Csa Service Center, Llc v. Air Design Systems ( 2013 )

 88, 92, 787 P.2d 777, 779 (1990). If the sanction is not case concluding, the
district court has the discretion to decide whether or not to hold an
evidentiary hearing on the abusive litigation practices before imposing the
sanction. Bahena v. Goodyear Tire & Rubber Co. (Bahena I), 126 Nev. ,
, 235 P.3d 592, 600-01 (2010). Thus, we conclude that the district court
did not abuse its discretion in dismissing CSA's second amended
complaint against A-1 and Air Design without an evidentiary hearing.
These sanctions were not case concluding and were appropriate remedial
measures for CSA's inappropriate litigation practices that compromised
the evidence.
After considering CSA's issues on appeal, we conclude that in
addition to the sanctions against CSA, two other issues warrant
discussion, while the remaining issues lack merit. First, CSA contests the
district court's order granting A- l's motion in limine barring construction
defect evidence at the special master's hearing. Second, CSA challenges
the appointment of the special master to determine the lien amounts and
adoption of the master's report. We conclude that the district court did not
abuse its discretion in granting A-1's motion in limine. It allowed CSA to
prove offsets against A-1 before the special master while appropriately
barring CSA from proffering construction defect evidence, since CSA had
compromised that evidence. Also, we conclude that the district court did
not abuse its discretion in appointing the special master to determine the
lien amounts because NRS 108.239(7) and NRCP 53(c) permitted this
appointment. Nor did it abuse its discretion in adopting the special
master's report because, given CSA's failure to object under NRCP
53(e)(2), the district court had the discretion to determine that the report
was not clearly erroneous and to adopt it.
SUPREME COURT
OF
NEVADA
2
(0) 1947A
Factual and procedural background
After being contracted by CSA to improve CSA's properties, a
general contractor enlisted the services of A-1, Air Design, and respondent
JD Construction, Inc. A-1 retained respondent Loftin Equipment to
supply equipment. Suspecting improprieties in the performance of the
general contractor's and subcontractor's work, CSA fired the general
contractor and did not allow its subcontractors to return to the job site.
After not being fully paid for their work, A-1, Air Design, JD, and Loftin
filed mechanics' liens against CSA's property.
CSA filed a complaint against the general contractor, and A-1,
Air Design, JD, and Loftin filed complaints against CSA to foreclose on
their mechanics' liens. CSA amended its initial complaint, adding Air
Design and A-1 as defendants and asserting contract and tort-based
claims based on allegedly deficient and incomplete work. Ultimately, the
district court consolidated the various cases that arose from the parties'
claims against each other. The district court bifurcated CSA's claims
against the general contractor from the remaining claims by CSA and the
other parties and referred the mechanics' lien claimants to a special
master to determine the amount and priority of the mechanics' liens.
CSA filed a second amended complaint, asserting contract and
tort-based claims against A-1 and Air Design on the basis of construction
defects and non-performance. In support of its claims, CSA submitted
documents to show the work that subsequent contractors performed in
order to remedy the defects.
A-1 filed a motion to dismiss the second amended complaint
or, in the alternative, for summary judgment on the basis that CSA
engaged in spoliation of the evidence as to A-1's work. A-1 alleged that it
3
lacked the opportunity to obtain evidence of its allegedly faulty work
because CSA prohibited it from returning to the job site and hired
contractors to remedy A-1's work. Air Design filed a joinder to A-1's
motion to dismiss and submitted an affidavit of CSA's architect, which
revealed that subsequent work, including demolition, was performed in
the areas where Air Design had allegedly produced faulty work.
After hearings on A-1's and Air Design's motions, the district
court determined that spoliation justified a dismissal of CSA's
construction defect claims and it granted summary judgment in favor of A-
1 and Air Design on all claims that CSA asserted against them in the
second amended complaint. As a result, CSA lacked any remaining claims
against A-1 and Air Design, but the case continued because there
remained the subcontractors' complaints against CSA to foreclose on their
mechanics' liens.
