MINUTES OF THE meeting
of the
ASSEMBLY Committee on Judiciary
Seventy-Second Session
March 24, 2003
The Committee on Judiciarywas called to order at 9:07 a.m., on Monday, March 24, 2003. Chairman Bernie Anderson presided in Room 3138 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.
Note: These minutes are compiled in the modified verbatim style. Bracketed material indicates language used to clarify and further describe testimony. Actions of the Committee are presented in the traditional legislative style.
COMMITTEE MEMBERS PRESENT:
Mr. Bernie Anderson, Chairman
Mr. John Oceguera, Vice Chairman
Mrs. Sharron Angle
Mr. David Brown
Ms. Barbara Buckley
Mr. John C. Carpenter
Mr. Jerry D. Claborn
Mr. Marcus Conklin
Mr. Jason Geddes
Mr. Don Gustavson
Mr. William Horne
Mr. Garn Mabey
Mr. Harry Mortenson
Ms. Genie Ohrenschall
Mr. Rod Sherer
GUEST LEGISLATORS PRESENT:
Assemblyman Joe Hardy, District No. 20, Clark County
STAFF MEMBERS PRESENT:
Allison Combs, Committee Policy Analyst
Risa B. Lang, Committee Counsel
Carrie Lee, Committee Secretary
OTHERS PRESENT:
Renny Ashleman, Southern Nevada Homebuilders
Len Nevin, Nevada Subcontractor’s Association; and Interstate Plumbing and Air Conditioning, Las Vegas and Reno, Nevada
Matthew Sharp, Nevada Trial Lawyers Association, Reno, Nevada
Chairman Anderson:
Good morning. The Assembly Committee on Judiciary will come to order. [Roll called. The Chair reminded the Committee members and those present in the audience of the Standing Rules and appropriate meeting etiquette.] You should see in front of you the request for Committee introduction; I have three BDRs (bill draft requests). We need to take them one at a time.
· BDR 19-1282 – Limits access to records related to homeland security. (A.B. 462)
ASSEMBLYWOMAN BUCKLEY MOVED FOR COMMITTEE INTRODUCTION OF BDR 19-1282.
ASSEMBLYMAN GEDDES SECONDED THE MOTION.
THE MOTION CARRIED. (Mr. Oceguera and Ms. Ohrenschall were not present for the vote.)
· BDR 14-504 – Provides that certain money may be distributed to Peace Officers’ Standards and Training Commission and used for certain purposes. (A.B. 461)
ASSEMBLYMAN HORNE MOVED FOR COMMITTEE INTRODUCTION OF BDR 14-504.
ASSEMBLYMAN BROWN SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
· BDR 15-1283 – Makes various changes regarding manufacture, sale and use of tobacco products. (A.B. 460)
ASSEMBLYMAN GEDDES MOVED FOR COMMITTEE INTRODUCTION OF BDR 15-1283.
ASSEMBLYWOMAN ANGLE SECONDED THE MOTION.
THE MOTION CARRIED. ASSEMBLYWOMAN OHRENSCHALL ABSTAINED FROM THE VOTE.
Chairman Anderson:
I’ll sign all three of those and get them to the Floor. At the end of today we will not adjourn, but will go into recess for the potential meeting behind the Bar. Remember that today is the last day that Committee introductions can be accomplished, so there’s a slight chance that we will be meeting behind the Bar to accomplish anything else that is delivered to us. There’s the potential for maybe, three or four more bills that need to come to us before the end of the day if we’re going to get them in. Please note that Ms. Ohrenschall abstained from voting on BDR 15-1283. Ms. Ohrenschall, did you wish to state the reason for your abstention?
Assemblywoman Ohrenschall:
I am abstaining because I am the director of Cirani Incorporated, which deals in tobacco products. To avoid any possibility of any potential appearance of conflict of interest, I will be abstaining from any bills that involve tobacco.
Chairman Anderson:
Thank you for reminding me. Let’s turn our attention to the first bill of the day, Assembly Bill 317. Mr. Brown, this would be yours.
Assembly Bill 317: Revises provision pertaining to amount recoverable by contractor upon notice of lien. (BDR 9-1132)
Assemblyman David Brown, District No. 22, Clark County:
Thank you, Mr. Chairman, and members of the Judiciary Committee, for taking a few minutes with me and A.B. 317. A.B. 317 deals with Nevada’s mechanic’s lien statute and makes some minor, but important, revisions. I’ll try to be brief. By way of preface, for some of our new members on the Committee as to mechanic lien law, basically, if you have a construction project, the state has deemed that those who provide working materials to a project ought to be paid and so have provided a mechanism in the statute to give them some security in case there are payment problems, that is, a mechanic’s lien. So if they provide materials or work to a project and are not paid, they may record a lien against the property and, through the courts, foreclose on that lien. Sometimes that can be lengthy litigation. They’ve got to prove up all points of their lien, but this is a security for contractors, who have put their sweat and labor into a project.
Certain provisions in the lien statute currently require that a general contractor, or a prime contractor, have a duty to defend the owner in lien actions from subcontractors or suppliers from below. This bill keeps that in place, but it provides that that duty to defend is not upheld when the owner has failed to pay the prime contractor; to me, and to everyone who has looked at this, that only makes sense. If an owner withholds money, or loses money, and just doesn’t have money to pay, then they, of course, shouldn’t have a defense provided to them from the prime contractor. That is one correction that A.B. 317 provides. In a particular hotel litigation down in Las Vegas, the courts upheld this statutory duty, and the owner went out and hired very expensive counsel, who put about four or five associates on it. If you put four or five people on a case, you’re going to have extremely exorbitant legal fees, and it was deemed somewhat, by the industry, perhaps an abuse of this statute. This merely attempts to set that aright in the case where the owner has failed to pay.
The other substantive change is that an owner may withhold monies from the prime contractor if there is a lien recorded by a subcontractor or a supplier. However, the owner cannot withhold money if the lien was recorded due to the owner’s failure to pay, and if the prime contractor has tendered to the owner a lien release, which I think in the industry’s mind only makes sense. Those are essentially the changes in this. In subsection 4, the bill defines “prime contractor”; in current statute, it merely states “contractor,” and really, you need to clarify between the prime contractor and the lower-tier subcontractors to make a more sensible statute. With that, I’m happy to take any questions.
Chairman Anderson:
Let’s try to understand this. If I’m the owner of a home I want to remodel, and I go to a contractor to do the remodeling to build an addition to the house, and in the course of the determination of this whole thing I decide that, in addition to the actual addition to the dwelling, I may need a new heater/air conditioner unit, and a new floor, new rugs in the house as a whole, and want to do that all under the one contract, I would be able to do so. I need a new roof, because of the new addition, and therefore want the old roof and the new roof to match up, so the contractor does the whole thing. He subcontracts out to the roofer, the air conditioning unit and floor people, plumber, painter, and all the rest of those folks that are going to be involved, and now it comes to the very end, and I don’t like the way the windows fit. So I withhold from paying my contractor because I’m unhappy with something that happens along the line. How is the air conditioning guy affected, or is he?
Assemblyman Brown:
The monies that would be withheld, in my opinion, should go to the window work. I think that the owner would certainly have an obligation, still, to pay for the work that was correctly performed. You would have specifications that would have to be achieved and if the workmanship, relative to the windows, was not correctly performed, then I believe you would have the right to withhold those sums until the prime contractor had the subcontractor come out and bring that up to specification.
Chairman Anderson:
Now the only relationship I have is with the contractor; I’m happy with the floor and the air conditioning unit, but I’m not happy with the windows. How do I hold the contractor responsible if I don’t withhold my money?
Assemblyman Brown:
My position is that you could withhold the money, particularly as to the window work.
Chairman Anderson:
I guess I would need to know where the bill is, relative to the window contractor, as compared with everybody else. I don’t know what the differentiation is in my bill, I guess.
Assemblyman Brown:
I think I understand. You could sit down with the prime contractor, who, at the same time, has an affirmative contractual duty to take care of you. Some subcontractors will break down per line item what is being billed for; that’s really where that could be taken care of.
Assemblyman Horne:
Just for clarification, on page 2, about being able to withhold the contractor’s money if a subcontractor were to record a lien, are we interfering with that contractual agreement between a subcontractor and a contractor? I know that the contractor, you say, can give a lien release. Am I getting this confused?
