MINUTES OF THE
SENATE Committee on Judiciary
Seventy-second Session
March 11, 2003
The Senate Committee on Judiciary was called to order by Chairman Mark E. Amodei, at 8:09 a.m., on Tuesday, March 11, 2003, 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 Amodei, Chairman
Senator Maurice E. Washington, Vice Chairman
Senator Mike McGinness
Senator Dennis Nolan
Senator Valerie Wiener
Senator Terry Care
COMMITTEE MEMBERS ABSENT:
Senator Dina Titus (Excused)
STAFF MEMBERS PRESENT:
Nicolas Anthony, Committee Policy Analyst
Bradley Wilkinson, Committee Counsel
Lora Nay, Committee Secretary
OTHERS PRESENT:
The Honorable Deborah A. Agosti, Chief Justice, Supreme Court
Judge Susan Deriso, Sparks Township (Department 1), Justice of the Peace, Washoe County
Steve G. Holloway, Lobbyist, Associated General Contractors, Framing Contractors Association, National Association of Women in Construction
Ivan R. “Renny” Ashleman, Lobbyist, Nevada Homebuilders Association, Southern Nevada Homebuilders Association
Fred L. Hillerby, Lobbyist, American Institute of Architects-Nevada (AIA)
We are opening the hearing on Senate Joint Resolution (S.J.R.) 5.
SENATE JOINT RESOLUTION 5: Proposes to amend Nevada Constitution to allow Legislature to establish intermediate appellate court. (BDR C-607)
The Honorable Deborah A. Agosti, Chief Justice, Supreme Court:
Senate Joint Resolution 5 is before you at the request of the Supreme Court of Nevada to begin anew the process of a proposed constitutional amendment authorizing the creation of an intermediate appellate court. Unlike the bills you have seen fit to approve in the past, this is a first-time bill. It would, through the permissive language “the legislature may,” rather than “the legislature shall,” create an intermediate appellate court. We have asked the bill be written and this is the result. The matter began anew because we are not optimistic, if it were put to the voters in the next general election, they would vote in its favor, given the status of the budget for the State. Were you to pass the same bill you passed 2 years ago, which required the creation of an intermediate appellate court, there is no question there would be expense involved.
By beginning the process anew, we would have 2 years where, hopefully, the financial picture of this State would be improved. We also are hopeful the voters of this State would be confident the Legislature would know when the time is right for the creation of an intermediate appellate court, both financially as well as from the caseload perspective of our court.
As I mentioned briefly at the state of the judiciary message, the caseload at the Nevada Supreme Court is a very high caseload. Right now it is static and it has not risen in the last few years. I have a graph, but not a PowerPoint presentation because we are technology poor. I can make it available to you; it shows how our caseload seems to develop. It goes up, then it levels off; it goes up, and then it levels off for a period of time. We are in one of those level periods. I imagine we will need to see a spike, when it goes up again, before we can justify an intermediate appellate court in a way the voters will accept.
From a work standpoint, we have done a good job at whittling down the backlog. At this point it is very difficult to call the number of cases we have before us. We have approximately a backlog of 1700 cases or thereabouts. Of those cases, maybe only the notice of appeal has been filed, maybe only the opening brief has been filed. They are not all ready for decision. There are only about 500 cases ready to be scheduled for argument or for disposition. I can say the court is pretty current at this point and we are proud of that; but it does make it difficult in discussions with the voters to explain why we need an intermediate appellate court. You understand the time it takes to devote to the many cases we do have. Sometimes cases do not get the time and consideration they deserve. We have a very high caseload compared to what other states’ high courts address in a 1-year time period
Senator Wiener:
You have gone on record and we have processed this before. Is this exactly the language of our prior consideration?
Chief Justice Agosti:
No, not at all.
Senator Wiener:
Could you explain what changes we have?
