Maya I-215, Llc v. Moore ( 2013 )

 order of dismissal. They also question whether Pengilly Robbins Slater
Bell's representation of Maya violates the Nevada Rules of Professional
Conduct. We remand this issue for further consideration by the district
court.
I.
Maya and Screaming Eagle argue that the district court erred
by using the interestedness test that this court articulated in In re
AllIERCO Derivative Litig., 127 Nev. 252 P.3d 681 (2011), when it
counted member votes regarding whether or not to initiate the underlying
litigation. Moreover, they maintain that the vote was unnecessary
because the district court misinterpreted Maya's operating agreement
when it held that a majority of Maya's members may override a manager's
decision to institute litigation.
A motion to dismiss under NRCP 12(b)(5) "is subject to a
rigorous standard of review on appeal." Buzz Stew, LLC v. City of N. Las
Vegas, 124 Nev. 224, 227-28, 181 P.3d 670, 672 (2008) (quotation omitted).
Where, as here, the district court considers documents outside the
pleadings, this court considers the order of dismissal as an order granting
summary judgment. Lumbermen's Underwriting Alliance v. RCR
Plumbing, Inc., 114 Nev. 1231, 1234, 969 P.2d 301, 303 (1998). Summary
judgment is appropriate when pleadings and evidence demonstrate that
no genuine issue of material fact remains and the moving party is entitled
to judgment as a matter of law. Wood v. Safeway, Inc., 121 Nev. 724, 729,
121 P.3d 1026, 1029 (2005).
The district court misread AMERCO. AIVIERCO involved the
interestedness of corporate officers in declining to institute litigation, 127
Nev. at , 252 P.3d at 698. AMERCO allowed the company's
shareholders to proceed with a derivative action because any demand on
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the company's officers would have been futile. Here, the district court
considered the opposite—the interestedness of a limited liability
company's members in authorizing or discontinuing litigation initiated by
the company's manager—and so the AMERCO interestedness test does
not apply.
The member vote is irrelevant if the company's operating
agreement vests authority to make the decision in the manager. Courts
routinely use contract principles when interpreting operating agreements.
1 Larry E. Ribstein and Robert R. Keatinge, Ribstein and Keatinge on
Limited Liability Companies, § 4:16 (updated 2012). If a contract is clear
and unambiguous, there is no room for interpretation and the court
enforces the contract as written. Kaldi v. Farmer's Ins. Exch., 117 Nev.
273, 278-79, 21 P.3d 16, 20 (2001).
Here, the operating agreement is unambiguous. Section 6.1 of
Maya's operating agreement establishes that Maya is a manager-managed
LLC, and under section 6.4, Maya's manager is authorized "to do all
things necessary or convenient" to carrying out the company's business,
including the "institution, prosecution and defense of any proceeding in
the Company's name." (Emphasis added). This provision does not require
the members' consent. By comparison, section 5.10 lists decisions that the
manager cannot make without consent. The end of section 5.10 then
reiterates that the authority to act on behalf of Maya, "except for the
matters set forth above or otherwise reserved to the Members . . . shall be
vested in the Manager." (Emphasis added). Together, sections 5.10 and
6.4 mandate that Maya's manager has authority to act to carry out the
company's business, subject to few limitations. And while Maya's
members have some reserved powers, such as those listed in sections 5.10
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and 5.12, nothing in the operating agreement allows members to override
a manager's business decisions, including the decision to institute a
lawsuit. Accordingly, the district court erred by dismissing the lawsuit on
the basis of the members' votes because Screaming Eagle is authorized to
act on the company's behalf until other corporate measures are taken. 1
In his answering brief, Moore argues that Pengilly Robbins
Slater Bell's representation of Maya creates a conflict of interest because
the firm previously represented manager Gayler in a related case. 2 This
court is not in a position to address this issue because the district court
has yet to do so and it appears fact-bound. But we agree that the issue of
professional ethics is one that merits review by the district court, as part
of its supervisory power over the lawyers who appear before it. Brown v.
Eighth Judicial Dist. Court, 116 Nev. 1200, 1205, 14 P.3d 1266, 1269
(2000) ("District courts are responsible for controlling the conduct of
attorneys practicing before them, and have broad discretion in
determining whether disqualification is required in a particular case.").
We therefore remand this issue to the district court with
instructions to consider whether Pengilly Robbins Slater Bell's
'For example, Maya's members may have the option of removing the
manager under section 5.10.1 of the operating agreement.
2 Moore also argues that Pengilly Robbins Slater Bell cannot
represent Maya because the Maya members voted to terminate the
company's relationship with counsel. Given that Screaming Eagle may
institute legal proceedings, it has the authority to retain legal counsel of
its choosing. Accordingly, this argument lacks merit.
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representation of Maya violates the Nevada Rule of Professional Conduct
and for such further proceedings as are appropriate in light of this order.
Based on the foregoing, we
ORDER the judgment of the district court REVERSED AND
REMAND this matter to the district court for proceedings consistent with
this order.
lebt.tuf
' , C.J.
Picke
J.
GibSons
J.
J.
cc: Hon. Elizabeth Goff Gonzalez, District Judge
Lansford W. Levitt, Settlement Judge
Pengilly Robbins Slater
Marquis Aurbach Coifing
Eighth District Court Clerk
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