Urban Outfitters, Inc. v. United Construction Co. ( 2021 )

UNITED STATES DISTRICT COURT 1 2 DISTRICT OF NEVADA 3 * * * 4 URBAN OUTFITTERS, INC., Case No. 3:21-cv-00109-MMD-CLB 5 Plaintiff, ORDER GRANTING MOTION TO STAY 6 v. DISCOVERY 7 DERMODY OPERATING COMPANY, [ECF No. 31] LLC, et. al., 8 9 Defendants. 10 11 Currently pending before the Court is Defendant Dermody Operating Company, 12 LLC’s (“Dermody”) motion to stay discovery, (ECF No. 31), which was joined by Defendant 13 United Construction Co. (“United”) (collectively “Defendants”), (ECF No. 32). Plaintiff Urban 14 Outfitters, Inc. (“Urban”), responded to the motion, (ECF No. 35), and Defendants replied. 15 (ECF Nos. 39, 40.) The Court has reviewed the relevant pleadings and papers, and, for the 16 reasons set forth below, the motion to stay is granted. 17 I. BACKGROUND 18 A. FACTUAL SUMMARY 19 In 2011 Urban contracted with Defendants to build a distribution and fulfillment 20 center located at 12055 Moya Boulevard, Reno, Nevada (“the Site”). (ECF No. 1 at 1-3.) 21 Defendants agreed to develop, design, and construct the center consisting of a building 22 containing approximately 462,720 square feet, associated driveways, parking areas, 23 landscaped areas, on-site utilities and facilities, and ancillary improvements on the Site. 24 (ECF No. 1-1 at 14.) The building was constructed between 2011 and 2012, and Urban 25 was provided a “Certificate of Occupancy” on February 2, 2012. (Id. at 69.) 26 27 1 Urban claims it later became aware of alleged construction defects on the Site. 2 Starting in April 2019, Urban alleges it experienced problems with the roof and its assembly. 3 (Id. at 50.) Subsequently, Urban claims it identified additional construction defects on the 4 Site, which included: (1) heaving, settlement and cracking of the asphalt and concrete 5 paving in and around the truck dock area; (2) structural failure of the exterior stairs and 6 bollards; and (3) cracking and vertical displacement of the southwest corner of the docking 7 bay structure including interior and exterior cracking of various building components. (ECF 8 No. 1 at 9.) Urban claims the origins of these issues are related to the original construction, 9 and it will have to pay for various repairs. (Id. at 9-11.) 10 B. PROCEDURAL HISTORY 11 On March 3, 2021—approximately 9 years after the construction was completed— 12 Urban filed a complaint against Defendants. (ECF No. 1.) Urban asserts various claims 13 against Defendants such as breach of contract, breach of covenant of good faith and fair 14 dealing, negligence, and breach of express warranties, which arise from the alleged 15 defective construction of the Site. (Id. at 11-16.) 16 1. MOTIONS TO DISMISS 17 In response to the complaint, United and Dermody each filed a motion to dismiss for 18 failure to state a claim. (ECF Nos. 10, 12.) In both motions, Defendants argue Urban’s 19 claims must be dismissed because: (1) the claims in the complaint are precluded by 20 Nevada’s 6-year statute of repose; (2) these claims were not revived by the Nevada 21 Legislature’s 2019 amendment to NRS 11.202, which extended the repose period to 10 22 years; (3) Urban’s contract claims are precluded by Nevada’s 6-year statute of limitations; 23 and (4) the negligence claim is barred by the economic loss doctrine. (ECF No. 10 at 9-17; 24 ECF No. 12 at 4-15.) 25 In support of its motion to dismiss, Dermody also filed a “Request for Judicial Notice,” 26 which appended several public records, which United joined. (ECF Nos. 13, 14, 17.) These 27 documents include: (1) United’s building permits for the different elements of construction, 1 dated June 28, 2011, August 2, 2011, May 19, 2011, and July 15, 2011; (2) the “Certificate 2 of Substantial Completion” for the Site issued on February 2. 