Chief Justice Agosti:
In the past the language was mandatory. It required the Legislature to establish an intermediate appellate court upon enactment of the constitutional provision. This one is permissive. The Legislature may establish an intermediate appellate court. We have discussed this at great length in the court. My colleagues and I believe the Legislature has been supportive of the Nevada Supreme Court and understands the caseload we are carrying. It also understands the financial difficulties facing the State. Considering both our caseload and the financial condition of the State, an intermediate appellate court may be created when there is a good financial base to support one and when there is a caseload that will justify it. It is no longer a mandatory provision.
Senator Amodei:
We will close the hearing on S.J.R. 5 and open the hearing on Senate Bill (S.B.) 203.
SENATE BILL 203: Enacts provisions concerning separation and adjudication of certain small claims actions. (BDR 6-612)
Judge Susan Deriso, Sparks Township (Department 1), Justice of the Peace, Washoe County:
I am here on behalf of the Nevada Judges Association to testify in support of S.B. 203. We actually asked for this bill. As you know, small claims is the peoples’ court. It allows procedure for the average person to come to court inexpensively and without an attorney to collect on monies owed. This bill addressed a weakness in the law allowing defendants to defeat the purpose of a small claim by filing a possibly frivolous or an unrelated counterclaim that could technically deprive the small claims court of its jurisdiction. This would force the small claims litigants to either hire attorneys and proceed in a higher court or dismiss their action. I do not think this is the intent of small claims. The net result deprives the small claimants of their day in court. This bill would allow the small claims judge to avert this problem by going forward with the small claims matter and severing the counterclaim for refiling in either a formal justice court action or in a district court action. This, in effect, forces the counter to settle or have it addressed in the small claims arena. In addition, this allows the small claims litigants to have their day in court without reference to the counterclaims.
This bill also allows for the litigants to stipulate to the fact they would want the case to be heard in a higher court without the judge needing to take any action. Of course, if the counterclaim is bona fide, germane, and appropriate, the small claims judge does not have to sever the case and could send it up to the appropriate court. It just allows us to sever it if we feel this person is entitled to his or her day in small claims court. There is a justice court rule allowing for formal justice court actions to be severed if a counterclaim exceeds the justice court amount. It can be severed and the justice court case remains in justice court and the counterclaim would go up to district court. There already is a justice court rule in place for justice court cases. We are hoping to have one in the small claims arena for our small claims litigants. For the record, the secretary has a copy of the justice court rule (Exhibit C) reflecting the ability to sever the claim as well as the Nevada Supreme Court opinion outlining what the court felt the Legislature intended for the people’s court.
Senator Amodei:
Is there any other testimony on S.B. 203? Seeing none, we will close the hearing on S.B. 203 and open the hearing on S.B. 206, and refer to the mock-up provided (Exhibit D. Original is on file in the Research Library).
SENATE BILL 206: Makes various changes to provisions relating to mechanics’ and materialmen’s liens. (BDR 9-755)
Steve G. Holloway, Lobbyist, Associated General Contractors, Framing Contractors Association, National Association of Women in Construction:
I am the executive vice president for the Associated General Contractors in Las Vegas. I am here on behalf of the sponsors for S.B. 206. For the record, those sponsors are: Associated Builders and Contractors, Associated General Contractors in Las Vegas, Associated General Contractors in Northern Nevada, the Framing Contractors Association, the Mechanical Contractors Association of Nevada, the National Association of Minority Contractors, the National Association of Women in Construction, the National Electrical Contractors Association, the Nevada Association of Mechanical Contractors, the Plumbing and Mechanical Contractors of Nevada, the Sheet Metal and Air Conditioning Contractors’ National Association, the Southern Nevada Air Conditioning Refrigeration Service Contractors Association, and the Southern Nevada Home Builders Association.
This bill has been 4 years in the works. It was introduced and then withdrawn last session at the request of the development community as they felt they had not had sufficient input. For the last 2 years, we have been meeting with that portion of the community and other interested parties to hammer out certain refinements in this bill. We believe this bill is fair to all those it affects, the owners, the developers, the general contractors, the subcontractors, the equipment rental companies, and suppliers, et cetera.
This bill is an outgrowth of the Venetian, the Aladdin, and the Regent. Even though we have been working on it 4 years, I would simply point out the actions involving the lien law claimants over the Venetian construction are still in court, and those who have not gone bankrupt have settled for 30 or 40 cents on the dollar. The purpose of this bill is to prohibit the prospective waiver of a lien claimant’s rights, and to confirm, clarify, and standardize the procedures and forms required for a waiver and release upon payment. The procedures for recording notice of lien and a surety bond, to release a lien, and the proceedings to adjudicate a lien. If you would like, Mr. Chairman, I can go through section by section and briefly describe what each section does.
Senator Care:
I will disclose my law firm represents Bovis Lend Lease LMB (Lehrer McGovern Bovis) Inc., which built phase 1 of the Venetian; although we do not represent Bovis on matters related to the construction of the Venetian. In Section 2, would it say a subcontractor is an agent of the owner? Will you elaborate on how that would be?
Mr. Holloway:
This is the current language in the existing statute. We debated long over whether to continue to include subcontractor in the definition of agent of the owner. There are times when the subcontractor can or may have control of the property, the improvement, or work of improvement. At that point in time, the subcontractor would be considered an agent of the owner.
Senator Care:
Section 7 is about a disinterested owner, I understand the definition, but can you tell me what recourse a disinterested owner has? For example, I once represented a landlord who owned a shopping center where an electrician was recruited by a tenant and did some work. Then the tenant skipped out and never paid the electrician. A lien was filed on the shopping center itself.
Mr. Holloway:
Disinterested owners, as soon as they learn the work is being done, should file notices as disinterested owners. The existing law and the proposed changes would then absolve the disinterested owner’s property of any lien claims. They need to file the notice as soon as they become aware work is being done by the tenant. What the courts look at, and unfortunately there has been no Nevada Supreme Court decision in this area, are such things as whether the owner required the tenant to do this work or whether there usually is an allowance to do the work. The court will accept the fact this is a disinterested owner, although there have been one or two cases to the contrary. Now they look for evidence the owner required the work. If it was the owner who had the contract with the contractor, then the disinterested owner does not apply. However, if the contract is between the tenant and the prime contractor or subcontractor, then generally the provisions on disinterested owner would apply and the property would be absolved of any lien.
Senator Care:
On section 21, about surety, my scribbled notes say “who is this,” and “why not someone licensed to issue bonds in Nevada?” Section 21 subsection 1, says: “Is included in the United States Department of the Treasury’s Listing of Approved Sureties; and ...”
Mr. Holloway:
Yes, this language was recommended by the surety association. We used it because it gives a little broader reach on surety bonds, so you are not necessarily in this hard market, stuck with having to have an A-plus surety rating. You can drop down to what would be termed a B rating. The U.S. Treasury keeps up with the sureties and their financial standings and posts them much better then other standard agencies you look to to approve sureties. This is why this language is included. The surety would also have to be licensed in this State to do business.
Senator Care:
In section 25, there is a subsection 2 saying, “A condition, stipulation or provision in a contract or other agreement for the improvement of property or for the construction, alteration or repair of a work of improvement in this state that attempts to do any of the following is void:” and then it lists several. There is also a provision in section 26: “Any term of a contract that attempts to waive or impair the lien rights of a contractor, subcontractor or supplier is void.” What if somebody actually commenced an execution of the contract and work is actually performed, then someone says this contract is void. Could this happen?
Mr. Holloway:
It says the provision would be void.
Senator Care:
Just the provision?
Mr. Holloway:
Yes, not the entire contract.
Senator Care:
In section 28, the last line in subsection 2: “If a contractor or a professional is required to be licensed pursuant the provisions of NRS [Nevada Revised Statutes] to perform his work, the contractor or professional will only have a lien pursuant to subsection 1 if he is licensed to perform the work.” I am wondering if there is some sort of responsibility for somebody to ascertain whether this person has a license to begin with.
Mr. Holloway:
I do not believe so, Senator. This would be a defense to an owner or a developer or general contractor or one of his agents in a lien proceeding, if he could point out the contractor who filed the lien was not licensed in this State. The lien would be invalid under this paragraph.
