Hodgman v. Las Vegas Motorcoach Partners, Llc

 Appellants brought suit in district court against their
homeowners' association, the association's board of directors (collectively,
the Association), and Las Vegas Motorcoach Partners (Partners), an entity
that extended a loan to the Association. Both groups of respondents
moved to dismiss on the ground that appellants' lawsuit was subject to
mandatory arbitration and that the district court was therefore the
inappropriate forum to resolve the parties' dispute. See NRS 38.310(1)
("No civil action based upon a claim relating to. . . Nile interpretation,
application or enforcement of any. . . bylaws, rules or regulations adopted
by an association. . . may be commenced in any court in this State unless
the action has been submitted to mediation or arbitration . . . .").
The district court agreed and granted respondents' motions.
Thereafter, respondents requested attorney fees and costs, and the district
court awarded both. On appeal, appellants contend that these awards
were improper.' We address each award in turn.
Appellants had a reasonable basis for believing that district court was the
proper forum to resolve their dispute
The district court awarded attorney fees to respondents under
NRS 18.010(2)(b), which permits such an award "when the court finds that
the claim. . . was brought or maintained without reasonable ground or to
harass the prevailing party." On appeal, appellants contend that the
district court abused its discretion in basing the awards of attorney fees on
this conclusion. See Semenza v. Caughlin Crafted Homes, 111 Nev. 1089,
'Because appellants did not appeal from the order of dismissal, we
do not address the propriety of that order.
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1095, 901 P.2d 684, 687 (1995) (reviewing a district court's award of
attorney fees under NRS 18.010(2)(b) for an abuse of discretion).
We agree. "Although a district court has discretion to award
attorney fees under NRS 18.010(2)(b), there must be evidence supporting
the district court's finding that the claim or defense was unreasonable or
brought to harass." Bower v. Harrah's Laughlin, 125 Nev. 470, 493, 215
P.3d 709, 726 (2009). Here, the district court's order failed to identify any
evidence that supported its finding, and our independent review of the
record reveals no evidence that could do so.
To the contrary, the record demonstrates that appellants
reasonably believed NRS 38.310 was inapplicable. As they explained
when opposing respondents' motions to dismiss, appellants believed that
their three causes of action could be established under principles of
common law and without resort to the Association's bylaws, rules, or
regulations. Namely, appellants' cause of action for declaratory relief
sought to void the Association's loan agreement with Partners on the
ground that it was unconscionable. Cf. Pacificare of Nevada v. Rogers, 127
Nev. , 266 P.3d 596, 598 (2011) (indicating that the doctrine of
unconscionability derives from principles of common law). Likewise,
appellants sought to establish their breach-of-fiduciary-duty cause of
action against the Association's president by showing that he had engaged
in self-dealing, thereby breaching his duty of loyalty. Cf. Shoen v. SAC
Holding Corp,, 122 Nev. 621, 632, 137 P.3d 1171, 1178 (2006) ("[T]he duty
of loyalty requires the board and its directors to maintain, in good faith,
the corporation's and its shareholders' best interests over anyone else's
interests."). Finally, appellants sought to establish their breach-of-
fiduciary-duty cause of action against the Association's directors by
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showing that some directors approved the loan agreement without
knowing what the loan's material terms were, thereby breaching their
duty of care. 2 Cf. id. ("[T]he duty of care consists of an obligation to act on
an informed basis. . . .").
In our only published opinion discussing NRS 38.310's scope,
we generally held that li]f parties dispute the interpretation and
enforcement of CC&Rs [or governing documents], they must first submit
to mediation or arbitration." Hamm v. Arrowcreek Homeowners' Ass'n,
124 Nev. 290, 301, 183 P.3d 895, 904 (2008). As explained above, the
causes of action in appellants' complaint arguably do not implicate the
Association's governing documents. While respondents may have been
able to point to various bylaws, rules, or regulations in defending against
appellants' claims, nothing in NRS 38.310 or Hamm necessarily should
have alerted appellants of the need to anticipate respondents' theories of
defense when deciding whether to file their complaint in district court.
Thus, although we need not decide whether appellants'
complaint was subject to NRS 38.310's arbitration requirement,
appellants at least had a reasonable basis for believing that the district
court was the appropriate forum to resolve their dispute with respondents.
Cf. Bobby Berosini, Ltd. v. PETA, 114 Nev. 1348, 1354-55, 971 P.2d 383,
387 (1998) (reversing an award of attorney fees under NRS 18.010(2)(b)
2 We recognize that the exact basis for appellants' cause of action
against the directors is less than clear and that certain allegations may
implicate the Association's governing documents. Nonetheless, to the
extent that the district court inferred an improper motive on appellants'
part based solely on ambiguities in their pleadings, the district court
abused its discretion.
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when "the status of Nevada law was unclear" regarding the viability of the
plaintiffs complaint). Consequently, the district court abused its
discretion in awarding attorney fees under NRS 18.010(2)(b), see
Semenza, 111 Nev. at 1095, 901 P.2d at 687, and we reverse these
awards. 3
The district court impliedlv granted additional time for respondents to file
and serve their memoranda of costs
Appellants contend that respondents failed to file and serve
their memoranda of costs within five days of when the district court
entered its dismissal order. See NRS 18.110(1) (stating that a party who
requests costs "must file with the clerk, and serve a copy upon the adverse
party, within 5 days after the entry of judgment, or such further time as
the court or judge may grant, a memorandum of the items of the costs in
the action or proceeding" (emphasis added)). Appellants acknowledge,
however, that NRS 18.110(1)'s five-day requirement is not jurisdictional,
and we have previously held that when the district court proceeds to
award costs after the five-day window has elapsed, it has impliedly
granted additional time. Eberle v. State ex rel. Redfield Trust, 108 Nev.
3 Contraryto the Association's contention, its award of attorney fees
cannot be affirmed by treating the award as a sanction imposed under
NRCP 11. For the district court to impose sanctions on its own initiative
under NRCP 11(c), it would have needed to "enter an order describing the
specific conduct" that it believed was sanction-worthy and afford
appellants an opportunity to establish otherwise. NRCP 11(c)(1)(B).
Nothing in the record suggests that the district court did this.
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587, 590, 836 P.2d 67, 69 (1992). Consequently, respondents' requests for
costs were timely and are therefore affirmed. 4
Consistent with the foregoing, we ORDER the judgment of the
district court AFFIRMED IN PART AND REVERSED IN PART.
Gibbons
Douglas
Saitta
cc: Hon. Kathy A. Hardcastle, District Judge
Robert F. Saint-Aubin, Settlement Judge
Adams Law Group
Leach Johnson Song & Gruchow
Carbajal & McNutt, LLP
Eighth District Court Clerk
4Appellants contend that the district court failed to rule on their
motion to retax costs. Because their motion was pending when the district
court granted respondents' requests for costs, appellants' motion was
impliedly denied. Bd. of Gallery of History v. Datecs Corp., 116 Nev. 286,
289, 994 P.2d 1149, 1150 (2000) (noting that the district court's failure to
rule on a request constitutes a denial of the request).
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