Business Law

What Are They and Why You Must Hold and Document Them Correctly

Corporate Annual Meetings: What Are They and Why You Must Hold and Document Them Correctly?

Corporate Annual Meetings: What Are They and How to Hold and Document Them Correctly            

A corporation in Nevada is recommended to hold an annual meeting of its shareholders or members.  The meeting may be held anywhere, but must be held in the location and manner provided for in the articles of incorporation and/or bylaws of the corporation.  Unless otherwise provided in the articles of incorporation or bylaws, the entire board of directors, any two directors, or the president may call annual and special meetings of the shareholders and directors.  NRS 78.310. (more…)

Business Entities: Initial List of Officers and Directors and State Business License.

Business Entities: Initial List of Officers and Directors and State Business License.

One of the requirements to start a new corporation in Nevada is to complete and file an Annual List of Officers, Directors, and Resident Agent with the Secretary of State’s office “on or before the last day of the first month after filing the articles of incorporation.”  NRS 78.150. (more…)

Business Entities: What is a Registered Agent in Nevada?

Business Entities: What is a Registered Agent in Nevada?

In legal terms, a Registered Agent (“RA”) is a person or business who is designated by a business entity registered with the state to receive service of process when that entity is sued.  Service of process is the formal procedure for informing a company that legal action has been filed against it and requiring it to file a response to the same.  NRS Chapter 77.

Since a business such as a corporation or limited liability company is not a person, the law requires that a single person be named to accept service of process.  A business must therefore designate its RA by filing a form with the Secretary of State.  Thereafter, once the RA is served with process papers, the entity is deemed to have received the same and its obligation to respond is triggered.

            A joint venture is a contractual relationship in the nature of an informal partnership wherein two or more persons conduct some business enterprise, agreeing to share jointly, or in proportion to capital contributed, in profits and losses.  A prime example we see often is a venture for the development of land.  In this example, one venturer may own real property and may agree to allow a second venturer to build improvements (an office building, for instance) on the real property and that the venture will sell the real property with the improvements and share in the profits at an agreed-upon rate. (more…)

Partnership by Estoppel in Nevada

Partnership by estoppel is a statutory recognition that someone “represents himself or herself, or consents to another representing him or her to any one, as a partner” and should therefore be held responsible as a partnership under the law.  NRS 87.160(1).  A partner is an association of two or more persons doing business together for a profit.  NRS 87.060(1).

In other words, if I tell someone that you are my partner and you agree or do not correct me, that person has the right to presume we are acting as a partnership.  In a partnership, the partners have unlimited personal liability for the acts of the partnership and the acts of  their partners, so holding oneself out as a partner can have huge legal implications.  NRS 87.433.   Nevada’s Supreme Court has held that the consent to be treated as a partnership may be reasonably implied from the conduct of the parties.

The Moral: unless you want to have unlimited liability for the acts of that person, don’t say they are your partner.

Nevada Partnership Formation and Law

Nevada Partnership Formation and Law

I hear people refer to those with whom they do business as their “partners” frequently.  I even hear this from people who are really shareholders in a corporation or members in a limited liability company.  I am fairly certain that if most of them understood the potential liability of forming a true partnership, they would never call themselves someone’s partner ever again.  Partnerships are relatively easy to form (beware: some court decisions and Nevada’s statutes have held that a partnership can be formed just by telling those with whom you are doing business that you and another person are “partners”), requiring simply an association of two or more persons doing business together for a profit.  NRS 87.060(1).  Every partner is a fiduciary to the other partner(s).  That means the partner has a legal duty to act in the best interests of his or her partners and of the partnership rather than acting in his or her own interest.  NRS 87.210. (more…)

How Does a Party Prosecute an Action for Misappropriation of Trade Secrets?

NRS 600A.030(2) defines “misappropriation” as:

(a) Acquisition of the trade secret of another by a person by improper means;

(b) Acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means; or

(c) Disclosure or use of a trade secret of another without express or implied consent by a person who:

(1)  Used improper means to acquire knowledge of the trade secret;

(2)  At the time of disclosure or use, knew or had reason to know that his knowledge of the trade secret was:

(I) Derived from or through a person who had used improper means to acquire it;

(II)  Acquired under circumstances giving rise to a duty to maintain its secrecy or limit its use; or

(III)  Derived from or through a person who owed a duty to the person seeking relief to maintain its secrecy or limit its use; or

(3)  Before a material change of his position, knew or had reason to know that it was a trade secret and that knowledge of it had been acquired by accident or mistake.

NRS 600A.040 provides injunctive relief for the actual or threatened misappropriation of trade secrets, stating;

  1. Actual or threatened misappropriation may be enjoined. Upon application to the court, an injunction must be terminated when the trade secret has ceased to exist, but the injunction may be continued for an additional reasonable period of time to eliminate commercial or other advantage that otherwise would be derived from the misappropriation.

* * *

  1. In appropriate circumstances, the court may order affirmative acts to protect a trade secret. As used in this subsection, “affirmative acts” includes, without limitation, issuing an injunction or order requiring that a trade secret which has been misappropriated and posted, displayed or otherwise disseminated on the Internet be removed from the Internet immediately.

In Frantz, the Nevada Supreme Court found misappropriation of trade secrets based on the fact that: (l) lists containing information were missing after the former employee left the job; (2) the former employee contacted the plaintiff’s customers to offer “more competitive pricing;” and (3) the former employee’s phone records and other evidence indicated calls to plaintiff’s customers.  As a result, the former employee was liable for misappropriation of trade secrets.   The Court further found that the competitor had misappropriated trade secrets when the competitor hired the former employee, announced that competitor intended to compete against plaintiff by taking all of plaintiff’s customers, and the competitor hired employees from other competitive companies and asked them to use their knowledge about their former employers’ pricing structure and customer base.  Id.

To prove misappropriation under NUTSA, a plaintiff must plead and prove: (1) the existence of a valuable trade secret as defined by the statute; (2) misappropriation through use, disclosure, or nondisclosure of use of the trade secret; and (3) the misappropriation was wrongful because it was made in breach of an express or implied contract or by a party with a duty not to disclose.  Frantz, 116 Nev. at 466, 999 P.2d at 358.  The Court has wide discretion in calculating damages, subject only to a review for abuse of discretion.  Id. (citing Diamond Enters., Inc. v. Lau, 113 Nev. 1376, 1379, 951 P.2d 73, 74 (1997) (citations omitted)).

Business Owner’s Toolbox

How to Start Your Business

Business Owner’s Toolbox

So, You Want to Own Your Own Business in Nevada?
A Primer on Types of Business Formations In Nevada
Three Popular Nevada Business Entities and How to Structure Them
Thinking of Opening a Nevada Business?  Here Are Some Things You Should Know About Licensing
Why You Should Never Refer to Someone as Your Partner
Nevada Partnership Formation and Law
Joint Venture versus Partnership: What is the Difference? (COMING SOON) (more…)

Mediation Settlement Agreement

Ever get to the end of a mediation and realize that this may be your only chance to memorialize an agreement with the other side without them trying to change the terms of the deal afterward?  Take this handy Memorandum of Understanding* to your mediation and you will have a ready-to-fill-out template that provides many of the boilerplate provisions seen in many settlement agreements.

 

 

*I am not the author of this agreement and take no credit for its provisions.  Use at your own risk and only after seeking the advice of competent counsel.

N.R.S. CHAPTER 78 – PRIVATE CORPORATIONS

GENERAL PROVISIONS

NRS 78.010             Definitions; construction.

NRS 78.015             Applicability of chapter; effect on corporations existing before April 1, 1925.

NRS 78.020             Limitations on incorporation under chapter; compliance with other laws.

NRS 78.025             Reserved power of State to amend or repeal chapter; chapter part of corporation’s charter. (more…)

N.R.S. CHAPTER 33 – INJUNCTIONS

GENERAL PROVISIONS

NRS 33.010             Cases in which injunction may be granted.

NRS 33.015             Injunction to restrain unlawful act against witness or victim of crime.

NRS CHAPTER 32 – RECEIVERS

NRS 32.010             Cases in which receiver may be appointed.

NRS 32.015             Additional cases in which receiver may be appointed.

NRS 32.020             Reversion and disposition of unclaimed dividends in receivership.

We have all been there.  During trial a witness testifies inconsistently with her prior testimony.  So you dutifully pull out the transcript to impeach her.  Here is a method I have found that works to limit the witness’ ability to wiggle out of prior testimony.

First, commit the witness to the testimony she gave under oath today.  Say something like “on direct examination, you testified that the light was green for southbound traffic on Rainbow when you entered the intersection, correct?”  Make sure you are quoting the prior testimony as closely as possible in order to avoid having the witness quibble. (more…)

(Discoverability of Conversations During Deposition Breaks)

Let’s pretend that your client needs a restroom break during a deposition and there is no question pending (thus, not triggering an In Re Stratosphere Corporation, 182 F.R.D. 614 (D. Nev. 1998) problem).  You and your client requested a break.  Before going back into the deposition, you remind your client about the training you gave him to answer only the question asked and not to volunteer information.  You also tell him to beware if opposing counsel asks questions about that smoking gun document that he pay special attention to the second paragraph.  Under a recent Nevada decision, no privilege would attach to that conversation, meaning your client could and would be forced to divulge the contents of that conversation if the examining attorney is aware of the decision. (more…)

How should one properly respond to a Nevada subpoena?  As is so often the case in the law, the answer is “it depends.” Let’s first discuss the different types of subpoenas and then decide on the best way to respond to them.

The post assumes that you are not a party to the litigation and that the subpoena is not for trial testimony.  If that is the case, the subpoena is served for the purpose of  either compelling your attendance to testify or for gathering information one of the parties thinks they need to prove their case, and is called a discovery subpoena.  A discovery subpoena may require the receiving party to turn over documents, allow for the inspection of physical premises, and/or provide testimony.  Nevada Rules of Civil Procedure (“NRCP”), NRCP 45(b)(1), NRCP 30(b)(1). (more…)

In Nevada, there are very few restrictions on what name can be given to a corporation.  First, a corporation may not be the name or initials of a natural person unless it also contains and additional designation such as “Incorporated,” “Limited,” “Inc.,” “Ltd.,” “Company,” “Co.,” “Corporation,” “Corp.,” or other word which identifies it as not being a natural person.  NRS 78.035.  Second, the name “must be distinguishable . . . from the names of all other” companies registered with the Nevada Secretary of State.  NRS 78.039. Finally, the name may not insinuate that the corporation is a “bank” or “trust,” associated with a regulated industry unless it has approval to do so by the appropriate state agency which regulates that industry.  NRS 78.045.

A more practical concern is whether a chosen name infringes on the trademark of another business.  A prudent business owner will determine that the proposed business name does not infringe on that of another.  There are both state and federal trademarks to consider.

In our last post, we discussed Articles of Incorporation.  In this post, we discuss a corporation’s bylaws.  A corporation’s bylaws are written rules by which the corporation, its officers, directors, and shareholders must abide.  They establish how the company is ruled and what are the duties and obligations of its officers, directors, and shareholders.  Unlike the articles of incorporation, there is no obligation to file the bylaws with the Nevada Secretary of State.

Most bylaws will contain (remembering that the officers and directors will be legally required to adhere to the standards.  Importantly, if they are sued, the bylaws are the standard against which their actions will be judged): (more…)

Nevada Jury Instructions

NEV. J.I. 1.0               DUTY OF JUDGE AND JURY
NEV. J.I. 1.01             USE OF INSTRUCTIONS
NEV. J.I. 1.02            MASCULINE FORM OF PRONOUN INCLUDES FEMININE OR CORPORATION
NEV. J.I.1.03             WHAT IS AND WHAT IS NOT EVIDENCE  (more…)

In Nevada, a corporation is formed when one or more persons, called “incorporators”, sign and file articles of incorporation with the Nevada Secretary of State.  Roughly stated, the articles of incorporation state the intention of the incorporators to transact business as a separate legal entity

A corporation may be formed to conduct any lawful business, or to promote or conduct any legitimate object or purpose NRS 78.030(1).  The articles must contain the following information:

(more…)

Nevada Arbitration Rules

Rule 1.  The court annexed arbitration program
Rule 2.  Intent of program and application of rules
Rule 3.  Matters subject to arbitration
Rule 4.  Relationship to district court jurisdiction and rules
Rule 5.  Exemptions from arbitration
(more…)

Nevada Rules of Civil Procedure

RULE 33.  INTERROGATORIES TO PARTIES

      (a) Availability.  Without leave of court or written stipulation, any party may serve upon any other party written interrogatories, not exceeding 40 in number including all discrete subparts, to be answered by the party served or, if the party served is a public or private corporation or a partnership or association or governmental agency, by any officer or agent, who shall furnish such information as is available to the party. Leave to serve additional interrogatories shall be granted to the extent consistent with the principles of Rule 26(b)(2). Without leave of court or written stipulation, interrogatories may not be served before the time specified in Rule 26(a).

      [As amended; effective January 1, 2005.]

      (b) Answers and Objections.

              (1) Each interrogatory shall be answered separately and fully in writing under oath, unless it is objected to, in which event the objecting party shall state the reasons for objection and shall answer to the extent the interrogatory is not objectionable. The answers shall first set forth each interrogatory asked, followed by the answer or response of the party.

              (2) The answers are to be signed by the person making them, and the objections signed by the attorney making them.

             (3) The party upon whom the interrogatories have been served shall serve a copy of the answers, and objections if any, within 30 days after the service of the interrogatories. A short or longer time may be directed by the court or in the absence of such an order, agreed to in writing by the parties subject to Rule 29.

              (4) All grounds for an objection to an interrogatory shall be stated with specificity. Any ground not stated in a timely objection is waived unless the party’s failure to object is excused by the court for good cause shown.

              (5) The party submitting the interrogatories may move for an order under Rule 37(a) with respect to any objection to or other failure to answer an interrogatory.

      [As amended; effective January 1, 2005.]

      (c) Scope; Use at Trial.  Interrogatories may relate to any matters which can be inquired into under Rule 26(b), and the answers may be used to the extent permitted by the rules of evidence.

       An interrogatory otherwise proper is not necessarily objectionable merely because an answer to the interrogatory involves an opinion or contention that relates to fact or the application of law to fact, but the court may order that such an interrogatory need not be answered until after designated discovery has been completed or until a pretrial conference or other later time.

      [As amended; effective January 1, 2005.]

      (d) Option to Produce Business Records.  Where the answer to an interrogatory may be derived or ascertained from the business records of the party upon whom the interrogatory has been served or from an examination, audit or inspection of such business records, including a compilation, abstract or summary thereof, and the burden of deriving or ascertaining the answer is substantially the same for the party serving the interrogatory as for the party served, it is a sufficient answer to such interrogatory to specify the records from which the answer may be derived or ascertained and to afford to the party serving the interrogatory reasonable opportunity to examine, audit or inspect such records and to make copies, compilations, abstracts or summaries. A specification shall be in sufficient detail to permit the interrogating party to locate and to identify, as readily as can the party served, the records from which the answer may be ascertained.

      [As amended; effective January 1, 2005.]

Nevada Rules of Civil Procedure

(January 2017)

I.     SCOPE OF RULES—ONE FORM OF ACTION

NRCP 1 – SCOPE OF RULES
NRCP 2 – ONE FORM OF ACTION

II.     COMMENCEMENT OF ACTION; SERVICE OF PROCESS, PLEADINGS, MOTIONS, AND ORDERS (more…)

Nevada Rules of Civil Procedure

Form 32.  Judgment on Decision by the Court

(Title of Court)

                                                                                Civil Action, File Number __________

A.B., Plaintiff                                 }

        v.                                               }        Judgment

C.D., Defendant                             }

      This action came on for [trial] [hearing] before the Court, Honorable John Marshall, District Judge, presiding, and the issues having been duly [tried] [heard] and a decision having been duly rendered,

      It Is Ordered and Adjudged

      [that the plaintiff A. B. recover of the defendant C. D. the sum of __________, with interest thereon at the rate of __________ per cent as provided by law, and his costs of action.]

      [that the plaintiff take nothing, that the action be dismissed on the merits, and that the defendant C. D. recover of the plaintiff A. B. his costs of action.]

      Dated at __________, Nevada, this _____ day of __________, 20_____.

                                                                                  ______________________________

                                                                         District Judge

      [Added; effective March 16, 1964.]

Nevada Rules of Civil Procedure

Form 25.  Request for Admission Under Rule 36

       Plaintiff A. B. requests defendant C. D. within _____ days after service of this request to make the following admissions for the purpose of this action only and subject to all pertinent objections to admissibility which may be interposed at the trial:

       1.  That each of the following documents, exhibited with this request, is genuine.

       (Here list the documents and describe each document.)

       2.  That each of the following statements is true.

       (Here list the statements.)

                                                                   Signed: _____________________________

                                                                         Attorney for Plaintiff

                                                                Address: _____________________________

Nevada Rules of Civil Procedure

 Form 24.  Request for Production of Documents, Etc., Under Rule 34

      Plaintiff A. B. requests defendant C. D. to respond within _______ days to the following requests:

       (1) That defendant produce and permit plaintiff to inspect and to copy each of the following documents:

       (Here list the documents either individually or by category and describe each of them.)

       (Here state the time, place, and manner of making the inspection and performance of any related acts.)

       (2) That defendant produce and permit plaintiff to inspect and to copy, test, or sample each of the following objects:

       (Here list the objects either individually or by category and describe each of them.)

       (Here state the time, place, and manner of making the inspection and performance of any related acts.)

       (3) That defendant permit plaintiff to enter (here describe property to be entered) and to inspect and to photograph, test or sample (here describe the portion of the real property and the objects to be inspected).

      (Here state the time, place, and manner of making the inspection and performance of any related acts.)

                                                                   Signed: _____________________________

                                                                         Attorney for Plaintiff

                                                                Address: _____________________________

      [As amended; effective September 27, 1971.]

Nevada Rules of Civil Procedure

Form 23.  Motion to Intervene as a Defendant Under Rule 24

(Title of Court)

                                                                                Civil Action, File Number __________

A. B., Plaintiff                                }

        v.                                               }        Motion to Intervene as a Defendant

C. D., Defendant                            }

E. F., Applicant for Intervention }

      E. F. moves for leave to intervene as a defendant in this action, in order to assert the defenses set forth in his proposed answer, of which a copy is hereto attached, on the ground that __________ and as such has a defense to plaintiff’s claim presenting both questions of law and of fact which are common to the main action.2

                                                             Signed: ________________________________

                                                                    Attorney for E. F., Applicant for Intervention

                                                          Address: ________________________________

_______________________

      2For other grounds of intervention, either of right or in the discretion of the court, see Rule 24(a) and (b).

 

Notice of Motion

(Contents the same as in Form 19)

(Title of Court)

                                                                                Civil Action, File Number __________

A. B., Plaintiff                                }

        v.                                               }        Intervener’s Answer

C. D., Defendant                            }

E. F., Intervener                             }

First Defense

      Intervener admits the allegations stated in paragraphs 1 and 4 of the complaint; denies the allegations in paragraph 3, and denies the allegations in paragraph 2 in so far as they assert the

Second Defense

      (Set forth defenses.)

                                                                   Signed: _____________________________

                                                                         Attorney for E. F., Intervention

                                                                Address: _____________________________

Nevada Rules of Civil Procedure

Form 22-B.  Motion to Bring in Third-Party Defendant

       Defendant moves for leave, as third-party plaintiff, to cause to be served upon E. F. a summons and third-party complaint, copies of which are hereto attached as Exhibit X.

                                                                   Signed: _____________________________

                                                                         Attorney for Defendant C. D.

                                                                Address: _____________________________

 Notice of Motion

       (Contents the same as in Form 19. The notice should be addressed to all parties to the action.)

Exhibit X

      (Contents the same as in Form 22-A.)

      [Added; effective March 16, 1964.]

Nevada Rules of Civil Procedure

Form 3.  Complaint on a Promissory Note

      1.  Defendant on or about June 1, 1935, executed and delivered to plaintiff a promissory note [in the following words and figures: (here set out the note verbatim)]; [a copy of which is hereto annexed as Exhibit A]; [whereby defendant promised to pay to plaintiff or order on June 1, 1936 the sum of ten thousand dollars with interest thereon at the rate of six percent per annum].

      2.  Defendant owes to plaintiff the amount of said note and interest.

      Wherefore plaintiff demands judgment against defendant for the sum of ten thousand dollars, interest, and costs.

                                                                     Signed:_____________________________

                                                                          Attorney for Plaintiff

                                                                   Address:_____________________________

                                                              Telephone:_____________________________

 

      NOTES TO FORM 3

      1.  The pleader may use the material in one of the three sets of brackets. His choice will depend upon whether he desires to plead the document verbatim, or by exhibit, or according to its legal effect.

       2.  Under the rules free joinder of claims is permitted. See Rules 8(e) and 18. Consequently the claims set forth in each and all of the following forms may be joined with this complaint or with each other. Ordinarily each claim should be stated in a separate division of the complaint, and the divisions should be designated as counts successively numbered. In particular the rules permit alternative and inconsistent pleading. See Form 10.

In a civil setting, a statute of limitation sets a time limit on when one must file a civil lawsuit or lose the opportunity to do so.  In other words, if the statute of limitations places a 2 year expiration on a personal injury claim, one must file the claim within two years of the injury or be subject to dismissal.  The concept dates back to Roman law and is designed to prevent fraudulent or stale claims from being brought after a reasonable period of time when evidence and memories disappear regarding the events surrounding the claim.  The amount of time differs depending on the nature of the claim and is set by our legislature.

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In WPH Architecture, Inc. v. Vegas VP, __ P.3d __, 131 Adv. Op. 88 (Nev. Nov. 5, 2015), the Nevada Supreme Court held that Rule 68 Offers of Judgment, together with statutes allowing offers of judgment in Nevada “are substantive laws that apply to the arbitration proceedings in the current case.”  In this case, the contract between the litigants required arbitration of any disputes pursuant to the American Arbitration Association’s Construction Arbitration Rules, and applying Nevada substantive law.  Prior to arbitration, the claimant made a statutory and Rule 68 offer of judgment.  The respondent rejected the offer of judgment, then lost at arbitration.

(more…)

Nevada’s Rules Governins Alternative Dispute Resolution defines a Settlement Conference as:

“Settlement conference” is a process whereby, with the approval of the district judge to whom the case is assigned, a district court judge not assigned to the particular case, senior judge, special master, referee or other neutral third person, conducts, in the presence of the parties and their attorneys and person or persons with authority to resolve the matter, a conference for the purpose of facilitating settlement of the case.

 

(more…)

Definition of Mediation

Nevada’s Rules Governing Alternative Dispute Resolution define Mediation as:

“Mediation” means a process whereby a neutral third person, called a mediator, acts to encourage and facilitate the resolution of a dispute between two or more parties. It is an informal and nonadversarial process with the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement. In mediation, decision-making authority rests with the parties. The role of the mediator includes, but is not limited to, assisting the parties in identifying issues, fostering joint problem solving, and exploring settlement alternatives.

(more…)

Nevada’s Rules Governing Alternative Dispute Resolution defines Arbitration as:

“Arbitration” means a process whereby a neutral third person, called an arbitrator, considers the facts and arguments presented by the parties and renders a decision, which may be binding or nonbinding as provided in these rules.

(more…)

NEVADA ARBITRATION RULES

Rule 1.  The court annexed arbitration program.  The Court Annexed Arbitration Program (the program) is a mandatory, non-binding arbitration program, as hereinafter described, for certain civil cases commenced in judicial districts that include a county whose population is 100,000 or more. Judicial districts having a lesser population may adopt local rules implementing all or part of the program.

[Added; effective July 1, 1992; amended effective January 1, 2005.]

Rule 2.  Intent of program and application of rules.

(A)  The purpose of the program is to provide a simplified procedure for obtaining a prompt and equitable resolution of certain civil matters.

(B)  These rules shall apply to all arbitration proceedings commenced in the program.

(C)  These arbitration rules are not intended, nor should they be construed, to address every issue which may arise during the arbitration process. The intent of these rules is to give considerable discretion to the arbitrator, the commissioner and the district judge. Arbitration hearings are intended to be informal, expeditious and consistent with the purposes and intent of these rules.

(D)  These rules may be known and cited as the Nevada Arbitration Rules, or abbreviated N.A.R.

[Added; effective July 1, 1992; amended effective January 1, 2005.]

(more…)

RULES GOVERNING ALTERNATIVE DISPUTE RESOLUTION

(Arbitration and Mediation)

A. GENERAL PROVISIONS

Rule 1.  Definitions.  As used in these rules:

(A)  “Arbitration” means a process whereby a neutral third person, called an arbitrator, considers the facts and arguments presented by the parties and renders a decision, which may be binding or nonbinding as provided in these rules.

(B)  “Mediation” means a process whereby a neutral third person, called a mediator, acts to encourage and facilitate the resolution of a dispute between two or more parties. It is an informal and nonadversarial process with the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement. In mediation, decision-making authority rests with the parties. The role of the mediator includes, but is not limited to, assisting the parties in identifying issues, fostering joint problem solving, and exploring settlement alternatives.

(C)  “Settlement conference” is a process whereby, with the approval of the district judge to whom the case is assigned, a district court judge not assigned to the particular case, senior judge, special master, referee or other neutral third person, conducts, in the presence of the parties and their attorneys and person or persons with authority to resolve the matter, a conference for the purpose of facilitating settlement of the case.

[Added; effective March 1, 2005.]

(more…)

Nevada Revised Statutes, NRS 38.209  “Arbitrator” defined.  “Arbitrator” means an individual appointed to render an award, alone or with others, in a controversy that is subject to an agreement to arbitrate.

(Added to NRS by 2001, 1274)

(more…)

ARBITRATION OF ACTIONS IN DISTRICT COURTS AND JUSTICE COURTS

 

NRS 38.250  Nonbinding arbitration of certain civil actions filed in district court required; nonbinding arbitration of certain civil actions filed in justice court authorized; effect of certain agreements by parties to use other alternative methods of resolving disputes.

1.  Except as otherwise provided in NRS 38.310:

(a) All civil actions filed in district court for damages, if the cause of action arises in the State of Nevada and the amount in issue does not exceed $50,000 per plaintiff, exclusive of attorney’s fees, interest and court costs, must be submitted to nonbinding arbitration in accordance with the provisions of NRS 38.250 to 38.259, inclusive, unless the parties have agreed or are otherwise required to submit the action to an alternative method of resolving disputes established by the Supreme Court pursuant to NRS 38.258, including, without limitation, a settlement conference, mediation or a short trial.

(b) A civil action for damages filed in justice court may be submitted to binding arbitration or to an alternative method of resolving disputes, including, without limitation, a settlement conference or mediation, if the parties agree to the submission.

2.  An agreement entered into pursuant to this section must be:

(a) Entered into at the time of the dispute and not be a part of any previous agreement between the parties;

(b) In writing; and

(c) Entered into knowingly and voluntarily.

Ê An agreement entered into pursuant to this section that does not comply with the requirements set forth in this subsection is void.

3.  As used in this section, “short trial” means a trial that is conducted, with the consent of the parties to the action, in accordance with procedures designed to limit the length of the trial, including, without limitation, restrictions on the amount of discovery requested by each party, the use of a jury composed of not more than eight persons and a specified limit on the amount of time each party may use to present the party’s case.

(Added to NRS by 1991, 1343; A 1993, 556, 1024; 1995, 1419, 2537, 2538; 1999, 852, 1379; 2003, 851; 2005, 391)

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UNIFORM ARBITRATION ACT OF 2000

 

NRS 38.206  Short title.  NRS 38.206 to 38.248, inclusive, may be cited as the Uniform Arbitration Act of 2000.

(Added to NRS by 2001, 1274)

 

NRS 38.207  Definitions.  As used in NRS 38.206 to 38.248, inclusive, the words and terms defined in NRS 38.208 to 38.213, inclusive, have the meanings ascribed to them in those sections.

(Added to NRS by 2001, 1274)

 

NRS 38.208  “Arbitral organization” defined.  “Arbitral organization” means an association, agency, board, commission or other entity that is neutral and initiates, sponsors or administers an arbitral proceeding or is involved in the appointment of an arbitrator.

(Added to NRS by 2001, 1274)

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NEVADA REVISED STATUTES

CHAPTER 38 – MEDIATION AND ARBITRATION

 

UNIFORM ARBITRATION ACT OF 2000

 

NRS 38.206             Short title.

NRS 38.207             Definitions.

NRS 38.208             “Arbitral organization” defined.

NRS 38.209             “Arbitrator” defined.

NRS 38.211             “Court” defined.

NRS 38.212             “Knowledge” defined.

NRS 38.213             “Record” defined.

NRS 38.214             Notice.

NRS 38.216             Applicability.

NRS 38.217             Waiver of requirements or variance of effects of requirements; exceptions.

NRS 38.218             Application for judicial relief; service of notice of initial motion.

NRS 38.219             Validity of agreement to arbitrate.

NRS 38.221             Motion to compel or stay arbitration.

NRS 38.222             Provisional remedies.

NRS 38.223             Initiation of arbitration.

NRS 38.224             Consolidation of separate arbitration proceedings.

NRS 38.226             Appointment of arbitrator; service as neutral arbitrator.

NRS 38.227             Disclosure by arbitrator.

NRS 38.228             Action by majority.

NRS 38.229             Immunity of arbitrator; competency to testify; attorney’s fees and costs.

NRS 38.231             Arbitration process.

NRS 38.232             Representation by lawyer.

NRS 38.233             Witnesses; subpoenas; depositions; discovery.

NRS 38.234             Judicial enforcement of preaward ruling by arbitrator.

NRS 38.236             Award.

NRS 38.237             Change of award by arbitrator.

NRS 38.238             Remedies; fees and expenses of arbitration proceeding.

NRS 38.239             Confirmation of award.

NRS 38.241             Vacating award.

NRS 38.242             Modification or correction of award.

NRS 38.243             Judgment on award; attorney’s fees and litigation expenses.

NRS 38.244             Jurisdiction.

NRS 38.246             Venue.

NRS 38.247             Appeals.

NRS 38.248             Uniformity of application and construction. (more…)

EMPLOYMENT DISCRIMINATION AND WRONGFUL TERMINATION

In Nevada, the elements for a claim of retaliatory discharge (sometimes called employment discrimination, wrongful discharge, or tortious discharge) are:

  1. Employee engaged in protected activity while employed (such as filing a discrimination charge or opposing unlawful employer practices);
  2. Employee suffered an adverse employment action by the employer;
  3. The protected activity was a motivating factor in the adverse employment action;
  4. Causation and damages; and
  5. Punitive damages.

Burlington N. v. White, 126 S. Ct. 2405 (2006); Steiner v. Showboat Operating Co., 25 F.3d 1459, 1464 (9th Cir. 1994); Allum v. Valley Bank of Nevada, 114 Nev. 1313, 970 P.2d 1062, 1066 (1998); D’Angelo v. Gardner, 107 Nev.704, 819 P.2d 206, 212 (1991); Hansen v. Harrah’s, 100 Nev. 60, 675 P.2d 394 (1984); 42 U.S.C. § 2000e-3(a).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of civil RICO violations (Racketeering Influenced and Corrupt Organizations Act) are:

  1. Defendants engaged in racketeering activities as defined in NRS 207.390 and a racketeering enterprise as is defined in NRS 207.380;
  2. Defendants acting directly, and in conspiracy with one another or through their syndicate, participated directly in racketeering activity by engaging in at least two crimes related to racketeering;
  3. Defendant’s activities have the same or similar pattern, intent, results, accomplices, victims, or methods of commission, or otherwise interrelated by distinguishing characteristics and are not isolated events;
  4. Defendant acquired or maintained directly or indirectly an interest in, or control of, any enterprise, or defendants are employed by or associated with any enterprise to conduct or participate directly or indirectly in the affairs of the enterprise through a racketeering activity;
  5. Plaintiff’s injuries flow from the defendant’s violation of a predicate Nevada RICO act;
  6. Plaintiff’s injury was be proximately caused by the defendant’s violation of the predicate act;
  7. Plaintiff did not participate in the commission of the predicate act; and
  8. Plaintiff is entitled to institute a civil action for recovery of treble damages proximately caused by the RICO violations. NRS 207.470(1).

NRS 207.470; Stoddart v. Miller, 2008 WL 6070835 (Nev. 2008 ); Siragusa v. Brown, 114 Nev. 1384, 971 P.2d 801 (1999); Gordon v. Eighth Judicial Dist. Ct., 12 Nev. 216, 231, 913 P.2d 240, 250-51 (1996); Cummings v. Charter Hosp. of Las Vegas, Inc., 111 Nev. 639, 896 P.2d 1137 (1995); Allum v. Valley Bank of Nevada, 109 Nev. 280, 849 P.2d 297 (1993); Hale v. Burkhardt, 104 Nev. 632, 634, 764 P.2d 866, 867 (1988).

 

See elements for other claims at the Nevada Law Library

Jay Young’s Peer Reviews

Mark Twain’s reportedly once said, “I like criticism, but it must be my way.”  Below are actual blind peer reviews given of Jay Young, Las Vegas, Nevada business attorney, arbitrator, and mediator to lawyer.com.  Mr. Young’s peers–attorneys and judges–have given him the highest marks available for knowledge and ethics in Arbitration, Litigation, Commercial Law, Real Estate, and Business Law.

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Jay Young, Nevada Business Attorney and Arbitrator

Jay Young is a Las Vegas, Nevada Arbitrator, Mediator, and Supreme Court Settlement Judge

For downloadable pdf of this article, click here.

Many of the complaints that I hear from litigators about arbitration could be resolved if the arbitration clause which forced the parties into litigation were written better.  Arbitrations are, of course, a creature of contract.[1]  Therefore, the parties’ arbitration agreement[2] is often the beginning and end of the arbitrator’s authority.[3]  The arbitrator is bound to give effect to the contractual rights and expectations of the parties “in accordance with the terms of the agreement.”[4]  In fact, although the Federal Arbitration Act presumes that arbitration awards will be confirmed except upon a few narrow circumstances,[5] the arbitrator who acts beyond the scope of the authority found in the parties’ arbitration clause risks having the award vacated.[6]  So, if you want the arbitrator to behave differently, write a better arbitration agreement.  (more…)

In Nevada, in order to collect attorney fees as special damages, one must plead and prove:

  1. Plead that they are entitled to collect attorney fees as special damages in the complaint pursuant to NRCP 9(g);
  2. Must plead and prove that fees are a “natural and proximate consequence of the injurious conduct”; and
  3. Must prove fees as to each claim.

Liu v. Christopher Homes, LLC, 321 P.3d 875 (2014); Sandy Valley Assoc. v. Sky Ranch Estates Owners Ass’n, 117 Nev. 948, 956, 35 P.3d 964, 969 (2001).

 

See elements for other claims at the Nevada Law Library

1794297759_6d53e7c4f5_b                The Nevada Supreme Court recently decided that the waiver of the right to arbitrate a dispute is presumptively within the jurisdiction of the courts, not arbitrators to decide unless the arbitration agreement clearly reserves this question of arbitrability to the arbitrator.  That is if the claimed waiver arises from litigation conduct.

The case involves claims against a payday lender who obtained, according to the court, “thousands of default judgments” against defendants who failed to appear in collection actions brought after default on the short term loans.  Plaintiffs sued as a class to, inter alia, have the court deem the default judgments void and uncollectable when it was learned that the lender’s process server engaged in “sewer service—the practice of accepting summonses and complaints for service, failing to serve them, then falsely swearing in court-filed affidavits that service had been made when it was not.”

The lender’s motion to compel arbitration based on agreements to arbitrate was denied when the District Court held the lender waived its right to arbitration by bringing the collections actions and obtaining the default judgments at issue.  (more…)

Generally

Nevada has no limit on the rate of interest to which parties may agree so long as the agreement reflects an arms-length transaction.[1]  Further, Nevada allows compound interest on loans.[2]

Pawnbrokers and Short Term Loans

Although Nevada does not have a general limitation on interest rates, certain transactions and business are subject to interest rate and other restrictions.  Pawnbrokers are prohibited from charging more than 13% interest per month on any loan of money secured by personal property (more…)

In Nevada, the elements for a claim usurpation of corporate opportunity are:

  1. Defendant is a fiduciary to a company;
  2. Defendant appropriates for her own use, an opportunity that should belong to the company;
  3. The competing business is operated to the detriment of the Plaintiff company;
  4. Defendant has an interest or expectancy in the competing business’s opportunity; and
  5. Causation and damages.

Simply stated, a company’s fiduciary is forbidden from appropriating a business opportunity belonging to the company for her own personal gain.  19 Am. Jur. 2d, Corporations, § 1311.  The Doctrine is recognized in Nevada.  Leavitt v. Leisure Sports, Inc., 103 Nev. 81, 87-88, 734 P.2d 1221 (1987) (“it is generally recognized that a corporate fiduciary cannot exploit an opportunity that belongs to the corporation.”).  The central questions presented to courts in most Corporate Opportunity Doctrine situations are whether the company has an expectancy interest in the opportunity and whether the opportunity, in all fairness, belongs to the Company.  Id.  Under this view, the existence of a protectable opportunity is tested by determining  whether the company has an “expectancy or interest” therein.  If the company has a legal or even equitable interest or expectancy growing out of a pre-existing right or relationship, the fiduciary may not keep the opportunity for herself.  Am. Jur. Proof of Facts 2d 291 Corporate Opportunity Doctrine – Fairness of Corporate Official’s Acquisition of Business Opportunity § 2 (2003).  Stated another way, any proposed activity developed through the company’s assets that is reasonably incident to the business is a protected opportunity.  See Anest v. Audino, 773 N.E.2d 202, 210-11 (Ill. App.  2d  2002).   In such a situation, if a fiduciary takes the opportunity for herself, the Company may elect to claim all benefits therefrom for itself, and the law will impress a trust in favor of the company on the opportunity and its profits.  McLinden v. Coco, 764 N.E.2d 606, 616 (Ind. App. 2002); I.P. Homeowners, Inc. v. Radtke, 558 N.W.2d 582, 288 (Neb. Ct. App. 1997); Bank of Amer. v. Ryan, 207 Cal. App. 2d 698, 24 Cal. Rptr. 739 (1962) (recognizing that the implied trust is imposed not only on the property and its profits, but also imposes liability for interest at the legal rate from the receipt of profits, rents, etc.).

 

See elements for other claims at the Nevada Law Library

 

The Lanham Act prohibits unfair competition. See 15 U.S.C. § 1125.

15 U.S.C. § 1125. False designations of origin, false descriptions, and dilution forbidden (a) Civil action (1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or devise, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which — (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or (B) in commercial advertising or promotion, misrepresents the nature, characteristics, quahties, or geographic origin of his or her or another person’s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

Courts have recognized that the Lanham Act represents an affirmative code of business ethics. See Gold Seal Co. v. Weeks, 129 F.Supp. 928 (D.D.C. 1995) Aff’d subnom. S.C. Johnson & Son, v. Gold Seal Co., 230 F.2d 832 (D.C. Cir. 1955), cert, denied. 352 U.S. 829 (1956). According to this business code, competitors may not destroy the basis of genuine competition by destroying the buyers’ opportunity to judge fairly between rival products. Id.

For over a century, the United States Supreme Court has recognized that the primary reason for prohibiting unfair competition is to guard against public deception. See Laurence Mfg. Cn. v. Tennessee Mfg. Co., 138 U.S. 537 (1891). “[T]he touchstone of a Section 1125(a) unfair competition claim is whether the defendant’s actions are likely to cause confusion.” Matrix Essentials, Inc. v. Rmporium Drug Mart, Inc., 988 F.2d 587, 592 (5th Cir. 1993). Like claims for trademark infringement, claims for unfair competition under the Lanham Act require the same threshold showing of a likelihood of consumer confusion as to the source of the goods. See John Paul Mitchell Syst. v. Pete-N-Larry’s, Inc., 862 F.Supp. 1020, 1023 (W.D. N.Y. 1994).

To determine if there is a likelihood of confusion, courts consider multiple factors. The Ninth Circuit Court of Appeals has recognized that eight non-dispositive factors should be considered when evaluating a likelihood of confusion: (1) the strength of the mark; (2) the proximity of the goods; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the marketing channels; (6) the type of goods and the degree of care likely to be exercised by the purchaser; (7) the defendant’s intent in selecting the mark; and (8) the likelihood of expansion of the product lines. See AMP, Tnr,. v. Sleekcraft Boats. 599 F.2d 341, 348-49 (9th Cir. 1976). Most commonly, these factors are used to determine the likelihood of confusion in trademark infringement cases. Id.

 

See elements for other claims at the Nevada Law Library

The following are actual client reviews found on Avvo, Google, Yelp, and Facebook for Jay Young


New Business Setup 5.0 stars

Posted by Kristina

Jay Young is an outstanding attorney. He is very informative and takes time out to teach his clients. I recently changed the legal structure of my business. Jay took the time to assess my business and gave me his recommendation. I was very pleased with his team. I definitely recommend using an attorney for any business set up. Jay is prompt, kind, and such a pleasure to work with.

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The elements of a Lanham Act false advertising claim are as follows:

  • the defendant made a false or misleading statement of fact in a commercial advertisement about a product;
  • the statement either deceived or had the capacity to deceive a substantial segment of potential consumers;
  • the deception is material, in that it is likely to influence the con­sumer’s purchasing decision;
  • the product is in interstate commerce; and
  • the plaintiff has been or is likely to be injured as a result of the statement.

See, e.g., Cook, Perkiss and Liehe, Inc. v. N. Cal. Collection Serv., Inc., 911 F.2d 242, 244 (9th Cir. 2000); Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24, 33 n.6 (1st Cir. 2000); Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 495 (5th Cir. 2000); Balance Dynamics Corp. v. Schmitt Indus., 204 F.3d 683, 689 (6th Cir. 2000); United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1180 (8th Cir. 1998); Johnson & Johnson-Merck Consumer Pharm. Co. v. Rhone-Poulenc Rorer Pharm., Inc., 19 F.3d 125, 129 (3d Cir. 1994); Skil Corp. v. Rockwell Int’l Corp., 375 F. Supp. 777 (N.D. Ill. 1974).

A false advertiser “shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”  15 U.S.C. § 1125(a) (emphasis added). This element states both standing injury requirements.  Courts have consistently rejected consumer standing to sue for false advertising under the Lanham Act, however. See, e.g., Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 n.5 (5th Cir. 1996) (“[W]e have found no case which suggests that ‘consumers’ have standing under § 43(a).”); Stanfield v. Osborne Indus., Inc., 52 F.3d 867, 873 (10th Cir. 1995) (“[T]hus, to have standing for a false advertising claim, the plaintiff must be a competitor of the defendant and allege competitive injury.”); Serbin v. Ziebart Int’l Corp., 11 F.3d 1163, 1177 (3d Cir. 1993) (holding that the consumers, as noncommercial plaintiffs, do not have standing under the Lanham Act); Colligan v. Activities Club of New York, Ltd., 442 F.2d 686 (2d Cir. 1971) (analyzing the legislative history and purpose behind § 43(a) and concluding that consumers lacked standing to bring action under the Lanham Act); Bacon v. Sw. Airlines Co., 997 F. Supp. 775, 780 (N.D. Tex. 1998) (holding that there is no private cause of action for consumers under the false advertising prong of the Lanham Act); see also James S. Wrona, False Advertising and Consumer Standing Under Section 43(a) of the Lanham Act: Broad Consumer Protection Legislation or a Narrow Pro-Competitive Measure?, 47 RUTGERS L. REV. 1085  (1995) (concluding that most courts agree that consumers do not have standing to sue, although various rationales are still employed).

Section 45 of the Lanham Act protects “persons engaged in … commerce against unfair competition.  15 U.S.C. § 1127.  Section 45 requires a commercial or competitive injury.  In the Ninth Circuit, a plaintiff must “allege commercial injury based upon a misrepresentation about a product, and also that the injury was ‘competitive,’ i.e., harmful to the plaintiff’s ability to compete with the defendant.”  Barrus v. Sylvania, 55 F.3d 468, 470 (9th Cir. 1995) (quoting Waits v. Frito-Lay, Inc., 978 F.2d 1093 (9th Cir. 1992)).

The Plaintiff must first prove the Defendant made a false or misleading statement of fact.  Falsity is demonstrated by proving either: (1) the statement is literally false, or (2) although literally true, the statement is likely to mis­lead, confuse, or deceive consumers.  S.C. Johnson & Son, Inc. v. Clorox Co., 241 F.3d 232, 238 (2d Cir. 2001); United Indus. Corp., 140 F.3d at 1179; Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139–40 (9th Cir. 1997).  Whether an advertisement is liter­ally false is an issue of fact.  See, e.g., Clorox Co. Puerto Rico, 228 F.3d at 34.  “A claim is conveyed by necessary implica­tion when, considering the advertisement in its entirety, the audience would recognize the claim as readily as if it had been explicitly stated.”  Id. at 35.  A suggestive representation is less likely to be found as a literally false statement.  See, e.g., Id.; United Indus. Corp., 140 F.3d at 1175.  Proving that the adver­tisement is literally false depends on the nature of the claim made in the advertisement, as well as the context in which the claim was made.  See Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 495 (5th Cir. 2000) (“When construing the allegedly false or misleading statement to determine if it is actionable under section 43(a), the statement must be viewed in the light of the overall context in which it appears.”); United Indus. Corp., 140 F.3d at 1180.  For example, a visual image may make an advertisement literally false.  In Rhone-Poulenc Rorer Pharm., Inc. v. Marion Merrell Dow, Inc. (93 F.3d 511, 516 (8th Cir. 1996)), the court found literal falsity when a drug manufacturer’s television advertisement showed images of two gasoline pumps side by side, but displaying different prices, together with a question “Which one would you choose?”  The court held the advertisement inaccurately portrayed that the manufacturer’s and competitor’s drugs are substituted for one another.

Misleading Statements

A statement which is literally true may nevertheless be actionable false advertising. “Statements that are literally true or ambigu­ous but which nevertheless have a tendency to mislead or deceive the consumer are actionable under the Lanham Act.”  United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir. 1998).  This is true where claims convey a false impres­sion, are misleading in context, or may be deceptive when viewed by consumers.  Id. at 1180.

If an advertisement is literal­ly true but misleading, the plaintiff must also prove that the adver­tisement has in fact deceived or has a tendency to deceive.  See, e.g., Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24, 33 (1st Cir. 2000).  The plaintiff must prove materiality by extrinsic evidence showing what consumers actually believe when viewing the advertising.  Id.; Gordon & Breach Science Publishers S.A. v. Am. Inst. Of Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y. 1994).

Opinion and Puffery

Opinion and puffery are not actionable. For a statement to be actionable under Section 43(a), it must be a statement of fact, as opposed to mere opinion or bald assertion. See also Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1145 (9th Cir. 1997); Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 496 (5th Cir. 2000) (collecting cases); Groden v. Random House, 61F.3d 1045, 1051 (2d Cir. 1995) (stating that when a statement is “obviously a statement of opinion,” it cannot “reasonably be seen as stating or implying provable facts”).  A state­ment of fact is one that “(1) admits of being adjudged true or false in a way that (2) admits of empirical verification.”  Presidio Enter., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674, 679 (5th Cir. 1986);  “Puffery,” comes in two forms: (1) an exaggerated, blustering, and boasting statement upon which no reasonable buyer would be justified in relying; or (2) a general claim of superiority over com­parable products that is so vague that it can be understood as noth­ing more than a mere expression of opinion.  Pizza Hut, 227 F.3d at 496-97.

Commercial Advertising or Promotion

The false or misleading statement of fact must appear in a “com­mercial advertising or promotion.”  See 17 U.S.C. § 1125(a); Seven-Up Co. v. Coca-Cola Co., 86 F.3d 1379, 1383 (5th Cir. 1996).  “Commercial advertising or promotion” is defined as:

  • commercial speech;
  • by a defendant who is in commercial competition with the plaintiff;
  • for the purpose of influencing consumers to buy the defendant’s goods or services; and
  • that is disseminated sufficiently to the relevant purchasing pub­lic to constitute “advertising” or “promotion” within that industry, even if not made in a “classical advertising campaign.” Coastal Abstract Serv., Inc. v. First Am. Tit. Ins. Co., 173 F.3d 725, 734 (9th 1999); Gordon & Breach Science Publishers S.A. v. American Inst. of Physics, 859 F. Supp. 1521, 1532 (S.D.N.Y. 1994); see also Sports Unlimited, Inc. v. Lankford Enter., Inc., 275 F.3d 996, 1004-05 (10th Cir. 2002) (using these four factors to determine whether challenged conduct constitutes “commercial advertising or promotion”); Seven-Up Co., 86 F.3d at 1384. The definition excludes non-commercial speech; non-commercial speech is entitled to a greater protection under the First Amendment than commercial speech.  Gordon & Breach, 859 F. Supp. at 1536.

Materiality

A plaintiff must demonstrate that the false or misleading advertising or promotion at issue is “material.”  JTH Tax, Inc. v. H&R Block East Tax Serv., Inc., 28 Fed. App. 207 (4th Cir. 2002).  Materiality centers on whether the false or misleading advertisement deceives or is likely to deceive.  Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 502 (5th Cir. 2000); Sandoz Pharm. Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 228-29 (3d Cir. 1990).  Such materiality generally is established when the advertisement deceives, or has the capacity to deceive, a substantial segment of potential con­sumers about a relevant quality or characteristic of the prod­uct or service.

Literally False Statements

Where the statement at issue is literally false, materiality is presumed. “With respect to materi­ality, when the statements of fact at issue are shown to be lit­erally false, the plaintiff need not introduce evidence on the issue of the impact the statements had on consumers.”  Pizza Hut, 227 F.3d at 497; see also S.C. Johnson & Son, 241F.3d at 232; Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24 (1st Cir. 2000).  Section 43(a) does not require an additional showing of deception.

Misleading Statements

With a literally true but misleading statement, materiality is decided based on public’s actual reaction to the advertisement.  See Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1140 (9th Cir. 1997);  Pizza Hut, 227 F.3d at 497; Johnson & Johnson-Merck Consumer Pharm. Inc. Co. v. Rhone-Poulenc Rorer Pharm., 19 F.3d 125 (3d Cir. 1994).  “The plaintiff may not rely on the judge or the jury to determine, based solely upon his or her own intuitive reaction, whether the advertisement is deceptive.”  Pizza Hut, 227 F.3d at 497 (quotation omitted); see also Clorox Co. Puerto Rico, 228 F.3d at 37; Johnson & Johnson v. Smithkline Beecham Corp., 960 F.2d 294, 297 (2d Cir. 1992).  Plaintiff must demonstrate that the advertising deceived a substantial portion of the public.  See United Indus. Corp. v. Clorox Co., 140 F.3d 1175, 1182 (8th Cir. 1998).  “[W]here the advertisement is liter­ally true, [public perception] is often the only measure by which a court can determine whether a commercial’s net communicative effect is misleading.”  Pizza Hut, 227 F.3d at 503 n.13.  Generally, surveys are the preferred vehicle; however, evidence of consumers’ letters, calls, and affidavits, can also show consumer deception.  See Clorox Co. Puerto Rico, 228 F.3d at 36; Pizza Hut, 227 F.3d at 497; Pizza Hut, 227 F.3d at 497.

Willful or Bad Faith Conduct

The 9th Circuit held that if the defendant violated the Lanham Act will­fully or in bad faith, a plaintiff is not required to provide a con­sumer survey or any other extrinsic evidence in order to prove materiality.  U-Haul Intl., Inc. v. Jartan, Inc., 793 F.2d 1034 (9th Cir. 1986).

In some circuits, if the defendant “intentionally set out to deceive the public,” using “deliberate conduct” of an “egregious nature” in light of the advertising culture of the marketplace in which the defendant competes, a presumption arises that consumers were, in fact, deceived, dispensing with the need for the plaintiff to commis­sion a consumer survey.

Clorox Co. Puerto Rico v. Procter & Gamble Commercial Co., 228 F.3d 24 36 n.9 (1st Cir. 1998); see also United Indus. Corp., 140 F.3d at 1183; Johnson & Johnson-Merck Consumer Pharm. Co. v. Rhone-Poulenc Rorer Pharm., Inc., 19 F.3d 125 (3d Cir. 1994); Resource Dev., Inc. v. Statue of Liberty-Ellis Island Found., Inc., 926 F.2d 134 (2d Cir. 1991).

Remedies

The Lanham Act provides for both injunctive and monetary relief.  See 15 U.S.C. §§ 1116 – 1117.  For literally false claims where a plaintiff is only seeking injunctive relief, no additional evidence is necessary, and for misleading claims, a tendency to deceive consumers must be established.  See, e.g., Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 497 (5th Cir. 2000); American Council, 185 F.3d at 618 (“Although plaintiff need not present consumer surveys or testimony demonstrating actual deception, it must present evidence of some sort demonstrating that consumers were misled.”).  If a plaintiff seeks damages, however, it must prove actual confusion or deception arising from the violation. See generally George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532, 1537 (2d Cir. 1992).  Injunctive relief only requires a showing that the defendant’s rep­resentations have a tendency to deceive consumers (which is presumed where the statement is literally false).  See, e.g., Pizza Hut, 227 F.3d at 497; American Council, 185 F.3d at 618.

Monetary Damages

Once a violation of section 43(a) has been established, the plaintiff is entitled

subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. . . . In assessing profits the plaintiff shall be required to prove defendant’s sales only; defendant must prove all elements of cost or deduction claimed. In assessing damages the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not penalty. The court in exceptional cases may award reason­able attorney fees to the prevailing party.

15 U.S.C. § 1117(a).  The courts enjoy broad discretion when determining damages.  Burger King Corp. v. Mason, 855 F.2d 779 (11th Cir. 1988).

Several forms of monetary relief are possible, including the amount of profits lost as a result of the defendant’s false advertising (marketplace damages), the defendant’s profits gained as a result of its false advertising (unjust enrichment), amounts necessary for corrective advertising, and attorney fees.  Ninth Circuit law holds that punitive damages are not available for vio­lation of section 43(a).  Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d 197 (9th Cir. 1989).  Further, the Ninth Circuit has held that the “[p]ublication of deliberately false comparative claims gives rise to a presumption of actual deception and reliance,” reasoning that:

The expenditure by a competitor of substantial funds in an effort to deceive consumers and influence their purchasing decisions justi­fies the existence of a presumption that consumers are, in fact, being deceived. He who has attempted to deceive should not com­plain when required to bear the burden of rebutting a presumption that he succeeded.

U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034, 1040-41 (9th Cir. 1986); see also Resource Dev., Inc. v. Statue of Liberty-Ellis Island Found., Inc., 926 F.2d 134 (2d Cir. 1991) (“[U]pon a proper showing of such deliberate conduct, the burden shifts to the defendant to demonstrate the absence of consumer confusion.”); Porous Media Corp. v. Pall Corp., 110 F.3d 1329, 1334-35 (8th Cir. 1992) (applying rule only in context of comparative advertising where plaintiff’s product was specifically targeted).

Defendant’s Profits

The Ninth Circuit suggests that willful con­duct is required in order to recover defendant’s profits.  See Minn. Breeders, Inc. v. Schell & Kampeter, Inc., 41 F.3d 1242, 1247 (8th Cir. 1994); Gracie v. Gracie, 217 F.3d 1060, 1068 (9th Cir. 2000).

 

See elements for other claims at the Nevada Law Library