N. American Properties v. McCarran Int'l Airport ( 2016 )

IN THE SUPREME COURT OF THE STATE OF NEVADA
NORTH AMERICAN PROPERTIES, A No. 61997
PARTNERSHIP COMPOSED OF
TIMOTHY S. HEERS; GARY R. HEERS;
CHERYL D. NOTLE; TERRIE D.
HEERS; AND CATHLEEN J. HEERS, FILED
Appellants, FEB 1 9 2016
vs.
MCCARRAN INTERNATIONAL
AIRPORT; AND CLARK COUNTY, A
POLITICAL SUBDIVISION OF THE
STATE OF NEVADA,
Respondents.
ORDER OF AFFIRMANCE
This is an appeal from a district court summary judgment in a
government takings action. Eighth Judicial District Court, Clark County;
Jerome T. Tao, Judge.
Appellant North American Properties (NAP) owned land close
to McCarran Airport. Respondents McCarran International Airport and
Clark County (collectively, the County), through Ordinance 1599, imposed
certain height restrictions for structures close to McCarran Airport, and a
portion of the airspace above NAP's property was encumbered. This court
has already held that Ordinance 1599 is a regulatory per se taking.
McCarran Int'l Airport v. Sisolak, 122 Nev. 645, 675, 137 P.3d 1110, 1130
(2006).
NAP sued to recover compensation for the County's taking.
During the course of litigation, the district court found that NAP
misrepresented when it owned the property and engaged in discovery
abuses by failing to disclose evidence that might have shown (1) NAP
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lacked standing, (2) other necessary parties had an interest in NAP's
claim, and (3) NAP was judicially estopped from bringing a takings claim.
Among other documents, NAP failed to timely disclose a deed of trust on
the property, two ownership transfers, and a bankruptcy involving the
property.
Based on these misrepresentations and discovery abuses, the
district court sanctioned NAP through its inherent powers and NRCP 37.
Specifically, the district court applied an adverse inference against NAP,
concluding that unproduced documents would show NAP lacked standing
and was judicially estopped from bringing a takings claim. After applying
these adverse inferences, the district court granted the County's motion
for summary judgment, holding that NAP did not have standing to sue
and it was judicially estopped from bringing the takings claim. In light of
NAP's egregious abuses, we affirm the district court's decision to impose
case-ending sanctions pursuant to its inherent powers.'
The record clearly shows that NAP engaged in egregious litigation abuses
The district court's decision to sanction NAP was based on two
principal findings: (1) from 2009 to 2012, NAP misrepresented to the court
that it owned the property when it filed its complaint and never attempted
to fix this misrepresentation, even when it was clear the district court was
'Having found that the district court did not abuse its discretion in
issuing case-ending sanctions through its inherent powers, we need not
address whether the district court abused its discretion in also issuing a
case-ending sanction pursuant to NRCP 37. See Ash Springs Dev. Corp. ix
O'Donnell, 95 Nev. 846, 848, 603 P.2d 698, 699-700 (1979) ("Because of our
disposition, it is unnecessary to reach the other issues raised by the
parties.").
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relying on it; and (2) NAP failed to disclose and review for relevancy a
huge cache of documents held in Arizona until after the close of discovery,
and a substantial number of those documents were later found to be
relevant. We conclude the record substantially and clearly supports the
district court's findings See Weddell v. H20, Inc., 128 Nev. 94, 101, 271
P.3d 743, 748 (2012) (stating that a district court's factual findings will be
upheld unless they are clearly erroneous or unsupported by substantial
evidence).
First, the record plainly supports the district court's
conclusion that NAP affirmatively misrepresented its ownership to the
court and then failed to correct that misrepresentation even after it was
clear the court was relying on it. NAP's initial complaint says "[a]t all
relevant times, [NAP] has been the owner" of the property. In opposition
to a motion challenging its standing, NAP stated "the County tax records
show NAP as the record title owner at the time of the taking alleged and
no other transactions are at issue." At a hearing on a motion to dismiss
NAP's complaint for lack of standing, NAP's counsel said NAP "is the
name of the entity that has always owned this property .... [NAP is] the
name of the partnership that owns this property." NAP's amended
complaint repeats that "[a]t all relevant times, NAP has been the owner"
of the property. NAP also claimed that "[t]here is no genuine dispute" that
"[p]laintiffs own" the property. Based on these representations, the
district court granted NAP's motion for partial summary judgment
regarding standing, finding that "[t]he [p]laintiffs in this case are the
owners of' the property. The record does not show any effort by NAP to
correct the district court's misconception of the property's actual
ownership history.
