Court Opinion

ID: 3174244
Source: CourtListenerOpinion
Date Created: 2016-02-05 08:46:35.90115+00
Date Added: 2024-06-11T13:31:11.745076
License: Public Domain

132 Nev., Advance Opinion   el
                       IN THE SUPREME COURT OF THE STATE OF NEVADA

                MB AMERICA, INC., A NEVADA                          No. 66860
                CORPORATION,
                Appellant,
                vs.
                                                                             FILED
                ALASKA PACIFIC LEASING                                       FEB 0 4 2016
                COMPANY, AN ALASKA BUSINESS                                       K. LTEMAN
                CORPORATION,                                            CL      is

                                                                        BY       kli
                Respondent.                                                   EF DEP A ERK

                MB AMERICA, INC., A NEVADA                          No. 67329
                CORPORATION,
                Appellant,
                vs.
                ALASKA PACIFIC LEASING
                COMPANY, AN ALASKA BUSINESS
                CORPORATION,
                Respondent.

                            Consolidated appeals from district court orders granting a
                motion for summary judgment and awarding attorney fees in a
                contractual dispute action. Second Judicial District Court, Washoe
                County; Lidia Stiglich, Judge.
                            Affirmed.

                Robison Belaustegui Sharp & Low and Michael E. Sullivan, Reno,
                for Appellant.

                Laxalt & Nomura, Ltd., and Marilee Breternitz and Holly S. Parker, Reno,
                for Respondent.

                BEFORE SAITTA, GIBBONS and PICKERING, JJ.
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                                                OPINION
                By the Court, SAITTA, J.:
                            This opinion addresses the issue of whether a prelitigation
                mediation provision in the parties' contract constitutes an enforceable
                condition precedent to litigation. We hold that it does and that because
                MB America, Inc. (MBA) did not initiate mediation as required under its
                agreement with Alaska Pacific Leasing Company, the district court
                correctly granted Alaska Pacific's motion for summary judgment.
                Furthermore, because Alaska Pacific was the prevailing party under NRS
                18.010, we hold that the district court did not abuse its discretion by
                awarding Alaska Pacific attorney fees.
                               FACTUAL AND PROCEDURAL HISTORY
                            MBA is a Nevada corporation headquartered in Reno, Nevada,
                selling rock-crushing machines, primarily for commercial purposes.
                Alaska Pacific is an Alaska business based out of Anchorage, Alaska.
                MBA and Alaska Pacific entered into an agreement (the Agreement),
                whereby Alaska Pacific agreed to become a dealer for MBA's line of
                products.
                            After termination of the Agreement, a dispute arose regarding
                more than $100,000 in equipment purchases made by Alaska Pacific,
                while acting as a dealer under the terms of the Agreement. MBA filed a
                complaint in the district court seeking (1) declaratory relief that the
                Agreement was valid and binding on the parties and that MBA had not
                breached the Agreement, and (2) specific performance of the mediation
                provision of the Agreement. Subsequently, Alaska Pacific filed a motion
                for summary judgment, alleging that MBA had prematurely filed its
                complaint because it had not complied with the mediation provision in the

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                 Agreement.      The district court granted Alaska Pacific's motion.
                 Subsequently, the district court awarded Alaska Pacific attorney fees as a
                 prevailing party.
                                                DISCUSSION
                              MBA argues that the district court erred in granting summary
                 judgment in favor of Alaska Pacific on MBA's complaint for declaratory
                 relief and specific performance because: (1) genuine issues of material fact
                 remain as to whether Alaska Pacific refused to participate in mediation as
                 required by the Agreement and whether Alaska Pacific's prior refusal to
                 mediate rendered any further attempt by MBA to mediate the dispute
                 futile, (2) the district court ignored the purpose and scope of declaratory
                 relief claims in Nevada, (3) the district court erred by dismissing the
                 complaint instead of staying the proceedings and ordering the parties to
                 mediate, and (4) the district court abused its discretion by awarding
                 attorney fees to Alaska Pacific.
                 The district court did not err in granting summary judgment in favor of
                 Alaska Pacific
                              "This court reviews 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 no genuine issue of material fact
                 exists and that the moving party is entitled to judgment as a matter of
                 law. Id.
                      The prelitigation provision in the parties' contract is a condition
                      precedent to litigation
                              Although this court has not addressed the issue of whether
                 prelitigation mediation provisions in a contract can constitute a condition
                 precedent to litigation, other jurisdictions have and held that they can. In

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                 DeValk Lincoln Mercury, Inc. v. Ford Motor Co., the United States Court
                 of Appeals for the Seventh Circuit enforced a prelitigation mediation
                 provision by way of summary judgment, stating that the mediation
                 provision was a condition precedent to litigation. 811 F.2d 326, 336 (7th
                 Cir. 1987). The court reasoned that the mediation clause was
                 straightforward in stating that it was a condition precedent to any
                 litigation.   Id. at 335-36. This required strict compliance with the
                 provision. Id. at 336. Although the court entertained the argument that
                 the defendant's conduct constituted a waiver of the mediation right, the
                 court determined that a nonwaiver provision in the parties' agreement
                 precluded such an argument. Id. at 336-37.
                               Similarly, in Tattoo Art, Inc. v. TAT International, LLC,   the
                 court noted that "[a] number of courts have found that when parties to a
                 lawsuit have elected not to be subject to a court's jurisdiction until some
                 condition precedent is satisfied, such as mediation, the appropriate
                 remedy is to dismiss the action." 711 F. Supp. 2d 645, 651 (E.D. Va. 2010).
                 The court began with the proposition that "failure to mediate a dispute
                 pursuant to a contract that makes mediation a condition precedent to
                 filing a lawsuit warrants dismissal." Id. (internal quotations omitted). In
                 analyzing whether a condition precedent existed, the court stated that the
                 agreement entered into by the parties "unambiguously provide[d] that the
                 parties must, at minimum, request mediation of any dispute arising from
                 the [a]greement prior to initiating litigation." Id.   The Tattoo Art court
                 further stated that, "[a's with any other contract, this [c] ourt cannot
                 simply ignore the clear intent of the parties."   Id. at 652. As such, the
                 court held "that [p]laintiff [had] failed to satisfy the condition precedent

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                 necessary to trigger the right to initiate litigation" and, absent defendant's
                 waiver of rights to mediation, dismissal was proper. Id.
                             In this opinion, we adopt the positions taken in DeValk and
                 Tattoo Art and hold that the mediation provision in the parties' contract is
                 an enforceable condition precedent to litigation.
                       MBA did not comply with the prelitigation mediation provision in
                       the Agreement
                             Here, as the provision at issue unambiguously addresses
                 mediation as a condition precedent to litigation, the terms are given their
                 "usual and ordinary signification."    Traffic Control Servs., Inc. v. United
                 Rentals Nw., Inc., 120 Nev. 168, 174, 87 P.3d 1054, 1058 (2004) (internal
                 quotations omitted). Paragraph 13 of the Agreement, titled "Disputes and
                 Mediation," states:
                             The parties agree that any disputes or questions
                             arising hereunder, including the construction or
                             application of [the] Agreement shall be submitted
                             to mediation between [MBA] and [Alaska Pacific]
                             with the rules of the American Arbitration
                             Association, of which any hearing or meeting
                             should be conducted in Reno, NV. Any mediation
                             settlement by the parties shall be documented in
                             writing. If such mediation settlement modifies the
                             language of this Agreement, the modification shall
                             be put in writing, signed by both parties and
                             added to the Agreement as an attachment.
                             If mediation between the parties does not result in
                             a mutual satisfying settlement within 180 days
                             after submission to mediation, then each party
                             will have the right to enforce the obligations of
                             this Agreement in the court of law of Reno,
                             Nevada with all reasonable attorney fees, court
                             costs and expenses incurred by the prevailing
                             party in such litigation to be paid by the other
                             party.

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                                          1:411,`M-1'
                             The commercial mediation procedures under paragraph M-2 of
                 the American Arbitration Association's (AAA) "Commercial Arbitration
                 Rules and Mediation Procedures," titled "Initiation of Mediation," states:
                             Any party or parties to a dispute may initiate
                             mediation under the AAA's auspices by making a
                             request for mediation to any of the AAA's regional
                             offices or case management centers via telephone,
                             email, regular mail or fax. Requests for mediation
                             may also be filed online via WebFile at
                             www.adr.org.
                             The party initiating the mediation shall
                             simultaneously notify the other party or parties of
                             the request. The initiating party shall provide the
                             following information to the AAA and the other
                             party or parties as applicable:
                                   (i)     A copy of the mediation provision of
                                           the parties' contract or the parties'
                                           stipulation to mediate.
                                   (ii)    The names, regular mail addresses,
                                           email addresses, and telephone
                                           numbers of all parties to the dispute
                                           and representatives, if any, in the
                                           mediation.
                                   (iii)   A brief statement of the nature of the
                                           dispute and the relief requested.
                                   (iv)    Any    specific   qualifications   the
                                           mediator should possess.
                 (Emphases added.)
                             Paragraph 13 of the Agreement and paragraph M-2 of the
                 commercial mediation procedures, when read together, indicate that MBA
                 had a duty to follow the AAA rules regarding mediation procedures and
                 that those rules require MBA to submit a request for mediation to "any of
                 the AAA's regional offices or case management centers" in order to initiate

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                mediation. MBA is also required to notify Alaska Pacific of any formal
                request.
                            It is undisputed that MBA did not take the required actions to
                initiate mediation. Thus, MBA failed to comply with a prelitigation
                mediation provision in the Agreement before filing its action in the district
                court. Nevertheless, MBA argues that it was not required to comply with
                the prelitigation mediation provision.
                      MBA's failure to comply with the prelitigation mediation provisions
                      in the Agreement preclude initiation of litigation
                            MBA contends that it was not required to first exhaust
                mediation with the AAA, given Alaska Pacific's prior rejections of MBA's
                informal mediation requests. MBA disagrees with the district court's
                characterization of a mediation provision as an "administrative remedy,"
                but contends that even if it were, "it is well established that the
                exhaustion doctrine only applies to available administrative remedies."
                MBA relies on Malecon Tobacco, LLC v. State, Department of Taxation,
                118 Nev. 837, 839, 59 P.3d 474, 476 (2002), as support for the proposition
                that "exhaustion is not required when a resort to administrative remedies
                would be futile." MBA states that it did not file a formal request with the
                AAA because it would have been futile to do so, and therefore, it did not
                have to exhaust the mediation remedy prior to filing its complaint.
                            We agree with MBA that the district court erred in
                characterizing mediation as an administrative remedy. The district court
                cited no authority to support that characterization, and indeed, this court
                has distinguished between mediation and administrative adjudication.
                Holt v. Reg'l Tr. Servs. Corp., 127 Nev. 886, 891 n.2, 266 P.3d 602, 605 n.2
                (2011) ("[T]he purpose of mediation. . . is not to adjudicate or issue
                findings, instead it is a process meant to define, evaluate, make
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                recommendations on issues, and try to settle issues." (citing Guzman v.
                Laguna Dev. Corp., 219 P.3d 12, 16 (N.M. Ct. App. 2009))).
                            Although the district court incorrectly based its findings on a
                mistaken assumption that a mediation provision is an administrative
                remedy, it nevertheless reached the correct result. As the prelitigation
                mediation provision constituted a condition precedent to litigation, and
                MBA initiated litigation without complying with the prelitigation
                mediation provision in the Agreement, the district court's order granting
                summary judgment was proper. Saavedra-Sandoval v. Wal-Mart Stores,
                Inc., 126 Nev. 592, 598-99, 245 P.3d 1198, 1202 (2010) (holding that a
                district court's order will be affirmed "if the district court reached the
                correct result, even if for the wrong reason").
                            To the extent that MBA argues that Alaska Pacific's alleged
                conduct was a waiver of Alaska Pacific's right to mediation as a condition
                precedent to litigation, see DeValk, 811 F.2d at 336-37, this argument also
                fails. MBA provides several examples of what it claims are Alaska
                Pacific's rejections of MBA's efforts to pursue mediation prior to MBA's
                initiation of litigation. First, MBA proffers a letter dated February 27,
                2014, in which MBA claims it informed Alaska Pacific that any disputes
                arising under the Agreement needed to be sent to mediation in Reno,
                Nevada. The relevant portion of the letter states:
                            Lastly, under paragraphs 12 and 13 of the
                            Agreement, any disputes or questions arising
                            under the application of the Agreement shall be
                            submitted to mediation pursuant to the rules of
                            the [AAA] and the hearing shall be conducted in
                            Reno, Nevada pursuant to Nevada law. Hopefully
                            this will not be necessary.

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                 (Emphasis added.) However, nothing in this letter indicates that MBA
                 requested mediation. In fact, MBA's statement that "fhlopefully this will
                 not be necessary" actually works against MBA's assertion because it
                 implies that this letter does not constitute a request for mediation.
                              MBA next relies on a letter that it received from Alaska
                 Pacific in reply to MBA's February 27, 2014, letter threatening litigation.
                 In relevant part, the letter states:
                              Please note that Paragraph 13 ("Disputes and
                              Mediation") of the Agreement does not apply in
                              this matter as we do not contest [MBA's] right to
                              cancel the agreement, but rather take issue with
                              the fact that [MBA] acted in bad faith by accepting
                              our payment for units which we were not obligated
                              to purchase and then cancelling the Agreement
                              less than eleven (11) months later.
                 Although this letter may demonstrate a belief by Alaska Pacific that
                 mediation did not apply, it does not demonstrate a rejection by Alaska
                 Pacific of a mediation request by MBA.
                              MBA also relies on a declaration by Miriano Ravazzolo, Chief
                 Executive Officer of MBA, and an affidavit of Michael E. Sullivan,
                 attorney of record for MBA, for its contention that Alaska Pacific rejected
                 MBA's requests for mediation. Ravazzolo's declaration states that
                 "[c]ounsel for [MBA] requested mediation in his February 27, 2014 letter
                 to [Alaska Pacific's] Vice President David Faulk. Unfortunately, [Alaska
                 Pacific] rejected that invitation for mediation . . . ." As discussed above,
                 contrary to Ravazzolo's declaration, the letter does not request mediation.
                 Therefore, there was no mediation request for Alaska Pacific to reject, and
                 Ravazzolo's statement does not support MBA's argument that a formal
                 request for mediation was futile.

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                               Sullivan's affidavit states that he "attempted in good faith to
                obtain the consent of [Alaska Pacific] to participate in mediation." He
                then states:
                               Additionally, after this letter was sent out I spoke
                               with representatives in Alaska for [Alaska Pacific]
                               and advised them that [MBA] would participate in
                               mediation but it would need to be in Reno,
                               Nevada. Unfortunately, [Alaska Pacific] and Mr.
                               Faulk ignored those requests and instead sent
                               threatening letters indicating that [Alaska Pacific]
                               would be filing suit in Alaska.
                Sullivan's affidavit finally states that
                               [a]t no time since the filing of this lawsuit has
                               [Alaska Pacific] ever agreed to participate in
                               mediation in Reno, Nevada even though the
                               undersigned has requested both local Reno
                               counsel. . . and [Alaska Pacific's] counsel to
                               participate in mediation in Reno.
                However, when taken in the light most favorable to MBA—that is, when
                the allegations in the affidavits are taken at face value—this does not
                constitute evidence that Alaska Pacific refused to engage in mediation.
                Although Sullivan states that Alaska Pacific never agreed to participate in
                mediation, he does not state that Alaska Pacific categorically rejected a
                request for mediation. Therefore, Alaska Pacific's conduct cannot be seen
                as a waiver of its right to mediation.
                The complaint for declaratory relief was not ripe for judicial review
                               MBA also contends that the district court erred in granting
                Alaska Pacific's motion for summary judgment by ignoring the purpose
                and scope of declaratory relief claims in Nevada. It contends that it
                appropriately sought judicial assistance to declare the obligations of the
                parties to conduct mediation in Reno, Nevada, pursuant to NRS 30.030
                and NRS 30.040.
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                              In Kress v. Corey, this court stated that the Uniform
                  Declaratory Judgment Act opened the door "to the adjudication of
                  innumerable complaints and controversies not theretofore capable of
                  judicial relief, and courts may now function to vindicate challenged rights,
                  clarify and stabilize unsettled legal relations and remove legal clouds
                  which create insecurity and fear." 65 Nev. 1, 25-26, 189 P.2d 352, 364
                  (1948) (citation omitted) (internal quotations omitted).
                              Kress also included the four elements that must be met before
                  declaratory relief may be granted:
                              (1) there must exist a justiciable controversy; that
                              is to say, a controversy in which a claim of right is
                              asserted against one who has an interest in
                              contesting it; (2) the controversy must be between
                              persons whose interests are adverse; (3) the party
                              seeking declaratory relief must have a legal
                              interest in the controversy, that is to say, a legally
                              protectable interest; and (4) the issue involved in
                              the controversy must be ripe for judicial
                              determination.
                  Id. at 26, 189 P.2d at 364 (internal quotations omitted); see also Doe v.
                  Bryan, 102 Nev. 523, 525, 728 P.2d 443, 444 (1986) (holding that the four
                  elements described in Kress constituted the requirements for a justiciable
                  controversy in a declaratory relief action).
                              Here, as discussed above, the issues are not ripe for judicial
                  review because MBA failed to comply with the mediation terms of the
                  agreement. Paragraph 13 of the Agreement states:
                              The parties agree that any disputes or questions
                              arising hereunder, including the construction or
                              application of [the] Agreement shall be submitted
                              to mediation between [MBA] and [Alaska Pacific]
                              with the rules of the American Arbitration
                              Association, of which any hearing or meeting
                              should be conducted in Reno, NV.
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                (Emphases added.) There is no dispute that the Agreement provides the
                formal requirements for mediation. The language of the Agreement
                clearly establishes that disputes "shall be submitted to mediation." MBA
                failed to comply with the terms of the Agreement by neglecting formally to
                submit the dispute to mediation.
                            Thus, the issue was not ripe for judicial review and the district
                court properly dismissed MBA's complaint for declaratory relief. Even
                assuming that the complaint for declaratory relief was ripe for judicial
                review, the issue is now moot because following the filing of the present
                appeal, the parties participated in a mediation/settlement conference
                process.
                The district court did not err by refusing to stay the proceedings
                            MBA also contends that the district court erred by not staying
                the proceedings and ordering the parties to mediate. MBA relies on NRS
                38.221(6)-(7) and the unpublished order in AJS Construction, Inc. v.
                Pankopf, Docket No. 60729 (Order of Summary Reversal and Remand,
                September 25, 2013), 1 for this proposition. Because the authorities cited
                by MBA address arbitration, as opposed to mediation, they are inapposite
                here. Indeed, the United States Court of Appeals for the Eleventh Circuit
                has stated that "the law of arbitration is in nearly every respect an
                illogical foundation for enforcement of mediation agreements." Advanced
                Bodycare Sols., LLC v. Thione Int'l, Inc., 524 F.3d 1235, 1240 (11th Cir.

                       'MBA's reliance on this unpublished order is misplaced. Although
                amendments to the Nevada Rules of Appellate Procedure allow for citation
                to unpublished orders, the amendments apply only to orders entered on or
                after January 1, 2016. As the AJS Construction order was entered prior to
                January 1, 2016, it is not persuasive.

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                2008) (internal quotations omitted). The court also held that "because the
                mediation process does not purport to adjudicate or resolve a case in any
                way, it is not 'arbitration," and thus arbitration remedies, such as
                "mandatory stays and motions to compel, are not appropriately invoked to
                compel mediation." Id.
                                Accordingly, the district court did not err by refusing to stay
                the proceedings.
                The district court properly awarded attorney fees to Alaska Pacific as a
                prevailing party
                                MBA argues that the district court abused its discretion in
                granting Alaska Pacific's motion for attorney fees as Alaska Pacific was
                not a "prevailing party because it did not succeed on any significant issue
                of the case."
                                An award of attorney fees is reviewed for an abuse of
                discretion. Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 417, 132 P.3d
1022, 1027-28 (2006) (reviewing an award of attorney fees for an abuse of
                discretion). An abuse of discretion can occur when the district court bases
                its decision on a clearly erroneous factual determination or it disregards
                controlling law. NOLM, LLC v. Cty. of Clark,       120 Nev. 736, 739, 100 P.3d
658, 660-61 (2004) (holding that relying on factual findings that are
                "clearly erroneous or not supported by substantial evidence" can be an
                abuse of discretion (internal quotations omitted)); Bergmann v. Boyce, 109
Nev. 670, 674, 856 P.2d 560, 563 (1993) (holding that a decision made "in
                clear disregard of the guiding legal principles [can be] an abuse of
                discretion").
                      Alaska Pacific was the prevailing party
                                The district court awarded attorney fees to Alaska Pacific
                based on NRS 18.010(1), which provides that the "compensation of an
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                  attorney and counselor for his or her services is governed by agreement,
                  express or implied, which is not restrained by law." "A party. . . prevail[s]
                  under NRS 18.010 if it succeeds on any significant issue in litigation
                  which achieves some of the benefit it sought in bringing suit." Valley Elec.
                  Ass'n v. Overfield, 121 Nev. 6, 10, 106 P.3d 1198, 1200 (2005) (internal
                  quotations omitted). "To be a prevailing party, a party need not succeed
                  on every issue," LVMPD v. Blackjack Bonding, Inc., 131 Nev., Adv. Op. 10,
                  343 P.3d 608, 615 (2015), but the action must proceed to judgment, Works
                  v. Kuhn, 103 Nev. 65, 68, 732 P.2d 1373, 1376 (1987) ("[A] party to an
                  action cannot be considered a prevailing party within the contemplation of
                  NRS 18.010, where the action has not 'proceeded to judgment."),
                  disapproved of on other grounds by Sandy Valley Associates v. Sky Ranch
                  Estates Owners Ass'n, 117 Nev. 948, 955 n.7, 35 P.3d 964, 969 n.7 (2001).
                  An order dismissing a complaint is sufficient to find a prevailing party.
                  See Semenza v. Caughlin Crafted Homes, 111 Nev. 1089, 1094, 1096, 901
P.2d 684, 687, 688 (1995).
                              Here, the district court did not abuse its discretion by granting
                  attorney fees to Alaska Pacific, as a summary judgment in favor of Alaska
                  Pacific and dismissal of MBA's complaint were sufficient to find Alaska
                  Pacific a prevailing party, and as such, entitled to an award of attorney
                  fees under NRS 18.010. See Semenza, 111 Nev. at 1094, 1096, 901 P.2d at
                  687-88.
                                                 CONCLUSION
                              The district court did not err in granting summary judgment
                  in favor of Alaska Pacific because MBA did not comply with a prelitigation
                  condition precedent for mediation contained in the Agreement.

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                Furthermore, the district court did not abuse its discretion in awarding
                attorney fees to Alaska Pacific because it was the prevailing party.
                Accordingly, we affirm the district court order granting summary
                judgment and its award of attorney fees.

                                                                                J.

                We concur:

                                               J.

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