Senator Care:
I know there have been some alterations in existing law for example, as to time factors. On page 14, line 19, it says, “Within 40 days after the recording of a valid notice of completion.” It used to say “timely,” and you came up with 40 days. There are a couple of other provisions in the bill where the time frame has been altered or even established, why did you do that?
Mr. Holloway:
Once a project is completed, the existing law provides a notice of lien must be filed in 90 days. You will have already filed your notice of right to lien. If the owner files a notice of completion, the time frame in which to file a lien is shortened to 40 days. In this State, this has always been the law; we just clarified it. The primary changes in the other notices are twofold. One, in the notice on the right to lien, we have said in the past the law has required the lien be filed within 31 days once work is commenced on the property. In this bill, you can file that notice anytime prior to the completion of work. It is only good for the 31 days prior to when you filed it for the work you did in that period and for any work you did until the completion of the work of improvement. This gives a little more flexibility on the notice of right to lien.
The second notice we have required applies to residential projects only. Fifteen days before you file your notice of lien, you must file a notice of intent to lien. This is intended to give the owner on residential projects time to meet with you if your subcontractor and the general contractor failed to pay you, even though the owner had failed to pay the general contractor, and will give you time to clear this up before a lien is filed. As the houses are completed in a residential project, you want to turn them over and be able to sell them. If you have a lien on the property, and usually the lien will apply to the whole subdivision, you need to get that cleared before you can sell houses as they are completed. This is to give that owner-developer an additional advance notice there is someone who intends to file a lien. It will give her or him a chance to get with the general contractor, subcontractor, or supplier and get it cleared up.
Senator Wiener:
In section 41 on page 27 around line 14, you have added some additional language proposed, would you explain what you are hoping to accomplish and would you be able to give us an example of what this would address?
Mr. Holloway:
There has been an ongoing and continuing problem in the courts. The law was not clear and the practices of the different courts varied. We made it very clear if a lien is upheld, the lien claimant will be awarded, either on his or her lien or against the surety bond if one is filed, the lienable amount found due by the court, the cost of preparing and filing the lien including attorneys fees, and any interest that may be due on that amount. In the paragraph you are referring to, we also wanted to make sure if the lien was not upheld, the court could, at its discretion, award costs and reasonable attorneys fees to the owner or other person defending against the claim. In our amendment we say “prevailing party,” rather than “owner” or “person,” if the court finds the lien was not pursued by the lien claimant with reasonable costs.
Senator Care:
In section 46, the preferential trial, after you have filed the Rule 16.1 mandatory pre-trial conference report, the joint case conference report, then you have the notice of demand for preferential trial setting. Looking at line 17 on page 33, it says, “Any supplemental discovery responses ...” I am wondering about the discovery requests which can be done at the case conference. I know these things are going to move quickly. What is the overall time frame for discovery? When do you actually make those first requests, and any supplemental requests and when do they have to be?
Mr. Holloway:
We lengthened the time for preferential trial from 30 to 60 days and gave the court 60 days to schedule the preferential trial, as opposed to 30 days under the existing law. This extends the time you had to do whatever discovery you needed once you are notified of the lien and any request for a preferential date.
Senator Care:
In a matter like this, the discovery requests are immediate?
Mr. Holloway:
If the court will sign a preferential date, yes.
Ivan R “Renny” Ashleman, Lobbyist, Nevada Homebuilders Association, Southern Nevada Homebuilders Association:
We were participants in this 2-year process, involving not only the individuals named by Mr. Holloway, but also representatives of the title community and other affected members of the community. We sincerely believe this bill will greatly improve the ability to clearly follow the lien law of Nevada and it will be of some assistance in trying to avoid some of the major problems with liens we have seen. I do practice in this area personally and our present lien law is almost unreadable. The judges have proven this many times and so have attorneys. This will be easier to work with, at least for the 2-year period. It is worth trying the compromise we have agreed to in this process.
