Smith v. Crown Financial Services of America, 22964
| Citation | 890 P.2d 769,111 Nev. 277 |
| Decision Date | 02 March 1995 |
| Docket Number | No. 22964,22964 |
| Parties | Dean SMITH and Rachael J. Smith dba Jane Enterprises, Appellants/Cross-respondents, v. CROWN FINANCIAL SERVICES OF AMERICA, a Nevada Corporation, Crown Financial Services of America, a California Corporation, as a Corporate Entity and in its Capacity as General Partner of Injection Mold Partners, Ltd., a California Limited Partnership; Michael W. Dooling, Individually, Respondents/Cross-appellants. |
| Court | Supreme Court of Nevada |
In October 1988, Dean Smith and Rachael Smith, doing business as Jane Enterprises ("appellants"), filed a complaint alleging damages in excess of $110,000 for breach of contract and misrepresentation, and for an accounting of sales of a toy product known as the "Zing Ring" or "Groove Tube." Appellants had executed a "Letter of Intent" with Michael Dooling, the president of Crown Financial Services of America, which in turn was the general partner of the toy manufacturer, Injection Mold Partners, Inc. (collectively referred to as "respondents"). The letter of intent provided that appellants would have the exclusive right to market the toy and would receive a commission of one dollar for every toy sold. The parties subsequently executed an "Addendum to Letter of Intent" under which appellants were entitled to a commission of twenty-five cents for every Zing Ring sold.
Without informing appellants, Crown Financial subsequently granted exclusive national marketing and licensing rights to a third party, who enlisted the interest of a major toy manufacturer. Crown Financial then attempted to unilaterally terminate the letter of intent, precipitating appellants' lawsuit. Prior to trial, appellants declined to accept respondents' unapportioned joint offer of judgment. 1
After a bench trial, the district court found that the letter of intent was a non-binding "agreement to agree." Accordingly, the district court entered judgment for respondents. Respondents then moved for an award of $59,078.50 in attorney fees pursuant to NRCP 68 and NRS 17.115, and for costs. The district court held that respondents could not recover attorney fees under NRCP 68 or NRS 17.115 because the unapportioned joint offer of judgment was invalid. However, the district court found that respondents were entitled to $20,000 for attorney fees and costs pursuant to NRS 18.010. Both parties appeal this award. 2 Respondents also challenge an order of the district court which required respondents to pay half of the cost of preparing a trial transcript for the record on appeal.
NRS 18.010(2) states:
In addition to the cases where an allowance is authorized by specific statute, the court may make an allowance of attorney's fees to a prevailing party:
(a) When he has not recovered more than $20,000; or
(b) Without regard to the recovery sought, when the court finds that the claim, counterclaim, cross-claim or third-party complaint or defense of the opposing party was brought without reasonable ground or to harass the prevailing party.
Respondents concede that appellants' suit was neither groundless nor brought for the purpose of harassment. Furthermore, the record on appeal, which includes the trial transcript, would not support such a conclusion. Therefore, the district court must have awarded attorney fees pursuant to NRS 18.010(2)(a).
Respondents claim that, as prevailing parties which recovered less than $20,000 (respondents neither sought nor recovered damages), they are entitled to an award of fees under NRS 18.010(2)(a). Based on the legislative history of the 1985 amendments to NRS 18.010, respondents argue that NRS 18.010(2)(a) permits prevailing defendants to recover attorney fees even though the defendants did not receive a money judgment.
Since the 1985 amendments to NRS 18.010, this court has held that a party may recover attorney fees pursuant to NRS 18.010(2)(a) only if that party received a money judgment at trial. Woods v. Label Investment Corp., 107 Nev. 419, 427, 812 P.2d 1293, 1299 (1991) (); Key Bank v. Donnels, 106 Nev. 49, 53, 787 P.2d 382, 385 (1990) (). Having reviewed the legislative history of the 1985 amendments, and the prior history of the statute, we conclude that we should not now deviate from the rule established by Woods and Key Bank.
NRS 18.010 represents a deviation from the general rule in this country regarding attorney fees:
It has been a consistent rule throughout the United States that a litigant has no inherent right to have his attorneys' fees paid by his opponent or opponents. Such an item is not recoverable in the ordinary case as damages, nor as costs, and hence is held not allowable in the absence of some provision for its allowance either in a statute or rule of court, or some contractual provision or stipulation. This sweeping general rule has been applied in legions of cases to preclude recovery of attorneys' fees, whether by the plaintiff or by the defendant, from one's opponent in a civil action.
