CAPRIATI CONSTR. CORP., INC. VS. YAHYAVI C/W 80821

137 Nev., Advance Opinion 4,1
IN THE SUPREME COURT OF THE STATE OF NEVADA
CAPRIATI CONSTRUCTION CORP., No. 80107
INC., A NEVADA CORPORATION,
Appellant,
vs.
BAHRAM YAHYAVI, AN INDIVIDUAL,
Respondent.
CAPRIATI CONSTRUCTION CORP., No. 80821
INC., A NEVADA CORPORATION,
Appellant,
vs. FILED
BAHRAM YAHYAVI, AN INDIVIDUAL,
Respondent. NOV 1 0 2021
BY
IEF DEPUTY CLERK
Consolidated appeals from a final district court judgment
pursuant to a jury verdict and a post-judgment order awarding attorney
fees in a tort action. Eighth Judicial District Court, Clark County; Ronald
J. Israel, Judge.
Affirmed.
Hutchison & Steffen, PLLC, and Michael K. Wall, Las Vegas; Law Offices
of Eric R. Larsen and Eric R. Larsen, Las Vegas; Wilson, Elser, Moskowitz,
Edelman & Dicker, LLP, and David S. Kahn and Mark Severino, Las Vegas,
for Appellant.
Prince Law Group and Dennis M. Prince and Kevin T. Strong, Las Vegas,
for Respondent.
BEFORE THE SUPREME COURT, EN BANC.
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OPINION
By the Court, PARRAGUIRRE, J.:
In this opinion, we clarify two points of law. First, evidence of
a defendanes liability insurance is admissible under NRS 48.135(2) if the
defendant first introduces evidence suggesting its inability to pay a
judgment. Second, a plaintiff represented on a contingency-fee basis may
recover the entirety of the contingency fee as post-offer attorney fees under
NRCP 68. As the district court adhered to this law when rendering its
decisions, we discern no error from these proceedings and affirm.
FACTS AND PROCEDURAL HISTORY
An employee of appellant Capriati Construction Corp., Inc.,
drove a forklift into a street travel lane and collided with respondent
Bahram Yahyavi's vehicle, resulting in injury to Yahyavi. Yahyavi brought
an action against Capriati alleging negligence, and in its answer, Capriati
denied liability. Capriati then filed a petition for bankruptcy. Following
the conclusion of Capriati's bankruptcy proceedings, the negligence case
proceeded to trial. Prior to trial, Yahyavi served Capriati with an offer of
judgment for $4 million, pursuant to NRCP 68, which Capriati rejected. In
his opening statement at trial, Yahyavi told the jury that Capriati had
discarded the forklift operator's employment file. Capriati did not object.
Yahyavi called the forklift operator as a witness, who admitted fault.
Because of conflicting schedules, two of Capriati's experts also testified
during Yahyavi's case in chief. They explained that Yahyavi's damages
were exaggerated.
After Yahyavi rested his case, Capriati elicited testimony that
its business had filed for reorganization. Yahyavi objected and moved for
sanctions on the ground that his recovery would be prejudiced by Capriati's
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intentional elicitation of inadmissible evidence suggesting to the jury that
it was unable to pay a judgment. Capriati asserted that it was rebutting
Yahyavi's allegations of spoliation. The district court agreed with Yahyavi
and, as relevant here, (1) struck Capriati's answer as to liability and
disallowed its remaining witnesses to testify, and (2) instructed the jury
that Capriati had liability insurance to satisfy any verdict. The jury
returned a $5.9 million verdict in favor of Yahyavi.
After trial, Yahyavi moved for $2.3 million in attorney fees—his
contingency fee—under NRCP 68 on the ground that the jury's verdict of
$5.9 million exceeded the $4 million offer ofjudgment that Capriati rejected
nine months before trial. The district court weighed the appropriate factors
and awarded Yahyavi $2.3 million in attorney fees.
Capriati appeals, arguing that the district court erroneously
(1) imposed case-concluding sanctions, (2) instructed the jury that it could
consider Capriati's liability insurance, and (3) awarded Yahyavi attorney
fees that were incurred before the offer of judgment was rejected.
DISCUSSION
Sanctions
Capriati argues that the district court erroneously imposed
case-concluding sanctions by striking its additional witnesses. It adds that
this constituted an unduly harsh sanction because it barred Capriati from
showing the jury evidence that Yahyavi's damages were exaggerated.
