Russo v. Shac, LLC

• Decision Date: 17 November 2021
• Docket Number: No. 82197-COA,82197-COA
• Citation: 498 P.3d 1289 (Table)
• Parties: Nadine RUSSO, an Individual, Appellant, v. SHAC, LLC, d/b/a Sapphire Gentlemen's Club, a Nevada Limited Liability Company; Peter Feinstein, an Individual; David Michael Talla, an Individual; and John Lee, an Individual, Respondents.
• Court: Nevada Court of Appeals

498 P.3d 1289 (Table)

Nadine RUSSO, an Individual, Appellant,

v.SHAC, LLC, d/b/a Sapphire Gentlemen's Club, a Nevada Limited Liability Company; Peter Feinstein, an Individual; David Michael Talla, an Individual; and John Lee, an Individual, Respondents.

No. 82197-COA

Court of Appeals of Nevada.

FILED NOVEMBER 17, 2021

Prokopius & Beasley

Bighorn Law/Las Vegas

Chesnoff & Schonfeld

The Palmer Law Firm, P.C.

ORDER AFFIRMING IN PART, REVERSING IN PART, AND REMANDING

Nadine Russo was a bartender and cocktail server at the respondent Sapphire Gentlemen's Club.² Respondent John Lee was the general manager at Sapphire and had supervisory control over the managers and other employees. As general manager, Lee would host bi-monthly off-premises "promotional dinners" during which Sapphire employees would attempt to persuade attendees to spend the rest of their night at Sapphire. Sapphire's "promo team" would typically include two or more of the club's female bartenders or cocktail waitresses along with Lee and one or more of his subordinate managers. Lee would order his managers to modify schedules in order to "cherry-pick" which female employees attended the promotional dinners. He would then use the off-premises dinners as a pretext to lure the employees into sexual encounters with him or his associates. Lee's conduct was well known to two of Sapphire's ownership group—respondents Peter Feinstein and David Michael Talla.

In December 2014, a few months after Russo was hired at Sapphire, Lee ordered one of his managers to arrange for Russo to attend a New Year's Eve party at the Henderson home of "Dr. Nick," one of Lee's associates and a frequent patron of Sapphire. Shortly after arriving at the party, Russo, who is married, became extremely intoxicated. She has little recollection of the night's events, but does remember Lee performing a sexual act on her in Dr. Nick's bathroom. The following morning, Russo awoke in her own home unable to recall how she had gotten there. When Russo arrived at Sapphire for her shift later that day, she texted Lee to ask if she could meet with him. He invited her into his office and she went to voice her concerns about the previous night's events with Lee and the gaps in her memory. Lee ignored her concerns and instead demanded that she perform a sexual act on him. Afraid of losing her job, Russo complied. Lee then summarily dismissed Russo from his office.

For the next three years, Lee regularly demanded sexual favors including sexual intercourse from Russo, and she acquiesced for fear of suffering repercussions at work. He would often require her to drive to his house or meet him in some isolated location to carry out his desires. Lee would frequently record videos of Russo performing sex acts on him. On one occasion, Lee instructed Russo to sneak away from her husband and drive to Lee's house where he demanded she have sex with him in his garage. When Russo asked to use Lee's bathroom after the intercourse, Lee refused and instead told her to urinate in his yard. During her shifts at Sapphire, Lee would insist that Russo send him sexually explicit photos of herself, which she did. Lee continued requesting explicit photos until approximately May 2018.

At some point, Russo ceased responding to Lee's demands after her husband found out about the situation, causing turmoil in the home the couple shared with Russo's daughter. After ignoring several of Lee's communications, Russo immediately experienced an increase in write-ups at Sapphire and a decrease in the quantity and quality of the shifts she was assigned. Around May 3, 2018, Russo emailed Sapphire's human resources manager, Brianna Thompson, explaining that Russo was "feeling bullied" at work and requesting a meeting with Thompson. Several days later, the two had a telephone conversation during which Thompson dismissed Russo's complaints and discouraged her from pursuing her grievances any further. Thereafter, management continued to single-out Russo and her income was systematically reduced by 40%. Russo consequently quit her job at Sapphire in May 2018.

On March 28, 2020, Russo filed a civil complaint in district court.³ As to Sapphire, Russo alleged (1) tortious constructive discharge, (2) intentional infliction of emotional distress (IIED), (3) negligent training, supervision, and retention of Lee, and (4) respondeat superior. As to Feinstein and Talla, Russo alleged negligent training, supervision, and retention of Lee. Finally, as to Lee, Russo alleged IIED and negligence per se. Sapphire, Feinstein, and Talla (hereinafter where applicable, collectively, Sapphire) filed a motion to dismiss for lack of subject matter jurisdiction under NRCP 12(b)(1) and for failure to state a claim upon which relief can be granted under NRCP 12(b)(5). Lee filed a motion to dismiss for failure to state a claim under NRCP 12(b)(5).

Russo opposed Sapphire's motion to dismiss, and Sapphire filed a reply to her opposition. Russo also opposed Lee's motion to dismiss, but her opposition was untimely. At the hearing on the motions to dismiss, Russo requested leave to amend the complaint should the court be inclined to dismiss it. Also at the hearing, the court allowed arguments on the merits of Lee's motion to dismiss (instead of granting the motion based on Russo's failure to timely oppose it).⁴

The district court ultimately granted both Sapphire's and Lee's motions to dismiss. While it never expressly ruled on Russo's oral motion to amend, the court dismissed the complaint with prejudice. Lee's motion to dismiss was granted on the merits. Russo now raises multiple issues on appeal. We address each in turn.

The district court erred in ruling that the statute of limitations barred Russo's IIED claim against Lee

On appeal, Russo argues that Lee's conduct must be viewed in its entirety for the purpose of determining when her claim against him accrued. She argues that it was Lee's sexual misconduct coupled with his retaliatory actions—as her general manager—after she stopped surrendering to his demands, that gave rise to her severe emotional distress. Lee counters that he only could be liable, if at all, for the underlying alleged sexual misconduct and not for Russo's "employment injuries." Because, according to Lee, Russo ceased responding to Lee's demands sometime before January 2018, her March 2020 complaint was untimely.

A defendant's motion to dismiss under NRCP 12(b)(5) is "subject to a rigorous standard of review on appeal." Buzz Stew, LLC v. City of North Las Vegas , 124 Nev. 224, 227, 181 P.3d 670, 672 (2008) (internal quotation marks omitted). In reviewing dismissal under NRCP 12(b)(5), we recognize all factual allegations in Russo's complaint as true and draw all inferences in her favor. Id. at 228, 181 P.3d at 672. Russo's complaint should be dismissed only if it appears beyond a reasonable doubt that she could prove no set of facts, which, if true, would entitle her to relief. Id. Because Nevada is a "notice-pleading" jurisdiction, a complaint need only set forth sufficient facts to demonstrate the necessary elements of a claim for relief so that the defending party has "adequate notice of the nature of the claim and relief sought." W. States Constr., Inc . v. Michoff , 108 Nev. 931, 936, 840 P.2d 1220, 1223 (1992) ; see also Droge v. AAAA Two Star Towing, Inc. , 136 Nev. 291, 308-09, 468 P.3d 862, 878-79 (Ct. App. 2020) (discussing Nevada's liberal notice pleading standard).

The parties agree that a two-year statute of limitations applies to Russo's IIED and negligence per se claims. See NRS 11.190(4)(e). "The general rule concerning statutes of limitation is that a cause of action accrues when the wrong occurs and a party sustains injuries for which relief could be sought." Petersen v. Bruen , 106 Nev. 271, 274, 792 P.2d 18, 20 (1990). Dismissal of a claim is not appropriate unless the statute of limitations bar is apparent on the face of the complaint. See Kellar v. Snowden , 87 Nev. 488, 491, 489 P.2d 90, 92 (1971) ("When the defense of the statute of limitations appears from the complaint itself, a motion to dismiss is proper."). Taking Russo's allegations as true, see Buzz Stew , 124 Nev. at 228, 181 P.3d at 672, at the very least, Lee engaged in a continuous course of conduct including demanding sexually explicit photos from Russo until May 2018. As such, it does not appear from the face of the complaint that the statute of limitations ran before the complaint was filed and a question remains as to whether Russo could have pursued her IIED claim against Lee, based on his alleged sexual misconduct alone, until May 2020. Therefore, dismissal based on the statute of limitations was improper. See Kellar , 87 Nev. at 491, 489 P.2d at 92.

In addition, Russo's complaint alleges that, as general manager, Lee would direct his subordinate managers to modify their employees’ work schedules to either reward or punish the employees for complying or not complying with his sexual demands. As to Russo's IIED claim, the complaint specifically cites both Lee's sexual misconduct and his abuse of power to punish noncompliant employees at work as the sources of her emotional distress. The complaint states that Russo spoke with the human resources manager around May 3, 2018, to alert her of the misconduct by Lee. Thereafter, Russo alleges that management continued to harass her—presumably at Lee's direction—to the point where her income was reduced by 40%. Lee argues that we must look only to his underlying sexual misconduct because he is not responsible for Russo's "employment injuries." We disagree.

Nevada recognizes IIED in the employment termination context. Dillard Dep't Stores, Inc. v . Beckwith , 115 Nev. 372, 378, 989 P.2d 882, 886 (1999) (citing Shoen v. Amerco, Inc. , 111 Nev. 735, 747, 896 P.2d 469, 476 (1995) ); see also MGM Grand Hotel-Reno, Inc. v. Insley , 102 Nev. 513, 520, 728 P.2d 821, 825-26 (1986) (holding that a terminated employee's IIED claim...