Assemblyman Brown:
Presently, the statute states he can do that, so we aren’t changing that with this revision, but what we’re doing is creating a way to get the money flowing again. An owner just can’t hold on to the money and if there’s a lien release, he has no basis for that. The contingency, here, is first, “If the lien claimant’s notice of lien resulted from the owner’s failure to pay the prime contractor for the lien claimant’s work,” the subcontractor’s work, “materials or equipment, the owner shall not withhold the amount set forth in the notice of the lien,” the subcontractor’s lien, “from the prime contractor,” and in another contingency, “If the prime contractor tenders a release of the lien claimant’s lien to the owner.” If the owner has paid, well, he can withhold that, in my opinion, at a subsequent date, or billing. But, again, if the prime contractor is able to provide the owner with the lien release, then he doesn’t have the right to withhold. That make sense?
Assemblyman Horne:
Yes, a little bit. So if we have a subcontractor that does work without a work order, then the contractor takes it upon himself to say, “No, we don’t have approval for this; I’m not going to pay you for this work,” and the subcontractor records a lien, the owner is the one that the lien is recorded on, not the contractor. What remedy does that owner have? Does that fall into where the contractor…I’m going by the relationship between the contractor and the subcontractor.
Assemblyman Brown:
Right now under the statute, and under the revision according to this bill, I believe the prime would still have the duty to defend the owner in that instance.
Assemblyman Mortenson:
The subcontractor puts a lien against the owner. Are you saying, that at this point with the current law and the proposed law, that the contractor can get rid of that lien if it’s paid, and he would do it if he was paid?
Assemblyman Brown:
Are you asking can the prime contractor sign a lien release that is effective as to the subcontractor’s lien? No.
Assemblyman Mortenson:
OK.
Assemblyman Brown:
When it states that the prime contractor tenders a release of a lien claimant’s lien, it is a release from the subcontractor.
Assemblyman Mortenson:
It’s a release from the subcontractor, but it’s not a release from the lien? I’m not sure I understand that.
Assemblyman Brown:
No, it is what’s called a lien release in the industry, and it’s executed by the subcontractor.
Assemblyman Mortenson:
But the lien is still against the homeowner?
Assemblyman Brown:
No, the lien has been released, therefore, the withholding is no longer reasonable, and we don’t want that to take place.
Assemblyman Mortenson:
The contractor can get rid of the subcontractor’s liens; he can do a lien release?
Assemblyman Brown:
Only the party who recorded the lien can release the lien. If it is a subcontractor’s lien, only that party can release that lien, with the exception that an owner, or a prime contractor, who has a duty on behalf of the owner, goes to the court and says, “Court, this lien is not reasonable; it has to be expunged.” That’s the exception.
Chairman Anderson:
The only two people that can place a lien against the property are the prime contractor and the subcontractor.
Assemblyman Brown:
In essence, someone who provides work or materials to the project.
Chairman Anderson:
So if the warehouse sells to the subcontractor for the shingles for use on the house, can the warehouse place a lien against the property, based upon the original ownership?
Assemblyman Brown:
That’s correct.
Chairman Anderson:
So there are three: the contractor, the subcontractor, and the supplier of the material; all three of those can place it. If, for example, the owner paid the contractor 100 percent of whatever he had contracted for, and he in turn fails to pay the subcontractors, the liens still remain in place against the owner’s property, even though he paid 100 percent and then still remains liable for the workmanship and the material, because they’re on the house, and the subcontractors have not been paid, so the property still remains at risk, correct?
Assemblyman Brown:
That is correct.
Chairman Anderson:
This bill does not solve that particular dilemma.
Assemblyman Brown:
No, that is as the statute exists today. There is, however, the obligation of the prime contractor to defend the owner in those instances.
Chairman Anderson:
The owner could go to court and prove to the court that he had paid the contractor in his entirety, and the court, then, could expunge those from me. Then the warehouse and the subcontractor would then have to stand in line against the contractor, who may have misspent the dollars or gone out of business?
Assemblyman Brown:
That’s exactly correct. In fact, you shouldn’t even have to go to court; the prime is supposed to do that for you under the statute.
Chairman Anderson:
Mr. Ashleman, are you speaking on this particular piece of legislation?
Renny Ashleman, Southern Nevada Homebuilders:
[Introduced himself.] Mr. Chairman, not really, but I would suggest, if it hasn’t already been suggested by Assemblyman Brown, I came in a minute late, that you perhaps might want to hold this and work this with S.B. 206, which is coming over. It is a major revision of the lien laws to make sure we get everything coordinated. Other than that, I’m not taking a position on the bill.