Before the special master's hearing on the mechanics' liens
against CSA, A-1 filed a motion in limine to exclude testimony by CSA's
experts regarding alleged defects and remedial repairs performed upon A-
l's work because the district court already found that CSA compromised
the construction defect evidence. The district court granted A-1's motion,
providing that "construction defect issues should not be heard by . . .
[Special Master] Bell and the motion is granted to the extent that it
precludes anything dealing with construction defect."
The special master held a hearing with the lien claimants and
CSA and determined the amounts owed by CSA. Thereafter, JD, A-1, and
Loftin filed motions to adopt the special master's determinations. Air
Design filed a joinder to A-1's motion. In the absence of an objection by
CSA to the special master's findings, the district court granted the
motions.
After a hearing by the special master determining the priority
of the liens, the district court entered a final judgment against CSA on the
amount and priority of the mechanics' liens. CSA subsequently appealed.
The sanctions against CSA for its spoliation of the evidence
CSA contends that the district court abused its discretion in
dismissing CSA's complaints against A-1 and Air. Design on the basis of
spoliation, arguing that the district court should have held an evidentiary
hearing on spoliation of the evidence before doing so. We disagree.
Generally, a district court's discovery sanctions will not be
reversed unless there has been an abuse of discretion. Foster v. Dingwall,
126 Nev. „ 227 P.3d 1042, 1048 (2010). If the sanction imposed is
that of dismissal with prejudice, a somewhat heightened standard of
review applies. Id, Generally, NRCP 37 provides for discovery sanctions
for a party's willful violation of a discovery order. Young v. Johnny Ribeiro
Bldg., Inc., 106 Nev. 88, 92, 787 P.2d 777, 779 (1990). But it is within the
district court's "inherent equitable powers" to dismiss an action for
abusive litigation practices not listed under a statute. Id. (quoting
TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 916 (9th Cir. 1987)).
As an exercise of the district court's equitable powers,
discovery sanctions must be "just and . . . relate to the claims at issue."
Foster, 126 Nev. at , 227 P.3d at 1048. Dismissal of a party's complaint
as a sanction does not need to be "preceded by other less severe sanctions,
[but] it should be imposed only after thoughtful consideration of all the
factors involved in a particular case." Bahena v. Goodyear Tire & Rubber
Co. (Bahena 1), 126 Nev. 235 P.3d 592, 598 (2010) (quoting
5
Young, 106 Nev. at 92, 787 P.2d at 780). In considering dismissal as a
discovery sanction, the district court may weigh
"the degree of willfulness of the offending party,
the extent to which the non-offending party would
be prejudiced by a lesser sanction, the severity of
the sanction of dismissal relative to the severity of
the discovery abuse, whether any evidence has
been irreparably lost, the feasibility and fairness
of alternative, less severe sanctions . . . , the policy
favoring the adjudication on the merits, whether
sanctions unfairly operate to penalize a party for
the misconduct of his or her attorney, and the
need to deter. . . similar abuses."
Bahena I, 126 Nev. at , 235 P.3d at 598 (quoting Young, 106 Nev. at 93,
787 P.2d at 780). If the dismissal is not a case-concluding sanction, then
the district court has the discretion to determine the nature and extent of
the hearing that precedes the sanction. Id. at , 235 P.3d at 600-01. A
case-concluding sanction is one that results in the conclusion of the case,
the offending party being "out of court," and an appeal being the offending
party's only recourse. Bahena v. Goodyear Tire & Rubber Co. (Bahena II),
126 Nev . 245 P.3d 1182, 1186 (2010).
Dismissal is a proper sanction where a plaintiff possesses the
evidence at issue but disposes of it before filing a complaint. See Stubli u.
Big D Int'l Trucks, Inc., 107 Nev. 309, 313-14, 810 P.2d 785, 787-88 (1991)
(providing that dismissal was appropriate in a similar situation where
evidence was irreparably lost). Before litigation, a party must preserve
items that are "reasonably calculated to lead to the discovery of admissible
evidence." Bass-Davis v. Davis, 122 Nev. 442, 450, 134 P.3d 103, 108
(2006). A party in control of the evidence is required to preserve it once
litigation is reasonably foreseeable. Id.6
Here, the very evidence that CSA relied upon for its claims
revealed its acts of spoliation. CSA submitted a memorandum drafted by
a third party that identified deficiencies in A-1's work, and CSA hoped to
use this as the basis for its claims, but that very memorandum also
revealed that subsequent subcontractors remedied the alleged deficiencies.
CSA also submitted work orders and invoices revealing the same. Hence,
CSA disposed of the evidence as to A-1's work, such that there was no way
for the subcontractors to independently have their work evaluated for
defects. Further, much of this remedial work occurred before CSA filed its
claims and before A-1 learned of the claims asserted against it; thus, CSA
foreclosed A-1's opportunity to gather evidence for its defense.
CSA engaged in similar acts as to Air Design's work. The
work orders of subsequent subcontractors showed that CSA compromised
the evidence of Air Design's work. A deposition by CSA's architect
provided that, after the termination of the initial contract, demolition and
repair work occurred in the area where Air Design had worked. Since Air
Design did not perform any work after CSA terminated the general
contractor, it too was precluded for gathering evidence it could use for its
defense.
Adjudicating the construction defect claims would have given
CSA the unfair advantage of being the only party who had the opportunity
to collect and review evidence of the allegedly defective work. Thus, the
district court did not abuse its discretion in dismissing CSA's complaints
against A-1 and Air Design as this was the appropriate response to CSA's
inappropriate litigation practices.
As the sanctions against CSA did not end the case, the district
court did not need to hold an evidentiary hearing on spoliation before
7
imposing the sanctions. After the imposition of the sanctions against CSA,
the case continued because subcontractor's mechanics' liens remained for
resolution by the special master and the district court. Moreover, the
district court did not entirely deny CSA the chance to rebut the allegations
of spoliation before imposing the sanctions. The district court held
hearings on A-1's and Air Design's motions; these hearings afforded CSA a
chance to contest the allegations of spoliation.
The order granting A-1's motion in limine
CSA argues that the district court abused its discretion in
granting A-1's motion in limine, contending that the district court
improperly excluded an expert's report showing that A-1 did not complete
its work. We disagree.
The district court has wide discretion in determining
admissible evidence. State ex rel. Dep't of Highways v. Nev. Aggregates &
Asphalt Co., 92 Nev. 370, 376, 551 P.2d 1095, 1098 (1976). A motion in
limine may be used to exclude or admit evidence. See EDCR 2.47.
Here, contrary to CSA's arguments, the district court's order
granting A-1's motion in limine did not preclude CSA from presenting
evidence of offsets against A-1; the order only barred CSA from using
evidence of construction defects. CSA could have presented any other
evidence to show that A-1 did not complete its work, including a redacted
version of its expert report, so long as the evidence did not pertain to
construction defects. Thus, the district court did not abuse its discretion
in granting A-1's motion in limine because it allowed CSA to prove offsets
8
against A-1 while barring construction defect evidence that CSA
compromised.'
The appointment of the special master and the adoption of his report
CSA contends that the district court delegated too much power
to the special master and that, because the litigation was so complex, it
should not have adopted the special master's report. We disagree.
We review the appointment of a special master for an abuse of
discretion. Russell v. Thompson, 96 Nev. 830, 835, 619 P.2d 537, 540
(1980). The abuse of discretion standard also applies to the district court's
review and adoption of the special master's report. Venetian Casino
Resort, LLC v. Eighth Judicial Dist. Court, 118 Nev. 124, 132, 41 P.3d 327,
332 (2002).
The appointment of the special master
NRS 108.239(7) permits the use of special masters in
mechanics' lien cases. It provides, in pertinent part, that "[t]he court shall
. . . , by decree, proceed to hear and determine the claims in a summary
way, or may, if it be the district court, refer the claims to a special master
to ascertain and report upon the liens and the amount justly due thereon."
NRS 108.239(7).
1 CSA also contests the order granting JD's motion in limine, which
barred CSA from using construction defect evidence at the special master
hearing on JD's lien amount. We are unable to address this issue as CSA
failed to offer this court a citation to the hearing transcript underlying the
order and the order's language. NRAP 28(a)(9) (stating that an appellant
must cite to the record upon which it relies); NRAP 30(b)(1) and (3)
(requiring an appellant to include all necessary materials, including
transcripts, that are necessary for reviewing the issues).
SUPREME COURT
OF
NEVADA
9
(0) 1947A
These masters "regulate all proceedings . . . and . . . do all acts
and take all measures necessary or proper for the efficient performance of
the master's duties under the order." NRCP 53(c). They are appointed
when necessary and "in matters of account and of difficult computation of
damages . . . upon a showing that some exceptional condition requires it."
NRCP 53(b). In lien matters, the special master may only report on the
liens and the amount due, whereas the district court determines the lien's
validity. Venetian, 118 Nev. at 130, 41 P.3d at 330. Further, when the
district court reviews the special master's findings and recommendations,
it does so under a clearly erroneous standard. Id. at 132, 41 P.3d at 331-
32; see also NRCP 53(e)(2). The district court reviews the conclusions of
law de novo. Venetian, 118 Nev. at 132, 41 P.3d at 331-32.
Here, the district court assigned a special master to resolve
"the calculation, computation of damages, and amount owing, including
principal, interest, attorney's fees and lien costs, as to each lien claimant."
It also directed the master to determine the liens' priority. The district
court did not direct the master to ascertain the liens' validity. Thus, it did
not improperly delegate its duties to the special master. See id. at 130, 41
P.3d at 330.
CSA concedes that the litigation was a complex civil matter
with various parties and claims. These situations are exactly the type
where it is proper to use a special master because "litigation involves
matters of account that would reach substantial proportions and would
potentially consume an inordinate amount of judicial resources." Id. at
128, 41 P.3d at 329. Hence, the district court did not abuse its discretion
in appointing the special master to determine the amounts due on the
mechanics' liens.
10
The adoption of the special master's report
Following the special master's hearing, the master must
submit a report to the district court, including findings of fact and
conclusions of law. NRCP 53(e)(1). In cases not tried before a jury, "the
court shall accept the master's findings of fact unless clearly erroneous."
NRCP 53(e)(2). If any party makes an objection within ten days after
being served with the master's findings, the district court, "after [a]
hearing[,] may adopt the report or may modify it or may reject it in whole
or in part or may receive further evidence or may recommit it with
instructions." Id.Here, CSA failed to object to the special master's findings
under NRCP 53(e)(2). As a result, the district court considered the special
master's report, determined that the report was not clearly erroneous, and
adopted it. The record does not include any indication that the report was
clearly erroneous. Thus, the district court did not abuse its discretion in
adopting the special master's report. 2
2Also, we disagree with CSA's contentions that the district court
erred in adopting the special master's report, that NRCP 53(e)(3) only
allows for a report to be read to the jury, and that CSA lacked the
opportunity to present evidence of any offsets. Although NRCP 53(e)(3)
allows for a report to be read to the jury in jury actions, it does not apply
in a case with no jury, such as this. Further, there is no right to a jury
trial in foreclosure of mechanics' liens. Close v. Isbell Constr. Co., 86 Nev.
524, 529, 471 P.2d 257, 261 (1970) (explaining that a jury may not be
claimed in matters of equity and that foreclosure of mechanics' liens is an
equity matter). Therefore, although a jury trial may have been requested
with regard to CSA's construction defect and/or fraud claims, the
mechanics' liens issues were to appropriately be conducted via a bench
trial. Also, CSA had the opportunity to present evidence of offsets before
continued on next page . . .
SUPREME COURT
OF
NEVADA
11
1947A
Conclusion
In light of the above, and since we have considered CSA's
remaining contentions and concluded that they lack merit, we
ORDER the judgment of the district court AFFIRMED.
J.
Gibbons
Douglas
Saitta
cc: Hon. Kathleen E. Delaney, District Judge
Patti, Sgro & Lewis
Hitzke & Associates
Susan Frankewich, Ltd.
Wilson, Elser, Moskowitz, Edelman & Dicker, LLP/Las Vegas
Gordon & Rees, LLP
Eighth District Court Clerk
. . . continued
the special master; it was only precluded from using construction defect
evidence in doing so.
SUPREME COURT
OF
NEVADA
12
(0) 1947A