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Additionally, the record clearly supports the district court's
conclusion that NAP (1) did not produce documents related to its standing
until the County brought forth newly discovered documents showing that
the district court might have incorrectly held that NAP had standing; (2)
provided an enormous number of relevant documents after the close of
discovery, just days before trial; and (3) failed to review a large cache of its
documents for relevancy. On June 8, 2012, the County brought a motion
for summary judgment challenging the district court's earlier conclusion
that NAP had standing to sue. This is the first time the record indicates
NAP did not own the property when it filed suit. Discovery closed three
weeks later on June 29, 2012. On August 7, 2012, the district court
specifically ordered production of documents related to (1) the property's
sale to NAP, Inc., and a third party during bankruptcy; (2) Household
Bank's deed of trust; and (3) NAP, Inc.'s bankruptcy. At a September 12,
2012, hearing, one of NAP's general partners disclosed, for the first time,
that "millions of documents, literally," regarding businesses owned and
operated by the general partners, including NAP, were held in a storage
facility in Arizona, and no one had disclosed those documents or reviewed
them for relevancy. At a September 19, 2012, status check, NAP's counsel
informed the court that NAP had produced 22 banker boxes of relevant
material, and that a significantly greater number of documents remained
that needed to be reviewed for relevancy and disclosed.
Therefore, the record supports the district court's
determination that "the Plaintiff affirmatively misrepresented its standing
to the Court, induced the Court to grant partial summary judgment based
upon that misrepresentation, knew that the Court relied upon its
misrepresentations, and then failed to produce documents in its possession
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for over eighteen months that could have revealed the misrepresentation."
Having concluded that the district court's factual description of NAP's
misconduct is supported by substantial evidence, we must now determine
whether the district court imposed an appropriate sanction.
The district court did not abuse its discretion in imposing case-ending
sanctions against NAP
District courts in Nevada may sanction abusive litigation
practices through their inherent powers. Young v. Johnny Ribeiro Bldg.,
Inc., 106 Nev. 88, 92, 787 P.2d 777, 779 (1990). A court's inherent power
to sanction is designed "to protect the dignity and decency of its
proceedings and to enforce its decrees, and thus it may issue contempt
orders and sanction or dismiss an action for litigation abuses." Halverson
v. Hardcastle, 123 Nev. 245, 261, 163 P.3d 428, 440 (2007). Generally,
"this court will not reverse sanctions absent a clear showing of abuse of
discretion." Hamlett v. Reynolds, 114 Nev. 863, 865, 963 P.2d 457, 458
(1998). However, case-ending sanctions require "a somewhat heightened
standard of review." Foster v. Dingwall, 126 Nev. 56, 65, 227 P.3d 1042,
1048 (2010). That somewhat-heightened review requires this court to
determine whether (1) the sanction is just and relates to the specific
conduct at issue; and (2) the district court engaged in an express,
thoughtful, and preferably written analysis of all material factors. Id.;
Young, 106 Nev. at 92-93, 787 P.2d at 779-80. Such factors might include:
[1] the degree of willfulness of the offending party,
[2] the extent to which the non-offending party
would be prejudiced by a lesser sanction, [3] the
severity of the sanction of dismissal relative to the
severity of the discovery abuse, [4] whether any
evidence has been irreparably lost, [5] the
feasibility and fairness of alternative, less severe
sanctions, such as an order deeming facts relating
to improperly withheld or destroyed evidence to be
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admitted by the offending party, [6] the policy
favoring adjudication on the merits, [7] whether
sanctions unfairly operate to penalize a party for
the misconduct of his or her attorney, and [8] the
need to deter both the parties and future litigants
from similar abuses.
Young, 106 Nev. at 93,787 P.2d at 780.
First, we conclude that the district court's case-ending
sanctions were both just and sufficiently related to NAP's underlying
misconduct. NAP's misrepresentations and evasive discovery practices
were not related to some tangential issue, but its actual ability to bring a
claim against the County. NAP's abuses directly impaired the district
court's ability to determine whether NAP (1) had standing to sue, (2) failed
to join additional parties with an interest in the takings claim, and (3) was
judicially estopped from asserting the takings claim based on
representations made during bankruptcy proceedings. Each of these
issues speaks directly to NAP's ability to prosecute a claim at all, and, in
the absence of abusive litigation practices, each is typically dealt with in
the early stages of litigation, not days before trial. Thus, it was just for
the district court to impose a case-ending sanction against NAP, which
finagled its way deep into the litigation process through misrepresentation
and selective disclosure. Moreover, a case-ending sanction is sufficiently
related to NAP's abusive conduct because the issues NAP manipulated—
standing, failure to join a necessary party, and judicial estoppel—each
speak directly to NAP's ability to invoke the judicial process.
Next, we conclude the district court's 13-page order provided a
careful and thorough analysis of its rationale for disposing of NAP's claim.
Although the district court's order never directly discusses Young, its
analysis touches all but one of the Young factors. See Young, 106 Nev. at
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93-94, 787 P.2d at 780 (showing that district courts are not required to
consider every Young factor so long as the case-ending sanction's rationale
is carefully and thoughtfully explained).
First, the district court discussed the degree of NAP's
willfulness, noting that it "affirmatively misrepresented its ownership"
and made misrepresentations "in connection with facts that no party could
plausibly claim to have forgotten." Moreover, NAP's failure to disclose
documents was an act of "active concealment" that was "intentional or at
least highly reckless." In other words, NAP's misrepresentations were
non-negligent, and its discovery abuses were willful.