Chairman Anderson:
Thank you for the indication. Anybody else who wishes to speak in support of Assembly Bill 317? Anybody wishing to speak in opposition to A.B. 317? Let’s close the hearing on Assembly 317. We’ll put it on the board to await the arrival of other bills dealing in this area. We need to get Dr. Hardy out of Government Affairs for the hearing on A.B. 338, so we’ll take a minute recess while we wait for Dr. Hardy.
Let’s open the hearing on Assembly Bill 338. Good morning, Dr. Hardy, how are you?
Assembly Bill 338: Requires Supreme Court of Nevada to adopt rules which require that before undertaking representation of client for purposes of commencing litigation, attorney must ensure that client is adequately informed about litigation. (BDR 1-803)
Assemblyman Joe Hardy, District No. 20, Clark County:
Thank you, Mr. Chair, for your courtesy, and for the patience of the Committee. I am a family physician and there is some intent, looking at what I would call “informed consent” in the medical field, and having that same kind of opportunity to happen between a client and an attorney. Assembly Bill 338 is a bill that calls for the adoption of additional rules of conduct by the Nevada Supreme Court that applies to attorneys that would require attorneys to adequately inform litigation clients, in certain areas, before undertaking to represent that client for the purpose of commencing a lawsuit on behalf of the client. To accomplish this, Assembly Bill 338 seeks to add a new provision to Chapter 7 of the Nevada Revised Statutes, which is entitled, “Attorneys and Counselors at Law.”
The additional rules of conduct that the [Nevada] Supreme Court is mandated by this bill to adopt would require an attorney to adequately inform a litigation client in areas concerning:
· The nature and purpose of the litigation being contemplated on behalf of the client
· The risks and benefits of the litigation being contemplated on behalf of the client
· The potential costs
· The potential length
· Any collateral, legal consequences associated with the contemplated litigation
· The existence of any available alternative methods of dispute resolution in lieu of commencing the contemplated litigation
The provisions of Assembly Bill 338 would become effective July 1, 2003. Giving some background to this proposal, in campaigning I came across anecdotal experiences that dealt with people who discovered that they were involved with a suit and didn’t know they were. It was somewhat problematic to be at a cocktail party and be asked why the person was suing their friend and the person would say, “I’m not,” and the friend would say, “Yes, you are.” There were also issues about financing or selling, for instance, a condo, where the person wouldn’t be in a position to sell or refinance their condo because they did not realize that their condo project, or their condo in particular, was involved with a suit, thus hanging up the financial aspects of that potential property transfer.
I handed out an exhibit marked “Informed Consent Litigation” (Exhibit C). What this would do is it would be a protection for the consumer, by allowing the consumer to have information before litigation commences. It would allow some communication that would improve the client/attorney relationship and the timeliness of resolution, while decreasing the “surprise factor” of unintended consequences.
I also see it as a potential to decrease court costs via alternative arbitration options that the client could be aware of, and therefore, opt to pursue other ways of doing things, instead of the litigation. For instance, the court now has at its disposal a short trial program, and that program, as I’m told, takes about six months, versus the three years, average, to go to court with standard litigation. The problems would have an opportunity to get fixed instead of being tied up in court, and, therefore, nobody can fix the appropriate problems that may be involved with construction defect litigation.
It would improve the reputation of the legal profession, that’s in my own mind, common sense and common courtesy would be allowed to be participated in, and endorsement of quality legal representation that is actually already happening. I think if you talk to most attorneys, they are already doing the concepts and the intent of this bill. The [Nevada] Supreme Court would adopt additional rules of conduct; it would not be Joe Hardy, it would be the [Nevada] Supreme Court that decides what rules of conduct that they would like. Looking at the concept of not restricting them to their rules of conduct, but allowing them to come up with those rules as they see needed. This would not be a penalty, but an expectation; I do not have any punitive clauses that I’m proposing, but I would encourage lay language to be used and clearly defined issues for the client in bold, and underlined, type, and to not hide things in fine print.
I would suggest that the [Nevada] Supreme Court consider the “opt-in” clause, so that when the potential client gets something in the mail and realizes that they do not have anything to do with an attorney, so they do not read it and they pitch it, they have just pitched something that says, “If you don’t return this, you are now part of the suit.” They never read it, and if they did read it, they didn’t understand it; if they understood it, they didn’t realize that they had to return it, otherwise they were included in the suit. This would also encourage the [Nevada] Supreme Court to make rules suggesting that there be notification of the contract of representation and give those specifics to the client. Mr. Chair, I’d be happy to answer any questions.
