Mitchell v. Nype

IN THE SUPREME COURT OF THE STATE OF NEVADA
DAVID J. MITCHELL; LAS VEGAS No. 80693
LAND PARTNERS, LLC; MEYER
PROPERTY LTD.; ZOE PROPERTY,
LLC; LEAH PROPERTY, LLC; WINK FILE
ONE, LLC; AQUARIUS OWNER, LLC;
SEP 2 2022
LVLP HOLDINGS, LLC; AND LIVE
BROWN
WORKS TIC SUCCESSOR, LLC, CL EME COURT
Appellants, BY
DEP
vs.
RUSSELL L. NYPE; REVENUE PLUS,
LLC; AND SHELLEY D. KROHN,
Res ondents.
ORDER AFFIRMING IN PART, VACATING IN PART, AND
REMANDING
This is an appeal from a final judgment in an action for
fraudulent conveyance, civil conspiracy, and alter ego liability. Eighth
Judicial District Court, Clark County; Elizabeth Goff Gonzalez, Judge.
This case concerns respondents Russell Nype and Revenue
Plus, LLC's (collectively Nype), ongoing attempt to collect an approximately
$2.6 million judgment that they had previously been awarded against
appellant Las Vegas Land Partners, LLC (LVLP), and several other related
entities owned by appellants David Mitchell and Barnet Liberman.' Nype
1Although Liberman and related entity Casino Coolidge, LLC, did not
participate in this appeal, we nevertheless elect to treat them as appellants.
See Bullion Mining Co. v. The Croesus Gold & Silver Mining Co., 3 Nev.
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was unsuccessful in collecting the original judgment and discovered that
Mitchell and Liberman had taken deliberate steps to divert assets away
from LVLP and the other original judgment debtors to other companies they
owned or managed, including appellants Meyer Property, Ltd.; Zoe
Property, LLC; Leah Property, LLC; Wink One, LLC; Aquarius Owner,
LLC; LVLP Holdings, LLC; and Live Works TIC Successor, LLC (all
appellants collectively referred to as Mitchell). Mitchell's actions effectively
made the original judgment debtors insolvent and prevented Nype from
satisfying the original judgment. Upon discovering Mitchell's deliberate
conduct, Nype instituted the instant action against Mitchell, asserting
claims for declaratory relief, fraudulent conveyance, civil conspiracy,
constructive trust, and alter ego liability. The district court found in favor
of Nype on his claims of fraudulent conveyance, civil conspiracy, and alter
ego liability and awarded Nype a total of $15,148,339 in compensatory
damages and roughly $4.5 million in attorney fees and costs as special
damages.
Mitchell now argues, among other things, that these two
awards were in error. As we explain below, the district court's
compensatory damages award was erroneous because it exceeded the
amount of damages Nype actually suffered. Further, we conclude that
while the district court properly awarded Nype attorney fees and costs, the
amount of the award was nevertheless erroneous because the district court
did not properly consider the factors set forth in Brunzell v. Golden Gate
National Bank, 85 Nev. 345, 455 P.2d 31 (1969).
336, 340 (1867) (stating a judgment reversed as to one appellant may also
be reversed to a non-party who is jointly liable for the same injury).
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The compensatory damages award to Nype was erroneous
Mitchell argues that the district court's approximately $15
million award to Nype in compensatory damages is erroneous because the
amount awarded exceeds the actual injury Nype suffered as a result of
Mitchell's conspiratorial conduct. Mitchell contends that the amount
awarded is equal to all of the profits he received during the conspiratorial
time period. He posits that the awarded amount, instead, should not exceed
the original judgment because that is the only injury Nype suffered:
Nype replies that the district court's award properly
compensates him for the injury suffered as a result of the conspiratorial
conduct. Namely, Nype contends that the award properly compensates him
for (1) the amount of the previous judgment, (2) lost business opportunities,
and (3) the emotional injury that he suffered.
