                      4Appellants   contend that the district court failed to rule on their
                motion to retax costs. Because their motion was pending when the district
                court granted respondents' requests for costs, appellants' motion was
                impliedly denied. Bd. of Gallery of History v. Datecs Corp., 116 Nev. 286,
                289, 994 P.2d 1149, 1150 (2000) (noting that the district court's failure to
                rule on a request constitutes a denial of the request).

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