Second, the district court discussed how a lesser sanction
would prejudice the County, concluding that the problems NAP caused
were "substantial and uncorrectable at this stage of the litigation."
Specifically, NAP produced an enormous number of relevant documents
"on the virtual eve of trial," thereby placing an onerous and undue burden
on the County to review and prepare those documents for trial. And
although the district court's sanctions had the effect of ending NAP's case
against the County, the district court actually did impose lesser sanctions
than outright dismissal. Instead, it deemed evidence related to NAP's
misconduct adverse. Thus, the district court properly considered lesser
sanctions and found them appropriate.
Third, the district court expressly found that a severe sanction
was warranted because NAP's course of conduct represented "a very
serious violation of both the letter and spirit of the rules of discovery."
According to the district court's analysis, NAP affirmatively
misrepresented its standing, induced the district court to grant partial
summary judgment based on the misrepresentations, knew the district
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court had relied on those misrepresentations, and then failed to disclose
documents that would reveal the misrepresentations for 18 months. We
believe the district court's conclusion—that NAP's course of conduct
warranted severe sanctions—is sound and supported by the record.
Fourth, the district court did not conclude that evidence was
irreparably lost. However, the overarching theme of its order is that
NAP's misconduct placed an enormous and unfair burden on the County to
go through a huge number of newly produced documents before a trial
date only two weeks away. In other words, the evidence was not
irreparably lost, but NAP's abusive conduct greatly undermined the utility
of that evidence by robbing the County of the opportunity to carefully
review and consider it before trial.
Fifth, the district court considered and adopted a lesser
sanction than outright dismissal, instead opting to deem certain concealed
evidence as adverse to NAP's claims. The district court's decision to
impose that adverse inference at summary judgment had the effect of
resolving three contested issues that NAP spent many months improperly
obfuscating—NAP's standing, other parties' potential interest in the
litigation, and judicial estoppel—in the County's favor. Although imposing
these sanctions effectively ended the case, the adverse inference was still a
narrower and lesser sanction than an outright dismissal.
Sixth, the district court's order implicitly considered the
judiciary's policy favoring adjudication on the merits. Specifically, the
court concluded that by concealing a huge number of documents until just
before trial, NAP had irreparably prejudiced the court. In other words,
NAP's conduct irreparably prejudiced the district court's ability to perform
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its adjudicative duties by misrepresenting facts that had great bearing on
the merits of the case.
Seventh, the district court's sanction did not punish NAP for
its counsel's misconduct. Indeed, the district court expressly found that
"Plaintiff's counsel was not complicit," and NAP "failed to produce those
documents despite repeated written requests by its attorney to do so."
Therefore, the district court's sanction expressly punishes NAP for its own
misconduct.
Finally, the district court's order does not discuss deterring
litigation misconduct as a rationale for imposing sanctions against NAP.
However, this court does not require district courts to consider every
Young factor, so long as the district court's analysis is thoughtfully
performed. See Young, 106 Nev. at 93-94, 787 P.2d at 780.
In sum, we conclude that the district court's sanction order
resulted from a written, careful, and thorough examination of the relevant
factors, as required by Young. Id. at 92-93, 787 P.2d at 779-80.
Specifically, the district court found NAP's misconduct was non-negligent
and willful, irreparably prejudiced the County and court, severely
undermined the proceedings, greatly impaired the utility of the withheld
evidence, and could not be blamed on NAP's counsel. Moreover, the
district court's sanction, although effectively case-ending, was narrower
and less severe than an outright dismissal with prejudice.
Thus, having reviewed the district court's order, we conclude it
did not abuse its discretion by using its inherent powers to sanction NAP,
even under the heightened standard of review for case-ending sanctions.
NAP also argues that the district court abused its discretion
by imposing case-ending sanctions without first holding an evidentiary
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hearing. We disagree. The record reflects multiple hearings during which
NAP—either through its counsel, its partners, or both—presented its
contentions regarding whether it misrepresented its standing and
committed discovery violations. Therefore, the district court did not abuse
its discretion because it provided NAP with more than one meaningful
opportunity to present evidence and arguments regarding its misconduct
before issuing case-ending sanctions.
Accordingly, we
ORDER the judgment of the district court AFFIRMED.
Parraguirre
aa-spc J.
Hardesty
J.
J.
J.
Gibbons
, J.
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cc: Eighth Judicial District Court Dept. 20
Ara H. Shirinian, Settlement Judge
Efrem A. Rosenfeld & Associates
Paul C. Ray, Chtd.
Mark R. Smith
Thompson & Heers, PC
Clark County District Attorney/Civil Division
Brownstein Hyatt Farber Schreck, LLP/Las Vegas
Henderson City Attorney
Kilpatrick, Adler & Bullentini
Joshua D. Weber
Reno City Attorney
Fennemore Craig Jones Vargas/Reno
Pisanelli Bice, PLLC
Eighth District Court Clerk
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