The appropriateness of a damages award presents a mixed
question of law and fact. "Whether a party is entitled to a particular
measure of damages is a question of law reviewed de novo." Dynalectric Co.
of Nev., Inc. v. Clark & Sullivan Constructors, Inc., 127 Nev. 480, 483, 255
P.3d 286, 288 (2011) (internal quotation marks omitted). Further, the
actual amount of damages awarded is a question of fact reviewed for an
abuse of discretion. Flamingo Realty, Inc. v. Midwest Dev., Inc., 110 Nev.
984, 987, 879 P.2d 69, 71 (1994).
Historically, an award of compensatory damages is proper when
the award is limited to the amount representing the actual injury or loss
caused by the tortfeasor's wrongful conduct. Quigley v. Cent. Pac. R.R. Co.,
11 Nev. 350, 371 (1876). "The damage for which recovery may be had in a
civil [conspiracy] action is not the conspiracy itself but the injury to the
plaintiff produced by specific overt acts." Aldabe v. Adams, 81 Nev. 280,
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286, 402 P.2d 34, 37 (1965) (internal quotation marks omitted), overruled
on other grounds by Siragusa•v. Brown, 114 Nev. 1384, 1393, 971 P.2d 801,
807 (1998).
Having considered the parties' briefs and their supporting
documentation, we conclude that the district court's compensatory damages
award goes beyond merely compensating Nype for the injury he suffered.
The district court awarded Nype $15,148,339 in compensatory damages
relating to Mitchell's conspiracy to circumvent the satisfaction of the $2.6
million judgment. While the district court did not explain how this amount
properly compensates Nype, it did determine that $15,148,339 represented
the amount that Mitchell and Liberman received from the appellant entities
as distributions from 2007 to 2016. Although it is not clear if this was the
basis for the district court's award, relying on this figure would be
erroneous. The injury Nype suffered because of Mitchell's conspiracy to
evade satisfying the original judgment is not the amount of distributions
Mitchell and Liberman received during the period of the ongoing
conspiracy. Rather, the actual injury Nype suffered is the value of the
original judgment, $2.6 million, along with whatever costs were incurred,
post-judgment, attempting to satisfy the original judgment.2 The injury a
plaintiff suffers is not simply the amount a defendant may have available
2 We recognize that Nype's injury is presently greater than just the
original $2.6 million judgment because of the ongoing accrual of interest.
Further, as we discuss below, Nype's injury also includes the attorney fees
and costs incurred in litigating the instant appeal. Thus, on remand an
appropriate award will consist of two components: (1) the original judgment,
plus appropriate interest; and (2) costs and fees incurred post-judgment
while attempting to satisfy the original judgment, including the costs and
fees associated with this second suit.
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to satisfy a judgment, obtained because of their tortious conduct.3 Miller v.
Schnitzer, 78 Nev. 301, 311 n.1, 371 P.2d 824, 830 n.1 (1962) (explaining
"compensatory damages are designed to make the plaintiff whole for her
injury, without reference to the defendant's ability to pay"), abrogated on
other grounds by Ace Truck and Equip. Rentals, Inc. v. Kahn, 103 Nev. 503,
507-08, 746 P.2d 132, 135-36 (1987), abrogated on other grounds by Bongiovi
v. Sullivan, 122 Nev. 556, 583, 138 P.3d 433, 452 (2006). Further, we reject
Nype's argument that the district court's award properly compensates him
for other types of injuries he suffered, including lost business opportunities
and emotional distress. Neither the district court's order nor the record on
appeal demonstrates that Nype has presented sufficient evidence to support
his claim that he suffered these types of injuries in a manner that would be
compensable.
In summary, the district court's award goes beyond
compensating Nype for the injuries actually suffered, and instead affords
him a significant windfall. Accordingly, we vacate the district court's
compensatory damages award and remand the issue for further
consideration.
The district court's decision to award respondent attorney fees
was proper
3The district court's award effectively operates as a disgorgement
award, which is a measure of damages that is only available where
statutorily authorized and is not a theory of recovery for a private plaintiff.
Although LVLP's trustee was permitted to participate in the proceedings,
the trustee did not assert a disgorgement claim and, therefore, recovery
measured in this manner is not appropriate.
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Mitchell contends that Nype was erroneously allowed to seek
recovery of attorney fees and costs as special damages.
This court reviews a party's eligibility to recover attorney fees,
as it implicates a question of law, de novo. Pardee Homes of Nev. v.
Wolfram, 135 Nev. 173, 176, 444 P.3d 423, 425-26 (2019). Attorney fees
may be awarded as either (1) "fees as a cost of litigation" or (2) "fees as an
element of damage [s]." Sandy Valley Assocs. v. Sky Ranch Estates Owners
Ass'n, 117 Nev. 948, 955, 35 P.3d 964, 968-69 (2001), receded from on other
grounds by Horgan v. Felton, 123 Nev. 577, 170 P.3d 982 (2007), and Liu v.
Christopher Homes, LLC, 130 Nev. 147, 321 P.3d 875 (2014); see also
Sumner Hill Homeowners' Ass'n, Inc. v. Rio Mesa Holdings, LLC, 141 Cal.
Rptr. 3d 109, 138 (Ct. App. 2012) (explaining attorney fees may be awarded
as damages or as fees, with the latter concerning an attorney's mode of
compensation and the former concerning "damages wrongfully caused by
[the] defendant's improper actions." (alteration in the original) (internal
quotation marks omitted)). Where attorney fees are awarded under the first
basis, this court has adopted the American Rule—recovery is prohibited
absent authorization by agreement, statute or rule. Pardee Homes of Nev.,
135 Nev. at 177, 444 P.3d at 426.
Nevada's flagship case addressing attorney fees as an element
of damages is Sandy Valley. In Sandy Valley, we did not adopt an express
test for determining when attorney fees are considered an element of
damages, but instead expressed that such fees are recoverable when the
fees are "the natural and proximate consequence of the [defendant's]
injurious conduct." 117 Nev. at 957, 35 P.3d at 969. We also provided the
following three examples of when attorney fees may be considered a
recoverable element of damages: (1) "when a party claims it has incurred
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attorney fees as foreseeable damages arising from tortious •conduct or a
breach of contract," id. at 956, 35 P.3d at 969; (2) when a party incurs fees
"in recovering real or personal property acquired through the wrongful
conduct of the defendant or in clarifying or removing a cloud upon the title
to property," id. at 957, 35 P.3d at 970; or (3) in "actions for declaratory or
injunctive relief.... when the actions were necessitated by the opposing
party's bad faith conduct," id. at 958, 35 P.3d at 970.
Since Sandy Valley, we have clarified when attorney fees as
special darnages are appropriate. For instance, the ability to recover under
the first example has been narrowed by requiring that the resulting
attorney fees arise from more than simply the costs incurred as part of
prosecuting a breach-of-contract action." Wolfram, 135 Nev. at 178, 444
P.3d at 426. Similarly, with respect to the second example, attorney fees
are allowable only as special damages in slander of title actions rather than
all actions prosecuting issues regarding a cloud on title. Horgan v. Felton,
123 Nev. 577, 586, 170 P.3d 982, 988 (2007). Specifically, we stated that
attorney fees are permissible as special damages
[only] in slander of title actions because "the
defendant . . . by intentional and calculated action
leaves the plaintiff with only one course of action:
that is, litigation .... Fairness requires the
plaintiff to have some recourse against the
intentional malicious acts of the defendant."
Id. at 585, 170 P.3d at 987-88 (quoting Rorvig v. Douglas, 873 P.2d 492, 497
(Wash. 1994); see also Sumner Hill Homeowners' Ass'n, 141 Cal. Rptr. 3d at
138 (reaching the same conclusion). Since Sandy Valley, we have narrowly
construed a party's ability to recover attorney fees as special damages to
instances where attorney fees were incurred because, as a result of the
defendant's intentional efforts, the plaintiff had no other choice but to
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litigate. See Liu v. Christopher Homes, LLC, 130 Nev. 147, 155-56, 321 P.3d
875, 880 (2014) (holding appellant could properly seek attorney fees as
special damages in a third-party breach of contract action against
respondent).
In conclusion, a common thread runs throughout Sandy Valley
and its progeny—attorney fees are special damages only when, due to a
defendant's intentional wrongful conduct, litigation is absolutely necessary
to vindicate the party's rights.
Mitchell contends that because Nype's action was not of the
type given as an example in Sandy Valley, his attorney fees were simply a
cost of litigation and, therefore, should not have been recoverable. We
disagree. While couched in varying causes of action, the gravamen of Nype's
complaint seeks to recover a previous judgment against LVLP, which up to
this point Nype has been unsuccessful in collecting because Mitchell has
deliberately acted in such a manner so as to prevent Nype from satisfying
the original judgment. Numerous similarities can be drawn between Nype's
situation and a cause of action for slander of title. Specifically, much like a
plaintiff who is compelled to litigate to clear title to property because of a
defendant's intentional action, here, for Nype to satisfy the original
judgment against LVLP, it has become absolutely necessary for him to bring
this instant action against Mitchell, Liberman, and all of the related
appellant entities to satisfy the original judgment. Mitchell's actions have
made the present action absolutely necessary. Nype's expenses amount to
more than just the cost of litigation, and instead constitute a portion of the
damages that have been proximately caused by Mitchell's deliberate
actions. Thus, while there are undoubtedly differences between Nype's
action and an action for slander of title, the similarities, as they relate to
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this issue, are significant. As such, we conclude that Nype was properly
eligible to recover attorney fees as special damages.4
However, While we conclude that Nype could properly seek to
recover attorney fees incurred in the present litigation5 as special damages,
we nevertheless vacate the district court's award on the grounds that the
district court failed to conduct a proper analysis of the appropriate fees
under Brunzell. Cf. Gunderson v. D.R. Horton, Inc., 130 Nev. 67, 82, 319
P.3d 606, 616 (2014) (stating a district court's failure to analyze the
appropriateness of an award of attorney fees under Brunzell constitutes an
abuse of discretion).
Accordingly, while we conclude Nype could seek recovery of
attorney fees, we nevertheless vacate the district court's judgment with
respect to its award of attorney fees. On remand, the district court is to
reconsider the appropriate amount of attorney fees in light of the Brunzell
factors and the foregoing discussion. Accordingly, we
4Alternatively,Mitchell argues that Nype failed to sufficiently plead
the request for attorney fees as special damages under NRCP 9(g). We
disagree. We construe Rule 9(g) liberally as necessitating that a party need
only "notify the opposing party and the court of the nature of the damages
and enable the preparation of a responsive pleading." 5A Charles Alan
Wright, Arthur R. Miller & A. Benjamin Spencer, Federal Practice and
Procedure § 1311 (4th ed. Update 2022). Nype, by requesting attorney fees
as part of each cause of action in the complaint, sufficiently satisfied this
standard.
5Our conclusion above only permits Nype to recover the fees and costs
incurred in this second suit. Any attorney fees and costs incurred while
obtaining the original judgment are not recoverable.
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ORDER the judgment of the district court AFFIRMED IN
PART AND VACATED IN PART AND REMAND this matter to the district
court for further proceedings consistent with this order.67
Parraguirre
, J. J.
Hardesty
J.
Cad.ish Pickering
,
Herndon
cc: Hon. Jerry Wiese, II, Chief Judge
Eighth Judicial District Court, Dept. 11
Paul M. Haire, Settlement Judge
E. Brent Bryson, P.C.
Cohen Johnson, LLC
John W. Muije & Associates
Eighth District Court Clerk
6We have also considered Mitchell's other arguments, including the
challenge to the sufficiency of the evidence, and conclude each of those
arguments are without merit. As such, we affirm the district court's order
in all other respects.
7The Honorable Abbi Silver, Justice, voluntarily recused herself from
participation in the decision of this matter.
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