Mr. Holloway:
We have introduced a cleanup amendment. You have been given the proposed amendments (Exhibit E and Exhibit F). Legislative Counsel Bureau (LCB) has reviewed the cleanup amendment at Chairman Amodei’s request. Most of the changes in the amendment are just that, they are to clear up things the drafter had missed or things we thought needed to be clarified after we read the finished product. We have discussed the two major changes.
Mr. Ashleman:
In all fairness to LCB, this cleanup was mostly our afterthoughts.
Fred L. Hillerby, Lobbyist, American Institute of Architects-Nevada (AIA):
We are here to support the S.B. 206. In fact, my client asked me to monitor this bill and as I was sitting here today some questions arose in my mind. I would at least like to put on the record the more I read the bill, it was less clear. Let me give you the scenario arising in the case of an architect who is called to perform services for someone who owns a piece of land. The architect draws a set of plans with elevations and all that sort of thing showing how a very good commercial project could be developed. The owner does not pay the architect and does not do the improvement. However, the owner uses the architect’s plans to show to a potential buyer of that piece of property. This property has been enhanced by those plans.
If you read section 9 on page 2, it does say enhancement, but then as you read the following subsections they are just talking about buildings and mines and drilling of holes. In the case I have just given you that does not occur. I look at section 24, which talks about a work of improvement, and again it means the “entire structure or scheme of improvement as a whole, including, without limitation, all work, materials and equipment ...” I am not finding things in here an architect would have a lien right against a piece of property no dirt had ever been turned upon, but for which he had, in fact, provided services that did enhance the potential value of the property to the subsequent owner. You could look at the agent of the owner, an engineer, a land surveyor. These are also people who could provide services that would improve the value of the land or enhance the value of the land. The original owner may never do anything to move a piece of dirt, but may use those plans to show and enhance the value of property as it is sold. As you are considering these amendments, I would like this question on the record. I do not want to slow down the progress of this bill because they have done a lot of work and we would like to see it passed and the architects included.
Vice Chairman Washington:
I understand what you are saying. Even though they are listed in section 2 as the agent of owner, conceptually you have a plan or an architect a developer could use to serve a plot of dirt or piece of land to a perspective buyer and then not get paid for it.
Mr. Hillerby:
I am concerned the way this new language is, he might not have a right to.
Mr. Ashleman:
In that regard we did not change the act. The language Mr. Hillerby is concerned about is existing language. It does not have anything to do with our changes. Our recollection is if you have a contract to design a building on a piece of property, this is the type of improvement or enhancement which will allow the filing of a lien.
Vice Chairman Washington:
So, it is current language then?
Mr. Ashleman:
That is right.
Vice Chairman Washington:
I guess the problem is solved. Is that all right Mr. Hillerby or would you still prefer ...
Mr. Hillerby:
I am not sure the old law handled this, so let me verify and come back again. I have no intent to delay this bill.
Vice Chairman Washington:
If you work with Mr. Holloway and Mr. Ashleman and bring back some type of language, I am sure the Chairman will entertain it. With no further testimony we will close the hearing on S.B. 206.
Chairman Amodei:
Returning to S.J.R. 5, the first bill we heard today, proposing to amend the constitution to allow the Legislature to establish an intermediate appellate court, to start the procedure to do that. What is the pleasure of the committee?
SENATOR WIENER MOVED TO DO PASS SENATE JOINT RESOLUTION 5.
SENATOR CARE SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)
*****
Chairman Amodei:
Moving to S.B. 203 concerning the separation and adjudication of certain small claims actions, what is the pleasure of the committee?
SENATOR CARE MOVED TO DO PASS S.B. 203.
SENATOR WIENER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.)
*****
Mr. Ashleman:
Mr. Hillerby has indicated he will go back to his people. We have agreed to accept a friendly amendment in the other House if he has a problem. He has agreed to wait until it is there.
Senator Amodei:
We will have a work session on Friday and we will plan on rolling this in at that time. With no further business to come before the committee we are adjourned at 8:52 a.m.
Lora Nay,
Committee Secretary
APPROVED BY:
Senator Mark E. Amodei, Chairman
DATE: