Court Opinion

ID: 2824336
Source: CourtListenerOpinion
Date Created: 2015-08-11 04:41:49.804144+00
Date Added: 2024-06-11T09:16:19.762792
License: Public Domain

131 Nev., Advance Opinion    57
                          IN THE SUPREME COURT OF THE STATE OF NEVADA

                DOUBLE DIAMOND RANCH MASTER                            No. 65666
                ASSOCIATION, A NEVADA
                NONPROFIT CORPORATION,
                Petitioner,                                                FILED
                vs.
                                                                            JUL 3 0 2015
                THE SECOND JUDICIAL DISTRICT
                                                                              IF K. Lim3Etie,
                COURT OF THE STATE OF NEVADA,                                 F RUP;Vaz         RT
                IN AND FOR THE COUNTY OF
                WASHOE; AND THE HONORABLE
                SCOTT N. FREEMAN, DISTRICT
                JUDGE,
                Respondents,
                and
                THE CITY OF RENO, NEVADA,
                Real Party in Interest.

                            Original petition for a writ of mandamus or prohibition
                challenging a district court order denying a motion to dismiss in a contract
                action.
                            Petition denied.

                Wolf, Rifkin, Shapiro, Schulman & Rabkin, LLP, and Don Springmeyer,
                John M Samberg, and Christopher W. Mixson, Reno,
                for Petitioner.

                Karl S. Hall, City Attorney, and Susan Ball Rothe, Deputy City Attorney,
                Reno,
                for Real Party in Interest.

                BEFORE THE COURT EN BANC.

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                                                   OPINION

                By the Court, HARDESTY, C.J.:
                            NRS 116.3105(2) permits a homeowners' association that
                provides at least 90 days' notice to terminate "any contract, . . that is not
                in good faith or was unconscionable to the units' owners at the time
                entered into." In this writ petition, we address whether the 90 days' notice
                operates as a statute of limitations or a notice for the recipient to
                commence litigation. We conclude that NRS 116.3105(2) does not act as a
                statute of limitations, and a recipient of an association's notice of
                termination of a contract is not required to take legal action within the 90-
                day time frame. Accordingly, we deny this petition.
                                                   FACTS
                            In 1996, Kreg Rowe, the developer of petitioner Double
                Diamond Ranch Master Association (the Association) entered into a
                Maintenance and Operation Agreement (Maintenance Agreement) with
                the City of Reno. Because the property was in a flood zone, the Federal
                Emergency Management Agency required the developer to obtain a Letter
                of Map Revision and enter into the Maintenance Agreement prior to
                developing the South Meadows and Double Diamond Ranch homes in
                Reno, Nevada. The Maintenance Agreement requires, among other
                obligations, that the Association maintain certain flood control channels,
                provide rock rip-rap protection in the Double Diamond/South Meadows
                area, and file an annual report.
                            In February 2012, the Association gave notice to the City that
                it was terminating the contract pursuant to NRS 116.3105(2). This
                statute permits homeowners' associations to terminate at any time a

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                 contract that was entered into by a declarant' if the contract was
                 (1) unconscionable to the units' owners at the time entered into, and
                 (2) the association provides 90 days' notice to the recipient. NRS
                 116.3105(2). In its notice, the Association claimed that it should not have
                 been a party to the Maintenance Agreement because Mr. Rowe signed the
                 agreement on the Association's behalf one day before the Association
                 legally came into being. Further, the Association claimed that Mr. Rowe
                 entered into the Maintenance Agreement for his own benefit, in order to
                 "develop the adjacent property as he desired." Finally, the Association
                 claimed that the City never sought to enforce the Maintenance Agreement
                 and only learned about its existence recently. Later that month, the City
                 rejected the Association's notice of termination.
                             In October 2013, the City brought an action against the
                 Association seeking specific performance of the Maintenance Agreement.
                 The Association moved to dismiss the complaint for failure to state a claim
                 for relief and failure to join indispensable parties. More specifically, the
                 Association argued that the contract was invalid as the Association had
                 statutorily terminated the Maintenance Agreement 20 months before.
                 The Association also contended that it did not own the property at issue,

                       'A declarant is the real estate developer of a property who has
                 control of a homeowners' association until a certain percentage of homes
                 are sold and the homeowners can elect the association's first board of
                 directors. See NRS 116.035(1) (defining a "declarant" as "any person or
                 group of persons acting in concert who . . . fals part of a common
                 promotional plan, offers to dispose of the interest of the person or group of
                 persons in a unit not previously disposed of'); NRS 116.31032 (detailing
                 the period of declarant's control of an association); NRS 116.31034
                 (describing the election process for the executive board of an association).