However, Capriati concedes that striking its answer as to liability was
supported by substantial evidence because its employee admitted fault at
trial.
We review a district court's sanctions order for an abuse of
discretion. MEI-GSR Holdings, LLC v. Pepperrnill Casinos, Inc., 134 Nev.
235, 242, 416 P.3d 249, 256 (2018). We employ "a somewhat heightened
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standard of review for case-concluding sanctions." Id. (internal quotation
marks omitted). Noncase-concluding sanctions, however, include those
after which a party is still able "to defend on the amount of damages."
Valley Health Sys., LLC v. Estate of Doe, 134 Nev. 634, 639, 427 P.3d 1021,
1027 (2018). We uphold noncase-concluding sanctions if substantial
evidence supports the district court's sanction order. Id. "Substantial
evidence is that which a reasonable mind could find adequate to support a
conclusion." Kolnik v. Nev. Emp't Sec. Dep't, 112 Nev. 11, 16, 908 P.2d 726,
729 (1996).
The district court struck Capriati's answer as to liability.
Because Capriati's employee admitted fault, the district court concluded
that striking Capriati's answer as to liability alone would serve as a nominal
sanction. Thus, the district court also struck Capriati's additional
witnesses. Although Capriati argues that this was a case-concluding
sanction, we disagree because it was still allowed to defend on the amount
of damages. Specifically, Capriati presented testimony from two witnesses
to show that Yahyavi's damages were exaggerated. Moreover, Capriati
commented on Yahyavi's damages in its closing argument. Thus, we are
unpersuaded that striking Capriati's additional witnesses amounted to a
case-concluding sanction.
We further conclude that substantial evidence supported the
district court's decision to strike Capriati's additional witnesses. The record
shows that Capriati intentionally elicited inadmissible testimony
describing its bankruptcy. See RPC 3.4(e) (providing that a lawyer's
allusion to any matter unsupported by admissible evidence is misconduct);
see also Geddes v. United Fin. Grp., 559 F.2d 557, 560 (9th Cir. 1977)
(explaining "that the financial standing of the defendant is inadmissible as
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evidence [to] determin[e] . . . compensatory damages"). Moreover, the
record supports the district court's conclusion that striking Capriati's
answer as to liability alone would serve as a nominal sanction because
Capriati's employee admitted fault. Because substantial evidence
supported the district coures sanctions order, it imposed sanctions within
its discretion.'
Jury instruction
Capriati argues that the district court erroneously instructed
the jury, "ECapriati] has liability insurance to satisfy in whole or part any
verdict you may reach in this case." It argues that this instruction was
prejudicial because it informed the jury that it could reach any verdict,
which violates NRS 48.135.2 Yahyavi argues that, once a defendant
introduces evidence suggesting its inability to pay a judgment, NRS
48.135(2) allows the plaintiff to introduce evidence of the defendant's
liability insurance to cure any resulting prejudice.
We review the district coures "decision to admit or refuse jury
instructions for an abuse of discretion." MEI-GSR Holdings, 134 Nev. at
237, 416 P.3d at 253 (internal quotation marks omitted). We review
'Capriati adds that this sanction was also unduly harsh because it
elicited evidence of its bankruptcy to rebut Yahyavi's allegations of
spoliation. We reject this argument because Capriati could have objected
to Yahyavi's opening statement, see NRS 47.040(1)(a), rather than eliciting
inadmissible evidence regarding its bankruptcy. We further reject
Capriati's unsupported argument that a lay juror would not understand
that the term "reorganization" is synonymous with bankruptcy.
2Insofar as Capriati argues that this jury instruction was an improper
sanction, we conclude that it was a proper curative instruction, given
Capriati's misconduct. See BMW v. Roth, 127 Nev. 122, 133, 252 P.3d 649,
656 (2011) (explaining that a curative instruction may be issued as a
sanction).
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whether the instruction "accurately states Nevada law" de novo. Id. at 238,416 P.3d at 253 (internal quotation marks omitted).
We have not addressed whether evidence of a defendant's
liability insurance is admissible under NRS 48.135(2) after the defendant
introduces evidence suggesting its inability to pay a judgment. We interpret
a statute consistently with its plain meaning. See Leven v. Frey, 123 Nev.
399, 403, 168 P.3d 712, 715 (2007). Turning to the statutory text,
1. Evidence that a person was or was not
insured against liability is not admissible upon the
issue whether the person acted negligently or
otherwise wrongfully.
2. This section does not require the exclusion
of evidence of insurance against liability when it is
relevant for another purpose, such as proof of
agency, ownership or control, or bias or prejudice of
a witness.
NRS 48.135. We have explained that NRS 48.135(2) "use[s] 'such as to
introduce a nonexclusive list." Bigpond v. State, 128 Nev. 108, 115 n.5, 270
P.3d 1244, 1248 n.5 (2012). Thus, under the plain meaning of NRS
48.135(2), evidence of liability insurance may be admissible in situations
other than those expressly listed in the statute.
Persuasive authorities lead us to conclude that evidence of a
defendanes liability insurance is admissible under NRS 48.135(2) if the
defendant first introduces evidence suggesting its inability to pay a
judgment. See Wheeler v. Murphy, 452 S.E.2d 416, 426 (W. Va. 1994)
("[O]nce the defendant offers evidence of his financial status to influence
the jury . . . , then the plaintiff may rebut such evidence by introducing
proof of the defendanes liability insurance."); see also Younts v. Baldor Elec.
Co., Inc., 832 S.W.2d 832, 834 (Ark. 1992) (holding the same).
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Capriati first introduced evidence of its bankruptcy, thereby
suggesting that it was unable to pay a judgment in favor of Yahyavi. Thus,
to cure the resulting prejudice, the district court appropriately instructed
the jury that Capriati had liability insurance to satisfy any judgment. This
instruction accurately states Nevada law, and the district court therefore
acted within its discretion.3
Attorney fees
Capriati argues that the district court erroneously awarded
Yahyavi $2.3 million in attorney fees—the 40-percent contingency fee from
the $5.9 million verdict—after Capriati rejected a $4 million offer of
judgment nine months before trial. Capriati asserts that the plain meaning
of NRCP 68 requires the district court to analyze which fees were incurred
after the offer of judgment was rejected. It further argues that, when the
plaintiff is represented on a contingency basis, district courts should apply
the lodestar method to apportion NRCP 68 fees to those earned post-offer.
Yahyavi argues that Nevada precedent interpreting NRCP 68 allows a
party to collect the entire contingency fee as post-offer attorney fees because
the contingency fee does not vest until the plaintiff prevails.
This court "review [s] an award of attorney fees for an abuse of
discretion." Logan v. Abe, 131 Nev. 260, 266, 350 P.3d 1139, 1143 (2015).
3We reject Capriati's argument that this instruction was erroneous
because it told jurors that Capriati's insurance could satisfy any verdict.
Although such language could be improper in other cases, the language
used here was warranted to cure the prejudicial effect of Capriati's
misconduct. We also reject Capriati's argument that this instruction was
improper under the collateral-source rule, which bars evidence showing
that an injured party received a collateral payment. See Khowy v.
Seastrand, 132 Nev. 520, 538, 377 P.3d 81, 93-94 (2016). Because Capriati
was the tortfeasor, this rule is inapplicable.
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In exercising that discretion, the district court must make findings under
the Beattie and Brunzell factors. See Beattie v. Thomas, 99 Nev. 579, 588-
89, 668 P.2d 268, 274 (1983); Brunzell v. Golden Gate Nat'l Bank, 85 Nev.
345, 349, 455 P.2d 31, 33 (1969). Under Beattie, the district court considers
(1) whether the plaintiffs claim was brought in
good faith; (2) whether the defendants offer of
judgment was reasonable and in good faith in both
its timing and amount; (3) whether the plaintiffs
decision to reject the offer and proceed to trial
was grossly unreasonable or in bad faith; and
(4) whether the fees sought by the offeror are
reasonable and justified in amount.
99 Nev. at 588-89, 668 P.2d at 274. Under Brunzell, the district court
considers
(1) the qualities of the advocate: his ability, his
training, education, experience, professional
standing and skill; (2) the character of the work to
be done: its difficulty, its intricacy, its importance,
time and skill required, the responsibility imposed
and the prominence and character of the parties
where they affect the importance of the litigation;
(3) the work actually performed by the lawyer: the
skill, time and attention given to the work; (4) the
result: whether the attorney was successful and
what benefits were derived.
85 Nev. at 349, 455 P.2d at 33. Insofar as an attorney-fees award invokes
a question of law, we review it de novo. See In re Estate & Living Tr. of
Miller, 125 Nev. 550, 553, 216 P.3d 239, 241 (2009).
Under NRCP 68(f)(1)(B), if an offeree rejects an offer of
judgment and fails to obtain a more favorable judgment, the offeree must
pay "reasonable attorney fees, if any be allowed, actually incurred by the
offeror from the time of the offer." (Emphases added.) NRCP 68
"authorize[s] a party who makes an offer of judgment that is not improved
8
upon to recover the reasonable attorney fees and costs incurred after the
offer of judgment was made." Logan, 131 Nev. at 265, 350 P.3d at 1142.
District courts may award NRCP 68 attorney fees based on a
contingency-fee agreement without billing records so long as the party
seeking fees satisfies the Beattie and Brunzell factors. O'Connell v. Wynn
Las Vegas, LLC, 134 Nev. 550, 562, 429 P.3d 664, 673 (Ct. App. 2018).
Consistent with NRCP 68's plain meaning, the court of appeals in O'Connell
explained that NRCP 68 attorney fees based on a contingency-fee
agreement must be limited to those fees earned post-offer." Id. However,
O'Connell did not address whether a party may recover the entirety of the
contingency fee as post-offer attorney fees. Id.We now clarify that a district court may award the entire
contingency fee as post-offer attorney fees under NRCP 68 because the
contingency fee does not vest until the client prevails.4 See Grasch v.
Grasch, 536 S.W.3d 191, 194 (Ky. 2017) (holding that "the attorney does not
possess a vested right to the actual contingent fee itself until the case is won
or settled"); see also Hoover Slovacek LLP v. Walton, 206 S.W.3d 557, 562
(Tex. 2006) (holding the same). A contingency fee is contingent on the
plaintiff prevailing, which will happen only after an offer of judgment is
rejected—never before. Our holding is consistent with public policy
justifications supporting contingency-fee agreements, see O'Connell, 134
Nev. at 559-60, 429 P.3d at 671-72, as the contingency-fee-based award
properly serves as a punishment for rejecting a reasonable offer of
4We reject Capriati's argument that the lodestar method is necessary
to apportion an award of NRCP 68 attorney fees based on a contingency-fee
agreement. See Shuette v. Beazer Homes Holdings Corp., 121 Nev. 837, 864,
124 P.3d 530, 549 (2005) (explaining district courts are "not limited to one
specific approach" in determining reasonable attorney fees).
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judgment, see MEI-GSR Holdings, 134 Nev. at 245, 416 P.3d at 258
(explaining that one purpose of NRCP 68 is to punish parties for not
accepting a reasonable offer ofjudgment). We reiterate that a party seeking
NRCP 68 attorney fees based on a contingency-fee agreement must still
satisfy the Beattie and Brunzell factors.
Based on our holding, the district court did not err by
concluding that Yahyavi was entitled to recover the entirety of his
contingency fee under NRCP 68. The district court methodically weighed
the Beattie and Brunzell factors and concluded that the attorney fees were
reasonable. Based on this record, we conclude that the district coures
application of the Beattie and Brunzell factors does not constitute an abuse
of discretion. Thus, we affirm the attorney-fees award.5
CONCLUSION
Evidence of a defendant's liability insurance is admissible
under NRS 48.135(2) if the defendant first introduces evidence suggesting
its inability to pay a judgment. Moreover, a plaintiff represented on a
contingency-fee basis may recover the entirety of the contingency fee as
post-offer attorney fees under NRCP 68, so long as that party satisfies the
Beattie and Brunzell factors. We conclude that Capriati has presented no
5Insofar as Capriati argues that the district court's application of the
Beattie and Brunzell factors constitutes an abuse of discretion, we decline
to address this argument because Capriati did not cite the record to support
any of its fact-based assertions, including those pertaining to whether its
decision to proceed to trial was in bad faith. See NRAP 28(a)(10)(A), Allianz
Ins. Co. v. Gagnon, 109 Nev. 990, 997, 860 P.2d 720, 725 (1993) ("This court
need not consider the contentions of an appellant where the appellanes
opening brief fails to cite to the record on appeal."). Thus, we cannot
conclude that the district court abused its discretion.
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meritorious claims of error. Likewise, Capriati has not shown that the
district court's sanctions order constitutes an abuse of discretion. Because
the district court correctly applied Nevada law, we affirm the final judgment
and attorney-fees order.6
1 J.
Parraguirre
We concur:
ZIA. ter-4. , C.J.
Hardesty
, J
, J.
Silver
district court also denied Capriati's motions for a new trial and
6The
to retax costs. In Capriati's notice of appeal, it states that Capriati is also
appealing these post-judgment orders. However, Capriati's briefs provided
no argument as to these motions, and therefore we affirm them. See
Edwards v. Emperor's Garden Rest., 122 Nev. 317, 330 n.38, 130 P.3d 1280,
1288 n.38 (2006) (stating that arguments unsupported by citations to
relevant authority need not be considered by this court).
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HERNDON, J., with whom STIGLICH and PICKERING, JJ.,
agree, concurring in part and dissenting in part:
I concur with the decision to affirm the district court's sanctions
order and jury instruction. I disagree, however, with the majority's
conclusion that the district court properly exercised its discretion in
awarding the entirety of the contingency fee under NRCP 68 in the manner
in which the district court did so in the underlying case.
As the majority recognizes, NRCP 68 provides for awards of
post-offer attorney fees only. Logan v. Abe, 131 Nev. 260, 265, 350 P.3d
1139, 1142 (2015). In determining whether awarding such fees is
appropriate, a district court must first consider the factors laid out in
Beattie u. Thomas, 99 Nev. 579, 588-89, 668 P.2d 268, 274 (1983), and
Brunzell v. Golden Gate National Bank, 85 Nev. 345, 349, 455 P.2d 31, 33
(1969). Gunderson u. D.R. Horton, Inc., 130 Nev. 67, 81, 319 P.3d 606, 615-
16 (2014). The fourth Beattie factor specifically requires the district court
to consider whether the attorney fees sought "are reasonable and justified
in amount." Beattie, 99 Nev. at 589, 668 P.2d at 274. Other jurisdictions
have concluded that a district court cannot determine the reasonableness of
attorney fees actually incurred post-offer based solely on a contingency-fee
agreement. Cooper v. Thompson, 353 P.3d 782, 798-99 (Alaska 2015); Ga.
Dep't of Corr. v. Couch, 759 S.E.2d 804, 815 (Ga. 2014); cf. Blanchard u.
Bergeron, 489 U.S. 87, 92-93 (1989) (concluding that a contingency-fee
agreement can be a factor in determining the reasonableness of an attorney-
fee award but is not singularly determinative).
The majority concludes that an award of the entirety of the
contingency fee is reasonable because a client who has agreed to a
contingency-fee agreement has not incurred any attorney fees until the
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judgment is entered, which occurs after the NRCP 68 offer. However, those
fees begin to be earned at the inception of the case, when the attorney's
representation of the client begins, and they continue to be earned
throughout the pendency of the case. They do not materialize only upon
entry of the judgment. Thus, while fees are not yet owed by the client at
the time of offer, they have clearly been accrued by the attorney. Indeed,
under the attorney's contingency-fee agreement with the client, if the
attorney is unsuccessful, the attorney alone is responsible for those fees.
See Couch, 759 S.E.2d at 817 (recognizing that there is a "common sense
understanding that attorneys are accruing reasonable fees as they work on
a case; they simply are not entitled to collect the amount of fees agreed to
under a contingency fee contract from their client until the conditions of the
contract have been 'nee).
This court has previously recognized that recoverable post-offer
fees are not limited to those incurred by the client. Logan v. Abe, 131 Nev.
260, 265-66, 350 P.3d 1139, 1142-43 (2015) ("Because the statute (1 [is]
limited to the costs incurred rather than the party who pays them, we
therefore hold that . . . NRCP 68 allow[s] a party to recover qualifying
attorney fees and costs that were paid on its behalf by a third party.").
Therefore, even if the client does not owe payment for his or her attorney
fees until judgment is entered, those fees have been accrued by the attorney,
and it is unreasonable to require the offeree party to be responsible for the
entirety of the contingency fee when NRCP 68 only permits recovery of fees
incurred "from the time of the offer." NRCP 68(f)(B).
Moreover, it would be unfair to require the offeree party to pay
the entirety of the contingency fee when the offeree was unaware of the
private contingency-fee agreement when he or she rejected the offer of
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(E.D. Tex. 1996). A contingency-fee agreement "is a gamble for both the
lawyer and the client, because the value of the professional services actually
rendered by the lawyer may be considerably higher or lower than the
agreed-upon amount, depending on how the litigation proceeds." Couch,
759 S.E.2d at 816. The offeree should not be forced to bear the risk the
opposing party and his or her counsel agreed to when the offeree was not
subject to that agreement. The Texarkana court aptly described why
shifting the burden to the offeree to cover the entirety of the contingency fee
is unreasonable;
If the opposing counsel, in entering into a
contingency fee agreement with a client, assumes
the risk of nonpayment, then any compensation
that opposing counsel may ultimately receive on
account of the contingency should be paid by the
client—not the opposing party that did not prevail
at trial. Similarly, when the prevailing client
assumed the risk of having to pay its counsel a large
contingency fee rather than payment by the hour,
the risk assumed by the client cannot equitably be
shifted to the party that did not prevail at trial.
After all, it was the client that struck the
contingency fee agreement with its counsel, not the
party that lost at trial.
920 F. Supp. at 711-12. Thus, without additional evidence supporting a
contingency-fee-based award, a district court cannot find that awarding the
entirety of the contingency fee as post-offer attorney fees under NRCP 68 is
reasonable.
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Further, the district court erred in finding that "there is no way
to reasonably divide a contingency fee." While O'Connell v. Wynn Las
Vegas, LLC, concluded that a district court cannot deny attorney fees
because an attorney working on a contingency-fee basis does not submit
hourly billing records, the court of appeals recognized that in order to satisfy
the Beattie and Brunzell factors, an attorney would have to submit some
sort of evidence demonstrating the reasonableness of the fees sought. 134
Nev. 550, 558, 562, 429 P.3d 664, 670, 673 (Ct. App. 2018). While a
contingency-fee agreement may be "a guidepost to the reasonable value of
the services the lawyer performed, . . . [it] is not conclusive, and it cannot
bind the court in determining that reasonable value." Couch, 759 S.E.2d at
816. This can work both ways, as there may be times when the contingency
fee does not reflect the fees incurred by the attorney and a larger or a
smaller award may be necessary, as demonstrated with additional evidence
or a lack thereof. Id. (recognizing that a larger award may be necessary
when the opposing party is "unnecessarily litigious or otherwise [fails] to
follow the law governing civil litigation in a sanctionable way"). If a party
is seeking recovery of post-offer attorney fees, that party has the burden to
provide support for the reasonableness of the fees sought, which may
include the contingency-fee agreement but should also include additional
evidence or argument.1 See O'Connell, 134 Nev. at 561-62, 429 P.3d at 672-
1The majority recognizes that there must be different approaches
available to district courts in determining reasonable attorney fees.
However, by concluding it is appropriate to award the entirety of the
contingency fee post-offer, the majority is either (1) limiting the district
court's ability to determine reasonable attorney fees under NRCP 68 when
there is a contingency-fee agreement by requiring the entirety of the
contingency fee to be awarded in these circumstances, or (2) discouraging
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73 (recognizing that there are ways to determine the reasonableness of
attorney fees sought by the party besides hourly billing records).
Therefore, I conclude that the district court abused its
discretion by awarding the entirety of the contingency fee as post-offer
attorney fees under NRCP 68 without additional support demonstrating the
reasonableness of those attorney fees having been incurred post-offer.
Accordingly, I dissent and would reverse and remand the award of attorney
fees to the district court so that it can determine what fees were reasonably
incurred post-offer.
Herndon
We concur:
, J.
Stiglich
iddit J.
Pickering (I- °I
attorneys from keeping accurate records of their time spent on contingency-
fee cases so that they can seek the entirety of the contingency fee under
NRCP 68 on the ground that they lack any evidence, other than the
contingency-fee agreernent itself, to demonstrate what fees were reasonably
incurred post-offer, see O'Connell, 134 Nev. at 562 n.7, 429 P.3d at 673 n.7
(recognizing that the best practice for an attorney working on a contingency-
fee case is "to keep hourly statements or timely billing records to later
justify the requested feee).
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