Chairman Anderson:
In mandating to the [Nevada] Supreme Court that they do something, we’ve had just a bit of trouble relative to something called the separation of powers, that, from time to time, causes us just a little bit of concern. They get to make their rules just like we get to make ours. I’m not sure that we get to do that; we can suggest. In point of fact, taking their rules and then putting them into statute is just the other way around; that becomes a problem for me. The other part of this I’m curious about is, if you’re in a gated community, or in a common ownership group, particularly in the southern part of the state where such a large percentage of the new houses are, how do you prevent your homeowner’s association from having the contractual rights and obligations that you empowered them with, or have you have anticipated that type of question? So if your homeowner’s association decides to sue some contractor for the property not draining right, the grass not being cut correctly, or because somebody didn’t follow the CCRs (codes, covenants, and restrictions), you’re part of that suit whether you want to be or not, because the homeowner’s association is supposed to be looking out for your best interests. Are you suggesting that they not be able to do that?
Assemblyman Hardy:
To answer your second question first, the gated communities, the common ownership, or the homeowner’s associations, obviously have a myriad of laws and statutes that apply to them, and this is not intending to solve all the problems in the world, of which they have many. But this is intending what I call an informed consent, or the ability for the person to know what is happening. If there is a situation where an attorney is representing somebody, then that somebody deserves to know that they are involved in a suit, and according to their contract that they sign with the homeowner’s association, or some other, they may have, indeed, made that decision to enter in to whatever the homeowner’s association says, but that does not mean that they do not have the right to know that they are involved in that suit. This is from the perspective of a physician; before we do something to somebody, we have to tell them the risks, benefits, complications, and anticipations of what could happen. I think the consumer deserves to know what is happening, and what the advantages and disadvantages are. I’m not going to try to, in this bill, change all of the homeowner’s association’s procedures, as much as to allow the attorney who is proposing to represent somebody, or representing somebody, to know the ramifications of that decision that that person has to make, before that person brings litigation.
Addressing your first question, I, being somewhat of a neophyte, felt that I was potentially treading on toes; I took the liberty of calling several of the [Nevada] Supreme Court justices and I did not get an adverse response to the bill, as far as the problematic what they could and could not do. I did not intend to be a Supreme Court justice and make these rules for them, as much as to allow them to do this in such a way that they would feel comfortable and allow some problems to be avoided by this informed consent concept.
Assemblywoman Buckley:
I guess my concern with this bill is that this is already required of a lawyer. You have to tell a client all of these things in the bill, risks and benefits, potential costs, all of this. It would be like passing a bill that says doctors have to advise patients of the nature and purpose of the surgery, and the risks and benefits—informed consent—you already do it; you are already required to do it. For those doctors or lawyers that don’t do it, you report them to the licensing board. I don’t see any need for the legislation at all.
On the issue of “opt in” and “opt out,” that’s not affected by the rules of conduct of a lawyer; that’s governed by Nevada Rules of Civil Procedure Number 23, which doesn’t have anything to do with the rules governing a lawyer; they have to do with the rules governing a lawsuit. I thought I’d air those, to see if you have any reaction to those comments.
Assemblyman Hardy:
I think your points are well taken for the recognition that there are wonderful attorneys who already do this. I had the opportunity to receive, for instance, a blurb from a firm that talks about courtesy, faith, judgment, involvement, respect, support, trust—all of those qualities are the kinds of things that happen when there is informed consent between the client and the attorney. Likewise, I went through the Nevada Revised Statutes volume 42 and looked at, because I was referred here by somebody who knew what they were doing on the [Nevada] Supreme Court, and looked at the Supreme Court rules 150–203; it was interesting going through those rules, that indeed many of these things that we are talking about are in statute. Some are not as clear as perhaps they could be, and when I looked at the reality of what’s happening of people being involved in a lawsuit and not knowing, I realized there probably is some improvement that could be done from the consumer standpoint. Yes, there may be rules that deal with lawsuits that you are better off describing than I am; I always have a layperson’s view that if there’s a lawsuit, there’s a lawyer in there that’s involved with that who would be in a position to develop that trust, respect, et cetera, that is so common in place with attorneys and their clients and that special privilege that they have working together.
Vice Chairman Oceguera:
Along the same lines, I was just refreshing my memory on the rules of professional conduct for attorneys. As I look down the list: competence, diligence, communications, fees, confidentiality, meritorious claims and contentions, expediting litigation, and candor towards the tribunal. We take a course in law school in professional conduct. We take an exam, prior to passing the bar, on professional conduct; I feel, like Ms. Buckley, that this is a slap, to be quite frank. No question.
Assemblyman Mortenson:
We have two people on this Committee who are trained very well in the law, and I’m sure when they get a notification of the type Mr. Hardy was talking about, they know what it’s all about. I just recently, about a month ago, got a very official piece of paper with extremely fine print; in a bright light with my glasses on I could barely read it. I got about halfway through the first of many pages, and I said, “The hell with this. I’ve got better things to do than read this.” I didn’t understand what I’d read in the first half anyway. Then I periodically got other notifications dealing with the same subject matter; I presumed I was in a suit. I didn’t have the foggiest idea what it was about, and wasn’t about to even try to read these multiple pages of fine print. I think that for the laymen it would be a very good idea if he received a notice like this in the first place, with big letters that say, “Unless you return this, you’re in a lawsuit,” and then give, not the “legalese” explanation, but an explanation that someone not trained in the law can understand. I’m weary of being put into a suit and not knowing what’s going on.
Assemblywoman Ohrenschall:
All I can say about the bill is, I too, don’t really see any need for it. From the very first day in law school, we’re taught about the canons of ethics; we’re told that the reason, when you pass the Bar, you gain the title “Esquire,” is that you’re expected to act among the highest code of honor that any gentleman of England in the English Common Law could have, and that there’s severe repercussions if you don’t. Believe me, the repercussions that the bar has are very severe. I think what you’re getting at here is a few bad apples that perhaps the bar is still waiting to have hearings on, because they do examine, very thoroughly, because the penalty of disbarment, or of suspension, means, as it does to doctors, the inability to earn a living. The bar will examine very carefully what it does. Every summons that is sent out has very large print on it that says, “You have been sued. You must respond by this number of days, or a default can be entered against you.” I don’t see how much plainer English you could put that in. Now, if the bar would want to, and I believe the Bar already has areas where clients can go if there’s any language that perhaps they don’t understand, but I hate to say it, but I think that people who go to court should determine that, “God helps those who help themselves,” and that they can’t just be lazy and expect the law firm to do everything for them, simply because they signed a piece of paper. If you have evidence in your study in your desk that might help that lawyer, it’s your duty to look through your records, find those things, and bring them to the lawyer. It’s your duty to go back in time and think of the history of what happened and write down something that gives the chronology, so that the lawyer knows where to start doing both fact investigation and legal investigation. I don’t have any question.
Chairman Anderson:
I am a little concerned about the bill in terms of what it’s trying to accomplish, but we’ll continue on and see where it’s going to go. Mr. Nevin.
Len Nevin, Nevada Subcontractor’s Association, and Interstate Plumbing and Air Conditioning, Las Vegas and Reno, Nevada:
[Introduced himself.] We like the premise of the bill. There are people that do fall through the cracks and don’t know something’s happening to them until it’s too late. As an example, my mother-in-law in Las Vegas is involved in a construction defect lawsuit, has been for four years, and didn’t even know it. She has no clue, was never notified, never contacted; she was just entered into a class-action suit. We feel something like this is good direction for the average, everyday person. If an attorney’s going to go out there and do a lawsuit, then it’s only right for that person to know what the end result is going to be when they hired that attorney. The possible cost, being able to make alternative dispute resolutions, and all this; I mean it’s just a natural thing a person should have a right to have. So in that respect, and, Mr. Chairman, I realize your problem with the legislative body telling the [Nevada] Supreme Court, I know the Supreme Court doesn’t like to be told what to do; we found that out before. Maybe a resolution asking the Supreme Court to codify these procedures could be a direction, I don’t know. But I think the premise of the bill is good, because people do fall through the cracks, and those people should be protected.
Assemblywoman Ohrenschall:
I was going to suggest that the only thing that I can see, and the one complaint that I do hear a lot, is because lawyers do get dragged behind, is that sometimes people will call their lawyers with a question, and it may be a couple of weeks before they get a letter in response. Part of that is because the lawyer has to make the written record of what he said and what he’s done because he’s bound by strict rules, so the only way I can see that that could be made faster would be if you required the client, also, to submit his question in writing, so that the lawyer could be sure exactly what the question is that the client is trying to express. That might speed the process up, but I think it would involve the client, also, having to submit something in writing for the record that would be absolute. Do you think that might work, Mr. Nevin?
Len Nevin:
That could possibly work. I think there’s something out there that has to be done to streamline the process and let the people know what’s going to happen. There was a suit that was filed against an attorney in Las Vegas just recently. He represented a client who was in a wheelchair in a crosswalk who got hit by a car. He took it to court; he won the case. The jury came out and decided not only did he get a settlement, but they were going to make sure that he was “whole,” monetarily, for the rest of his life, and they added on more money for a lifetime. That attorney attached that money on top of his fees, so now that client is suing that attorney for misrepresentation.
Chairman Anderson:
Anybody else who wishes to be heard on Assembly Bill 338? Mr. Sharp.
Matthew Sharp, Nevada Trial Lawyers Association, Reno, Nevada:
[Introduced himself.] Initially, we had signed as neutral on this bill; in hearing the testimony, in all due respect, we oppose the bill. I echo the comments of Assemblywoman Buckley and Assemblyman Oceguera, that effectively, this is a form of overkill.
I’d like to address Assemblyman Mortenson’s concerns, which I think are legitimate but are not to do with this bill. When we sign up a client for a lawsuit under contingency fee agreement, the provisions within this bill are certainly discussed with the client, most of which are disclosed in the contingency fee agreement; there are specific rules that our state bar requires that we have as provisions to our contingency fee agreement. In the context of a case that’s not on a contingency fee, that’s on an hourly basis, lawyers are similarly required to explain to their clients up front what the lawsuit is, what the nature of the suit it, what the risks and benefits are. A suit is not filed without the consent of the client. If it is, those are serious problems, and that individual should be reported to our state bar, and disciplinary proceedings will result.
I believe in the context of what Assemblyman Mortenson was discussing was in a class action situation. In a class action, which is governed by our federal rules and Nevada Rules of Civil Procedure, which essentially, are rules for the lawsuit. A class action is allowed under certain limited contexts; it’s basically more efficient to proceed forth with a class than it is with hundreds and thousands of individual lawsuits. In those contexts, the notices that are provided to the clients, or to the people that are in the class action, are approved by the court; these are not things that just attorneys draft on their own, these are subjected to extensive briefing and approval by the court. Now, certainly anybody who’s a lawyer will admit, we tend to talk too much in legalese and those things should be addressed, but this bill is not the vehicle to address that. I think that the court system, and certainly I, as an attorney, can speak for Mr. Bradley, are always open to understanding and helping people understand our process. But this bill is essentially overkill, in all due respect to Assemblyman Hardy. If I could answer any questions from the Committee, I’d be happy to, Mr. Chairman.
Assemblyman Geddes:
I was wondering if you could just clarify something in my mind. In dealing with the homeowner’s associations, if a homeowner’s association votes to opt in on a lawsuit and then you have members who may not have voted to be in, or didn’t respond, would they be included in the suit as part of being a member of the homeowner’s association so it would be the whole association, or, if they don’t opt in, are they out?
Matthew Sharp:
I’ll preface my comment that I do not practice in construction defect litigation. It’s my understanding that the homeowner’s association is the client; they are the entity with the legal responsibility to protect the homeowner’s within the association, and then would proceed on the lawsuit. However, I believe that the notice would be provided through the association. But I certainly can get that question answered directly for you from one of our members in the construction defect litigation team.
Assemblyman Mortenson:
When you say that the lawyer is obligated to contact a person to let him know, or to find out, if he wants to be a litigant, is that an oral contact, or is it with the multiple pages of fine print again?
Matthew Sharp:
Let me differentiate between two cases. If you come to me and are interested in filing a lawsuit and we discuss the matter, and we agree that there’s a legitimate lawsuit to be filed, I enter into a written agreement with you. I obtain your approval to file the lawsuit; and you would read my complaint before I filed the lawsuit; those are the natural processes that are required currently. In the context of a class action, which is different, I’ll try and explain this as simply as I can, you have what’s called a class representative who has been harmed by a certain act in a manner in which thousands of other people have also been similarly harmed. You have a class representative who files the suit, who retains somebody like my law firm. We go to the court; the court then hears motions to decide whether a class action should be certified, and there’s certain rules governing that motion contained in the Rules of Civil Procedure.
If the court decides that a class action is the most efficient way to do that, they then certify the class. Then there are notices provided to class representatives, which I’m presuming you were, and you received a notice. That notice is approved by the court, so the content of the notice, which, I agree, I‘ve received them in the mail myself, might be deficient because it was assigned to individual lawyers and judges, who are probably overlooking things in their attempt to try to make things simple. But as a practical matter, you have to also understand that in certain class actions, and class actions serve a necessary function for our legal system, we do have thousands of people injured by the same type of conduct, it is impractical for that lawyer to contact each of a thousand clients and obtain the written consent. It would be a financial impossibility, and it would defeat the very purpose of class actions, which is to find a cost-efficient resolution to a problem where a large number of people have suffered a limited, similar type of harm.
Assemblyman Mortenson:
In such an instance where there is a class action and I get a notification, do I have a liability? In other words, if the situation turns upside-down, do I have a liability to pay the lawyer fees if he were not able to win the case?
Matthew Sharp:
The short answer would be no. In a class-action situation, any attorney’s fees have to be approved by the court.
Assemblyman Mortenson:
But can they come from me?
Matthew Sharp:
I can’t think of a situation when that would be conceivable. I preface my comments that I’m not a class-action lawyer, but I can’t envision a situation where an individual class of people would be responsible for fees, absent a settlement in a successful result.
Assemblyman Mortenson:
When I get that letter, do I automatically go into the suit if I take no action, or must I take a positive action with that letter, in order to be put into the suit? Which way does it go?
Matthew Sharp:
It would depend upon the specific notice that the court approved. Generally, the notices are an opt-out, which means you are in the lawsuit unless you affirmatively take steps to opt out. That, typically, is done, again, because the principle reason of class action is to find the most cost-efficient manner in which to litigate large numbers of similarly situated cases.
Assemblyman Mortenson:
I’m a little more comfortable than I was. I was under the impression that I might have a liability for not reading those four or five pages of fine print. If I had the option of opting in, I would read the fine print, but not forced in.
Assemblyman Mabey:
If I owned a condominium, and there was a class-action lawsuit and my condominium was involved in this, then I may not be able to sell my condominium, so that would be a problem for me. Would it be possible for me, when that class-action lawsuit started, or that homeowner’s association…do you understand where I’m coming from?
Matthew Sharp:
As I understand it, and again, I’m not a construction defect lawyer, but when the court provides notice of a class-action lawsuit vs. a homeowner’s association, the litigant, individual class-action members, have the opportunity to opt out. In your context, there should be a step where you could opt out of the class, and then you would not be part of the lawsuit, nor would you be bound by the lawsuit.
Assemblyman Horne:
Class actions also protect defendants from having to defend multiple suits, which is missing here. If you are the contractor, you don’t want to have to go to court eight, nine, ten times, because somebody’s chosen to opt out of a class action and sue on their own. In turn, that protects plaintiffs because oftentimes there are limited resources to provide remedy. If there are monetary remedies and if you have a class action and then an award is made to the class‑action parties, then you were outside that party and you sue then go to collect yours, there may be nothing left. Those are things to keep in mind that there’s a reason why we have class-action litigation.
Assemblywoman Buckley:
Along similar lines, since I do as many class actions as I possibly can, but I do it for the poor and I don’t charge fees, and I do not practice construction defect litigation, for the record, but just a prime example: there was a landlord in Las Vegas that was evicting people by just changing the locks—clearly illegal. He told the head of his company, ”Hey, I’m going to do this because the tenants are too dumb and poor to do anything about it.” If I had sued, just on behalf of one tenant—he did this to thousands of tenants—I could never bring 2,000 lawsuits, just could not physically do it. So you do a class action, and what I was able to do was get $1,500 for every tenant who came forward because of the illegal lockouts. And then the landlord learned, “Maybe I shouldn’t be doing this; maybe I should follow the law.” So if we didn’t have the class action device, that illegal conduct could go on undeterred because there would not be an effective way to bring 2,000 lawsuits.
Chairman Anderson:
Anybody else wishing to speak on Assembly Bill 338? Let me close the hearing on Assembly Bill 338 and bring it back to Committee. I’m not convinced that there’s a need for this particular bill, but we’ll hold it for a while. Questions? We are not going to adjourn; we’re going to recess in the event that we need to meet behind the Bar. If we’re meeting behind the Bar, it will not be for the purpose of passing a piece of legislation; the purpose will only be for bill introduction, it won’t be to hear a bill or to make a determination relative to those kinds of questions. With that, we are recessed.
RESPECTFULLY SUBMITTED:
Carrie Lee
Committee Secretary
APPROVED BY:
Assemblyman Bernie Anderson, Chairman
DATE: