MB America v. Alaska Pac. Leasing

132 Nev., Advance Opinion el
IN THE SUPREME COURT OF THE STATE OF NEVADA
MB AMERICA, INC., A NEVADA No. 66860
CORPORATION,
Appellant,
vs.
FILED
ALASKA PACIFIC LEASING FEB 0 4 2016
COMPANY, AN ALASKA BUSINESS K. LTEMAN
CORPORATION, CL is
BY kli
Respondent. EF DEP A ERK
MB AMERICA, INC., A NEVADA No. 67329
CORPORATION,
Appellant,
vs.
ALASKA PACIFIC LEASING
COMPANY, AN ALASKA BUSINESS
CORPORATION,
Respondent.
Consolidated appeals from district court orders granting a
motion for summary judgment and awarding attorney fees in a
contractual dispute action. Second Judicial District Court, Washoe
County; Lidia Stiglich, Judge.
Affirmed.
Robison Belaustegui Sharp & Low and Michael E. Sullivan, Reno,
for Appellant.
Laxalt & Nomura, Ltd., and Marilee Breternitz and Holly S. Parker, Reno,
for Respondent.
BEFORE SAITTA, GIBBONS and PICKERING, JJ.
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OPINION
By the Court, SAITTA, J.:
This opinion addresses the issue of whether a prelitigation
mediation provision in the parties' contract constitutes an enforceable
condition precedent to litigation. We hold that it does and that because
MB America, Inc. (MBA) did not initiate mediation as required under its
agreement with Alaska Pacific Leasing Company, the district court
correctly granted Alaska Pacific's motion for summary judgment.
Furthermore, because Alaska Pacific was the prevailing party under NRS
18.010, we hold that the district court did not abuse its discretion by
awarding Alaska Pacific attorney fees.
FACTUAL AND PROCEDURAL HISTORY
MBA is a Nevada corporation headquartered in Reno, Nevada,
selling rock-crushing machines, primarily for commercial purposes.
Alaska Pacific is an Alaska business based out of Anchorage, Alaska.
MBA and Alaska Pacific entered into an agreement (the Agreement),
whereby Alaska Pacific agreed to become a dealer for MBA's line of
products.
After termination of the Agreement, a dispute arose regarding
more than $100,000 in equipment purchases made by Alaska Pacific,
while acting as a dealer under the terms of the Agreement. MBA filed a
complaint in the district court seeking (1) declaratory relief that the
Agreement was valid and binding on the parties and that MBA had not
breached the Agreement, and (2) specific performance of the mediation
provision of the Agreement. Subsequently, Alaska Pacific filed a motion
for summary judgment, alleging that MBA had prematurely filed its
complaint because it had not complied with the mediation provision in the
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Agreement. The district court granted Alaska Pacific's motion.
Subsequently, the district court awarded Alaska Pacific attorney fees as a
prevailing party.
DISCUSSION
MBA argues that the district court erred in granting summary
judgment in favor of Alaska Pacific on MBA's complaint for declaratory
relief and specific performance because: (1) genuine issues of material fact
remain as to whether Alaska Pacific refused to participate in mediation as
required by the Agreement and whether Alaska Pacific's prior refusal to
mediate rendered any further attempt by MBA to mediate the dispute
futile, (2) the district court ignored the purpose and scope of declaratory
relief claims in Nevada, (3) the district court erred by dismissing the
complaint instead of staying the proceedings and ordering the parties to
mediate, and (4) the district court abused its discretion by awarding
attorney fees to Alaska Pacific.
The district court did not err in granting summary judgment in favor of
Alaska Pacific
"This court reviews a district court's order granting summary
judgment de novo." Wood v. Safeway, Inc., 121 Nev. 724, 729, 121 P.3d
1026, 1029 (2005). Summary judgment is proper if the pleadings and all
other evidence on file demonstrate that no genuine issue of material fact
exists and that the moving party is entitled to judgment as a matter of
law. Id.
The prelitigation provision in the parties' contract is a condition
precedent to litigation
Although this court has not addressed the issue of whether
prelitigation mediation provisions in a contract can constitute a condition
precedent to litigation, other jurisdictions have and held that they can. In
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DeValk Lincoln Mercury, Inc. v. Ford Motor Co., the United States Court
of Appeals for the Seventh Circuit enforced a prelitigation mediation
provision by way of summary judgment, stating that the mediation
provision was a condition precedent to litigation. 811 F.2d 326, 336 (7th
Cir. 1987). The court reasoned that the mediation clause was
straightforward in stating that it was a condition precedent to any
litigation. Id. at 335-36. This required strict compliance with the
provision. Id. at 336. Although the court entertained the argument that
the defendant's conduct constituted a waiver of the mediation right, the
court determined that a nonwaiver provision in the parties' agreement
precluded such an argument. Id. at 336-37.
Similarly, in Tattoo Art, Inc. v. TAT International, LLC, the
court noted that "[a] number of courts have found that when parties to a
lawsuit have elected not to be subject to a court's jurisdiction until some
condition precedent is satisfied, such as mediation, the appropriate
remedy is to dismiss the action." 711 F. Supp. 2d 645, 651 (E.D. Va. 2010).
The court began with the proposition that "failure to mediate a dispute
pursuant to a contract that makes mediation a condition precedent to
filing a lawsuit warrants dismissal." Id. (internal quotations omitted). In
analyzing whether a condition precedent existed, the court stated that the
agreement entered into by the parties "unambiguously provide[d] that the
parties must, at minimum, request mediation of any dispute arising from
the [a]greement prior to initiating litigation." Id. The Tattoo Art court
further stated that, "[a's with any other contract, this [c] ourt cannot
simply ignore the clear intent of the parties." Id. at 652. As such, the
court held "that [p]laintiff [had] failed to satisfy the condition precedent
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necessary to trigger the right to initiate litigation" and, absent defendant's
waiver of rights to mediation, dismissal was proper. Id.
In this opinion, we adopt the positions taken in DeValk and
Tattoo Art and hold that the mediation provision in the parties' contract is
an enforceable condition precedent to litigation.
MBA did not comply with the prelitigation mediation provision in
the Agreement
Here, as the provision at issue unambiguously addresses
mediation as a condition precedent to litigation, the terms are given their
"usual and ordinary signification." Traffic Control Servs., Inc. v. United
Rentals Nw., Inc., 120 Nev. 168, 174, 87 P.3d 1054, 1058 (2004) (internal
quotations omitted). Paragraph 13 of the Agreement, titled "Disputes and
Mediation," states:
The parties agree that any disputes or questions
arising hereunder, including the construction or
application of [the] Agreement shall be submitted
to mediation between [MBA] and [Alaska Pacific]
with the rules of the American Arbitration
Association, of which any hearing or meeting
should be conducted in Reno, NV. Any mediation
settlement by the parties shall be documented in
writing. If such mediation settlement modifies the
language of this Agreement, the modification shall
be put in writing, signed by both parties and
added to the Agreement as an attachment.
If mediation between the parties does not result in
a mutual satisfying settlement within 180 days
after submission to mediation, then each party
will have the right to enforce the obligations of
this Agreement in the court of law of Reno,
Nevada with all reasonable attorney fees, court
costs and expenses incurred by the prevailing
party in such litigation to be paid by the other
party.
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1:411,`M-1'
The commercial mediation procedures under paragraph M-2 of
the American Arbitration Association's (AAA) "Commercial Arbitration
Rules and Mediation Procedures," titled "Initiation of Mediation," states:
Any party or parties to a dispute may initiate
mediation under the AAA's auspices by making a
request for mediation to any of the AAA's regional
offices or case management centers via telephone,
email, regular mail or fax. Requests for mediation
may also be filed online via WebFile at
www.adr.org.
The party initiating the mediation shall
simultaneously notify the other party or parties of
the request. The initiating party shall provide the
following information to the AAA and the other
party or parties as applicable:
(i) A copy of the mediation provision of
the parties' contract or the parties'
stipulation to mediate.
(ii) The names, regular mail addresses,
email addresses, and telephone
numbers of all parties to the dispute
and representatives, if any, in the
mediation.
(iii) A brief statement of the nature of the
dispute and the relief requested.
(iv) Any specific qualifications the
mediator should possess.
(Emphases added.)
Paragraph 13 of the Agreement and paragraph M-2 of the
commercial mediation procedures, when read together, indicate that MBA
had a duty to follow the AAA rules regarding mediation procedures and
that those rules require MBA to submit a request for mediation to "any of
the AAA's regional offices or case management centers" in order to initiate
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mediation. MBA is also required to notify Alaska Pacific of any formal
request.
It is undisputed that MBA did not take the required actions to
initiate mediation. Thus, MBA failed to comply with a prelitigation
mediation provision in the Agreement before filing its action in the district
court. Nevertheless, MBA argues that it was not required to comply with
the prelitigation mediation provision.
MBA's failure to comply with the prelitigation mediation provisions
in the Agreement preclude initiation of litigation
MBA contends that it was not required to first exhaust
mediation with the AAA, given Alaska Pacific's prior rejections of MBA's
informal mediation requests. MBA disagrees with the district court's
characterization of a mediation provision as an "administrative remedy,"
but contends that even if it were, "it is well established that the
exhaustion doctrine only applies to available administrative remedies."
MBA relies on Malecon Tobacco, LLC v. State, Department of Taxation,
118 Nev. 837, 839, 59 P.3d 474, 476 (2002), as support for the proposition
that "exhaustion is not required when a resort to administrative remedies
would be futile." MBA states that it did not file a formal request with the
AAA because it would have been futile to do so, and therefore, it did not
have to exhaust the mediation remedy prior to filing its complaint.
We agree with MBA that the district court erred in
characterizing mediation as an administrative remedy. The district court
cited no authority to support that characterization, and indeed, this court
has distinguished between mediation and administrative adjudication.
Holt v. Reg'l Tr. Servs. Corp., 127 Nev. 886, 891 n.2, 266 P.3d 602, 605 n.2
(2011) ("[T]he purpose of mediation. . . is not to adjudicate or issue
findings, instead it is a process meant to define, evaluate, make
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recommendations on issues, and try to settle issues." (citing Guzman v.
Laguna Dev. Corp., 219 P.3d 12, 16 (N.M. Ct. App. 2009))).
Although the district court incorrectly based its findings on a
mistaken assumption that a mediation provision is an administrative
remedy, it nevertheless reached the correct result. As the prelitigation
mediation provision constituted a condition precedent to litigation, and
MBA initiated litigation without complying with the prelitigation
mediation provision in the Agreement, the district court's order granting
summary judgment was proper. Saavedra-Sandoval v. Wal-Mart Stores,
Inc., 126 Nev. 592, 598-99, 245 P.3d 1198, 1202 (2010) (holding that a
district court's order will be affirmed "if the district court reached the
correct result, even if for the wrong reason").
To the extent that MBA argues that Alaska Pacific's alleged
conduct was a waiver of Alaska Pacific's right to mediation as a condition
precedent to litigation, see DeValk, 811 F.2d at 336-37, this argument also
fails. MBA provides several examples of what it claims are Alaska
Pacific's rejections of MBA's efforts to pursue mediation prior to MBA's
initiation of litigation. First, MBA proffers a letter dated February 27,
2014, in which MBA claims it informed Alaska Pacific that any disputes
arising under the Agreement needed to be sent to mediation in Reno,
Nevada. The relevant portion of the letter states:
Lastly, under paragraphs 12 and 13 of the
Agreement, any disputes or questions arising
under the application of the Agreement shall be
submitted to mediation pursuant to the rules of
the [AAA] and the hearing shall be conducted in
Reno, Nevada pursuant to Nevada law. Hopefully
this will not be necessary.
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(Emphasis added.) However, nothing in this letter indicates that MBA
requested mediation. In fact, MBA's statement that "fhlopefully this will
not be necessary" actually works against MBA's assertion because it
implies that this letter does not constitute a request for mediation.
MBA next relies on a letter that it received from Alaska
Pacific in reply to MBA's February 27, 2014, letter threatening litigation.
In relevant part, the letter states:
Please note that Paragraph 13 ("Disputes and
Mediation") of the Agreement does not apply in
this matter as we do not contest [MBA's] right to
cancel the agreement, but rather take issue with
the fact that [MBA] acted in bad faith by accepting
our payment for units which we were not obligated
to purchase and then cancelling the Agreement
less than eleven (11) months later.
Although this letter may demonstrate a belief by Alaska Pacific that
mediation did not apply, it does not demonstrate a rejection by Alaska
Pacific of a mediation request by MBA.
MBA also relies on a declaration by Miriano Ravazzolo, Chief
Executive Officer of MBA, and an affidavit of Michael E. Sullivan,
attorney of record for MBA, for its contention that Alaska Pacific rejected
MBA's requests for mediation. Ravazzolo's declaration states that
"[c]ounsel for [MBA] requested mediation in his February 27, 2014 letter
to [Alaska Pacific's] Vice President David Faulk. Unfortunately, [Alaska
Pacific] rejected that invitation for mediation . . . ." As discussed above,
contrary to Ravazzolo's declaration, the letter does not request mediation.
Therefore, there was no mediation request for Alaska Pacific to reject, and
Ravazzolo's statement does not support MBA's argument that a formal
request for mediation was futile.
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Sullivan's affidavit states that he "attempted in good faith to
obtain the consent of [Alaska Pacific] to participate in mediation." He
then states:
Additionally, after this letter was sent out I spoke
with representatives in Alaska for [Alaska Pacific]
and advised them that [MBA] would participate in
mediation but it would need to be in Reno,
Nevada. Unfortunately, [Alaska Pacific] and Mr.
Faulk ignored those requests and instead sent
threatening letters indicating that [Alaska Pacific]
would be filing suit in Alaska.
Sullivan's affidavit finally states that
[a]t no time since the filing of this lawsuit has
[Alaska Pacific] ever agreed to participate in
mediation in Reno, Nevada even though the
undersigned has requested both local Reno
counsel. . . and [Alaska Pacific's] counsel to
participate in mediation in Reno.
However, when taken in the light most favorable to MBA—that is, when
the allegations in the affidavits are taken at face value—this does not
constitute evidence that Alaska Pacific refused to engage in mediation.
Although Sullivan states that Alaska Pacific never agreed to participate in
mediation, he does not state that Alaska Pacific categorically rejected a
request for mediation. Therefore, Alaska Pacific's conduct cannot be seen
as a waiver of its right to mediation.
The complaint for declaratory relief was not ripe for judicial review
MBA also contends that the district court erred in granting
Alaska Pacific's motion for summary judgment by ignoring the purpose
and scope of declaratory relief claims in Nevada. It contends that it
appropriately sought judicial assistance to declare the obligations of the
parties to conduct mediation in Reno, Nevada, pursuant to NRS 30.030
and NRS 30.040.
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In Kress v. Corey, this court stated that the Uniform
Declaratory Judgment Act opened the door "to the adjudication of
innumerable complaints and controversies not theretofore capable of
judicial relief, and courts may now function to vindicate challenged rights,
clarify and stabilize unsettled legal relations and remove legal clouds
which create insecurity and fear." 65 Nev. 1, 25-26, 189 P.2d 352, 364
(1948) (citation omitted) (internal quotations omitted).
Kress also included the four elements that must be met before
declaratory relief may be granted:
(1) there must exist a justiciable controversy; that
is to say, a controversy in which a claim of right is
asserted against one who has an interest in
contesting it; (2) the controversy must be between
persons whose interests are adverse; (3) the party
seeking declaratory relief must have a legal
interest in the controversy, that is to say, a legally
protectable interest; and (4) the issue involved in
the controversy must be ripe for judicial
determination.
Id. at 26, 189 P.2d at 364 (internal quotations omitted); see also Doe v.
Bryan, 102 Nev. 523, 525, 728 P.2d 443, 444 (1986) (holding that the four
elements described in Kress constituted the requirements for a justiciable
controversy in a declaratory relief action).
Here, as discussed above, the issues are not ripe for judicial
review because MBA failed to comply with the mediation terms of the
agreement. Paragraph 13 of the Agreement states:
The parties agree that any disputes or questions
arising hereunder, including the construction or
application of [the] Agreement shall be submitted
to mediation between [MBA] and [Alaska Pacific]
with the rules of the American Arbitration
Association, of which any hearing or meeting
should be conducted in Reno, NV.
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(Emphases added.) There is no dispute that the Agreement provides the
formal requirements for mediation. The language of the Agreement
clearly establishes that disputes "shall be submitted to mediation." MBA
failed to comply with the terms of the Agreement by neglecting formally to
submit the dispute to mediation.
Thus, the issue was not ripe for judicial review and the district
court properly dismissed MBA's complaint for declaratory relief. Even
assuming that the complaint for declaratory relief was ripe for judicial
review, the issue is now moot because following the filing of the present
appeal, the parties participated in a mediation/settlement conference
process.
The district court did not err by refusing to stay the proceedings
MBA also contends that the district court erred by not staying
the proceedings and ordering the parties to mediate. MBA relies on NRS
38.221(6)-(7) and the unpublished order in AJS Construction, Inc. v.
Pankopf, Docket No. 60729 (Order of Summary Reversal and Remand,
September 25, 2013), 1 for this proposition. Because the authorities cited
by MBA address arbitration, as opposed to mediation, they are inapposite
here. Indeed, the United States Court of Appeals for the Eleventh Circuit
has stated that "the law of arbitration is in nearly every respect an
illogical foundation for enforcement of mediation agreements." Advanced
Bodycare Sols., LLC v. Thione Int'l, Inc., 524 F.3d 1235, 1240 (11th Cir.
'MBA's reliance on this unpublished order is misplaced. Although
amendments to the Nevada Rules of Appellate Procedure allow for citation
to unpublished orders, the amendments apply only to orders entered on or
after January 1, 2016. As the AJS Construction order was entered prior to
January 1, 2016, it is not persuasive.
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2008) (internal quotations omitted). The court also held that "because the
mediation process does not purport to adjudicate or resolve a case in any
way, it is not 'arbitration," and thus arbitration remedies, such as
"mandatory stays and motions to compel, are not appropriately invoked to
compel mediation." Id.
Accordingly, the district court did not err by refusing to stay
the proceedings.
The district court properly awarded attorney fees to Alaska Pacific as a
prevailing party
MBA argues that the district court abused its discretion in
granting Alaska Pacific's motion for attorney fees as Alaska Pacific was
not a "prevailing party because it did not succeed on any significant issue
of the case."
An award of attorney fees is reviewed for an abuse of
discretion. Albios v. Horizon Cmtys., Inc., 122 Nev. 409, 417, 132 P.3d
1022, 1027-28 (2006) (reviewing an award of attorney fees for an abuse of
discretion). An abuse of discretion can occur when the district court bases
its decision on a clearly erroneous factual determination or it disregards
controlling law. NOLM, LLC v. Cty. of Clark, 120 Nev. 736, 739, 100 P.3d
658, 660-61 (2004) (holding that relying on factual findings that are
"clearly erroneous or not supported by substantial evidence" can be an
abuse of discretion (internal quotations omitted)); Bergmann v. Boyce, 109
Nev. 670, 674, 856 P.2d 560, 563 (1993) (holding that a decision made "in
clear disregard of the guiding legal principles [can be] an abuse of
discretion").
Alaska Pacific was the prevailing party
The district court awarded attorney fees to Alaska Pacific
based on NRS 18.010(1), which provides that the "compensation of an
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attorney and counselor for his or her services is governed by agreement,
express or implied, which is not restrained by law." "A party. . . prevail[s]
under NRS 18.010 if it succeeds on any significant issue in litigation
which achieves some of the benefit it sought in bringing suit." Valley Elec.
Ass'n v. Overfield, 121 Nev. 6, 10, 106 P.3d 1198, 1200 (2005) (internal
quotations omitted). "To be a prevailing party, a party need not succeed
on every issue," LVMPD v. Blackjack Bonding, Inc., 131 Nev., Adv. Op. 10,
343 P.3d 608, 615 (2015), but the action must proceed to judgment, Works
v. Kuhn, 103 Nev. 65, 68, 732 P.2d 1373, 1376 (1987) ("[A] party to an
action cannot be considered a prevailing party within the contemplation of
NRS 18.010, where the action has not 'proceeded to judgment."),
disapproved of on other grounds by Sandy Valley Associates v. Sky Ranch
Estates Owners Ass'n, 117 Nev. 948, 955 n.7, 35 P.3d 964, 969 n.7 (2001).
An order dismissing a complaint is sufficient to find a prevailing party.
See Semenza v. Caughlin Crafted Homes, 111 Nev. 1089, 1094, 1096, 901
P.2d 684, 687, 688 (1995).
Here, the district court did not abuse its discretion by granting
attorney fees to Alaska Pacific, as a summary judgment in favor of Alaska
Pacific and dismissal of MBA's complaint were sufficient to find Alaska
Pacific a prevailing party, and as such, entitled to an award of attorney
fees under NRS 18.010. See Semenza, 111 Nev. at 1094, 1096, 901 P.2d at
687-88.
CONCLUSION
The district court did not err in granting summary judgment
in favor of Alaska Pacific because MBA did not comply with a prelitigation
condition precedent for mediation contained in the Agreement.
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Furthermore, the district court did not abuse its discretion in awarding
attorney fees to Alaska Pacific because it was the prevailing party.
Accordingly, we affirm the district court order granting summary
judgment and its award of attorney fees.
J.
We concur:
J.
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