Mendenhall v. Tassinari

• Decision Date: 05 October 2017
• Docket Number: No. 68053.,68053.
• Citation: 403 P.3d 364
• Parties: Robert L. MENDENHALL, an individual; and Sunridge Corporation, a Nevada corporation, Appellants, v. Ronald TASSINARI, an individual; and American Vantage Brownstone, LLC, a Nevada limited liability company, Respondents.
• Court: Nevada Supreme Court

403 P.3d 364

Robert L. MENDENHALL, an individual; and Sunridge Corporation, a Nevada corporation, Appellants,

v.Ronald TASSINARI, an individual; and American Vantage Brownstone, LLC, a Nevada limited liability company, Respondents.

No. 68053.

Supreme Court of Nevada.

FILED OCTOBER 05, 2017

Marquis Aurbach Coffing and Micah S. Echols, Avece M. Higbee, and Adele V. Karoum, Las Vegas; Howard & Howard Attorneys PLLC and Gwen Rutar Mullins and Wade B. Gochnour, Las Vegas, for Appellants.

Santoro Whitmire and Nicholas J. Santoro and Oliver J. Pancheri, Las Vegas; Harry Paul Marquis, Chtd., and Harry Paul Marquis, Las Vegas; Legal Offices of James J. Lee and James J. Lee, Las Vegas, for Respondents.

BEFORE DOUGLAS, GIBBONS and PICKERING, JJ.

OPINION

By the Court, DOUGLAS, J.:

This case addresses the tension in the law that arises where a party that served an NRCP 68 offer of judgment discovers facts, during the ten-day irrevocable period for acceptance of NRCP 68 offers, that would otherwise impact the offering party's decision to serve an NRCP 68 offer in the first instance. Specifically, we must determine whether claims that are brought by the offering party in a second action, and arise out of these facts that were discovered after serving the NRCP 68 offer, are barred by general principles of claim preclusion or by the very terms of the NRCP 68 offer.

We hold that both the general principles of claim preclusion and the terms in an NRCP 68 offer are implicated where a party seeks to relitigate claims after entry of a final judgment pursuant to the NRCP 68 offer, even when they arise out of facts discovered during the NRCP 68 offer's ten-day irrevocable period for acceptance. We further hold that these subsequent claims are barred where principles of claim preclusion apply or, in the alternative, where the terms of the offer of judgment indicate that such claims are barred. Because appellants' claims are barred by both the doctrine of claim preclusion and by the terms of the offer of judgment, we affirm the district court's decision.

FACTUAL AND PROCEDURAL HISTORY

This appeal involves two distinct cases. The first case was dismissed after payment of an accepted offer of judgment (district court case no. A653822, the First Action), and the second case was dismissed under the doctrine of claim preclusion because it raised claims that were or could have been raised in the First Action (district court case no. A708281, the Second Action).

In the First Action, Brownstone Gold Town, LLC, and Brownstone Gold Town CV, LLC (collectively, the Brownstone Entities), sued appellants Robert Mendenhall and Sunridge Corporation for allegedly breaching an agreement entered into by the parties (the Term Sheet).¹ Pursuant to the Term Sheet, appellants agreed to contribute real property for the development of a 300–room hotel with casino and convention space. In exchange for the contribution of the property, appellants agreed to receive a 27 percent membership interest. The Term Sheet further provided that the Brownstone Entities would contribute $1,500,000 for a 2.7 percent membership interest, while other unnamed, nonparty investors (the Other Investors) would contribute $7,000,000 for a 12.6 percent membership interest. Additionally, the Term Sheet included signature blocks for the following four parties: (1) respondent American Vantage Brownstone, LLC (AVB), (2) the Brownstone Entities, (3) appellants, and (4) the Other Investors.

Relying on the Term Sheet, the Brownstone Entities invested considerable time and expense in acquiring plans, surveys, approvals, and land use entitlements. However, in spite of their assurances that they would contribute the property, appellants failed to fulfill this obligation. Alleging that appellants had breached the Term Sheet, the Brownstone Entities brought suit.

Before trial commenced in the First Action, appellants presented the Brownstone Entities with an offer of judgment (the Offer) in the amount of $1,200,000. The Offer was "in settlement of all claims between and among ROBERT L. MENDENHALL, SUNRIDGE CORPORATION, BROWNSTONE GOLD TOWN, LLC and BROWNSTONE GOLD TOWN CV, LLC or those asserted or that could have been asserted on behalf of each of them against one another ." (Emphasis added.) The Offer further stated:

Acceptance of this Offer of Judgment would fully discharge and release any and all claims as alleged, or that could have been alleged , in this action by ROBERT L. MENDENHALL, SUNRIDGE CORPORATION, BROWNSTONE GOLD TOWN, LLC, and BROWNSTONE GOLD TOWN CV, LLC, including, but not limited to, those asserted in the Complaint as well as any related or potential claims that could be asserted in this action against one another.

(Emphases added.)

Near the end of discovery, and during the Offer's ten-day irrevocable period, appellants learned that respondent Ronald Tassinari, a corporate officer of AVB, allegedly committed fraud concerning the Term Sheet. In particular, Tassinari testified during his deposition that he signed the Term Sheet on behalf of the Other Investors, even though prior representations were made that there were nonparty investors who would contribute the required amount of capital. Thus, appellants filed for leave to amend their answer to add a third-party complaint against respondents and assert counterclaims against the Brownstone Entities. The proposed amended pleading included allegations that Tassinari was a principal of the Brownstone Entities and AVB and that Tassinari, individually and in his role with the Brownstone Entities and AVB, misled appellants into believing there were other third-party investors. Appellants' motion argued that the claims arose out of the same set of facts and transactions as those set forth in the complaint.

The Brownstone Entities accepted the offer of judgment and the First Action was dismissed with prejudice, however, rendering appellants' motion moot. A few months after the Offer was accepted, appellants initiated the Second Action by filing a complaint that alleged fraud against respondents. Respondents subsequently filed a motion to dismiss appellants' complaint, which the district court granted. Ultimately, the district court determined that the doctrine of claim preclusion barred the Second Action. The court found that (1) the order of dismissal from the First Action was a final, valid judgment; (2) the claims asserted by appellants in the Second Action were based upon the same claims asserted in the First Action, or they could have been brought in the First Action; and (3) respondents were privies of the Brownstone Entities. This appeal followed.

DISCUSSION

The crux of appellants' argument is that the district court misinterpreted the doctrine of claim preclusion when it granted respondents' motion to dismiss. In particular, appellants argue that (1) respondents are not privies of the Brownstone Entities; (2) claim preclusion does not apply because the claims in the Second Action were not based on the same cause of action and were not "brought in the first case" because the district court did not consider them; (3) the fraud claims they asserted in the Second Action were not compulsory claims, but merely permissive claims, and thus the doctrine of claim preclusion does not apply; and (4) the fraud claims they asserted in the Second Action could not have been asserted in the First Action because they discovered respondents' alleged fraud during the Offer's ten-day irrevocable period, and thus, a formal barrier existed to their ability to bring the claims brought forth in the Second Action.

In deciding a motion to dismiss, if the district court considers matters outside the pleadings—as was the case here—the motion "shall be treated as one for summary judgment and disposed of as provided in Rule 56." NRCP 12(b) ; Thompson v. City of N. Las Vegas, 108 Nev. 435, 438, 833 P.2d 1132, 1134 (1992). Pursuant to NRCP 56(c), summary judgment is proper when no genuine issue of material fact remains and the movant is entitled to a judgment as a matter of law. Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005).

Claim preclusion applies

This court has established a three-part test for determining whether claim preclusion applies. See Five Star Capital Corp. v. Ruby, 124 Nev. 1048, 1054, 194 P.3d 709, 713 (2008), holding modified on other grounds by Weddell v. Sharp, 131 Nev., Adv. Op. 28, 350 P.3d 80 (2015). These three factors include determining whether "(1) the parties or their privies are the same, (2) the final judgment is valid, and (3) the subsequent action is based on the same claims or any part of them that were or could have been brought in the first case." Id. (footnote omitted).

The parties or their privies are the same

Nevada law previously limited the concept of privity to situations where the individual "acquired an interest in the subject matter affected by the judgment through ... one of the parties, as by inheritance, succession, or purchase." Bower v. Harrah's Laughlin, Inc., 125 Nev. 470, 481, 215 P.3d 709, 718 (2009) (internal quotation marks omitted), modified on other grounds by Garcia v. Prudential Ins. Co. of Am., 129 Nev. ––––, 293 P.3d 869 (2013). More recently, in Alcantara v. Wal–Mart Stores, Inc., this court adopted the Restatement (Second) of Judgments § 41, which additionally recognizes privity under an "adequate representation" analysis, but this applies only to persons who represent a litigant's interests. 130 Nev. ––––, ––––, 321 P.3d 912, 917 (2014).

"However, privity may also be found in other circumstances, beyond those categories noted in the Restatement...." Rucker v. Schmidt, 794 N.W.2d 114, 118 (Minn. 2011). Indeed, "[c]ontemporary courts ... have broadly construed the concept of privity, far beyond its literal and historic meaning, to include any situation in which the relationship between the parties is sufficiently close to supply preclusion." Vets North, Inc. v. Libutti, No. CV-01-7773-DRHETB, ...