1 Stuart M. Speiser, Attorneys' Fees § 12:3 at 463-64 (1973). The American Rule has been explained as "a deliberate departure from the English practice, stemming initially from the [American] colonies' distrust of lawyers and continued because of a belief that the English system favored the wealthy and unduly penalized the losing party." Id. at 467. The American Rule also spares litigants and the courts the additional burden involved in litigating the amount of fees which a prevailing party reasonably incurred. Id.
Nevada departed from the American Rule in 1951 when it amended the Civil Practice Act to permit the district court to award attorney fees to the "prevailing party" where "(1) the plaintiff does not seek recovery in excess of one thousand dollars ($1,000), or (2) in which the defendant does not seek a recovery in excess of one thousand dollars ($1,000)...." 1951 Nev.Stat., ch. 54, § 1 at 59. In 1957, the legislature amended NRS 18.010(2) to state:
The court may make an allowance of attorney's fees to:
(a) The plaintiff as prevailing party when the plaintiff has not sought recovery in excess of $3,000; or
(b) The defendant as prevailing party when the defendant has not sought recovery in excess of $3,000; or
(c) The defendant as prevailing party when the plaintiff has not sought recovery in excess of $3,000.
1957 Nev.Stats. ch. 91, § 1 at 129. In 1967, the Assembly Committee on the Judiciary heard testimony that 70% to 90% of contemporary jury verdicts were for a sum less than $9,000. Hearings on A.B. 223 Before the Assembly Committee on the Judiciary, 54th Leg.Sess. (1967) (statement of Bob Moore, Reno Attorney). Plaintiffs who sought relatively small recoveries were not being made whole because they were required to pay attorney fees out of their judgments. Id. Likewise, defendants who were vindicated at trial enjoyed a Pyrrhic victory when their attorney fees were substantial relative to the small amount in controversy. Id. The Nevada legislature responded by amending NRS 18.010(2), raising the amount in controversy from $3,000 to $10,000. 1967 Nev.Stats. ch. 466, § 1, at 1254. The legislature also changed the measure of a defendant's recovery under NRS 18.010(2)(b) from the amount the defendant "sought" to the amount the defendant "recovered." Id.
The subsequent amendments to NRS 18.010(2) indicate the legislature's continuing concern for making litigants in small civil suits whole. In 1977, the legislature amended NRS 18.010 to state:
The court may make an award of attorney's fees to:
(a) The plaintiff as prevailing party when he has not recovered more than $10,000; or
(b) The counterclaimant as prevailing party when he has not recovered more than $10,000; or
(c) The defendant as prevailing party when the plaintiff has not sought recovery in excess of $10,000.
1977 Nev.Stats. ch. 401, § 4 at 774. With these amendments, the legislature shifted the inquiry under NRS 18.010(2)(a) from the amount "sought" by the plaintiff to the amount actually "recovered." This change equalized the measure of recovery applied to plaintiffs and counterclaimants. Evidently, the legislature considered the amount actually recovered to be a better measure of the size of a civil suit than the amount sought; these amendments prevented parties from invoking or avoiding the operation of the statute simply by pleading damages either less than or in excess of $10,000.
While amending NRS 18.010(2)(a) and (b) as to plaintiffs and counterclaimants, the 1977 legislature declined to amend NRS 18.010(2)(c) relating to defendants. When a defendant prevails at trial, the amount in controversy cannot be measured by the plaintiff's recovery because the plaintiff recovers nothing. Absent a counterclaim, the successful defendant also recovers nothing. Under such circumstances, the only measure of the amount in controversy available to the court is the amount sought by the plaintiff. Accordingly, the 1977 legislature preserved this measure for determining which actions are sufficiently small to justify the special protection afforded to prevailing defendants.
Prior to 1985, this court's decisions implicitly recognized the importance of preserving a measure so as to limit the application of NRS 18.010(2)(a)'s predecessors to small civil actions. In City of Las Vegas v. Cragin Industries, 86 Nev. 933, 478 P.2d 585 (1970), the plaintiff brought suit against the city and a power company, seeking a permanent injunction against placement of electrical wires above ground and a declaration that an agreement between...
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