The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 8:45 a.m., on Wednesday, March 10, 1999, in Room 2149 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Senator Mark A. James, Chairman

Senator Mike McGinness

Senator Maurice Washington

Senator Dina Titus

Senator Valerie Wiener

Senator Terry Care

COMMITTEE MEMBERS ABSENT:

Senator Jon C. Porter, Vice Chairman (Excused)

GUEST LEGISLATORS PRESENT:

Senator Dean A. Rhoads, Northern Nevada Senatorial District

STAFF MEMBERS PRESENT:

Janice McClure, Committee Secretary

OTHERS PRESENT:

Chairman James opened the meeting by introducing four bill draft requests (BDRs).

Chairman James asked for a motion for committee introduction of the BDRs.

Chairman James opened the hearing on Senate Bill (S.B.) 314.

Senator Dean A. Rhoads, Northern Nevada Senatorial District, stated this particular issue had to do with the City of West Wendover judgeship. Senator Rhoads thanked Chairman James for expeditiously introducing S.B. 314. He then introduced David M. Stanton, Deputy City Attorney, City of West Wendover and Jim Eveleth, City Council, City of West Wendover, who will testify on this bill. Senator Rhoads provided the Senate Committee on Judiciary with suggested amendments to S.B. 314 (Exhibit C).

Mr. Stanton proposed an amendment to Nevada Revised Statutes (NRS) 5.020 relating to the election of municipal judges. He indicated the City of West Wendover is faced with a conflict between NRS 5.020, which only allows the selection of a municipal judge by election or by the use of a justice of the peace as an ex officio municipal judge, and NRS 266.405, which provides for the appointment of municipal judges. He said the City of West Wendover wants to have the flexibility as a general charter city to appoint municipal judges and select their terms. He continued with reference to Exhibit C. The City of West Wendover is proposing to incorporate NRS 266.405 into NRS 5.020 by adding the language "except otherwise provided in subsection 2 or NRS 266.405," which would create an exception to NRS 5.020 allowing for the appointment of municipal judges. Mr. Stanton said the current statutes do not allow the City of West Wendover to appoint a municipal judge without violating NRS 5.020. He continued the cities of Elko, Wells, Gabbs and Yerington all contain provisions in their charter allowing municipal judges to be appointed and the City of West Wendover does not have that option because it is a general law city.

Senator Care said he wanted the City of West Wendover to get what they need, but he does not want it to have an effect on Clark County. He asked for an explanation of the difference between general city law and charter city law.

Mr. Stanton replied there are three classes of cities. Cities of the third class do not have a special charter as Las Vegas does. The City of West Wendover is one of the few cities without a special charter and cities such as this have to rely on NRS chapter 266 in lieu of their charter. Mr. Stanton furthered he did not see anything in this amendment that would have any adverse impact on chartered cities.

Mr. Eveleth clarified the City of West Wendover is a general law city that follows all statute requirements of NRS chapter 266. He added Las Vegas and several other larger cities in Nevada are charter cities governed by a specific charter. He continued the only exceptions allowed in NRS chapter 5, which applies to municipal judges, is for charter cities to write into their charter how they appoint or elect their officials. He said NRS chapter 266 specifically spells out how general law cities are to accomplish that process as well. Mr. Eveleth furthered NRS chapter 5 currently seems to take precedent in setting the terms of the judgeships for 1 year, compared to the conflict that exists in NRS 266.405 allowing appointment or election of municipal judges for a term of 4 years. He said the City of West Wendover does not know which statute to follow and this particular change would reference NRS chapter 5 to NRS 266.405 for general law cities.

Brad Wilkinson, Committee Counsel, Legal Division, Legislative Counsel Bureau, said in looking at the proposed change it appeared the exception in NRS 266.405 is placed in the first sentence which seems to only make it an exception to the election requirement and does not really affect the term.

Thomas J. Grady, Lobbyist, Nevada League of Cities and Municipalities, addressed Senator Care’s concern stating there are six charter cities governed by NRS chapter 266 and the other 12 cities are special charter cities having their own charter under which they are governed. He continued the City of West Wendover is a city of the third class which is a city between 0 and 5,000 population, a city of the second class is between 5,000 and 20,000 population and a city of the third class is over 20,000 population. He suggested the elimination of the 1-year term because nobody is elected or appointed for a 1-year period of time. He would like the bill to provide for municipal judges to hold office for a period of time fixed by ordinance or by the city charter in which the judge shall hold office for a longer period.

