Entrepreneur

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, 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 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

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

  1. The existence of an agency relationship;
  2. The agent was negligent in fulfilling the agent’s duties; and
  3. Causation and damages.

Scialabba v. Brandise Constr. Co., 112 Nev. 965, 968; 921 P.2d 928, 930 (1996); Hunter Mining Laboratories, Inc. v. Mgt. Assistance, Inc., 104 Nev. 568, 570-71; 763 P.2d 350, 352 (1988).

 

See elements for other claims at the Nevada Law Library

In Nevada, the elements for a claim of negligent hiring, retention, and supervision are:

  1. Employer had a duty to protect plaintiff from harm resulting from its employment of the tortfeasor;
  2. Employer breached that duty by hiring, retaining, failing to train, supervise, or discipline the tortfeasor;
  3. Proximate cause; and
  4. Causation and damages.

Nurse v. U.S., 226 F.3d 99 (9th Cir. 2000); Blanck v. Hager, 360 F. Supp. 2d 137, 157 (2005); Goodrich and Pennington Mortgage Fund, Inc. v. RJ Woolard, Inc., 120 Nev. 777 (2004);  Rockwell v. Sun Harbor Budget Suites, 112 Nev. 1217, 1226-27, 925 P.2d 175, 1181 (1996); Harrigan v. City of Reno, 86 Nev. 678, 475 P.2d 94 (Nev. 1970); Amen v. Mercede Cty. Title Co., 58 Cal. 2d 528 (1962); Rianda v. Sand Benito Title Guar. Co., 35 Cal. 2d 170 (1950).

 

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

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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

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.

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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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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…)

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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…)

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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.

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

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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, 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

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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…)

 

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Many homeowners or car owners are shocked, after an accident, to find that their insurance does not pay for all of their losses (or those of someone they injured), or in some cases, even most of their losses.

How Much is Enough?

Whether you have the right amount and type of coverage may well depend on the amount of assets you have to protect. If you make $30,000 a year and rent an apartment, $100,000/ $300,000 coverage may suffice. If, on the other hand, you earn a six figure annual salary, have a business, or significant assets, carrying that little amount of coverage would be foolish. (more…)

Officers and directors have a fiduciary duty to protect the interests of the corporation and act in the best interests of its shareholders.  Guth v. Loft. fuc., 5 A.2d 503, 510 (Del. 1939).  Where a director is charged with breach of his or her fiduciary obligations, the ‘business judgment’ rule is utilized.  Horowitz v. Southwest Forest Indus., 604 F. Supp. 1130, 1134 (D. Nev. 1985)  The business judgment rule applies to protect managers of limited liability companies just as it does to protect directors of corporations.  Froelich v. Erickson, 96 F. Supp. 2d 507, 520 (D. Md. 2000).

Simply stated, the business judgment rule “bars judicial inquiry into the actions of corporate directors taken in good faith and in the exercise of honest judgment in lawful furtherance of corporate purposes.”  Id.  However misguided the business decision may be, the rule protects directors from judicial review of the wisdom of that decision.  See Citron v. Fairchild Camera & Instrument Corp., 569 A.2d 53, 64 (Del. 1989) (protecting Board decision for an arguably lower offer for the company). (more…)

In Nevada, the elements for a claim of business disparagement are:

  1. A false and disparaging statement that interferes with the plaintiff’s business or are aimed at the business’s goods or services;
  2. The statement is not privileged;
  3. The statement is made with malice; and
  4. Proof of special damages.

Clark County School District v. Virtual Educ. Software, Inc., 125 Nev. 374, 213 P.3d 496 (Nev. 2009).

 

See elements for other claims, including extensive research on defamation at the Nevada Law Library

 

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So, you did a will, trust, or even a full estate plan. Great! Is it fully funded? Do you understand what that means? Have your financial circumstances changed such that your assets are different today than they were five years ago when you did your will? If you have not also changed your will (or trust) to adjust for these changes, your family could pay the price.

The Three to Five Year Rule

We recommend that you have your estate plan (will, trust, living will, power of attorney, etc.) reviewed every three to five years. Unless you are more diligent than most of us, you are probably leaving things out of your estate plan if you do not have your plan reviewed regularly. (more…)

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When people are attacked, the natural reaction is to attack back. While competent trial attorneys are well equipped to attack the other side for you, a wise attorney will also step back from his role as an adversary and counsel you regarding your settlement options. In doing so, he is not necessarily telling you he doesn’t believe your side of the story. Rather, he is trying to get you, the astute businessperson, to make a smart business decision which considers only your bottom line, and not the emotion of the lawsuit or who is right and wrong. (more…)

In Nevada, the elements for a claim of breach of an implied warranty of fitness for a particular purpose are:

  1. Plaintiff contracted with defendant to provide him with goods;
  2. Defendant is a merchant with respect to goods of the kind sold to plaintiff;
  3. Plaintiff relied on defendant in selecting or using said goods which defendant represented could be used for a particular purpose;
  4. Defendant knew, or had reason to know, of plaintiff’s purpose in purchasing the goods and that plaintiff was relying on defendant’s skill or judgment to select or furnish goods meeting the stated or particular purpose;
  5. Plaintiff made timely notice to defendant that the goods are not fit for the purpose for which they were purchased; and
  6. Causation and damages.

NRS 104.2315; NRS104.2316; NRS 104.2315; Scaffidi v. United Nissan, 425 F. Supp. 2d 1172 (D. Nev. 2005); Olson v. Richard, 120 Nev. 240, 247, 89 P.3d 31, 35 (2004); Bradshaw v. Blystone Equip. Co. of Nev., 79 Nev. 441, 396 P.2d 396 (1963).

 

See elements for other claims at the Nevada Law Library

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There are state and local licensing requirements to do business in Nevada.

Effective October 1, 2009, the Nevada Legislature transferred the authority for issuance and collection of fees for a Nevada Business License from the Department of Taxation to the Secretary of State.  This step prevented the renewal of company charters by the filing of the “annual list” (whether an LLC, corporation, partnership, etc.) without paying the state business license.

All entities, except nonprofit corporations, movie companies, companies run from home (with certain income limitations), and certain religious organizations, are required to file a State Business License application or renewal at the time their annual list is due (whether they are a Nevada entity or qualifying as a foreign entity).

The business license fee is $200 annually, which may be prorated if your current business license expiration date falls after your annual list due date.  See the Nevada Secretary of State’s website at:  Nevada Secretary of State for more information.

Additionally, there are local business licensing requirements that vary widely depending on your jurisdiction (Clark County, City of Las Vegas, City of Henderson, City of North Las Vegas, etc.).  Before contacting the local jurisdiction, you will need to have organized or qualified your entity with the Secretary of State and have obtained a state business license.

 

By: Guest Blogger Mary Drury, Esq.

In Nevada, the elements for a claim of aiding and abetting another’s breach of a fiduciary duty are:

  1. A fiduciary relationship exists;
  2. The fiduciary breached the fiduciary relationship;
  3. The third party knowingly participated in the breach; and
  4. Causation and damages.

In re: Amerco Derivative Litigation, 252 P.3d 681 (Nev. 2011); J.P. Morgan Chase Bank, N.A. v. KB Home, 632 F. Supp. 2d 1013 (D. Nev. 2009); Klein v. Freedom Strategic Partners, LLC, 595 F. Supp. 2d 1152 (D. Nev. 2009).

 

See elements for other claims at the Nevada Law Library

TEMPORARY RESTRAINING ORDER, PRELIMINARY INJUNCTION, AND PERMANENT INJUNCTION

In Nevada, in order to obtain a temporary restraining order, preliminary injunction, or permanent injunction, generally, the following are considered by the courts:

  1. A party must demonstrate that it has a reasonable probability of success on the merits of its underlying claims;
  2. Without injunctive relief, plaintiff will suffer irreparable harm for which compensatory damages are inadequate;
  3. The court may weigh the public’s interest in seeing the harm stopped, as well as the relative hardships of the parties should the court take or refuse to take action; and
  4. The purpose of the restraining order/injunction is to preserve the status quo, or to “preserve a business or property interest.” Buion v. Terra Mktg. of Nev., Inc., 90 Nev. 237, 240, 523 P.2d 847, 848 (1974).
  5. Imposition of a bond is required by NRCP 65(c).

(more…)

In Nevada, the elements for a tort claim of breach of the covenant of good faith and fair dealing are:

  1. Existence of a valid contract;
  2. Every contract in Nevada contains an implied covenant to act in good faith in performance and enforcement of the contract;
  3. Justifiable expectation by the plaintiff to receive certain benefits consistent with the spirit of the agreement;
  4. Defendant performed in a manner that was in violation of or unfaithful to the spirit of the contract (the terms of the contract are complied with in a literal sense, but the spirit of the contract is breached);
  5. The existence of a special relationship of trust between the plaintiff and defendant;
  6. Unfaithful actions by the defendant were deliberate;
  7. Causation and damages; and
  8. Punitive Damages.

(more…)

In Nevada, the elements for a contract claim of breach of the covenant of good faith and fair dealing are:

  1. Existence of a valid contract;
  2. Every contract in Nevada contains an implied covenant to act in good faith in performance and enforcement of the contract;
  3. Justifiable expectation by the plaintiff to receive certain benefits consistent with the spirit of the agreement;
  4. Defendant performed in a manner that was in violation of or unfaithful to the spirit of the contract (the terms of the contract are complied with in a literal sense, but the spirit of the contract is breached);
  5. Unfaithful actions by the defendant were deliberate; and
  6. Causation and damages.

(more…)

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Buy-sell agreements can alleviate disputes that can arise between or among owners and can provide for payments to buy out an owner’s interest in the business at an owner’s death or disability without disrupting the ongoing business.   It can avoid family fights, fights between surviving owners and the deceased owner’s spouse, while maintaining the integrity of the company’s goodwill and liquidity. They are an essential part of proper corporate governance for any closely held business. If an owner is unable to continue in the business, the agreement triggers the sale of that owner’s portion of the company at a price designated in the agreement. (more…)

In Nevada, the elements for a claim of breach of an express warranty are:

  1. Existence of an express warranty (an affirmative act or promise made by the seller to the buyer which relates to the goods and becomes part of the basis of the bargain that the goods shall conform to the affirmation or promise);
  2. Affirmation of fact or promise by the seller to the buyer which relates to the goods described and becomes part of the bargain;
  3. The goods must conform to the description by the seller; no actual reliance by the buyer is required; and
  4. Causation and damages.

NRS 104.2313; Porcell v. Lincoln Word Prod., Inc., 713 F. Supp. 2d 1305 (D. N.M. 2010); Allied Fidelity Ins. Co. v. Pico, 99 Nev. 15 (1983).

 

See elements for other claims at the Nevada Law Library

I tried for 15 years to get my friend to do some basic Estate Planning.  I urged him, at a bare minimum, to create a will.  Better, do a full estate planning package: will, living trust, etc.  He assured me he didn’t need my help, and that he had everything “under control” without spending money on an attorney to do a Will and a Trust.  My friend died and I had to help his widow through the financial mess he left behind.  So far, his mistake has cost his widow over $100,000—and it was completely avoidable.

My friend was an extremely intelligent man and very capable in many ways.  But he did not have things “under control”.  Now, his widow will have to spend thousands of dollars in attorney fees, put his estate through probate, and lose almost 1/3 of the assets they worked so hard to accumulate.  His widow is learning through my friend’s mistakes that if you do not have an estate plan, the State will determine who gets your assets, not you.

This article gives an overview of the ways one may transfer assets upon his or her death, discussing the risks and rewards of each method in Nevada.  We will also discuss the estate planning tools that are available to you to avoid the risks associated with each transfer method. (more…)

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Why are you building a business?

In addition to providing yourself employment together with the flexibility, control and responsibility of business ownership, most people build businesses to sell them at a gain in order to retire or to build another business.

 How should you document the sale of your business?

There are primary two ways to sell your business. You can sell the assets or you can sell the equity (typically stock, LLC membership interests, or partnership interests).   These are documented quite differently and can have completely different tax benefits to the parties.  Additionally, a question that needs resolved is whether continuing liabilities of the business remain with the seller or become the obligation of buyer (typically documented by an indemnity from seller). (more…)

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Trademark Defined

A trademark is a word, name, symbol, or device that is used to distinguish one’s goods from others’ goods.  A service mark is a mark that is used in the marketing of services rather than goods. The processes for protecting trademarks and service marks are the same, so for simplicity, we will use the term “mark”.

Marks can be protected in three ways: common law use, federal registration, and state registration.  You do not have to register a mark under the common law; rights in a mark can be established by proof of legitimate use of the mark. However, only limited protection is provided under the common law. (more…)

The following abstract explains Nevada law on contract damages, and explains how our courts view, determine, and award damages.

EXPECTATION/COMPENSATORY DAMAGES

Expectation/Compensation Damages as the General Goal of Contract Damages.

The general goal of contract damages is to provide compensation for the injured party based on the injured party’s expectation interest.  3 D. Dobbs, Law of Remedies § 12.2(1), at 22 (2d ed. 1993); Restatement (Second) of Contracts § 347cmt. a (2008).  Although there are other remedies available for an injured party in a breach of contract situation, the general and traditional goals of awarding damages in a breach of contract case are aligned with the expectation/compensation remedy. Dobbs, § 12.2(1), at 22. (more…)

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Identity Theft is a Crisis of The Modern Era

We are seeing more and more cases of identity theft all the time.  The recent breaches at Home Depot, Target, Anthem, and Sony illustrate the breadth of the problem.. This issue is certainly a topic of national concern. While there are legal means to redress this problem, the best protection is to avoid identity theft altogether.  The following are some suggestions for preventing, or at least limiting the extent of, identity theft. (more…)

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What is a Letter of Intent?

Letters of Intent (“LOI”) can be very useful in setting forth the basic deal points of a transaction, but if they are construed as binding, the parties may get more (or less) than they bargained for.   Surprisingly, it may not be enough to say only once in a LOI that it is not a binding agreement.

In the famous case of Pennzoil v. Texaco, 729 S.W. 2d 768 (1987), the Texas court held that the LOI in that case contained enough terms that the billion plus dollar deal was enforced despite the fact that the LOI specifically said it was non-binding.  The parties were bound to their short form term sheet instead of a deal that contained bargained for and terms with all of the I’s dotted and T’s crossed. (more…)

The following abstract explains contract construction rules and how they are interpreted by Nevada courts.

AMBIGUOUS CONTRACT

  • If contract is ambiguous, then it will be construed against drafter. Dickinson v. State, Dept. of Wildlife, 110 Nev. 934, 877 P.2d 1059 (1994);
  • Any ambiguity in insurance contract must be interpreted against drafting party and in favor of insured. Farmers Ins. Grp. v. Stonik, 110 Nev. 64, 867 P.2d 389 (1994);
  • Where two interpretations of contract are possible, court will prefer interpretation which gives meaning to both provisions rather than interpretation which renders one of the provisions meaningless. Quirrion v. Sherman, 109 Nev. 62, 846 P.2d 1051 (1993);
  • Court may look to circumstances surrounding execution of contract and subsequent acts or declarations of parties to interpret unclear contract provisions. Trans Western Leasing Corp. v. Corrao Constr. Co., Inc., 98 Nev. 445, 652 P.2d 1181 (1982);
  • In construing ambiguous contract, court should place itself as nearly as possible in situation of parties. Barringer v. Gunderson, 81 Nev. 288, 402 P.2d 470 (1965);
  • The rule that the construction given to a contract by parties should carry great weight applies only to ambiguous contracts and not to contracts which are clear, certain and definite in their terms. Woods v. Bromley, 69 Nev. 96, 241 P.2d 1103 (1952);
  • Where language used in contract is equivocal or ambiguous, subsequent acts or declarations of parties showing practical construction put upon words may be resorted to for purpose of ascertaining their intention. Woods v. Bromley, 69 Nev. 96, 241 P.2d 1103 (1952).

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BREACH OF CONTRACT

In Nevada, the elements for a claim of breach of contract are:

  1. Valid contract (offer, acceptance, consideration) exists between plaintiff and defendant;
  2. Defendant breached the contract or failed to render performance when it became due;
  3. Defendant’s breach or failure of performance was unexcused;
  4. All conditions precedent to defendant’s duty to perform were fulfilled by plaintiff or were excused;
  5. Plaintiff was damaged by the breach;
  6. Causation and damages were a forseeable consequence of a particular breach (causation is an essential element of liability).

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