Archive for: 2015

In Nevada, the elements for a claim of civil assault are:

  1. Intentionally placing another person in reasonable apprehension of immediate harmful or offensive touching;
  2. Offender intended to cause harmful or offensive touching;
  3. Lack of consent for the contact;
  4. The victim was put in apprehension of such contact; and
  5. Causation and damages.

Graham v. Connor, 490 U.S. 386, 109 S. Ct. 1865 (1989); In re Bradshaw, 315 B.R. 875 (Bankr. D. Nev. 2004); Burns v. Mayer, 175 F. Supp. 2d 1259 (D. Nev. 2001); Lerner Shops v. Marin, 83 Nev. 75, 423 P.2d 398 (1967); Yada v. Simpson, 112 Nev. 254, 913 P.2d 1261; Wright v. Starr, 42 Nev. 441, 179 P. 877 (1919);  Prosser and Keeton on Torts, § 10 at 43 (5th ed. 1984).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of negligence are:

  1. Defendant owed a duty of care to plaintiff;
  2. Defendant breached that duty;
  3. The breach was the legal cause of plaintiff’s injuries; and
  4. Plaintiff suffered damages.

Turner v. Mandaly Sports Entm’t, LLC, 124 Nev. 213, 180 P.3d 1172 (2008); Scialabba v. Brandise Construction Co., 112 Nev. 965, 921 P.2d 928 (1996); Perez v. Las Vegas Med. Ctr., 107 Nev. 1, 4, 805 P.2d 589 (1991).  Negligence is the failure to exercise that degree of care which an ordinarily careful and prudent person would exercise under the same or similar circumstances.  NEVADA JURY INSTRUCTIONS 4.02; NEVADA JURY INSTRUCTIONS 4.03; BAJI 3.10.

 

See elements for other claims at the Nevada Law Library

In Nevada, the defense of unilateral mistake is available where:

  1. Mistake made by one party at the time of formation of a contract concerning a vital fact upon which they based their bargain;
  2. The mistake materially and adversely alters the contract;
  3. That party does not bear the risk of mistake; and
  4. The other party has reason to know of the mistake or caused it.

Unilateral Mistake may allow a party to a contract to obtain relief from that agreement.  Home Savers, Inc. v. United Sec. Co., 103 Nev. 357, 358-59, 741 P.2d 1355, 1356-57 (1987) (adopting Restatement (Second) of Contracts § 153 (1981)).  It occurs when one party makes a mistake as to a basic assumption of the contract, that party does not bear the risk of mistake, and the other party has reason to know of the mistake or caused it.  Id.

In Nevada, the defense of mutual mistake (or bilateral mistake) is available where:

  1. Mistake made by both parties at the time of formation of a contract concerning a vital fact upon which they based their bargain;
  2. The mistake materially and adversely alters the contract; and
  3. Conscious ignorance cannot support a mutual mistake defense.

In re Irrevocable Trust Agreement of 1979, 130 Nev. Adv. Op. 63 (Nev. 2014); Gramanz v. Gramanz, 113 Nev. 1, 8, 930 P.2d 753, 758 (1997).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of defamation per se are:

  1. False and defamatory statement by defendant concerning the plaintiff;
  2. Unprivileged publication of the statement to third party;
  3. Some level of fault amounting at least to negligence; and
  4. Actual or presumed damages. Damages which will be presumed if the defamation tends to injure plaintiff in his business (defamation per se).

To constitute defamation per se, the statement must fall into one of four categories: “(1) that the plaintiff committed a crime; (2) that the plaintiff has contracted a loathsome disease; (3) that a woman is unchaste; or, (4) the allegation must be one which would tend to injure the plaintiff in his or her trade, business, profession or office.”  Nev. Indep. Broad. Corp., 99 Nev. 404, 409, 664 P.2d 337, 341.  Additionally, the defamatory comments must imply a “habitual course of similar conduct, or the want of the qualities or skill that the public is reasonably entitled to expect.”  See Restatement (Second) of Torts § 573 cmt. d (1977).  With per se liability, the plaintiff is entitled to presumed, general damages.  Nev. Indep. Broad., 99 Nev. 404, 409, 664 P.2d 337, 341.  If the defamation tends to injure the plaintiff in his or her business or profession, it is deemed defamation per se, and damages will be presumed. Chowdhry v. NLVH, Inc., 109 Nev. 478, 483, 851 P.2d 459,462 (1993); see also Nev. Ind. Broad. v. Allen, 99 Nev. 404, 409, 664 P.2d 337, 341 (1983); Carey v. Piphus, 435 U.S. 247, 262 n.18, 98 Sup.Ct. 1042, 1052 n.18, (U.S. 1978); Fallon Min. Co., Inc. v. Caddell, 77 Fed. Appx. 416, 9th Cir. (2003); Bonjovi v. Sullivan, 122 Nev. 556, 138 P.3d 433 (Nev. 2006); Burns v. Mayer, 175 F. Supp. 2d 1259 (D. Nev. 2001); Switzer v. Rivera, 174 F. Supp. 2d 1097 (D. Nev. 2001); Branda v. Sanford, 97 Nev. 643, 646, 637 P.2d 1223, 1225 (1981); Williams v. Univ. Med. Ctr. So. Nev., 688 F. Supp. 2d 1134 (D. Nev. 2010); W. Page Keeton, et al Prosser & Keaton On the Law of Torts § 112, at 788 (5th Ed. 1984).

 

See elements for other claims at the Nevada Law Library

 

In Nevada, a plaintiff must take reasonable steps mitigate damages, which means to minimize the effects and loss related to his or her injuries/damages.  Dillard’s Dep’t Stores, Inc. v. Beckwith, 989 P.2d 882, (Nev. 1999); NRS 118.175; James Hardie Gypsum (Nevada), Inc. v. Inquipco, 112 Nev. 1397, 929 P.2d 903 (1996) (“As a general rule, a party cannot recover damages for loss that he could have avoided by reasonable efforts.” Conner v. S. Nevada Paving, Inc., 103 Nev. 353, 355, 741 P.2d 800, 801 (1987) (citation omitted). “[T]he rule den[ies] recovery for losses which could have been prevented by the . . . expenditures of plaintiff. . . .” Valencia v. Shell Oil Co., 147 P.2d 558, 561 (Cal. 1944). In order to recover loss of use damages, the plaintiff must “show diligence in getting the car repaired as early as reasonably possible.” Rownstein v. Bernhard & Turner Auto. Co., 180 N.W. 282, 284 (Iowa 1920). “[T]he trial court’s role, as trier of fact, is to determine the reasonable period of repair.” Airborn, Inc. v. Denver Air Ctr., Inc., 832 P.2d 1086, 1091 (Colo. Ct. App. 1992)).

 

See elements for other claims at the Nevada Law Library

In order to claim a deficiency judgment, a party must follow NRS 40.455, NRS 457, and NRS 459.  Specifically, a party must:

  1. Application by judgment creditor or beneficiary of trust within 6 months after the date of foreclosure sale or trustee sale per NRS 107.080. (NRS 40.455);
  2. Showing that there is a deficiency. (NRS 40.457);
  3. Hearing must be held before making award and evidence shall be heard regarding fair market value of the property as of the date of the foreclosure/sale. (NRS 40.459)   ; and
  4. Deficiency judgment shall be lesser of amount owed minus the fair market value, or the amount owed minus the actual sales price of property (plus interest from date of sale).

See elements for other claims at the Nevada Law Library

VIOLATION OF THE UNIFORM TRADE SECRETS ACT NRS CHAPTER 600A

In Nevada, the elements for a claim of misappropriation of trade secrets or violation of the uniform trade secrets act (known as the Nevada Trade Secrets Act or “NUTSA”) are:

  1. Plaintiff possesses a viable trade secret as part of its business, including but not limited to market research, customer lists, customer and product pricing information, formulas, patterns, compilations, programs, devices, methods, techniques, products, systems, processes, designs, prototypes, procedures and computer programming instructions which are extremely confidential and derive independent economic value from not being generally known to, and not being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from their disclosure or use;
  2. Plaintiff took adequate measures and maintained the foregoing information and technology as trade secrets, which secrecy was guarded and not readily available to others;
  3. Defendant intentionally, and with reason to believe that its actions would cause injury to plaintiff, misappropriated and exploited the trade secret information through use, disclosure, or non-disclosure of the use of the trade secret for defendant’s own use and personal gain;
  4. The misappropriation is wrongful because it was made in breach of an expressed or implied contract, or by one with a duty not to disclose the trade secret;
  5. Defendant misappropriated the trade secret information with willful, wanton, or reckless disregard of plaintiff’s rights;
  6. Causation and damages; and
  7. Punitive damages.

NRS Chapter 600A; Kaldi v. Farmers Ins. Exchange, 117 Nev. 273, 283-84, 21 P.3d 16, 23 (2001); Frantz v. Johnson, 116 Nev. 455, 466, 999 P.2d 351, 358 (2000) (a customer list can be a trade secret when extremely confidential and where the list was secret and guarded, where the list was missing after an employee had access to the list which went missing after the employee left his employment, then provided customers with “more competitive pricing”); Whitehead v. Nev. Com’n on Judicial Discipline, 110 Nev. 874, 904 n. 6, 878 P.2d 913, 932 (1994); 12 AMJUR POF 3d 711.

To prevail on a claim for a violation of Nevada’s Uniform Trade Secret Act, NRS 600A.010 et. seq., plaintiff must show that the defendant wrongfully used or disclosed a valuable trade secret.  NRS 600A.030(2); Caesars World, Inc. v. Milanian, 247 F. Supp. 2d 1171, 1203 (D. Nev. 2003); Frantz v. Johnson, 116 Nev. 455, 466, 999 P.2d 351, 358 (2000)(in determining whether information is entitled to trade secret protection, courts will consider “the extent and manner in which the employer guarded the secrecy of the information.”). An employer is the presumptively the sole owner of any patentable invention or trade secret information developed by the employee in his employment.  NRS 600A.500.  An employee’s use or disclosure of the same is wrongful when done in violation of a legal or contractual duty to refrain from such use of disclosure.  Caesars World, Inc. v. Milanian, 247 F. Supp. 2d 1171, 1203 (D. Nev. 2003).  That includes acting as a fiduciary, who owes a fiduciary duty and a duty of loyalty to the company and its owners.  Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 86, 735 P.2d 1221, 1224 (1987).

Courts favorably view non-disclosure and invention assignments because, unlike covenants not to work for a competing business, these covenants do not restrict an employee’s ability to provide for themselves and their families.  See Revere Transducers, Inc. v. Deere & Co., 595 N.W.2d 751, 761 (Iowa 1999) (“Nondisclosure-confidentiality agreements enjoy more favorable treatment in the law than do noncompete agreements” because “noncompete agreements are viewed as restraints of trade which limit an employee’s freedom of movement among employment opportunities.”).  The Revere court announced its standard for whether a nondisclosure-confidential or invention assignment agreement is enforceable as: (1) the restricting prohibiting disclosure is reasonably necessary for the protection of the employer’s business; (2) the restriction doesn’t unreasonably restrict the employee’s rights; and (3) the restriction is not prejudicial to the public interest?  Id.

Irreparable harm is presumed in situations where a confidentiality agreement or restrictive covenant has been breached or trade secrets have been misappropriated.  EchoMail, Inc. v. American Exr. Co., 378 F. Supp. 2d 1, 4 (D. Mass. 2005); Storage Tech. Corp. v. Custom Hardware Eng’g & Consulting, Inc.,  2004 WL 1497688 (D. Mass. 2004); FMC Corp v. Taiwan Tainan Giant Indus. Co., Ltd., 730 F.2d 61, 63 (2nd Cir. 1984) (trade secrets, once lost, is lost forever; its loss cannot be measured in money damages); Ivy Mar Co. v. C.R. Seasons, Ltd., 907 F. Supp. 547, 566 (E.D. N.Y. 1995); Computer Assoc., Inc. v. Bryan, 784 F. Supp. 982, 986 (E.D. N.Y. 1992); Refractory Technology, Inc. v. Koski, 1990 WL 119560, at *3 (N.D. Ill., Aug. 13, 1990) (loss of trade secret would cause plaintiff immediate, irreparable harm); ISC-Bunker Ramo Corp. V. Altech, Inc., 765 F. Supp. 1310, 1338 (N.D. Ill. 1990) (“it is often difficult to …. Determine the monetary damages suffered thereby”); CPG Prod. Corp. v. Mergo Corp., 214 U.S.P.Q. 206, 2145 (S.D. Ohio 1981) (the threat of disclosure, destruction, or dilution of trade secret constitutes irreparable injury justifying injunctive relief); Donald McElroy, Inc. v. Delany, 72 Ill. App. 3d 285, 294-95, 389 N.E.2d 1300, 1308 (1st Dist. 1979)(“Once a protectable interest has been established, injury to plaintiff will presumably follow if that interest is not protected:; threat of irreparable harm sufficient where former employee violated the terms of a non-disclosure agreement and was about to use confidential information against the plaintiff, irreparable injury was shown and preliminary injunction was properly granted).  Loss of goodwill, destruction of trade secrets, loss of client confidentiality and competitive disadvantage constitute irreparable harm for which no adequate remedy at law exists.  IDS Life Ins. O. v. SunAmerica, 136 F.3d 537, 543 (7th Cir. 1998) (irreparable injury presumed for loss of customer goodwill, future business, customer relationships, business reputation and trade secrets).  The law requires that such agreements be “supported by valuable consideration and . . . otherwise reasonable in its scope and duration.” NRS 613.200(4); see generally Camco, Inc. v. Baker, 113 Nev. 512, 936 P.2d 829, 832 (1997) (“[A]n at-will employee’s continued employment is sufficient consideration for enforcing a non-competition agreement.”).

Even without a non-disclosure agreement, confidential information obtained by an employee during employment by reason of his or her position cannot be used or disclosed to the detriment of the employer.  “An employee is obligated not to reveal employer’s confidential information during employment and after termination of employment.”  27 Am. Jur. 2d Employment Relationship § 224.  Nevada codified the Uniform Trade Secret Act (“UTSA” or “NUTSA”) at NRS 600A et. seq.  There is a split of authority whether any confidential information is protected if it is not covered by NUTSA.  These materials will treat all protected confidential commercial information as being contained in NUTSA and all others to be unprotected information.

At termination of employment, an employee who misuses confidential information (customer lists, formulas, etc.), is precluded from using the information and is required to return the materials to the employer.  27 Am. Jur. 2d Employment Relationship § 226 (citing NCH Corp. v. Broyles, 749 F.2d 247 (5th Cir. 1985); Advanced Magnification Instruments, Ltd. v. Minutemen Optical Corp., 522 N.Y.S.2d 287, 135 A.D.2d 889 (3d Dept. 1987); Gonzales v. Zamora, 791 S.W.2d 258 (Tex. App. Corpus Christi 1990)).   An employer, therefore, at common law, has some protection against disclosure of confidential information even without a valid non-disclosure agreement.  “However, an employee can use to his or her own advantage all the skills and knowledge commonly used in the trade that the employee acquired during the employee’s tenure of employment.” Id. (citing Serv. Ctr. of Chicago, Inc. v. Minogue, 180 Ill.App.3d 447, 535 N.E.2d 1132 (1989)).

Trade Secret is Defined by Statute

NUTSA defines exactly what is considered as protected confidential information in NRS 600A.030, which defines it as:

  1.  “Trade secret” means information, including, without limitation, a formula, pattern, compilation, program, device, method, technique, product, system, process, design, prototype, procedure, computer programming instruction or code that:

(a)  Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or any other persons who can obtain commercial or economic value from its disclosure or use; and

(b)  Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

See elements for other claims at the Nevada Law Library

It is an unlawful employment practice for an employer to discriminate against any person with respect to the person’s compensation, terms, conditions or privileges of employment because of race, color, religion, sec, sexual orientation, gender identity or expression, age (40 and older), disability or national origin.

Dennis v. Nevada, 282 F. Supp. 2d 1177, at 1181 (D. Nev. 2003); Switzer v. Rivera, 174 F. Supp. 2d 1097 (D. Nev. 2001); Wolber v. Service Corp. Int’l, 612 F. Supp. 235 (D. Nev. 1985).

Under federal law, companies with 15 or more employees are covered by Title VII of the Civil Rights Act of 1964, the primary law prohibiting employment discrimination, the Americans with Disabilities Act, which prohibits discrimination on the basis of disability, and the Genetic Information Nondiscrimination Act, which prohibits discrimination based on genetic information. Companies with 20 or more employees are subject to the Age Discrimination in Employment Act (ADEA), the federal law that prohibits discrimination against employees 40 years or older. Companies with four or more employees must comply with the employment discrimination provisions of the Immigration Reform and Control Act, which prohibits discrimination on the basis of citizenship status. And all companies of any size must pay men and women equally for doing equal work, by virtue of the Equal Pay Act.  In Nevada, companies with 15 or more employees are subject to the state’s antidiscrimination law.

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of malicious prosecution are:

  1. Filing of criminal action;
  2. Lack of probable cause to commence prior action;
  3. Malice;
  4. Favorable termination of prior the action; and
  5. Causation and damages.

LaMantia v. Redisi, 38 P.3d 877 (2002); Dutt v. Kremp, 111 Nev. 57 (1995); Chapman v. City of Reno, 85 Nev. 365 (1969).

 

See elements for other claims at the Nevada Law Library

KNPR’s State of Nevada program featured Jay Young this week.  Listen here

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A Living Will is different from a Living Trust and is different from a Will. A Living Will is a written statement instructing your family and doctor about what, if any, life-prolonging medical procedures you desire to be performed if your condition is terminal and there is no chance of recovery. In Nevada, it is known as a “Declaration” and allows you to declare your end of life care decisions.

You Have the Right to Refuse Medical Treatment

You have the right to refuse medical treatment. A Living Will gives you the opportunity to express your wishes in advance, since you may not be able to make those desires known when it becomes necessary to do so. Life prolonging procedures include assistance with breathing when you cannot breathe on your own, performing operations or prescribing antibiotics that cannot realistically increase your chance of recovery, starting your heart mechanically when it has stopped beating, or feeding you through a tube, etc.

In Nevada, a physician must follow the terms of your Living Will (Declaration) when:

You have an incurable and irreversible condition that, without the administration of life-sustaining treatment, will result in death within a relatively short time; and

You are not able to communicate your desires, such as if you are in a coma.

A Living Will can be very specific or very general. An example of a statement sometimes found in a Living Will is: “If I suffer an incurable, irreversible illness, disease, or condition and my attending physician determines that my condition is terminal, I direct that life-sustaining measures that would serve only to prolong my dying be withheld or discontinued.”

In Nevada, in order to qualify for the remedy of disgorgement of profits, one must plead and prove:

  1. Defendant owes another a fiduciary duty;
  2. Defendant has breached the fiduciary duty and profited thereby;
  3. Causation and damages; and
  4. Plaintiff is entitled to have Defendant disgorge profits which are the result of his breach.

G.K. Las Vegas Ltd. P’ship v. Simon Prop. Grp., 671 F. Supp. 2d 1203 (D. Nev. 2009); Alley v. Nevada Real Estate Div., 94 Nev. 123, 125; 575 P.2d 1334, 1335 (1978); Women’s Fed. Savings and Loan Assoc. V. Nevada Nat’l Bank, 81 F.2d 1255, 1260 (9th Cir. 1987); Holland Realty Inv. Co. v. State of Nevada, Dept. of Commerce, Real Estate Div., 84 Nev. 91, 97-98; 436 P.2d 422, 425-26 (1968).

 

See elements for other claims at the Nevada Law Library

In Nevada, a Lis Pendens is a document recorded with the recorder’s office giving all the world constructive notice that the plaintiff in a lawsuit claims an interest in certain real property.  The recording of a lis pendens requires the filing of a lawsuit and that the lawsuit involves some claim legal interest in the real property, such as a title dispute, a lien dispute, or a lien foreclosure.  In re Bradshaw, 315 B.R. 875 (Bkrtcy. D. Nev. 2004); see also NRS 14.010 (a party to a civil action “for the foreclosure of a mortgage upon real property or affecting title or possession of real property” may record a lis pendens).

A lis pendens may not properly be used to obtain lien or judgment against the property which can later be used in the eventual collection of a judgment.  Levinson v. Eighth Jud. Dist. Ct., 1109 Nev. 747, 857 P.2d 18, 20-21 (1993).    “As a general proposition, lis pendens are not appropriate instruments for use in promoting recoveries in actions for personal or money judgments; rather, their office is to prevent the transfer or loss of real property which is the subject of dispute in the action that provides the basis for the lis pendens.”  Levinson, 857 P.2d at 20.  NRS 14.015(2), (3); NGA#2, LLC v. Rains, 113 Nev. 151, 163 (1997).

 

See elements for other claims at the Nevada Law Library

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I have seen it many times.  A company grows from the kitchen table to a storefront and builds a successful enterprise.  The owner sweats and toils for years to build brand awareness and goodwill.  Things are finally gaining momentum for the once struggling business and they feel they are about to “make it”.  Then they get a registered letter from a law firm in a different state demanding that they stop using their own business name, tear down their signs, rip up their business cards, and start over.  The law firm claims that another business actually owns the right to the name and demands that the small company cease and desist using their name immediately, and that they might sue for damage!  Can they do that?

Yes, they can in certain circumstances if they have a priority trademark registration.  And you should make sure that you are on the side of the one sending the letter, not the one receiving it.  Read more from this article by one of my partners on how a Federal Trademark Registration may help your business.

Power of Attorney

In Nevada, a “Durable Power of Attorney for Health Care” is a signed, dated, and witnessed written instruction naming another person as your “agent” or “health care proxy” to make medical decisions for you if you should become unable to make them for yourself.  The instrument may include instructions regarding any treatment you would desire or those you wish to avoid, such as surgery or artificial feeding. The Durable Power of Attorney for Health Care will be in effect whenever you are unable to make decisions and, unlike the Living Will, is not limited to situations where you are terminal or have an incurable condition. The agent’s authority begins only when a physician determines that you have lost the capacity to decide about treatment.

Liquidated damages in Nevada enforces a remedy to which the parties agreed in the contract, provided that the agreed remedy is not unduly harsh to the defendant and does not fail to provide the plaintiff a meaningful remedy.  Impact Mktg. Int’l LLC, 2012 WL 359914 (citing Mason v. Fakhimi, 865 P.2d 333, 335 (1993) (Under Nevada law, liquidated damages are a good faith estimate of the damages likely to occur upon breach and which the parties agree to in their contract)).  The terms of a valid liquidated damages clause supersede any default award of expectation/compensatory damages. “Liquidated damages have been defined as the sum which a party to a contract agrees to pay if he/she breaks some promise and which, having been arrived at by a good faith effort to estimate the actual damages that will probably ensue from breach, is recoverable as agreed-upon damages if breach occurs.”  Joseph F. Sanson Inv. Co. v. 268 Ltd., 106 Nev. 429, 435, 795 P.2d 493, 496-97 (1990).  In Nevada, liquidated damages are prima facie valid unless the party challenging the provision can prove that it amounts to a penalty.  See Mason v. Fakhimi, 865 P.2d 333, 335 (1993); Joseph F. Sanson Inv. Co., 106 Nev. at 435.  In Joseph F. Sanson Inv. Co., the Supreme Court rejected the awarding of attorney fees under the liquidated damages stipulation that were fifteen times greater than the actual fees billed because this amount resulted in a penalty.  Joseph F. Sanson Inv. Co., 106 Nev. at 435.

Even with the various remedies available, the injured party must do whatever it can to avoid its injury.  Under Avoidable Consequence Doctrine, “a party cannot recover damages for loss that he could have avoided by reasonable efforts.”  Connor v. S. Nev. Paving, Inc., 103 Nev. 353, 356, 741 P.2d 800, 801 (1987); see also Interstate Com. Bldg. Serv., Inc. v. Bank of Am. Nat’l Trust and Sav. Ass’n., 23 F. Supp. 2d 1166, 1176 (D. Nev. 1998) (stating that the parties have the duty to mitigate or minimize their losses flowing from a breach of contract).  The breaching party has the burden of proving that the aggrieved party failed to mitigate damages.  Connor, 103 Nev. at 355.

In Nevada, “disputes regarding breach of contract are questions for a jury to decide.”  Id.  Therefore, once the elements required for a valid contract are established, the enforceability of the breach of contract and the resulting awarding of damages are fact-specific and up to the jury.

 

See elements for other claims at the Nevada Law Library

In Nevada, the defense of laches is available where delay by one party results in a disadvantage to the other such that the party seeking the defense of laches had a change in circumstances which would make granting relief to the delaying party inequitable.  Building & Constr. Trades v. Public Works, 108 Nev. 605,839 P.2d 633, 637 (1992).  The delay must cause actual prejudice.  Memory Gardens v. Pet Ponderosas, 88 Nev. 1, 4, 492 P.2d 123, 124 (1972).  The condition of the party asserting laches must become drastically altered, whereby it cannot be restored to its former state.  State v. Rosenthal, 107 Nev. 772, 819 P.2d 1296 (1991).  In circumstances where the statute of limitations has not run on an action, especially strong circumstances must exist to sustain the defense of laches.  Building & Constr. Trades v. Public Works, 108 Nev. 605,839 P.2d 633, 637 (1992).

 

See elements for other claims at the Nevada Law Library

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What Type of Entity Should You Form?

Some of the most frequent questions that we receive from clients revolve around entity selection for conducting different types of businesses.  One aspect involves governance and authority.  The issue of governance and authority is important because it determines who has the legal authority to bind the company to contracts and to act on behalf of the company.

The three most popular types of entities are corporations, limited liability companies, and limited partnerships. There are others, however, that might be better suited to your needs. (more…)

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A Homestead Declaration is a simple document that can protect your home’s equity from attack by creditors. It prevents a forced sale of your home to satisfy your debts to most creditors (unpaid medical bills, bankruptcy, charge card debts, business/personal loans, accidents). Nevada Revised Statutes, Chapter 115 governs the declaration of a homestead. It declares that a homestead is limited to your primary residence. It protects your land with a dwelling on it (including a mobile home or condominium) where you reside. It does not protect any investment or rental property that you own. You are protected up to $550,000 in equity in your primary residence in Nevada. (more…)

OR APPROPRIATION OF THE NAME AND LIKENESS OF A FAMOUS PERSON

In Nevada, the elements for a claim of invasion of privacy by invasion of the right of publicity or appropriation of the name and likeness of a famous person are:

  1. Defendant uses the name, voice, signature, photograph or likeness of another by a person, firm or corporation;
  2. Without the permission of the person;
  3. The misappropriation of the person’s likeness or identity is a personal injury;
  4. Defendant sought and obtained commercial value from the misappropriation of the person’s name or likeness;
  5. The commercial value belongs to the famous person;
  6. Plaintiff is entitled to compensation for damages of not less than $750 for the commercial value taken by the defendant; and
  7. Plaintiff is entitled to injunctive relief and punitive damages.

NRS 597.770 – NRS 597.810; People for the Ethical Treatment of Animals v. Bobby Berosini, Ltd., 895 P.2d 1269, 1278 (Nev. 1995); Hetter v. District Court, 110 Nev. 513, 519 (Nev. 1994).

 

See elements for other claims at the Nevada Law Library

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Litigators are fairly well known to be the scourge of the civilized world. After all, they are responsible for the number of lawsuits as well as the enormous costs associated with them, right? The truth is that I know litigators like that, but the majority of business attorneys I know do their best to keep their business clients from getting into legal battles. Saving the client from their own mistakes is sometimes difficult. It is made exponentially more difficult when the business owner decides it is cheaper to form the business using one of the various online services or legal software. They might as well be stamped with a warning that in case of a dispute, they almost guarantee full employment for litigators. (more…)

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When buying a business, the buyer should ensure that all assets must be free and clear of liens.  As a reminder, when purchasing a business, you can purchase either the ownership (the stock or the membership interest, for example) or the assets.  Either or both can be subject to liens.  Therefore, it is imperative that a lien search be conducted. (more…)

In Nevada, the elements to prove equitable estoppels or promissory estoppels are:

  1. Party to be estopped must be apprised of true facts;
  2. The party to be estopped must have intended that his conduct shall be acted upon or must so act that the party asserting estoppels has the right to believe it was so intended;
  3. The party asserting estoppel must be ignorant of the true facts; and
  4. The party asserting estoppels relied on the conduct of the other party, to his detriment.

Equitable Estoppel operates to prevent a party from asserting legal rights that, in equity and good conscience, they should not be allowed to assert because of their own conduct.  Silence can raise estoppel.  NGA No. 2 Ltd. Liability Co. v. Rains, 13 Nev. 1151, 946 P.2d 163 (1997); Vancheri v. GNLV. Corp.,105 Nev. 417, 421, 777 P.2d 366, 369 (1989); Pink v. Busch, 100 Nev. 684, 691 P.2d 456 (1984); Cheqer, Inc. v. Painters and Decorators Joint Committee, Inc., 98 Nev. 609, 655 P.2d 996 (1982).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of invasion of privacy through disclosure of false light are:

  1. The defendant gave publicity to a matter concerning the plaintiff that placed the plaintiff before the public in a false light (at least an implicit false statement of objective fact);
  2. The false light would be highly offensive to a reasonable person;
  3. The defendant had knowledge of, or acted in reckless disregard as to, the falsity of the publicized matter and the false light in which the plaintiff would be placed (requiring actual malice); and
  4. Plaintiff suffered emotional harm.

Flowers v. Carville, 310 F.3d 118, 1132 (9th Cir. 2002); Wood v. Hustler Magazine, Inc., 736 F.2d 1084, 1093 (5th Cir. 1984) (disclosure of stolen nude photos); Vail v. Pioneer Mut. Life. Ins. Co., 2010 U.S. Dist. LEXIS 107994, *5-6 (D. Nev. July 20, 2011) (citing Restatement (Second) of Torts § 652); Flowers v. Carville, 266 F. Supp. 2d 1245, 1252 (D. Nev. 2003).

 

See elements for other claims at the Nevada Law Library

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What is Disability Insurance?

Disability insurance attempts to insure you against any injury, sickness or illness which would prevent you from earning an income. It is designed to replace up to 66% of your gross income on a tax-free basis should you become disabled. It covers both long term and short term disabilities. Don’t think you need disability insurance?

Consider these sobering statistics:

  • Just over 1 in 4 of today’s 20 year-olds will become disabled before they retire. Source: Social Security Administration, Fact Sheet March 18, 2011;
  • Over 36 million Americans are classified as disabled; about 12% of the total population. More than 50% of disabled Americans are in their working years, from 18-64. Source: U.S. Census Bureau;
  • 8.3 million Disabled wage earners, over 5% of U.S. workers, were receiving Social Security Disability (SSDI) benefits at the conclusion of March 2011. Source: Social Security Administration, Disabled Worker Beneficiary Statistics, www.ssa.gov; and
  • In December 2010, there were over 2.5 million disabled workers in their 20s, 30s, and 40s receiving SSDI benefits. Source: Social Security Administration, Disabled Worker Beneficiary Statistics,www.ssa.gov . Please consider whether you need disability insurance on yourself or a loved one today.

Smart business owners will partially fund their buy/sell agreements through disability insurance and will carry disability insurance on key employees to benefit the business. Even if you have a policy through your employer, you should consider an additional policy so that your family does not have to worry about income if you become disabled for even a short period of time.

 

How healthy is your business? Are you SURE? Take a free Legal Checkup today at www.alegalcheckup.com 

In Nevada, the elements for a claim of defamation are:

  1. False and defamatory statement by defendant concerning the plaintiff;
  2. Unprivileged publication of the statement to third party;
  3. Some level of fault amounting at least to negligence; and
  4. Actual or presumed damages. Damages which will be presumed if defamation tends to injure plaintiff in his business (defamation per se).

“Defamation” is defined as “a publication of a false statement of fact.”  Pegasus v. Reno Newspapers, Inc., 118 Nev. 706, 714, 57 P.3d 82, 87 (2002).  To succeed on a defamation claim, a plaintiff must prove the following elements: (a) a false and defamatory statement concerning another; (b) an unprivileged publication to a third party; (c) fault amounting at least to negligence on the part of the publisher; and (d) either actionability of the statement irrespective of special harm, or the existence of special harm caused by the publication.  Lubin v. Kunin, 117 Nev. 107, 111, 17 P.3d 422, 425 (2001) (quoting PETA v. Boby Berosini, Ltd., 111 Nev. 615, 619, 895 P.2d 1269, 1272 (1995) (quoting the Restatement (Second) of Torts: Elements Stated § 558 (1965)) modified on other grounds by Las Vegas Dountown Redev. Agency v. Hecht, 113 Nev. 644, 650, 940 P.2d 134, 138 (1997)). (more…)

The following abstract explains Nevada law regarding equitable liens.

Introduction

The Nevada Supreme Court has acknowledged equitable liens as a remedy where an intention to create such a lien appears, and where the property which is to become subject to the lien is identifiable.  Union Indemnity co. v. A.D. Drumm, Inc., 57 Nev. 242, 70 P.2d 767 (1937).      The Nevada Supreme Court has relied upon Professor Pomery’s definition of an equitable lien:

In order, however, that a lien may arise in pursuance of the doctrine of equitable lien, agreement must deal with some particular property, either by identifying it, or by so describing it that it can be identified, and must indicate with sufficient clearness an intent that property so described, or rendered capable of identification, it to be held, or transferred as security for the obligation. (more…)

In Nevada, the elements for an equitable claim of declaratory relief are:

  1. A justifiable controversy exists between two or more parties;
  2. Regarding their respective rights pursuant to a contract;
  3. Such that the plaintiff asserts a claim of a legally protected right;
  4. The issue is ripe for judicial determination; and
  5. Plaintiff asks the court to determine the parties’ relative rights under the contract.

NRCP 57; NRS Chapter 30; Kress v. Corey, 65 Nev. 1, 189 P.2d 352 (1948).

 

See elements for other claims at the Nevada Law Library

IMG_4124-1200x800

Long term care insurance covers you for the expense of a in-home nursing care, nursing home, hospice care, assisted living, adult daycare, respite care, and Alzheimer’s facilities. As with any other insurance plan, long term care insurance seeks to protect you against a major loss that you can ill afford. When you think of it, the odds of needing nursing home care are a lot higher than

losing your house to fire. Yet, we don’t think of being without homeowners insurance. It is something to consider for yourself or for an aging loved one.

There are five major reasons why people buy long term care insurance:

  1. It allows you to maintain your independence so you won’t have to rely on family members;
  2. It helps to protect your assets against the high costs of long term care;
  3. It will help preserve wealth and/or your children’s inheritance;
  4. It helps make long term care services affordable, such as home health care and custodial care; and
  5. It will help provide you with more options than just nursing home care, and to pay for nursing home care if it’s needed.

As with any insurance product, you will need to perform a risk/benefit analysis to determine if this coverage is necessary for you. Take into consideration your current health, family history, your age, etc.

UNFAIR TRADE PRACTICES

In Nevada, the elements for a claim of deceptive trade practices are found in the following statutes:

NRS 598.0915 “Deceptive trade practice” defined.  A person engages in a “deceptive trade practice” if, in the course of his or her business or occupation, he or she:

1.  Knowingly passes off goods or services for sale or lease as those of another person.

2.  Knowingly makes a false representation as to the source, sponsorship, approval or certification of goods or services for sale or lease.

3.  Knowingly makes a false representation as to affiliation, connection, association with or certification by another person.

4.  Uses deceptive representations or designations of geographic origin in connection with goods or services for sale or lease.

5.  Knowingly makes a false representation as to the characteristics, ingredients, uses, benefits, alterations or quantities of goods or services for sale or lease or a false representation as to the sponsorship, approval, status, affiliation or connection of a person therewith.

6.  Represents that goods for sale or lease are original or new if he or she knows or should know that they are deteriorated, altered, reconditioned, reclaimed, used or secondhand. (more…)

So, you are thinking of buying a business?  What types of documentation or information should you be seeking from the seller before you agree on a price, sign documents, or pay any money?  This list will get you started:

  • Seller entity information
  • Documents necessary to discover the seller’s full financial Information
  • Physical Assets of the seller
  • Real Estate (owned and leased)
  • Intellectual Property owned by the seller or to which the seller has rights
  • Employee contracts and employee benefits owed
  • Licenses and permits held by the seller
  • Environmental due diligence
  • Taxes (including verification) owed
  • Material contracts with the seller’s customers and suppliers
  • Customer information
  • Currently pending or threatened litigation
  • Insurance coverage

In Nevada, the elements for a claim of intentional interference with prospective economic advantage (sometimes called intentional interference with prospective economic interest or prospective contractual relationship) are:

  1. A prospective contractual relationship between plaintiff and a third party;
  2. Defendant has knowledge of the prospective relationship;
  3. The intent to harm plaintiff by preventing the relationship;
  4. The absence of privilege or justification by the defendants;
  5. Actual harm to plaintiff as a result of defendant’s conduct; and
  6. Causation and damages.

Custom Tel., Inc. v. Int’l Tele-Services, Inc., 254 F. Supp. 2d 1173, 1180-81 (Nev. 2003); Wichinsky v. Mosa, 109 Nev. 84, 88, 847 P.2d 727 (1993); Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 88, 734 P.2d 1221, 1225 (1987).  Intention to interfere is the sine qua non of this tort.  M&R Inv. Co. v. Goldsberry, 101 Nev. 620, 707 P.2d 1143, 1144 (1985); Local Joint Exec. Bd. Of Las Vegas v. Stern, 98 Nev. 409, 651 P.2d 637, 638 (1982).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of conversion are:

  1. A distinct and intentional act of dominion by one which is wrongfully exerted over the property of another;
  2. Act committed in denial of, or inconsistent with the rightful owner’s use and enjoyment of the property;
  3. Act committed in derogation, exclusion, or defiance of the owner’s rights or titled in the property; and
  4. Causation and damages.

M.C. Multi-Family Development, L.L.C. v. Crestdale Assoc., Ltd., 193 P.3d 536, 543 (Nev., 2008); Evans v. Dean Witter Reynolds, 5 P.3d 1043 (Nev. 2000); Bader v. Cerri, 96 Nev. 352, 609 P.2d 314 (1980); Wantz v. Redfield, 74 Nev. 196 (1958); Boylan v. Huguet, 8 Nev. 345 (1873).

 

See elements for other claims at the Nevada Law Library

Are They Employees or Independent Contractors?

Are They Employees or Independent Contractors?

With challenges to the economy, companies are looking for every way possible to save money. A potential risk for employers is to mischaracterize an employee as an independent contractor, which may save payroll taxes in the short term but may lead to penalties on such taxes as well as other inadvertent violations of worker’s compensation laws, FMLA, etc, which each hold separate penalties for violation.

There are also state law implications, which vary by state so you may want to consult an attorney in your particular state as to that state’s definitions. Focusing purely on federal issues, the IRS previously had a 20-part test to evaluate whether a worker is an employee or independent contractor.

However, the new and improved IRS test focuses on three areas: (1) behavioral control, (2) financial control, and (3) the type of relationship.

1.  Behavior control addresses the amount of instruction given to a worker, such as work hours, specific job duties, and training.

2.  Financial control addresses the extent to which a worker can realize a profit or loss or seek reimbursement of business expenses.

3.  The third type of control is the type of relationship. Factors include the presence or absence of a written agreement and the permanency of the relationship.

Call today to speak with someone in our employment law department representing businesses and business owners and can answer specific questions in more detail concerning your business. They can also document employment agreements or properly document independent contractor agreements should the workers qualify as independent contractors.

 

How healthy is your business? Are you SURE? Take a free Legal Checkup today at www.alegalcheckup.com

 

In Nevada, one must prove the following in order for a court to impose a constructive trust:

  1. A confidential relationship between the parties;
  2. Retention of legal title by defendant against plaintiff would be inequitable under the circumstances; and
  3. Existence of trust is essential to the effectuation of justice.

Constructive trusts are those that arise purely by construction of equity, are entirely independent of any actual or presumed intention of the parties, and are often directly contrary to such an intention. Omer v. Omer, 523 P.2d 957, 961 (Wash.App. 1974).  Constructive trusts are entirely in invitum and are forced upon the conscience of the trustee for working out justice or frustrating fraud.  Id. (citing Carkonen v. Alberts, 83 P.2d 899 (Wash. 1938)).

When a court of equity finds that a defendant is the holder of a property interest which he retains due to unjust, unconscionable, or unlawful means, it takes the interest from the defendant and vests it in the wronged party.  24 George G. Bogert, et al., Bogert’s Trusts and Trustees § 471 (3d ed. 2007).  Often this is accomplished by issuing a decree that the defendant conveys to the complainant.  Id.  If the property has been sold, the trust attaches to its proceeds in the hands of the defendant, or to other property purchased by defendant into which the original property or its proceeds can be traced.  Id.  The plaintiff has the election of suing in equity for the imposition of a constructive trust or seeking damages in an action at law for the value of the property.  Id.  Equity is not limited in the types of relief that may be granted to enforce a constructive trust.  Id.

The court must take into account not only the original situation, but also all of the events that have occurred since the defendant began to hold inequitably.  Id.  For example, if the trust property or its product can be traced into the hands of a third party, a constructive trust may be imposed upon the property in the hands of the third party unless he is a bona fide purchaser for value and without notice.   Id.

Because constructive trusts do not require that the parties specifically intended to create a trust, they may be imposed when title to property is acquired by fraud, duress, undue influence, or is acquired or retained in violation of a fiduciary duty.  Bemis, 114 Nev. at 1027, 967 P.2d at 441; See Estate of Campbell, 704 A.2d 329, 331 (Me. 1997).  To summarize, absent coercion, duress, or mistake a constructive trust is generally imposed in only two situations: (1) where actual or constructive fraud is considered as equitable grounds for raising the trust; and (2) where there is a fiduciary duty and a subsequent breach of that duty.  GGSI Liquidation, 351 B.R. at 593 (citing See e.g., Amendola v. Bayer, 907 F.2d 760, 762-63 (7th Cir. 1990)).

In Nevada, a constructive trust will arise and affect property acquisitions under circumstances where: (1) a confidential relationship exists between the parties; (2) retention of legal title by the holder thereof against another would be inequitable; and (3) the existence of such a trust is essential to the effectuation of justice.  Locken, 98 Nev. at 372, 650 P.2d at 805 (quoting Schmidt, 82 Nev. at 375, 418 P.2d at 993).  The requirement that a constructive trustee have title, to the property involved and not mere possession, is critical to the imposition of a constructive trust.  Danning, 86 Nev. at 871, 478 P.2d at 167.  Proof of those circumstances must be by clear and convincing evidence.  Randono v. Turk, 86 Nev. 123, 128, 466 P.2d 218, 222 (citing Garteiz v. Garteiz, 70 Nev. 77, 82, 254 P.2d 804 (1953).

Courts have consistently imposed a constructive trust arising out of the breach of an oral agreement, especially where a confidential relation existed between the parties.  Davidson v. Streeter, 68 Nev. 427, 437, 234 P.2d 793, 798 (1951).  Although the betrayal of such confidence is constructively fraudulent, it is independent of any element of actual fraud.  Id.

Whether relations are technically fiduciary or merely informal, a confidential relation exists between two persons whenever one trusts in and relies on the other.  Randono, 86 Nev. at 129, 466 P.2d at 222.  Because the relationship hinges on whether trust is reposed, in order for a confidential relationship to exist there must be evidence of a special trust with respect to the property or business.  Id.  When one uses a confidential relation to acquire an advantage, which he ought not in equity and good conscience to retain, the court will convert him into a trustee and compel him to restore what he seeks unjustly to retain.  Davidson, 68 Nev. at 438, 234 P.2d at 798.  Indeed, equity will not permit the confidence placed in the grantee to be betrayed.  Id. at 437, 798.  Nevada recognizes confidential relationships in (a) investment advisors, (b) family, and (c) attorney-client relations, as discussed below.

Investment advisors occupy a confidential relationship toward those whom they advise.  Randono, 86 Nev. at 129, 466 P.2d at 222.  Where a trustee or other fiduciary holds property to be used for the benefit of his cestui, it is a breach of his trust to employ the property for his own private advantage.  Id.  That is, where he spends or consumes it for his own benefit, or uses it directly to acquire other property in his own name.  Id.  From an equity stance, courts will view the breach of trust as reprehensible as the criminal act of embezzlement. Id.  Thus, it is readily admitted to be a sufficient basis for charging the fiduciary with a constructive trust as to any avails of the breach of his express trust.  Id.

Given the confidential relationship of investment advisors, joint adventurers own each other a fiduciary duty.  Randono, 86 Nev. at 129, 466 P.2d at 222.  In Randono, the Turks and Randono became good friends socially and developed a close relationship.  Id. at 126, 466 P.2d 218, 219.  Because Randono was a promoter of business deals and a real estate sales man, he undertook to aid, counsel and advise the Turks in the investment of their earnings and savings.  Id.  In fact, Randono informed the Turks about an opportunity to acquire a half interest in 320 acres of Arizona land, which the Turks could later subdivide and resell for a profit.  Id.  Specifically, Randono told the Turks that they should invest together and buy the 320 acres at $21 an acre.  Id.  As a result, the Turks advanced $3,364.14 toward the purchase of property, which in fact was only sold for $11 an acre.  Randono, 86 Nev. at 126, 466 P.2d at 219.  Randono failed to disclose the purchase of an additional 200 acres with the Turks’ advanced money.  Id.  Consequently, the Court imposed a constructive trust on the 520 acres of realty due to the confidential relationship between the Turks and Randono whereby Randono fraudulently induced the Turks to advance funds.  Id. at 129-30, 466 P.2d 218, 222-23.

Where confidential relations between parent and child are shown to have existed and where a conveyance of property is made by the weaker to the dominant party, a presumption arises that the conveyance was obtained through the undue influence of the dominant party.  Schmidt, 82 Nev. at 376, 418 P.2d at 993.  The burden is on the dominant party claiming under the conveyance to show that the transaction was bona fide.  Id.

In Schmidt, a mother and father deeded land in California to their daughter and son jointly, indicating that they were to share alike in the property.  Id. at 374, 418 P.2d 991, 993.  However, when the father became ill and entered a hospital, the brother caused title to the property to be transferred from his father’s name to only his name.  Id. at 375, 418 P.2d 991, 993.  The brother argued that a constructive trust cannot result in this case where the conveyance is from the parent to an adult child because the parent is assumed to be the dominant party, and there can be no presumption of fraud or undue influence from the mere existence of the relationship.  Id.  Yet, the facts indicated that the father was an old man, very ill and suffering from hallucinations when the son acquired title of the property.  Schmidt, 82 Nev. at 376, 418 P.2d at 993.  Moreover, there was no evidence that consideration was given by the son to the father for the transfer.  Id.  Accordingly, the court held that the brother’s dealings clearly deprived his sister, the only other heir of the father and mother, of any share in the property.  Id.  Because a confidential relationship existed between the brother and father and the brother and sister, the Court found a constructive trust as to the property in favor of the daughter.  Id.

When an attorney deals with his client for the former’s benefit, the clearest and most satisfactory evidence can only overcome the presumptive invalidity of the transaction on the ground of constructive fraud.  Davidson, 68 Nev. at 440, 234 P.2d at 799.  This rule is founded in public policy, intended as a protection to the client against the strong influence to which the confidential relation naturally gives rise.  Id.  Thus, the requirement that the plaintiff’s proof must be clear and convincing proof to establish a constructive trust based upon violation of an oral trust arrangement, does not apply where the transfer is made to a fiduciary.  Id. at 439, 234 P.2d 793, 798-99.  Instead, in such an instance, the burden of overcoming certain presumptions is upon the fiduciary.  Id.

In Davidson, a fiduciary relationship existed between a seasoned attorney and a client who was, rather advanced in years of very limited education and with no experience in legal matters.  Id. at 441, 234 P.2d 793, 799.  The facts indicated that the client had complete confidence in her attorney and was satisfied with the work he had done for her in the past and therefore relied upon his advice.  Id.  The attorney had orally agreed to hold real property for the client’s benefit, to collect the rentals, and make the necessary payments under a subsisting contract of purchase.  Id. at 430, 234 P.2d 793, 794.  Even though the attorney carried out all of these promises, he eventually sold the premises, and upon the client’s demand for payment repudiated his oral agreement.  Id.  The Court found that the client transferred the deed to the attorney solely for him to hold the property in trust for her.  Davidson, 68 Nev. at 442, 234 P.2d at 800.  Specifically, no consideration was paid for the assignments or the deed, the transfer was not made for any preexisting indebtedness, nor was it given without consideration or given as a gift.  Id.  Therefore, the Court upheld a constructive trust upon the property in favor of the client based on their confidential relationship and her substantial interest in the property.  Id. at 430-32, 234 P.2d 793, 794-95.

A constructive trust will arise whenever the circumstances under which property was acquired make it inequitable that it should be retained by him who holds the legal title, as against another.  Schmidt, 82 Nev. at 375, 418 P.2d at 993.

In Bemis, a divorce decree provided that two minor sons would be entitled to equal payments from a $25,000 trust, when in the sole discretion of the trustees, payments shall be necessary for the support, education, or general welfare of either one of them.  Bemis, 114 Nev. at 1023, 967 P.2d at 439.  However, the father failed to establish the trust, which resulted in the sons never receiving any financial assistance from their father after the divorce.  Id.  When the father died, the sons filed creditors’ claims against their father’s estate to collect the money that the father had agreed to hold in trust pursuant to the divorce decree.  Id.  The Court found that the father’s retention of legal title of the funds that he promised to his sons in the divorce agreement was inequitable.  Id. at 1027, 967 P.2d 437, 441.  Because the other two elements of constructive trust were satisfied, the Court concluded that the father had held the monies designated for his sons in a constructive trust.  Id. at 1028, 967 P.2d 437, 442.  Therefore, upon the father’s death, the estate became the trustee of the constructive trust.  Bemis, 114 Nev. at 1028, 967 P.2d at 442.

The creation of a constructive trust arises when it is necessary to achieve justice.  See DeLee v. Roggen, 111 Nev. 1453, 1457, 907 P.2d 168, 170 (1995).  In DeLee, Sol sold property to a purchaser who went bankrupt shortly thereafter and the property was foreclosed.  Id. at 1454-55.  Morris, Sol’s brother, purchased the property at public auction held by the holder of the second mortgage and orally promised to give the property to Sol.  Id. at 1455, 907 P.2d 168, 169.  In exchange for the property, Sol promised to pay off farm equipment used in connection with the property, which constituted consideration for Morris’ promise to convey the 640 acres of land to Sol.  Id.  Although Sol completed payment on the equipment sometime in 1978, he made no demand on the property until Morris filed suit against Sol, ten years later, for default on loans totaling $100,000.  Id.

The Court held that justice does not require the creation of a trust to preserve Sol’s interest in the property because Sol refrained from making a demand on the property for over ten years mainly for self-serving reasons.  DeLee, 111 Nev. 1453, 1457, 907 P.2d 168, 170.  Specifically, Sol had so many debts that if he had made such a demand, the property would have been “gobbled up” by creditors.  Id.  Thus, the evidence fairly inferred that Sol never wanted the property in his name, but made the claim to it in an effort to deter Morris from collecting the sums due to him from Sol.  Id.  Since the existence of a constructive trust was not essential to the effectuation of justice, the Court did not address the other two requirements.  Id.

At least one Nevada Supreme court decision holds that a “[constructive] trust can be established only by allegations of extrinsic fraud pleaded with particularity and supported by clear and convincing proof.”  Garteiz v. Garteiz, 70 Nev. 77, 82, 254 P.2d 804, 806 (1953).  This rule of law has been carried into the Nevada Rules of Civil Procedure, which first became effective January 1, 1953.  Id.  NRCP 9(b) provides that “in all averments of fraud or mistake, the circumstances constituting fraud or mistake, shall be stated with particularity.”  NRCP 9(b).

While a constructive trust is usually invoked when property has been acquired by fraud, such a trust may also be imposed where it is against the principles of equity that a certain person retain the property even though the property was acquired without fraud.  See Ferguson v. Owens, 459 N.E.2d 1293, 1295-96 (Ohio 1984).  In fact, to have a constructive trust imposed on property wrongfully held by the defendant, it is not necessary to prove that the petitioner suffered any pecuniary loss or that defendant personally profited from the acquisition and retention.  24 Bogert’s Trusts and Trustees § 471.  For example, in Bemis, the court explained that constructive trusts are no longer limited to fraud and misconduct, but are implemented to redress any unjust enrichment.  Bemis, 114 Nev. at 1027, 967 P.2d at 441.  In other words, a constructive trust is a remedial device not solely arising in cases of outright wrongdoing.  Id.  As stated, to establish a claim for imposition of a constructive trust in Nevada, the complaint must allege facts sufficient to show the abuse of a confidential relationship, the retention of legal title would be inequitable, and unjust enrichment.  See Locken, 98 Nev. at 372, 650 P.2d at 805.

The party seeking to establish a constructive trust has the burden of proving the facts alleged to give rise to the existence of such a trust.  See In re Goldberg, 168 B.R. 382, 384 (9th Cir. 1994).  The standard of proof demanded by the Ninth Circuit and Nevada Courts is usually clear and convincing evidence.  See Id.; Randono, 86 Nev. at 128, 466 P.2d at 222 (citing Garteiz, 70 Nev. 77, 82, 254 P.2d 804, 806 (1953)).  In fact, it is well settled that a constructive trust cannot be established by a mere preponderance of evidence, but must be established by evidence that is clear, definite, unequivocal, and satisfactory.  Moore v. DeBernardi, 47 Nev. 33, 220 P. 544, 545 (1923).  Where the existence of a confidential or fiduciary relationship is a necessary factor in the determination of whether a constructive trust should be declared, the burden is on the party seeking to impose the constructive trust to show the existence of such relationship.  See Davidson, 68 Nev. at 439-40, 234 P.2d at 798-99.

Parol evidence is admissible to prove the facts and circumstances constituting fraud from which the constructive trust arises.  Randono, 86 Nev. at 128, 466 P.2d at 222 (citing Moore, 47 Nev. 33, 50, 213 P. 1041, 220 P. 544 (1923)).  Parol evidence may be introduced to establish a constructive trust because it is a trust that arises by operation of law whereby the statute of frauds is of no impediment to its existence.  See Locken, 98 Nev. at 372, 650 P.2d at 804.  Indeed, any evidence that tends to prove or disprove actual or constructive fraud and is necessary to constitute a constructive trust is admissible.  Moore, 220 P. at 545.  However, the evidence must not be objectionable as to the relevancy, competency, and materiality, and the evidence must be clear and convincing.  See Id.  In fact, some jurisdictions require that parol evidence must be so clear, strong, and unequivocal as to remove from the mind every reasonable doubt as to the existence of the trust.  In Re Woolum, 279 B.R. 865, 870 (M.D. Fla. 2002).

Proof of an oral promise is not a violation of the parol evidence rule, when granting the necessary relief through parol, because it does not contradict the deed, but arises out of equity.  Davidson, 68 Nev. at 438, 234 P.2d at 798.  In essence, equity binds the grantee’s conscience to hold the land for the real purposes of the conveyance where the use of the deed according to its legal operation would work a fraud.  Id.  Therefore, parol evidence explains the transaction out of which the equity arises.  Id.

Under the statute of frauds, a contract to convey land is void unless in writing and no trust in real property is valid unless created by writing or operation of law.  Id. at 437, 234 P.2d 793, 797-98.  Accordingly, an oral promise to re-convey property is invalid and cannot be enforced.  Id.  However, in Nevada, the imposition of a constructive trust does not conflict with the statute of frauds when there is an oral agreement between parties for the conveyance of land.  Locken, 98 Nev. at 372, 650 P.2d at 804.  In particular, NRS 111.205 provides in pertinent part:

1)  No estate or interest in lands shall be created, granted, assigned, surrendered or declared, unless by act or operation of law, or by deed or conveyance, in writing….

2)  Subsection 1 shall not be construed to affect in any manner the power of a testator in the disposition of his real property by a last will and testament, nor to prevent any trust from arising or being extinguished by implication or operation of law.

NRS § 111.205 (1861).  NRS 111.205(2) sets forth an exception to the statute of frauds, which permits the imposition of a constructive trust to avert the type of fraud the statute is designed and intended to prevent.  Locken, 98 Nev. at 372, 650 P.2d at 804.  Namely, Nevada courts have consistently imposed a constructive trust arising out of the breach of the oral agreement, especially where a confidential relation existed between the parties.  Davidson, 68 Nev. at 437, 234 P.2d at 798.  The betrayal of such confidence is constructively fraudulent and is independent of any element of actual fraud.  Id.  As such, in Nevada it is well settled that the statute of frauds is not an impediment to the existence of a constructive trust.  Locken, 98 Nev. at 372, 650 P.2d at 804.

A complainant seeking the establishment of a constructive trust is naturally subject to the ordinary rules of equity that he must come into court with clean hands and that he must do equity if he is to obtain equity.  24 Bogert’s Trusts and Trustees § 472 (3d ed. 2007).  In the rare case where the property in question was originally acquired by some artifice or illegal act, the subsequent possessor may try to oppose the imposition of the constructive trust doctrine by invoking the clean-hands doctrine.  See Locken, 98 Nev. at 372-73, 650 P.2d at 805.  In Locken, a father and son verbally agreed that the father was to make certain improvements upon the land, and after an awaited patent was granted, the son was to convey the property to his father.  Id. at 370, 650 P.2d 803, 804.  Although the father fulfilled his part of the agreement, expending considerable time, effort and money, the son refused to convey the property as agreed.  Id.  Specifically, the son argued that his father should be denied equitable relief because of the father’s affidavit accompanying the land patent application stating that the father had no interest in that parcel of land to be placed in the son’s name.  Id. at 373, 650 P.2d 803, 805.  The Court rejected this argument stating that, without condoning the father’s misstatement, such conduct, standing alone, absent an intent to deceive, does not amount to unclean hands.  Id.

Moreover, courts may overlook that the agreement was illegal or against public policy where: (1) the public interest cannot be restored because of the completed transaction; (2) no serious moral turpitude was involved; (3) the [subsequent possessor] is guilty of greater moral fault than the [initial possessor]; and (4) application of the rule would permit the [subsequent possessor] to be unjustly enriched at the expense of [the initial possessor].  Locken, 98 Nev. at 373, 650 P.2d at 805.  Essentially, the success or failure of this defense will turn on whether courts find the initial possessor’s acts of greater moral fault than the subsequent possessor’s act, which initially led to the constructive trust analysis in the first instance.

Because it is a remedy, the right to a constructive trust is subject to the statute of limitations on the underlying action that gives rise to the right to a constructive trust.  In re Advent Management Corp., 178 B.R. 480, 488 (9th Cir. 1995).  In Nevada, the statute of limitations begins to run from the time when the wronged party knows or should have known of the inequitable conduct of the titleholder.  Bemis, 114 Nev. at 1028, 967 P.2d at 442.

In Bemis, two sons first learned about the trust that their father was obligated to create for them after their father’s death on February 11, 1995.  Id.  Soon after, the two sons promptly filed creditors’ claims against the estate, but were denied.  Id.  Nevertheless, the district court held that the trust was repudiated in 1984 when the eldest son reached the age of twenty-five.  Id.  However, the Nevada Supreme Court held that when one seeks the imposition of a constructive trust in equity, the statue of limitations accrues when the wronged party knows or should have known about the constructive trustee’s wrongful holding.  Id.  Therefore, the district court erred in holding that the trust was repudiated because the sons only first learned about their father’s failure to create a trust for their benefit shortly before they filed their creditors’ claims in 1995.  Bemis, 114 Nev. at 1028, 967 P.2d at 442.

Yet, where the cause of action does not arise until a demand and refusal, and it is within the plaintiff’s power to make such a demand, the statute will commence to run after the lapse of a reasonable time.  Southward v. Foy, 65 Nev. 694, 705-06, 201 P.2d 302, 307 (1948).  The nature of the contract and the circumstances surrounding it will determine what qualifies as a “reasonable time.”  Id.

NRS 11.190(2)(c) provides that an action must be brought within four years upon a contract, obligation or liability not founded upon an instrument in writing.  NRS §  11.190(2)(c) (2007).  Moreover, the statute of limitations applies even when parties are in a fiduciary relationship.  DeLee, 111 Nev. at 1458, 907 P.2d at 170.  In DeLee, Morris purchased the property, paid all taxes and other costs and held title to the property.  Id.  Sometime between 1974 and 1976, Morris and Sol made an oral agreement and by 1978 Sol had performed his part of the agreement.  Id.  Unfortunately, Sol refrained from demanding the property for over ten years.  Id.  The Court held that Sol cannot, by withholding his demand, forever stay the running of the statute of limitations and then demand the property when it is most profitable to him.  Id.  Thus, Sol did not make a demand within a reasonable time after he had performed in 1978 and the four-year statute of limitations ran prior to his 1990 claim for the property.  DeLee, 111 Nev. at 1458, 907 P.2d at 170.

Laches may be a defense to an action to establish and enforce a trust.  Murphy v. Emery, 629 S.W.2d 895, 898 (Tenn. 1982).  The doctrine of laches applies to an action for breach of trust to the same extent that it applies to any other action in equity.  See Murphy, 629 S.W.2d at 897.  In particular, the doctrine is based on several equitable principles: (1) equity never lends its aid to one who, with knowledge of his rights and with opportunities to assert them, delays unreasonably to do so; (2) equity aids those who are vigilant, not those who sleep on their rights, and always discourages stale demands; (3) time, in equity, is a witness that what has long been acquiesced in must have originally been founded on some right.  Id.

As a defense, the elements of laches to an action by a beneficiary against a trustee are namely, lapse of time, want of diligence, knowledge or inexcusable ignorance, and change in the value of the property after the cause of action arises.  See Swanson v. Swanson, 501 S.E.2d 491, 493 (Ga. 1998).  These factors are relevant because laches is not merely a question of time, but principally a matter of inequity in permitting the claim to be enforced.  Id. at 494.  However, lapse of time is an important element and in some cases may be in itself telling on the question of inequity.  Id.

For laches to apply, repudiation of the constructive trust is not required, and the time usually runs from the moment that the trust arises by operation of law.  76 Am. Jur. 2d, Trusts § 721 (2d ed. 2007).  Laches is an affirmative defense to be pleaded and proved by the defendant in an action to impose a constructive trust.  See Swanson, 501 S.E.2d 491.  In particular, the defendant must establish unreasonable delay on the part of the plaintiff in filing suit, and hardship or disadvantage to the defendant as a result of such delay.  See Mills v. Holcomb, 389 So.2d 223 (Fla. App. 1980).

A party may attempt to invoke the homestead exemption as a defense to the imposition of a constructive trust.  However, the homestead exemption does not apply to transactions involving fraud or similar tortious conduct.  Maki v. Chong, 119 Nev. 390, 391, 75 P.3d 376, 377 (2003).

Nevada has a time-honored principle that states that she who keeps property that she knows belongs to another must restore that property.  Id. at 392, 75 P.3d 376, 379.  In Maki, Chong purchased real property from funds belonging to Maki who signed a limited power of attorney allowing Chong to cash his State Industrial Insurance System settlement check.  Id.  Although the purpose of the homestead exemption is to preserve the family home despite financial distress, insolvency, or calamitous circumstances, the Court found that Chong was undeserving of protection because she fraudulently obtained the funds to purchase her home.  Id. at 393-94, 75 P.3d 376, 379.  Specifically, the Court held that one cannot defeat the right to enforce a constructive trust or equitable lien against the property on the ground that the homestead exemption applies.  Id.  Otherwise, the entire purpose of the exemption would be defeated because it only provides protection to individuals who file the homestead exemption in good faith.  Maki, 119 Nev. at 394, 75 P.3d at 379.

When a plaintiff succeeds in enforcing a constructive trust, courts treat her as if she were enforcing a duty to deliver property under an express trust.  Capital Inv. Co. v. Executors of Estate of Morrison, 800 F.2d 424, 427 (4th Cir. 1986).  Consequently, plaintiff has the right to receive the property or its proceeds from a constructive trustee, as well as the right to receive a money judgment for property received against the constructive trustee.  Id.  Where it is necessary to make the successful plaintiff whole, the plaintiff may be allowed to recover a portion of the trust property or its proceeds along with a money judgment for the remainder.  Id.

A court of equity may decree an injunction for certain purposes, such as to restrain an unauthorized sale or diversion of the trust property.  76 Am. Jur. 2d, Trusts § 669 (2d ed. 2007).  For instance, a temporary injunction lies to freeze the res (Latin: “thing,” An object, interest or status, as opposed to a person.  Black’s Law Dictionary (8th ed. 2004)) of an alleged trust upon a showing that the res is in probable danger of dissipation and that there is a reasonable likelihood of success on the merits with respect to the constructive trust claim.  Korn v. Ambassador Homes, Inc., 546 So.2d 756, 757 (Fla. Dist. Ct. App. 1989).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of false imprisonment are:

  1. Defendant acts with the intention to confine another person within boundaries that are fixed by the defendant;
  2. The act is against the will of the plaintiff in such a manner as to violate the plaintiff’s right to be free from restraint of movement;
  3. Defendant is conscious of the confinement or is harmed by the confinement; and
  4. Causation and damages.

Jordan v. State ex rel. Dept. of Motor Vehicles and Public Safety, 121 Nev. 44, 110 P.3d 30 (Nev. 2005) abrogated on other grounds by Buzz Stew, LLC v. City of North Las Vegas, 181 P.3d 670 (Nev. 2008)(quoting Hernandez v. City of Reno, 97 Nev. at 433, 634 P.2d at 671 )Nev. 2005); abrogated on other grounds by Buzz Stew, LLC v. City of North Las Vegas, 181 P.3d 670 (Nev. 2008)).  Nelson v. City of Las Vegas, 99 Nev. 548, 665 P.2d 1141 (Nev. 1983); County of Riverside v. McLaughlin, 500 U.S. 44, 111 S. Ct. 1661 (1991).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of fraud in the inducement of a contract are:

  1. False representation made by defendant;
  2. Defendant’s knowledge or belief that the representation was false (or knowledge that it had an insufficient basis for making the representation);
  3. Defendant’s intention to induce plaintiff to consent to formation of contract;
  4. Plaintiff’s justifiable reliance upon the misrepresentation; and
  5. Damage to plaintiff resulting from such reliance.
  6. A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277 (2004); Lubbe v. Barba, 91 Nev. 596, 598; 540 P.2d 115, 118 (1975).

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of constructive discharge (also known sometimes as tortious discharge) are:

  1. The employee’s resignation was induced by actions and working conditions by the employer which are so intolerable as to amount to firing despite a lack of termination. The actions of the employer violate public policy;
  2. Objectively difficult or unpleasant working conditions to the extent that a reasonable employee would feel compelled to resign;
  3. The employer had actual or constructive knowledge of the intolerable actions and their impact on the employee;
  4. The situation could have been remedied; and
  5. Causation and damages.

Dillard Dept. Stores, Inc. v. Beckwith, 115 Nev. 372, 376, 989 P.2d 882 (1999); Martin v. Sears Roebuck & Co., 111 Nev. 923, 899 P.2d 551 (1995).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of fraud or intentional misrepresentation are:

  1. Defendant makes a false representation or misrepresentation as to a past or existing fact;
  2. With knowledge or belief by defendant that representation is false or that defendant lacks sufficient basis of information to make the representation;
  3. Defendant intended to induce plaintiff to act in reliance on the representation;
  4. Justifiable reliance upon the representation by the plaintiff;
  5. Causation and damages to plaintiff as a result of relying on misrepresentation; and
  6. Must be proved by clear and convincing evidence and be pled with specificity.

NRCP 9; NEVADA JURY INSTRUCTIONS 9.01; Jordan v. State ex rel. Dep’t of Motor Vehicles & Pub. Safety, 121 Nev. 44, 75, 110 P.3d 30, 51 (2005); J.A. Jones Constr. Co. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277, 89 P.3d 1009 (2004); Barmettler v. Reno Air, Inc., 14 Nev. 441, 956 P.2d 1382 (1998); Blanchard v. Blanchard, 108 Nev. 908 (1992);  Bulbman, Inc. v. Nev. Bell, 108 Nev. 105, 111, 825 P.2d 588, 592 (1992); Albert H. Wohlers & Co. v. Bartgis, 114 Nev. 1249, 1260, 969 P.2d 949, 957 (1998);  Sanguinetti v. Strecker, 94 Nev. 200, 206, 577 P.2d 404, 408 (1978); Lubbe v. Barba, 91 Nev. 596, 541 P.2d 115 (1975).

 

See elements for other claims at the Nevada Law Library

By Guest Blogger Matthew Kreutzer

Last night I reviewed a franchise agreement and found a surprising, and illegal, provision buried deep in the contract. If ever there was a compelling case for being careful when you are choosing legal counsel, I just found the provision that makes it.

But first, some background. My law practice involves representing both franchisors and prospective franchisees. For franchisors, I primarily draft franchise disclosure documents (“FDDs”) and franchise agreements; I assist my clients in obtaining franchise state registrations; and I assist them with day-to-day issues that arise in running their businesses. For prospective franchisees, I will review their proposed franchise agreements and FDDs and help them understand what they will be committing to do if they decide to buy the franchise. If the franchise company is willing to negotiate, I help prospective franchisees through that process.

I find that reviewing other companies’ FDDs and franchise agreements also helps me in my practice for franchisors; it’s always instructive to see what other industry leaders are doing. I have noticed that, in a small minority of systems, some franchisors go well beyond what is legally permitted to be included in the franchise agreement and include provisions that unquestionably violate the FTC Franchise Rule (the “Franchise Rule”) as well as various state franchise laws.

The Provision

If you’re on either side of the franchise relationship, you should know if your contract has a provision like this one. Pull out your franchise agreement now. Go ahead, I’ll wait.

You have it now? Good. Here’s the provision we’re looking for:

Release of Prior Claims. By executing this Franchise Agreement, Franchisee, and each successor of Franchisee under this Franchise Agreement forever releases and discharges Franchisor and its Affiliates, Its designees, franchise sales brokers, if any, or other agents, and their respective officers, directors. representatives, employees and agents, from any and all claims of any kind, in law or In equity, which may exist as of the date of this Franchise Agreement relating to, in connection with, or arising under this Franchise Agreement or any other agreement between the parties, or relating In any other way to the conduct of Franchisor, its Affiliates, its designees, franchise sales brokers, if any, or other agents, and their respective officers, directors, representatives, employees and agents prior to the date of this Franchise Agreement, including any and all claims, whether presently known or unknown, suspected or unsuspected, arising under the franchise, business opportunity, securities, antitrust or other laws of the United States, any stale or locality.

In plain English: “you, the franchisee acknowledge that we, the franchisor, may have lied to you and might be lying to you right now. Our entire FDD might be one of the greatest works of fiction since Moby Dick. You agree, however, that you waive all your legal rights to take action against us based on those lies, even if you have invested hundreds of thousands of dollars of your hard-earned money in this phony business.” Wow.

Do you have that one in your franchise agreement? You might have to do a bit of hunting for it. You would think something like that would be on the first page, bolded, in caps, with a box around it and perhaps accompanied by a self-lighting sparkler that draws your attention directly to the provision when you open the contract. But no, in the case of the contract in which I found this provision, it was buried on page 36 of a 39-page franchise agreement, with no particular emphasis placed upon it.

I will never include a provision like this in a franchise agreement I draft, nor will I ever recommend that a prospective franchise buyer sign a contract when it includes this provision. Why? It’s not only unfair, but it’s also illegal under the Franchise Rule and under various state franchise laws.

The Problem with Having the Provision

Now, I highly doubt that in most situations, the franchisor even knows this provision is in its franchise agreement. Most start-up franchise companies trust their franchise counsel to draft the agreement and don’t necessarily carefully consider each provision in the contract. This sort of provision is typically created by counsel, who is seeking to protect his or her client. An admirable goal, to be sure.

The problem is that this provision is impossible to justify to a prospective franchisee that notices it and understands its implications. If you’re a franchisor, imagine trying to explain that to a potential buyer: “we’re not lying to you.  But you have to agree as a condition of buying this franchise that we might be and that you won’t ever do anything about it if we are.”

A franchisor may be able to slip this one by a franchisee unnoticed, but a franchisee that notices and understands this provision is always going to have a problem with it. A franchisee that has experienced franchise legal counsel review the agreement for them will certainly flag the term and warn the franchisee against agreeing to it. That could cost you a sale.

To make matters worse for the franchisor, the types of franchisees that actually read the agreement before signing it and have legal counsel review it for them are exactly the type of franchisees the franchisor wants: franchisees that take their commitments seriously and are willing to put their time, effort, and money into understanding commitments before they make them.

Now, I have my doubts that this type of provision will be enforceable in any event because, as I said, including a provision like this one is an explicit violation of the Franchise Rule, which “prohibits franchise sellers from disclaiming or requiring a prospective franchisee to waive reliance on any representation made in the disclosure document or in its exhibits or amendments.” This provision does exactly that – and, as a result, the franchisor that included it in its agreement is in violation of the Franchise Rule (and various state laws) just for having the term in the contract.

Violating the Franchise Rule and state franchise laws leaves the franchisor exposed to lawsuits by franchisees that may have a state law “unfair trade practices” cause of action against the franchisor because of it. When those legal claims exist, a franchisor could face claims for damages or rescission. Moreover, state franchise administrators could refuse to register the franchise offering with a provision like this one (if they notice it) or worse, later take administrative action against the franchisor based on its violation of franchise law.

The better practice for franchisors that want to protect themselves, but do so within the bounds of the law, is to use exculpatory provisions and “compliance questionnaires” as part of the agreement signing process. A well-drafted exculpatory provision will provide a measure of protection to franchisors for unauthorized statements made by a renegade sales person, but will not seek to disclaim statements made by the franchisor in its FDD (and therefore is permissible under the Franchise Rule and many state laws).

The Lesson for Franchisors and Franchisees

If you are a franchisor, inclusion of a provision like this in your franchise agreement should make you question your legal counsel. Ask yourself: are you willing to risk losing a potential sale to a qualified, savvy, and ideal franchisee because you have a provision in your franchise agreement that probably isn’t enforceable anyway? Are franchisees that sign your contract without even reading or understanding it really the type of franchisees you want? And is “sneaking something past” your unwitting franchisees who don’t review every term of your contract really the way you want to do business? As I explain above, there are better (and legally-enforceable) ways to protect yourself in your franchise agreement, anyway.

If you are a prospective franchise buyer, this situation highlights the importance of: (1) reading your franchise agreement, cover-to-cover; and (2) hiring legal counsel experienced in franchise law to review your contract before you sign it. Contrary to the opinion of some, franchise agreements aren’t all boilerplate, and not all franchise contracts are created equally. Don’t assume that your franchise agreement doesn’t contain something objectionable just because other franchisees signed it.

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In Nevada, the elements for a claim of fraudulent transfer are:

  1. A transfer was made with actual intent to hinder, delay, or defraud any creditor of the debtor;
  2. Without receiving a reasonably equivalent value in exchange for the transfer or obligation;
  3. The debtor was engaged or was about to engage in a business or a transaction for which the remaining assets of the debtor were unreasonably small in relation to the business or transaction;
  4. Debtor intended to incur, or believed, or reasonably should have believed, that he would incur debt beyond his ability to pay as they became due; and
  5. There is heightened scrutiny if the transfer or obligation was to an insider as defined by statute.

NRS 112.180; NRS 112.210; NRS 112.190; In re: FSG-R, LLC, 2012 WL 753353; In re 155 East Tropicana, LLC, 2012 WL 668579; Herup v. First Boston Financial, LLC, 123 Nev. 27, 162 P.3d 870, 873 (2007); Montana Nat’l. Bank v. Michels, 631 P.2d 1260 (Nev. 1981); Crescent v. White, 92 Nev. 661, 556 P.2d 1265 (1976); Matusik v. Large, 85 Nev. 202, 462 P.2d 457 (1969); 32 Am. Jur. 2d Fraudulent Conveyances § 10, at 701.

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of constructive fraud are:

  1. The existence of a confidential relationship or some legal or equitable duty or fiduciary duty;
  2. Breach of that duty in a way that the law declares fraudulent because of its tendency to deceive others or to violate a duty or confidence; and
  3. Causation and damages.

Perry v. Jordan, 111 Nev. 943, 947, 900 P.2d 335, 337 – 338 (1995); Long v. Towne, 98 Nev. 11, 13, 639 P.2d 528, 530 (1982); Exec. Mgmt. v. Ticor Title Ins. Co., 114 Nev. 823, 963 P. 2d 465 (Nev. 1998);  In re Guardianship of Chandos, 18 Ariz.App. 583, 504 P.2d 524 (Ariz. App. 1972); Kudokas v. Balkus, 26 Cal. App.3d 744, 103 Cal.Rptr. 318, 321 (1972).

 

See elements for other claims at the Nevada Law Library

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While you may be tempted to cash any check received these days, with a memo noted “paid in full”, the cashing of that check may modify your earlier agreement and extinguish your contract.

For example, say you had an agreement to provide goods or services for $5,000.  You invoice the client.  The client sends you a check for $3,500 with a note marked “paid in full”.  If you cash the check, you may be held to effectively amend the agreement to accept the contract price of $3,500.

So, you ask, what are you to do when you get a check for less than the full amount?  Under the Uniform Commercial Code (UCC), you are not required to return the check; therefore, you could simply destroy the check.  As a business point, and this is not in the UCC, you can negotiate a payment plan or other settlement. (more…)

In Nevada, the elements for a claim of concert of action are:

  1. Two or more persons act together while committing a tort pursuant to a common design or plan; and
  2. Liability attaches for the tort of concert of action when two people commit a tort while “acting in concert with one another or pursuant to a common design.” (Proof of an agreement alone is insufficient, as the conduct of each tortfeasor must be individually tortuous);
  3. Causation and damages.

GES, Inc. v. Corbitt, 117 Nev. 265, 21 P.3d 11 (Nev. 2001); Halbertam v. Welch, 705 F.2d 472, 489 (D.C. Cir. 1983); Dow Chem. Co. v. Mahlum, 114 Nev. 1468, 1488, 970 P.2d 98, 112 (1998) overruled in part on other grounds by GES, Inc. v. Corbitt, 117 Nev. 265, 21 P.3d 11 (2011); Juhl v. Airington, 936 S.W.2d 640, 644 (Tex. 1996); Restatement (Second) of Torts § 876, bc (1979).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of fraudulent concealment are:

  1. Defendant concealed or suppressed a material fact;
  2. Defendant was under a duty to disclose the concealed fact;
  3. Defendant intentionally concealed or suppressed the fact with the intention of defrauding plaintiff;
  4. Plaintiff did not know about the fact and would have acted differently had they known; and
  5. Plaintiff sustained Causation and damages as a result of the concealment or suppression of the fact.

NEVADA JURY INSTRUCTIONS 9.03; Nevada Power Co. v. Monsanto Co., 891 F.Supp. 1406, 1415 (D. Nev. 1995); Riviera v. Morris, Inc., 395 F.3d 142 (9th Cir. 2005) (citing Dow Chem. Co. v. Mahlum, 14 Nev. 1468 (1998) overruled in part on other grounds).

 

See elements for other claims at the Nevada Law Library