2012; and (3) the “Certificate 3 of Occupancy” for the Site issued on February 2, 2021. (ECF Nos. 14, 13-2, 13-3.) These 4 documents, if judicially noticed, are critical in that they trigger the “substantial completion 5 date” as defined by Nevada’s statute of repose. (ECF No. 10 at 12.)1 6 On April 16, 2021, Urban opposed both motions to dismiss. (ECF Nos. 20, 22.) In 7 response to both motions, Urban argued: (1) the 2019 Amendments to Nevada’s statute of 8 repose, which extended the period from 6 to 10 years, retroactively applies to this case and 9 therefore the case was filed within the repose period; (2) the retroactive application of the 10 statute does not deprive Defendants of substantive rights; (3) retroactive application 11 preserves Urban’s claims under a rational basis approach; and (4) the economic loss 12 doctrine does not apply to Urban’s negligence claim because the Defendants are not design 13 professionals. (ECF No. 20 at 16-22; ECF No. 22 at 11-18.) 14 In response to United’s motion to dismiss, Urban also argued that, in the alternative 15 to dismissal, Urban should be granted leave to amend the complaint to add a new 16 defendant, GAF Materials, Inc. (“GAF”) and additional claims of fraud against United and/or 17 Dermody. (Id. at 22-23.) 18 2. MOTION TO STAY AND MOTION TO AMEND 19 On May 19, 2021, Dermody filed a Motion to Stay Discovery, which United joined. 20 (ECF Nos. 31, 32.) Dermody argues discovery should be stayed because: (1) the pending 21 motions to dismiss are dispositive of the entire case; (2) ruling on the motions does not 22 require discovery; and (3) a “preliminary peek” of the motions demonstrates Defendants’ 23 motions to dismiss will likely be granted. (ECF No. 31 at 5-6.) 24 25 1 Attached as “Exhibit A” to Urban’s Complaint is “Exhibit A-5, Appendix A”, (ECF No. 1-1 at 65-76), which is a letter prepared by Madsen, Kneppers & Associates that expressly 26 states the “Certificate of Occupancy” was received by Urban on February 2, 2012. (ECF No. 1-1 at 69.) This document, along with all other documents that constitute “Exhibit A,” was 27 attached to the Complaint. (See ECF No.1 at 17) (table of exhibits.) 1 In response to the motion to stay, Urban filed two documents. (ECF Nos. 34, 35.) 2 First, Urban filed a motion for leave to amend the complaint. (ECF No. 34.) Urban claims it 3 filed the motion for two reasons: (1) to comply with the Local Rules for requesting leave to 4 file an amended complaint; and (2) to further explain and elaborate on the basis for the 5 requested amendment it previously asserted in its opposition to United’s motion to dismiss. 6 (Id. at 1, 4.) Urban’s requested amendment seeks to add claims for: (1) fraud, deceptive 7 trade practices and civil conspiracy against United and GAF; (2) civil aiding and abetting 8 against GAF; and (3) to expand its allegations related to its breach of contract claim against 9 United. (Id. at 5-8.) 10 In addition, Urban filed an opposition to the motion to stay. (ECF No. 35.) In the 11 opposition, Urban argues the motion to amend moots Defendants’ motion to stay. 12 According to Urban, if the motion to amend is granted, the new claims for deceptive trade 13 practices, fraud, civil conspiracy, and civil aiding and abetting claims are not precluded by 14 the statute of repose and therefore a stay is not warranted. (Id. at 2.) 15 Dermody replied on May 28, 2021, which United also joined. (ECF Nos. 39, 40.) 16 Defendants argue the motion to stay should be granted because: (1) Urban failed to oppose 17 the motion to stay because it failed to address any of the substantive arguments raised in 18 the motion; and (2) the motion to amend does not “moot” the motion to stay as to Dermody 19 because none of the new claims in the proposed amended complaint are asserted against 20 Dermody and thus all the claims asserted against Dermody remain subject to dismissal 21 pursuant to the statute of repose. (ECF No. 39 at 2-4.) 22 II. LEGAL STANDARD 23 To determine if a stay is appropriate pending the ruling on a motion to dismiss, the 24 court considers the following factors: (1) whether the pending motion is potentially 25 dispositive of the case; (2) whether the motion can be decided without additional discovery; 26 and (3) whether the court is convinced that the plaintiff cannot state a claim for 27 relief. Tradebay, LLC v. eBay, Inc., 278 F.R.D. 597, 603 (D. Nev. 2011); Kor Media Group, 1 LLC v. Green, 294 F.R.D. 579, 581 (D. Nev. 2013); First Am. Title Ins. Co. v. Commerce 2 Assocs., LLC, No. 2:15-cv-832-RFB-VCF, 2015 WL 7188387, at *2 (D. Nev. Nov. 13, 3 2015). The court must take a “preliminary peek” at the merits of the underlying dispositive 4 motion in order to find whether the plaintiff can state a claim. Tradebay, 278 F.R.D. at 5 603. The “preliminary peek” does not prejudge the outcome of the motion; it merely 6 evaluates whether an order staying discovery is warranted. Id. 7 In conducting its review, the court also considers the goal of Federal Rule of Civil 8 Procedure 1, which provides that the Rules should “be construed, administered, and 9 employed by the court and the parties to secure the just, speedy, and inexpensive 10 determination of every action.” Fed. R. Civ. P. 1. With Rule 1 as its prime directive, the court 11 must decide whether it is more just to speed the parties along in discovery while a dispositive 12 motion is pending or to delay discovery to accomplish the inexpensive determination of the 13 case. See Big City Dynasty v. FP Holdings, L.P., 336 F.R.D. 507, 512 (D. Nev. 2020). 14 III. ANALYSIS2 15 A. DEFENDANTS’ MOTIONS TO DISMISS ARE DISPOSITIVE. 16 Pursuant to the Tradebay factors, the Court must first determine whether Defendants’ 17 motions to dismiss are potentially dispositive. Here, each motion primarily seeks dismissal 18 of the claims asserted against Defendants on the basis that the claims are precluded by the 19 applicable statute of repose. Nevada law imposes specific time limitations on claims arising 20 from alleged construction defects pursuant to a statute of repose. Somersett Owners Ass’n 21 22 2 The Court rejects Urban’s contention that the filing of its “Motion to Amend” moots the motion to stay. First, Urban sought to amend its complaint when it filed its opposition to 23 United’s motion to dismiss, which was filed prior to the motion to stay. (ECF No. 20 at 22- 23.) In addition, in Urban’s subsequent stand-alone motion to amend, it expressly states the 24 motion was filed to more fully elaborate on the arguments seeking amendment contained in 25 the opposition to dismiss and to comply with the Local Rules. (ECF No. 20 at 4.) Moreover, a review of the proposed amended complaint does not add new the claims against Dermody 26 and thus does not alter the arguments Dermody raised in its motions to dismiss or stay. For all these reasons, and to serve the purposes set forth in Fed. R. Civ. Pro. 1, the Court can 27 and should reach the substance of the motion to stay. 1 v. Somersett Dev. Co., Ltd., --- P.3d ---, 2021 WL 3237184, at *1-2 n.4 (Nev. July 29, 2021). 2 Unlike a statute of limitation, a statute of repose runs whether “a litigant has pursued his 3 rights diligently, but some extraordinary circumstance prevents him from bringing a timely 4 action.” Lozano v. Montoya Alvarez, 572 U.S. 1, 10 (2014). Thus, the statute of repose 5 continues to run no matter when the cause of action is discovered. FDIC v. Rhodes, 130 6 Nev. 893, 899 (2014). If a litigant does not bring a claim within the proscribed time-period, 7 the statute of repose extinguishes the claim as a matter of law. Albano v. Shea Homes Ltd. 8 P’ship, 634 F.3d 524, 536 (9th Cir. 2011). 9 If the motions to dismiss are granted, it appears most, if not all, of the claims asserted 10 in the complaint would likely be subject to dismissal pursuant to application of the statute of 11 repose. Moreover, to the extent the claims may not be precluded by the statute of repose, 12 Defendants argue in the alternative that the claims are still precluded by the applicable 13 statute of limitations and/or economic loss doctrine. Therefore, the Court finds Defendants’ 14 motions to dismiss are potentially dispositive. 15 B. NO DISCOVERY IS NEEDED TO DECIDE THE MOTIONS TO DISMISS. 16 Next, the Court must determine whether additional discovery is necessary for a ruling 17 on the motions to dismiss. Defendants argue the motions can be decided without additional 18 discovery. (ECF No. 31 at 5-6.) Urban, however, argues that the motions could not be 19 decided without additional discovery. (ECF No. 47 at 37-39.) Specifically, Urban argues 20 discovery is needed to determines the date of “substantial completion” of the project which 21 triggers the date the statute of repose began to run in this case. (Id.) The Court rejects 22 Urban’s arguments and agrees with Defendants that discovery is not necessary for 23 resolution of the motions to dismiss. 24 Under Nevada law, the statute of repose begins to run upon “substantial completion” 25 of the construction project. NRS 11.2020. “Substantial completion” is defined by statute as 26 the date on which: “(a) [t]he final building inspection of the improvement is conducted; (b) 27 [a] notice of completion is issued for the improvement; or (c) [a] certificate of occupancy is 1 issued for the improvement, whichever occurs later.” NRS 11.2055(1). Contrary to Urban’s 2 arguments, it submitted documents in support of its Complaint which expressly state that it 3 received a “Certificate of Occupancy” on February 2, 2012. (ECF No. 1-1 at 69.) Moreover, 4 even if Urban did not include this information with the Complaint, Dermody filed a “Request 5 for Judicial Notice,” which appears to contain public records that contain documents relating 6 to the inspection dates of the property, the “Certificate of Occupancy”, and the “Certificate 7 of Substantial Completion.” (ECF Nos. 13, 14.) If the District Court takes judicial notice of 8 these public records, discovery is not needed to determine the date of “substantial 9 completion,” which Nevada law expressly defines as occurring on either: the date of the final 10 inspection, the date of the notice of completion, and/or the date the certificate of occupancy 11 is issued.3 12 C. THE COURT IS CONVINCED THE MOTIONS ARE LIKELY TO BE GRANTED. 13 Finally, the Court must conduct a “preliminary peek” of the motions to dismiss to 14 determine whether a stay is warranted. In conducting this preliminary peek, it is the Court’s 15 duty is to ensure an inexpensive determination of this action, and delaying discovery would 16 prevent economic waste, since conducting discovery before the ruling on the motions to 17 dismiss would be futile. Having conducted this preliminary peek, the Court finds a stay is 18 warranted. 19 The crux of the issues presented in Defendants’ motions to dismiss are primarily 20 centered upon the application of Nevada’s statute of repose to Urban’s claims—i.e., what 21 22 3 A court may take judicial notice of a fact that is generally known and which is not 23 subject to dispute, and deemed authentic. Fed. R. Evid. 201; Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988, 999 (9th Cir. 2018). “[A] court may take judicial notice of 24 matters of public record without converting a motion to dismiss into a motion for summary 25 judgment.” Id. For purposes of this motion, this Court does not determine whether judicial notice will be taken of these documents. Rather, for purposes of ruling on the motion to stay, 26 the Court simply notes that if the District Court takes judicial notice of these documents, which is permitted under the Rules of Evidence and Ninth Circuit law, no discovery would 27 be necessary. 1 repose period applies and whether recent amendments to the repose period may be 2 applied “retroactively” to revive claims that appear to have been previously extinguished. 3 Based on the Court’s “preliminary peak” of the motions, and the Court’s review of recent 4 decisions issued by the Nevada Supreme Court, the Court is fairly convinced Defendants’ 5 motions to dismiss will likely be granted— regardless of which repose period applies. 6 Nevada’s statute of repose for construction-defect claims is defined by NRS 11.202. 7 Donnelly v. Anthony & Sylvan Pools Corp., 134 Nev. 932, 2018 WL 6818539 at *1 8 (December 21, 2018). NRS 11.202 covers all claims against a construction contractor for 9 any deficiency in “design, planning, supervision or observation of construction, or the 10 construction of an improvement . . .” regardless of the name used for the claim. NRS § 11 11.202(1); Somersett, 2021 WL 3237184, at *1-2 n.4. Prior to 2015, the deadline for the 12 statute of repose for construction claims “ranged from 6 to 12 years” after the date of 13 substantial completion, depending on the defect. Byrne v. Sunridge Builders, Inc., 475 P.3d 14 38, 41 (Nev. 2020). However, the Nevada legislature amended the statute twice, which is 15 relevant to this action. 16 First, on February 24, 2015, Nevada added a deadline to file a lawsuit against a 17 construction entity of “6 years after the substantial completion” date of the construction 18 project. NRS 11.202(1) (2015) (amended 2019). “The Nevada legislature provided that this 19 version of NRS 11.202 applies retroactively to actions in which the substantial completion 20 of the improvement to the real property occurred before the effective date [February 24, 21 2015] of this act and incorporated a one-year grace period to commence an action.” Lopez 22 v. U.S. Home Corp., No. 2:16-cv-01754-GMN-CWH, 2016 WL 6988486 at *3 (D. Nev. Nov. 23 27, 2016) (internal quotation omitted). Assuming substantial completion of the project 24 occurred in February 2012, if the 6-year statute of repose is applied Urban’s claims, these 25 claims should have been filed no later than February 2018. However, Urban did not file its 26 claims until March 2021—several years after the 6-year period expired. Thus, under the 6- 27 year statute of repose, it would appear Urban’s claims are subject to dismissal. 1 However, on October 1, 2019, the legislature further amended NRS 11.202 to replace 2 the 6-year requirement with a longer 10-year deadline instead. NRS § 11.202(1) (2019). 3 Although the 2019 amendment also contains a retroactivity clause, the Nevada Supreme 4 Court recently indicated that it has not yet determined whether the 10-year period contained 5 applies retroactively and left resolution of this issue in a recent opinion. See Somersett, 2021 6 WL 3237184, at *1-2 n.3 (“Retroactive effect of 2019 version [statute of repose] was not a 7 matter briefed by SOA” and thus 2015 version applied to case). 8 Moreover, in this case, retroactive application of the 2019 amendment presents a far 9 more complex issue. Here, under the 2015 amendments, Urban’s claims were extinguished 10 in 2018. If the 2019 amendment applies retroactively to Urban’s claims, it would effectively 11 revive claims that were previously extinguished prior to the enactment of the recent 12 amendment. Courts are divided on this issue. At this point, the Nevada Supreme Court nor 13 the Ninth Circuit Court of Appeals has ruled on whether the most recently amended statute 14 can revive claims that were “extinguished” by the tolling of the previous statute of repose. 15 Most courts that have addressed this issue have determined that revival of an 16 extinguished claim under these circumstances would violate a defendant’s due process 17 rights. See, e.g., Harding v. K.C. Wall Prod., Inc., 250 Kan. 655, 669 (1992) (“The legislature 18 cannot revive a cause of action barred by a statute of repose, as such action would 19 constitute the taking of property without due process.”) (emphasis in original); Catholic 20 Bishop of N. Alaska v. Does 1-6, 141 P.3d 719, 725 (Alaska 2006) (“Had the legislature 21 intended to revive time-barred civil claims, it would have explicitly stated so.”) If the District 22 Court agrees with these courts, it again appears all or most of Urban’s claims—whether in 23 the current complaint or proposed amended complaint—would be subject to dismissal. 24 The undersigned recognizes that the District Court may disagree and find that 25 dismissal is not proper. However, based on the undersigned’s review of the motions, 26 statutes, and caselaw, this Court is fairly convinced that Defendants’ motions to dismiss are 27 likely to be granted. 1 Based on the above analysis and review, the Court finds that each of the Tradebay 2 factors supports staying discovery and, therefore, Defendants’ Motion to Stay Discovery 3 should be granted. 4 IV. CONCLUSION 5 Accordingly, the motion to stay (ECF No. 31) is GRANTED. 6 Discovery will be stayed until a ruling is made on the motions to dismiss. 7 IT IS SO ORDERED. 8 DATED: _A_u_g_u_s_t _1_3_, _2_0_2_1__. __ 9 UNITED STATES MAGISTRATE JUDGE 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27