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                and other indispensable parties were necessary, such as the land owner
                and Mr. Rowe, the developer.
                            At the hearing on the motion, the Association argued that the
                statute required the recipient of the notice of contract termination to file
                suit within 90 days. More specifically, the Association argued that the
                burden shifted to the recipient to bring a cause of action within that time
                if it questioned an association's claim of unconscionability or lack of good
                faith. The district court ultimately denied the Association's motion to
                dismiss The court determined that there were several genuine issues of
                material fact; for example, whether the Association, including the property
                owners, benefited from the Maintenance Agreement and whether the
                parties' agreement was unconscionable. Further, the court stated that the
                statute provided no guidance as to when a recipient must pursue legal
                action, and instead, the City's letter rejecting the Association's notice of
                termination provided enough notice to the Association "that a justiciable
                controversy may exist as a result." Thereafter, the Association petitioned
                this court for a writ of mandamus or prohibition directing the district
                court to vacate its order denying the Association's motion to dismiss and to
                order dismissal instead.
                                               DISCUSSION
                            The Association petitions this court for a writ of mandamus
                compelling the district court to vacate the court's order denying its motion
                to dismiss. 2 "A writ of mandamus is available to compel the performance

                      2Alternatively,the Association seeks a writ of prohibition. A writ of
                prohibition is appropriate when a district court acts without or in excess of
                its jurisdiction. NRS 34.320; Club Vista Fin. Servs., LLC v. Eighth
                Judicial Dist. Court, 128 Nev., Adv. Op. 21, 276 P.3d 246, 249 (2012); see
                also Smith v. Eighth Judicial Dist. Court, 107 Nev. 674, 677, 679, 818 P.2d
                                                                    continued on next page...
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                     of an act that the law requires. . . or to control an arbitrary or capricious
                     exercise of discretion."   Inel Game Tech., Inc. v. Second Judicial Dist.
                     Court, 124 Nev. 193, 197, 179 P.3d 556, 558 (2008); see NRS 34.160; see
                     also Humphries v. Eighth Judicial Dist. Court, 129 Nev., Adv. Op. 85, 312
P.3d 484, 486 (2013). Generally, this court "declinefs] to consider writ
                     petitions that challenge interlocutory district court orders denying motions
                     to dismiss" because an appeal from a final judgment is an adequate legal
                     remedy. Int'l Game Tech., 124 Nev. at 197, 179 P.3d at 558. However,
                     even when an adequate and speedy remedy exists, this court may exercise
                     its discretion when an important issue of law needs clarification and
                     sound judicial economy warrants intervention. Cote H. v. Eighth Judicial
                     Dist. Court, 124 Nev. 36, 39, 175 P.3d 906, 908 (2008).
                                 While the Association has an adequate legal remedy, whether
                     the 90-day notice period within NRS 116.3105(2) operates as a statute of
                     limitations is an important issue of law in need of clarification, and
                     resolving this issue at this stage of the proceedings would promote judicial
                     economy. Accordingly, we exercise our discretion to consider the
                     Association's petition.
                     The 90-day notice period in NRS 116.3105(2) is not a statute of limitations
                                 The Association argues that the statute requires the recipient
                     of a notice of contract termination under NRS 116.3105(2) to take legal
                     action within 90 days, otherwise the 90-day language is superfluous. The

                     ...continued
                     849, 851, 853 (1991). Because the district court had jurisdiction to conduct
                     and determine the outcome of the motion hearing, we deny the
                     Association's alternative request for a writ of prohibition and consider this
                     petition under the mandamus standard.

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                Association further argues that the 90-day notice shifts the burden to the
                recipient to commence an action. We disagree.
                             Pursuant to NRS 116.3105, a homeowners' association may
                terminate contracts or leases entered into by declarants after giving 90
                days' notice. NRS 116.3105(1) permits associations to terminate contracts
                within two years of an executive board's election by its units' owners. In
                addition, NRS 116.3105(2) permits associations to terminate contracts at
                any time if the declarant did not enter into the contract in good faith or
                the contract was unconscionable to the units' owners at the time of
                contract formation. The Association argues that the statute requires the
                recipient of the notice to file legal action within the 90-day period.
                Interpreting whether NRS 116.3105(2)'s 90-day notice period operates as a
                statute of limitations is an issue of first impression and a question of law
                that we review de novo. 3 See Intl Game Tech., 124 Nev. at 198, 179 P.3d
                at 559 ("Statutory interpretation is a question of law that we review de
                novo, even in the context of a writ petition.").
                             This court has concluded that when a statute is facially clear,
                it will give effect to the statute's plain meaning.     DR. Horton, Inc. v.
                Eighth Judicial Din. Court, 123 Nev. 468, 476, 168 P.3d 731, 737 (2007).
                Where a statute is ambiguous, because it is susceptible to more than one
                reasonable interpretation, this court will consider reason and public policy
                to determine legislative intent.    Cable v. State ex rel. Emp'rs Ins. Co. of
                Nev., 122 Nev. 120, 124-25, 127 P.3d 528, 531 (2006). In addition, this

                      3 Moreover,   while several other states have adopted the Uniform
                Common Interest Ownership Act that Nevada adopted in 1991, no other
                state court has interpreted whether the statute requires a notice recipient
                to pursue legal action within the 90-day notice period.

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                court assumes that when enacting a statute, the Legislature is aware of
                related statutes. Id. at 125, 127 P.3d at 531.
                            NRS 116.3105(2) states in full as follows:
                            The association may terminate without penalty, at
                            any time after the executive board elected by the
                            units' owners pursuant to NRS 116.31034 takes
                            office upon not less than 90 days' notice to the
                            other party, any contract or lease that is not in
                            good faith or was unconscionable to the units'
                            owners at the time entered into.
                The statute does not expressly indicate what rights and obligations a
                recipient has when it receives an association's notice of termination of a
                contract. On the one hand, the 90 days' notice could indicate the time
                frame a party has to pursue legal action; on the other hand, the 90 days'
                notice could merely indicate the period the association must continue to
                perform under the contract before termination. Accordingly, we conclude
                that NRS 116.3105(2) is ambiguous, and we therefore look to the intent of
                the Legislature and to related statutes.
                            When interpreting an ambiguous statute to determine the
                Legislature's intent, this court will look to the legislative history of the
                statute in light of the overall statutory scheme.   See We the People Nev. v.
                Miller, 124 Nev. 874, 881, 192 P.3d 1166, 1171 (2008). In addition, "tithe
                [Llegislature is presumed to have intended a logical result, rather than an
                absurd or unreasonable one."'      Clark Cnty. Sch. Dist. v. Clark Cnty.
                Classroom Teachers Ass'n, 115 Nev. 98, 103, 977 P.2d 1008, 1011 (1999)
                (quoting Angoff v. M & M Mgmt. Corp.,      897 S.W.2d 649, 654 (Mo. Ct. App.
                1995)).
                            When the Legislature codified NRS Chapter 116, it modeled
                the chapter on the Uniform Common Interest Ownership Act (UCIOA).
                See, e.g., Hearing on A.B. 221 Before the Assembly Judiciary Comm., 66th
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                 Leg. (Nev., March 20, 1991); Hearing on A.B. 221 Before the Senate
                 Judiciary Comm., 66th Leg. (Nev., May 23, 1991). Nevada did not amend
                 any of the UCIOA language in the section of the bill that became NRS
                 116.3105(2), and thus, the statute mirrors section 3-105 of the UCIOA.
                 See Hearing on A.B. 221 Before the Assembly Judiciary Comm., 66th Leg.,
                 Exhibit C (Nev., April 17, 1991) (indicating no changes to the section of the
                 bill that became NRS 116.3105(2)), Compare NRS 116.3105(2), with Unif.
                 Common Interest Ownership Act § 3-105(b) (2008), 7 U.L.A. 349 (2009).
                 Testimony from one of the committee hearings on Assembly Bill 221
                 indicated that "association management and consumer protection were the
                 two most common threads throughout the bill." Hearing on A.B. 221
                 Before the Assembly Judiciary Comm., 66th Leg. (Nev., February 20,
                 1991) (testimony of Stephen Hartman). Further, the UCIOA offered
                 purchaser protections, including the "power of an association to terminate
                 'sweetheart' contracts entered into by the developer."           Id., Exhibit C
                 (prepared testimony by Michael Buckley).
                              Similarly, commentary to the UCIOA reflects that the purpose
                 behind this law was to address the "common problem in the development
                 of. . . planned community. . . projects: the temptation on the part of the
                 developer, while in control of the association" to engage in self-dealing
                 contracts. Unif. Common Interest Ownership Act § 3-105 cmt. 1, 7 U.L.A.
                 349. Thus, this law allows an association to terminate any contract that is
                 not bona fide or is unconscionable: "certain contracts . . . [are] so critical to
                 the operation of the common interest community and to the unit owners'
                 full enjoyment of their rights of ownership that they. . . should be voidable
                 by the unit owners." Id. at § 3-105 cmt. 2, 7 U.L.A. 349.

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                               The Restatement (Third) of Property also permits a similar
                termination of a contract entered into by a developer that is not bona fide
                or is unconscionable to the members, and also recognizes the conflicting
                interests of the declarant and the association. 4 Restatement (Third) of
                Prop.: Servitudes § 6.19 (2000). "The developer's primary interest is in
                completing and selling the project, while that of the purchasers is in
                maintaining their property values and establishing the quality of life they
                expected when buying the property." Id. at § 6.19 cmt. a. Recognizing
                that an association's "members have little opportunity to protect
                themselves" while the association is under the control of the developer,
                this rule permits associations to treat certain contracts as voidable. Id. at
                § 6.19 cmt. d. However, neither the UCIOA nor the Restatement speaks to
                whether a recipient can challenge the termination notice and when a
                recipient of a termination notice must file an action against the
                association.
                               Thus, interpreting the statute as a statute of limitations as
                the Association suggests would require us to read additional language into
                the statute, which we decline to do. 5 See McKay v. Bd. of Cnty. Comm'rs,

                      4 I11  the Restatement (Third) of Property: Servitudes
                § 6.19(3)(d) (2000):

                               After the developer has relinquished control of the
                               association to the members, the association has
                               the power to terminate without penalty. . . any
                               contract or lease that is not bona fide, or was
                               unconscionable to the members other than the
                               developer at the time it was entered into, under
                               the circumstances then prevailing.
                      5 Wedisagree with the Association's argument that the 90-day
                language in the statute would be superfluous if it were not acting as a
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                103 Nev. 490, 492, 746 P.2d 124, 125 (1987) (explaining that when a
                statute is silent, "it is not the business of this court to fill in alleged
                legislative omissions based on conjecture as to what the [L]egislature
                would or should have done").
                            Moreover, this court has identified three purposes for which
                statutes of limitations are intended to operate:
                            First, there is an evidentiary purpose. The desire
                            is to reduce the likelihood of error or fraud that
                            may occur when evaluating factual matters
                            occurring many years before. Memories fade,
                            witnesses disappear, and evidence may be lost.
                            Second, there is a desire to assure a potential
                            defendant that he will not be liable under the law
                            for an indefinite period of time. Third, there is a
                            desire to discourage prospective claimants from
                            "sleeping on their rights."
                State Indus. Ins. Sys. v. Jesch, 101 Nev. 690, 694, 709 P.2d 172, 175
                (1985).
                            Considering these purposes here, the evidentiary purpose is
                moot since the statute permits an association to terminate contracts "at
                any time." NRS 116.3105(2). Because an association can terminate a
                contract at any time, time passage, fading memories, disappearing
                witnesses, and lost evidence are seemingly less important than preserving
                an association's right to terminate.
                            The second and third purposes would be incongruent with the
                customary statute of limitations for contracts (either four or six years
                depending on if the contract is in writing).       See NRS 11.190(1)(b) and

                ...continued
                statute of limitations. The 90-day period appears to provide time for a
                notice recipient to make preparations for termination of the contract.

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                (2)(c). 6 While a potential defendant should not have to worry about
                liability after a certain period of time, as described above, we determine
                that the customary statute of limitations for contracts found in NRS
                11.190 should apply, as reducing the four-year or six-year limit to 90 days,
                while allowing an association to terminate a contract at any time, appears
                unequal. Similarly, the "desire to discourage prospective claimants from
                sleeping on their rights" and permitting a 90-day limitations period but
                allowing the association to terminate at any time essentially permits an
                association to "sleep on fits] rights" while one-sidedly denying a notice
                recipient the typical period of limitation. Jesch, 101 Nev. at 694, 709 P.2d
                at 175 (internal quotations omitted).
                            Thus, we conclude that neither the statute's plain language
                nor legislative history shows that the Legislature intended for the 90 days'
                notice requirement in NRS 116.3105(2) to act as a statute of limitations
                for a notice recipient to commence litigation. Rather, upon notice from an
                association, the notice recipient would then have the customary period of
                limitations for contracts under NRS 11.190 in which to commence an
                action. 7

                      @Under NRS 11.190(1)(b) and (2)(c), "actions . . . may only be
                commenced ... [wlithin 6 years .. . [on alii action upon a contract,
                obligation or liability founded upon an instrument in writing" or "[wlithin
                4 years ... [on am n action upon a contract, obligation or liability not
                founded upon an instrument in writing."

                       "In the same way that NRS 116.3105(2)'s 90-day requirement does
                not operate as a statute of limitations for a notice recipient, nothing in the
                plain language of the statute imposes a duty on the notice provider to file
                an action within the 90-day period in response to a denial of the contract
                termination notice.

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                             Because we conclude that the 90-day notice period in NRS
                116.3105(2) does not operate as a statute of limitations or shift the burden
                to a notice recipient to file an action, we conclude that the district court
                did not err in denying the Association's motion to dismiss, and we deny
                this petition.

                                                                 Litat.\        ,   C.J.
                                                     Hardesty

                We concur:

                 pi, 0                         J.
                Parraguirr,jar

                Douglas

                Saitta

                                                J.
                Gibbons

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                    PICKERING, J., with whom CHERRY, J., agrees, concurring:
                                I agree with the majority's decision to deny the petition for a
                    writ of mandamus or prohibition but would do so on the basis that this
                    challenge to the district court's order denying the petitioner's motion to
                    dismiss does not qualify for extraordinary writ relief At best, the petition
                    asserts legal error by the district court in not crediting the petitioner's
                    argument that, under NRS 116.3105, the City of Reno had 90 days to sue,
                    once the Double Diamond Ranch Master Association (HOA) gave notice it
                    was terminating the parties' contract as "not bona fide" or
                    "unconscionable." This termination provision, or one like it, has been part
                    of the Uniform Common Interest Ownership Act (UCIOA) since 1982.
                    Compare UCIOA § 3-105(b) (2008), 7 U.L.A., part 1B 349 (2009), with
                    UCIOA § 3-105 (1982), 7 U.L.A., part 2 107 (2009). Yet, as the majority
                    acknowledges, no court, including our Nevada district courts, has read this
                    termination provision as petitioner does. It is more natural to read the
                    provision as the district court did: after a notice of termination under NRS
                    116.3105, an HOA-terminable contract remains in force for at least 90
                    days. Such a contract is prospectively voidable but not void, in other
                    words.
                                Mandamus does not lie to correct a district court's legal error
                    in denying a motion to dismiss for failure to state a claim upon which
                    relief can be granted. State ex rel. Dep't of Transp. v. Thompson, 99 Nev.
358, 361-62, 662 P.2d 1338, 1340 (1983); see Int? Union, United Auto.,
                    Aerospace & Agric. Implement Workers of Am. (UAW) v. Nat'l Caucus of
                    Labor Comms., 525 F.2d 323, 326 (2d Cir. 1975) ("It is not the function of
                    mandamus to allow ad hoc appellate review of interlocutory orders when
                    only error is alleged."). Such an error, if one occurs, is correctable by the

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                district court as the case proceeds and by this court on direct appeal from
                the eventual final judgment. See Reno Hilton Resort Corp. v. Verderber,
                121 Nev. 1, 5-6, 106 P.3d 134, 136-37 (2005) (emphasizing that the final
                judgment rule, which withholds appellate review until final judgment is
                reached in the district court, plays "a crucial part of an efficient justice
                system": "If] or the trial court, it inhibits interference from the appellate
                court during the course of preliminary and trial proceedings, and for the
                appellate court, it prevents an increased caseload and permits the court to
                review the matter with the benefit of a complete record"). Also,
                mandamus "requires not only a clear error but one that unless
                immediately corrected will wreak irreparable harm"           In re Linee Aeree
                Italiane (Alitalia), 469 F.3d 638, 640 (7th Cir. 2006); see NRS 34.170
                (allowing for mandamus in cases "where there is not a plain, speedy and
                adequate remedy in the ordinary course of law"). "[B]ecause an appeal
                from the final judgment typically constitutes an adequate and speedy legal
                remedy, we generally decline to consider writ petitions that challenge
                interlocutory district court orders denying motions to dismiss" Int? Game
                Tech., Inc. v. Second Judicial Dist. Court, 124 Nev. 193, 197, 179 P.3d 556,
                558 (2008).
                              This petition, as filed, met none of the conventional criteria for
                extraordinary writ relief. It asserts legal error in the denial of a motion to
                dismiss. But the error not only was not "clear," as mandamus relief
                requires; it was, as the majority concludes, nonexistent. Nor did the
                petitioner establish that an eventual appeal would not afford an adequate
                legal remedy. The only harm alleged was the expense associated with the
                HOA having to defend itself in district court. But this harm inheres in
                any order denying a motion to dismiss and, by itself, is not enough to

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                justify writ relief "Postponing appeal to the end of a litigation, rather
                than interrupting it in medias res with a mandamus proceeding that
                would require this court to conduct interlocutory appellate review, is as
                likely to reduce as to increase the total expense of the litigation."   In re
                Linee Aeree Italiane, 469 F.3d at 640.
                            I recognize that, in International Game Technology, we
                deemed advisory or supervisory mandamus permissible when needed to
                resolve "an important issue of law [that] needs clarification and
                considerations of sound judicial economy and administration militate in
                favor of granting the petition." 124 Nev. at 197-98, 179 P.3d at 559. Such
                use of extraordinary writ review provides a needed "escape hatch" from
                the finality rule, which ordinarily defers appellate review until final
                judgment is reached in the district court, and the strict limitations
                conventionally imposed on extraordinary writ relief.       Cf. Am. Express
                Warehousing, Ltd. v. Transamerica Ins. Co., 380 F.2d 277, 282 (2d Cir.
                1967). "Even so, proper occasions for employing advisory mandamus are
                hen's-teeth rare: it is reserved for blockbuster issues, not merely
                interesting ones." In re Bushkin Assocs., Inc., 864 F.2d 241, 247 (1st Cir.
                1989). These limitations need to be observed, or the narrow exception to
                the rules governing extraordinary writ relief set forth in International
                Game Technology will overrun the final judgment rule.
                            I respectfully disagree with my colleagues in the majority that
                petitioner's argument with respect to the UCIOA termination provision
                codified as NRS 116.3105 presents the kind of "important issue of law
                need[ing] clarification" that would qualify a case for advisory mandamus.
                To me, the fact that the provision has existed for more than 30 years
                without any court or commentator reading it as the petitioner presses us

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                to do should have led us to summarily deny the petition so the case could
                proceed in district court. Instead, once this court ordered an answer and
                full briefing, the parties voluntarily suspended all proceedings in the
                district court, halting its forward progress. I submit that we should have
                denied the petition as procedurally insufficient, without reaching the
                merits. I therefore concur, but only in the result.

                                                      Pickering

                I concur:

                                             ,   J.

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