Chairman James asked how that was different from the existing bill. Mr. Grady replied one of the problems is that the current statute provides the judge shall hold office for 1 year. He would like the statute changed providing judges to hold office for a period of time fixed by ordinance adopted by the city or by the city charter. Mr. Grady pointed out NRS chapter 266 states the judges will hold office for 4 years.

Chairman James reiterated the amendment language is "except as otherwise provided in subsection 2, or NRS 266.405."

Senator Care asked if the amended language would permit a city like Las Vegas to have a choice of using an ordinance or a charter. Mr. Grady said that is the intent. Chairman James asked if the charter has to be changed by the Legislature. Mr. Grady said yes, or by a vote of the people, but he has never seen it done by a vote of the people. He continued the process of adopting an ordinance would involve public hearings whereby the ordinance has to be read at two meetings and then adopted at an open meeting.

Senator Washington asked if there would still be city elections for the judgeship. Mr. Grady replied not all cities elect their judges and pointed out that most smaller cities appoint judges.

Senator Wiener asked Mr. Grady if he had gotten any feedback from some of the municipal judges in some of the larger cities on this issue. Mr. Grady said he had just received this information yesterday, so he has not had an opportunity to get any feedback from other municipal judges. He said the administrator of the Sparks court may want to address this as he is present at this hearing.

Senator Care commented this issue could be addressed by including language that "in the case of a general law city, as determined by ordinance," and then the rest of the cities just staying with their charters. Mr. Grady said the addition of NRS 266.405 will provide for election or appointment of the judges.

Senator Washington asked Mr. Grady if he was suggesting foregoing the legislative process of setting the terms for municipal judges so the cities would do it themselves either through ordinances or city charter. Mr. Grady replied that was correct. Senator Washington furthered in that case the Legislature would delegate the responsibility down to the local municipalities. Mr. Grady replied not necessarily in that if a city wants to change its charter, it would come back to the Legislature. Senator Washington asked if the terms would be established either by ordinance or by the charter which initially is established by the legislative body. Mr. Grady said he believed NRS 5.020 provides for a 1-year term and he does not know of anyone who is selecting a judge for 1 year. He furthered most judgeship terms are running 4 to 6 years.

Senator Washington said he was concerned the legislative body would be relegating its responsibility down to the local municipalities to determine the terms of municipal judges.

Chairman James stated this bill will provide a judge must be chosen by election unless referral is made to NRS chapter 266 which provides the judges have to be elected, except for the third class cities wherein the mayor, with the advice and consent of the city council, can appoint all such officers, including municipal judges, which may be deemed expedient. He furthered those appointed officers shall hold their respective offices at the pleasure of the mayor and the city council. Mr. Grady said that will not change.

Chairman James asked whether the judges have a term of office. Mr. Grady responded if the judges are appointed, they work at the pleasure of the mayor and the council.

Mr. Eveleth said several of the smaller cities utilize their municipal judge as the elected justice of the peace for the county of the particular area. He continued the City of West Wendover appoints its officials for a term of 2 years which coincides with all elections. If the justice of the peace is changed by an election of the people, then the City of West Wendover would appoint the newly elected justice of the peace to the municipal court position as well.

Chairman James said that did not answer his question because NRS 5.020 provides that the governing body of a city, with the consent of the board of county commissioners and the justice of the peace, may provide that the justice of the peace in the township in which the city is located is ex officio the municipal judge of the city. Mr. Eveleth stated the city of West Wendover currently operates that way and would like the change so the city can have the option as it grows to appoint or elect a new municipal judge that is not the justice of the peace.

Chairman James pointed out NRS 266.405 provides which offices the city must have, and that includes a municipal judge, city attorney, treasurer and a clerk. He said the bill presented by Senator Rhoads addressed the municipal judges’ term, and the Senate Committee on Judiciary agreed to hear the bill so the judge did not have to run every year. But now the issue seems to be more about whether the judges should be appointed or elected and it is complicating the matter. He suggested changing the statute giving the judges a term of 4 or 6 years and then let the judges run for election if that is what they have to do.

Mr. Grady said if the Senate Committee on Judiciary chose to do that, the Nevada League of Cities would still like to see the language "shall hold office for 1 year" eliminated. Otherwise an election would have to be held every year.

Chairman James said the way it reads now is "1 year unless a longer period is fixed by the charter." He continued the representatives of the City of West Wendover are saying that is fine for cities that have a charter. Chairman James furthered the matter can be fixed by the Legislature so cities that are not charter cities do have a term.

Mr. Grady said he just wanted it understood that general law cities do not have the election each year. Chairman James said if the NRS 266.405 language is put in NRS 5.020, and the language about an ordinance adopted by the city is maintained, that would take care of the term issue.

Senator Wiener indicated the language "appointed at the pleasure" does not mean to her appointed for a term. Mr. Grady said NRS chapter 266 provides any appointed city officer works at the pleasure of the council. Senator Wiener said "appointed at the pleasure" means an official could be let go at any time the city council desires.

Mr. Stanton pointed out since 1907 all of the appointed positions have been at the pleasure of the mayor and the city council. Mr. Eveleth stated the statute provides it is at the mayor’s and council’s pleasure and that the council has to ratify any decision made by the mayor.

Mr. Stanton further pointed out NRS 5.020, with respect to having the justice of the peace act as the ex officio municipal judge, operates very much the same way. He added although the justice of the peace is an elected position, the governing body of the city with the consent of the board of county commissioners and the justice of the peace, may also effect a very similar appointment. He said he is only asking to be able to appoint a municipal judge who is not a justice of the peace.

Chairman James stated Mr. Wilkinson confirmed there is an internal conflict with the existing law. The cross-references do not yield a consistent result.

Stephen W. Driscoll, Lobbyist, City of Sparks Municipal Court, said he was testifying strictly on behalf of the Sparks Municipal Court and judges on the original bill as it was written. He addressed allowing the city to make changes in terms as needed either by charter or by ordinance if caught in between a legislative period of time.

Chairman James asked if Mr. Driscoll supported the bill as it was drafted. Mr. Driscoll said the bill as originally drafted was fine with the City of Sparks, but he recognized there are some other issues.

Senator Wiener asked if it would be procedural for the city to adopt an ordinance and then come back to the Legislature and get the charter changed. Mr. Driscoll said with the rapid growth of the City of Sparks, something which normally would be charter activity may need to be handled in between legislative sessions. The city would adopt an ordinance and this bill would allow the city to decide whether it was necessary to come back to the Legislature and update the charter to match the ordinance or just leave the charter as it was.

Senator Wiener said it sounded like that would give a city the opportunity to test out whether or not the change would work before changing the charter and then having to change it back again.

Robert Crowell, Lobbyist, Nevada Judges Association, said he had no difficulty with the bill as originally drafted and presented. He added that he needs to give some more thought to the term issues being amended into the bill before he can formulate a recommendation to the Senate Committee on Judiciary. He continued before the committee processes the bill further, he would like the opportunity to see the language defining "elected" and "appointed."

Being no further testimony, Chairman James closed the hearing on S.B. 314 and opened the hearing on Senate Concurrent Resolution (S.C.R.) 19.

Chairman James commended John H. O. LaGatta, Investment Banker, Concerned Citizen, on the detailed documentation he had submitted on this issue and also indicated that Dean Heller, Secretary of State, had a videotape which would be a good introduction to Mr. LaGatta’s testimony. He also explained S.C.R. 19 is proposing an interim study, and that normally this bill would go to the Senate Committee on Legislative Affairs and Operations for review. However, Senator Raggio had asked the Senate Committee on Judiciary to hear this bill first and then make some recommendations to the other committee.

Mr. LaGatta submitted a copy of his prepared testimony with relevant documentation supporting S.C.R. 19 (Exhibit D. Original is on file in the Research Library.). He said the bill is a strong concept for generating revenue within the range of the traditions of Nevada. Mr. LaGatta continued the bill pertains exclusively to the establishment of a chancery court, but there are other formulations of a business-oriented court he would like the Legislature to take into consideration. He further stated that the Legislature should also consider seeking more corporate financial-type revenues at the same time rather than having a commission just analyze a court. He then suggested viewing Mr. Heller’s videotape (Exhibit E. Original is on file in the Research Library.).

Mr. LaGatta said after viewing the videotape that it keyed in some of the relevant issues of S.C.R. 19. He suggested Nevada look to Delaware law. Chairman James pointed out the Nevada Legislature has been borrowing from Delaware law in adopting some of its new corporation law changes. Mr. LaGatta said he was aware of the Legislature using Delaware law in drafting S.B. 61. He furthered he believes Nevada has done a very good ad hoc job of attracting corporations and added, in terms of corporations per capita, Nevada is second in the country to Delaware. He said the chancery court is just part of the picture and is hoping S.C.R. 19 will be amended to state the study for a chancery court also includes the concept of attracting a lot more corporate business. Mr. LaGatta stated the underscoring point here is that Nevada’s population is growing at about 5 percent a year while gaming revenues are declining by virtue of competition.

Mr. LaGatta indicated that Delaware chancery court judges are specialists and experts in business law who promptly resolve cases with consistency and suggested Nevada consider specialized expert judges who are not slowed down by criminal, tort, or family law.

Chairman James asked if these judges are appointed or elected in the other states. Mr. LaGatta replied it would take him another week or so to make a survey of appointed/elected judges.

Mr. LaGatta suggested Nevada go after entities formed as special purpose bankruptcy remote entities, trust businesses, and the like. He said he felt strongly that the business court and the secretary of state’s office can generate private sector activities. He furthered if Nevada has the corporations and the court has the jurisdiction, then the local bar will be trying the cases which are important to the community. He added the fees should be higher than are currently being charged and there should be annual charges for corporations in order for Nevada to build up a revenue base.

Senator Titus asked if this procedure would take a constitutional amendment as in the creation of family court. Mr. Wilkinson said he thought it would.

Mr. LaGatta asked if it would be possible to have certain judges dedicated to business law alone. Mr. Wilkinson said he thought that would be possible.

Mr. LaGatta asked if the study group would be most constructively arranged if the idea was to look for objectives and then design a way of getting there to see whether or not a constitutional amendment is needed. Senator Titus said that could be a big part of the interim study committee’s concern.

Chairman James indicated the court of chancery has jurisdiction to hear and determine all matters and causes in equity. He added from reading a printout describing Delaware’s court of chancery that the court consists of one chancellor and four vice chancellors who must be nominated by the governor and must be confirmed by the senate for 12-year terms. He furthered from reading Delaware’s description that the chancellor and vice chancellors must be learned in the law and must be Delaware citizens.

Mr. LaGatta pointed out Delaware’s chancery court has proved to be quite pragmatic and equitable and has been overruled by their supreme court a number of times. He suggested Nevada seek a merged legal system in the creation of a chancery court to prevent the problems Delaware has faced in its legal system.

Dean Heller, Secretary of State, said he believed his video presentation would give the Senate Committee on Judiciary a good idea of what is going on in Delaware and what Nevada is competing against. He then presented two charts to the committee demonstrating the activities occurring in the Office of the Secretary of State (Exhibit F). He pointed out that Delaware produces roughly $300 million in revenue a year in contrast to the $30 million in revenue Nevada produced last year. He continued everything that was seen in the video is what the Office of the Secretary of State does as far as service and timeliness of service, and that even the fee structure is very close. He stressed the only difference between Nevada and Delaware is the stability with the chancery court system. Mr. Heller said the Office of the Secretary of State supports S.C.R. 19 in concept and would like further discussion.

Donald J. Reis, Chief Deputy Secretary of State, Office of the Secretary of State, said he practiced mostly business law as a private attorney in Michigan for 12 years and set up a lot of new business entities. He emphasized that he used Delaware law a great deal because of the certainty of it. He continued he had testified in a $4 million Delaware case which was disposed of in a 1½-day trial because the chancellor really understood the case and took a very active part in the proceedings. Mr. Reis said he thought the idea of a business court in Nevada would be a great asset.

Chairman James said if S.C.R. 19 passes, Mr. Reis’ participation and testimony for the interim committee would be extremely helpful. He pointed out Mr. LaGatta’s suggestions need to be considered in expanding the interim study by addressing not only the chancery court, but also a broader study of revamping Nevada’s corporate codes and fee structure to encourage economic development in Nevada. He continued the resolutions need to set out the purpose and scope of the investigation of the interim committee. Chairman James suggested giving the Senate Committee on Judiciary a chance to review Mr. LaGatta’s papers prior to a work session on the bill and proposed amendments. Mr. LaGatta volunteered to make himself available to answer questions of the Senate Committee on Judiciary.

There being no further testimony, Chairman James closed the hearing on S.C.R. 19 and adjourned the meeting at 10:05 a.m.

RESPECTFULLY SUBMITTED:

Janice McClure,

Committee Secretary

APPROVED BY:

Senator Mark A. James, Chairman

DATE: