YOUNT VS. CRISWELL RADOVAN, LLC , 2020 NV 47 ( 2020 )

136 Nev., Advance Opinion 4.7
IN THE SUPREME COURT OF THE STATE OF NEVADA
GEORGE STUART YOUNT, No. 74275
INDIVIDUALLY, AND IN HIS
CAPACITY AS OWNER OF GEORGE
YOUNT IRA,
Appellant,
vs.
CRISWELL RADOVAN, LLC; CR CAL FILE
NEVA, LLC; ROBERT RADOVAN;
JUL 3 0 2020
WILLIAM CRISWELL; CAL NEVA
LODGE, LLC; POWELL, COLEMAN CLE
AND ARNOLD LLP; DAVID BY
IEF DEPU1Y CLERK
MARRINER; AND MARRINER REAL
ESTATE, LLC,
Respondents.
Appeal from a final judgment in a contract and tort action.
Second Judicial District Court, Washoe County; Patrick Flanagan and
Jerome M. Polaha, Judges.
Affirmed in part, reversed in part, and remanded.
Lewis Roca Rothgerber Christie LLP and Daniel F. Polsenberg, Joel D.
Henriod, Abraham G. Smith, and Adrienne Brantley-Lomeli, Las Vegas;
Kaempfer Crowell and Richard G. Campbell, Jr., Reno,
for Appellant.
Howard & Howard Attorneys PLLC and Martin A. Little, Ryan T. O'Malley,
and Alexander Villamar, Las Vegas,
for Respondents Criswell Radovan, LLC; CR Cal Neva, LLC; Robert
Radovan; William Criswell; Cal Neva Lodge, LLC; and Powell, Coleman and
Arnold LLP.
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Simons Hall Johnston PC and Mark G. Simons, Reno,
for Respondents David Marriner and Marriner Real Estate, LLC.
BEFORE THE COURT EN BANC.
OPINION
By the Court, SILVER, J.:
This case arises from an attempt to restore and reopen the
historic Cal Neva Lodge, a resort and casino originally constructed in the
1920s, which sits on the California-Nevada border near Lake Tahoe. As the
restoration project neared completion, a critical loan unexpectedly fell
through. Certain investors in the project ostensibly collaborated to
undermine that loan. The entire project subsequently failed, and investor
George Stuart Yount sued the developers and others involved in setting up
his investment in the project. The defendants asserted affirmative defenses
but did not file any counterclaims or request any damages. At the
conclusion of trial, the district court denied relief on Yount's claims and,
despite the defendants never seeking to file a counterclaim or requesting
damages, awarded the defendants damages. The district court based its
award on evidence that Yount was involved with the group of investors that
undermined the loan and caused the project to fail, thereby damaging the
defendants.
In this opinion, we primarily address whether the district court
improperly awarded the defendants damages where no defendant expressly
asserted a counterclaim or requested damages. In particular, we address
whether the parties tried a counterclaim by implied consent under NRCP
2
15(b) and whether the damages award can be upheld under NRCP 8(c) or
54(c). We conclude the record neither supports the district court's
determination that the parties tried a counterclaim by consent nor supports
upholding the damages award. We therefore reverse the damages award
and remand for the district court to remove that award from its order. We
affirm, however, the district court's decision to deny relief on Yount's claims,
as Yount failed to prove he was entitled to relief.
FACTS
The Cal Neva Lodge redevelopment project
Property developers William Criswell and Robert Radovan
purchased the historic Lake Tahoe Cal Neva Lodge (the Lodge) in 2013,
intending to renovate and reopen it. As pertinent here, they created the
following Nevada limited liability companies: Criswell Radovan, LLC, as a
conduit to move money; CR Cal Neva, LLC, as the manager for the Cal Neva
project; and, through CR Cal Neva, LLC, Cal Neva Lodge, LLC, to purchase
and develop the property.
To raise funds needed for the project, Criswell and Radovan
issued a Private Placement Memorandum (PPM) soliciting $20 million in
equity investment. Under the PPM, each investment of $1 million would
give the investor a "founder's share," amounting to a 3.5% ownership in Cal
Neva Lodge, LLC. To subscribe for a founder's share, an investor would
sign a subscription agreement with Cal Neva Lodge, LLC. CR Cal Neva
purchased two founder's shares, and the subscription agreement allowed
CR Cal Neva to sell one of those shares at a future time. The largest
investor under the PPM was the Incline Men's Club Investment Group
(IMC).
David Marriner lived in nearby Incline Village and became
aware of the project. He contacted Criswell and Radovan, who hired
3
Marriner's real estate consulting firm to work on the project. They also
asked Marriner to help find investors for the Lodge. Marriner, who was
also an investor, knew Stuart Yount socially and introduced Yount to the
project, but Yount did not immediately invest.
In July 2015, Marriner informed Yount that only $1.5 million
of equity remained available for investment under the PPM. At that time,
the Lodge was set to open in December. Yount spoke with Radovan about
the project, and Marriner sent Yount the investment documents, including
the PPM. The PPM indicated that the project was over budget and would
need to be refinanced, pushing back the schedule. Marriner communicated
to Yount in August and September that Criswell and Radovan were trying
to close out the final founding membership, as Yount still had not invested.
Soon thereafter, however, Les Busick purchased the final $L5
million founder's share under the PPM. Simultaneously, Yount—after
discussing the investment with his accountant—decided to buy a $1 million
founder's share. Criswell and Radovan sold Yount one of their CR founder's
shares, as permitted by their subscription agreement. Yount signed a
subscription agreement with Cal Neva Lodge, and his investment funded
on October 13, 2015. During this same time, Radovan was considering a
$55 million refinance of the project to obtain extra funds necessary for its
completion.
Cal Neva Lodges executive committee, consisting of Criswell,
Radovan, two IMC members, and Busick, met in early November to discuss
the refinance after Mosaic Real Estate Investors, LLC, the company slated
to fund it, pressured Radovan to finalize the deal. The executive committee,
however, wanted to change certain loan terms and was therefore not ready
to complete the refinance deal. Criswell and Radovan then loaned $50,000
4
to Cal Neva Lodge so that Cal Neva Lodge could deposit those funds with
Mosaic to secure a term sheet from Mosaic.
By early December 2015, it was apparent the Lodge would not
open on time. Although the hotel was nearly complete, the foundation in
the bar area needed rebuilding. The opening was therefore delayed until
spring 2016. On December 12, Criswell and Radovan met with the
executive committee to explain the cost overruns and seek approval to
secure the Mosaic loan. The executive committee did not approve the loan,
and the meeting became heated.
The following day, Yount voiced his concerns about the project's
failing to Radovan. Around the same time, Yount, the IMC, and another
investor, apparently unhappy with Criswell and Radovan, began discussing
replacing Mosaic with another financer. Yount asked for the return of his
$1 million investment, but that money had already been spent. Yount then
learned that he had purchased one of CR's founder's shares—instead of a
share under the PPM—and emailed Marriner to complain. Criswell and
Radovan then asked Yount to sign documents stating his intent had been
to buy a CR share, but Yount refused.
The executive committee finally approved the loan in late
January 2016, and Radovan planned to meet with Mosaic a few days later,
but Mosaic canceled the meeting via email at the last moment. Mosaic
stated that it had met with a group of Cal Neva investors (later discovered
to include IMC members) who "were interested in hearing about the history
of Mosaic's involvement in CalNeva," and that Mosaic told them that Mosaic
had not heard "much" from Criswell and Radovan for nearly three months.
Mosaic said that the investors "explain[edl a little of the history of the deal
from their perspective" and that it appeared to Mosaic as though the project
5
was "a little bit of a mess right now." Mosaic therefore was going to "step
back, tear up the executed term sheet," so that the parties running the
project had "time to figure things out." Once the Mosaic loan fell through,
other lenders withdrew from the project and it failed.
Yount's lawsuit
Yount sued Criswell, Radovan, CR Cal Neva, Criswell Radovan,
LLC, the Cal Neva Lodge, LLC, Marriner and his real estate company, and
others for breach of contract, breach of fiduciary duty, fraud, negligence,
conversion, and securities fraud. Pertinent here, Yount generally alleged
that Marriner had misrepresented the project's health and that the
defendants, particularly Marriner and Radovan, misinformed Yount that
$1.5 million in founder's shares remained available to induce him to invest,
despite knowing they had already sold those shares to Busick. Yount
alleged that his purchase of a founder's share from Criswell and Radovan,
rather than through the same process as the other investors, damaged him
in excess of $1 million.2
CR answered the complaint and asserted affirmative defenses,
including comparative negligence, failure to mitigate damages, unclean
hands, and indemnity/contribution, essentially alleging that Yount's own
actions or omissions caused the damages he claimed. Marriner similarly
responded to Yount's claims by asserting that Yount caused his own
1We do not address the parties below who are not parties to this
appeal. We will hereinafter refer to Criswell, Radovan, CR Cal Neva,
Criswell Radovan, LLC, and the Cal Neva Lodge, LLC, collectively as "CR."
We will refer to Marriner and his real estate company collectively as
"Marriner."
2yount also requested punitive damages, interest on the judgment,
and attorney fees and costs.
6
damages, if any. Neither CR nor Marriner asserted a counterclaim or
requested damages. They also did not request any damages or other
affirmative relief in their unsuccessful pretrial motions for summary
judgment. Their proposed findings of fact and conclusions of law submitted
before trial similarly did not address any counterclaim or damages against
Yount.
The case proceeded to a bench trial before Judge Patrick
Flanagan. Considerable evidence addressed Yount's involvement with the
IMC and its actions to undermine the project's funding involving Mosaic.
Emails demonstrated Yount was in contact with the IMC and included in
conversations disparaging Criswell and Radovan, but those emails did not
show Yount directly undermined the Mosaic loan. CR repeatedly asserted
throughout trial, however, that no defendant had asserted counterclaims
against Yount and that the case was not about the project's collapse.
Marriner did not attempt to correct CR's characterization of the trial issues
or assert that he had made claims against Yount.
Yount focused his closing argument on what happened before
he funded his investment and argued that CR and Marriner tried to
improperly shift the focus of trial to what occurred after Yount purchased
his share. Yount ultimately conceded that no functional difference existed
between a founder's share and the share he purchased. CR responded that,
to the extent Yount was damaged, Yount caused those damages by
participating with the other investors in undermining the Mosaic loan,
resulting in the project's failure. CR also asserted that the failed project
"cost CR Cal Neva over $2 million in damages." Marriner did not argue that
Yount directly undermined the Mosaic loan, but nevertheless faulted Yount
for failing to warn CR of the IMC's plans to undermine the loan and asserted
7
that Yount's damages arose from the project's failure, rather than from how
Yount obtained his founder's share.
At the conclusion of the bench trial, Judge Flanagan stated his
detailed oral ruling, finding against each of Yount's claims. Judge Flanagan
thereafter addressed "Mlle defendants counterclaim fofl unclean hands"
and found that "it was the intent of the IMC to kill this loan" and "but for
the intentional interference with the contractual relations between Mosaic
and Cal Neva, LLC, this project would have succeeded." Judge Flanagan
ordered judgment in favor of the defendants and sua sponte awarded
Radovan and Criswell damages along with attorney fees and costs. In a
written "amended order" issued a few days later, Judge Flanagan clarified
the award: $1.5 million each to Criswell, Radovan, and Marriner; two years'
salary and management fees to Criswell and Radovan; lost development
fees to Criswell Radovan, LLC; and lost development fees to CR Cal Neva,
LLC. Sadly, Judge Flanagan suddenly fell ill and passed away before
entering written findings of fact and conclusions of law.
Yount subsequently appealed the amended order clarifying the
damages award, while, in the district court, the ca.se was reassigned to
Judge Jerome Polaha. After reviewing the record along with Judge
Flanagan's oral ruling, Judge Polaha ordered Yount to pay $1.5 million in
compensatory damages to each of Criswell, Radovan, and Marriner. The
parties then filed various motions in the district court, with CR moving to
amend the judgment; Marriner moving to amend his answer to include a
counterclaim; and Yount moving for judgment as a matter of law, for relief
from the judgment, to alter and amend the judgment, for a new trial, and
for limited post-judgment discovery regarding the Mosaic loan.
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This court then filed an order ruling that, as an appeal had been
timely taken from Judge Flanagan's written amended order and no post-
judgment motions had been filed at that time, "the district court has been
divested of its jurisdiction to grant the motions as of the docketing of th[isl
appeal." Yount v. Criswell Radovan, LLC, Docket No. 74275 (Order,
Aug. 24, 2018). The case was reassigned in district court again, this time to
Judge Egan Walker, who found he lacked jurisdiction to rule on the parties'
post-judgment motions based on this court's order and declined to exercise
jurisdiction to grant Yount's motion for post-trial discovery.
DISCUSSION
Yount argues on appeal that the district court erred by
awarding damages to respondents when they had not filed a counterclaim
or requested damages.3 For the reasons set forth below, we agree that the
district court improperly awarded damages to respondents in the absence
of an express or implied counterclaim.4
3No error arises from Judge Polaha entering a decision based on
Judge Flanagan's findings, as those findings were competent. See Smith's
Food King No. 1 v. Hornwood, 108 Nev. 666, 668-69, 836 P.2d 1241, 1242
(1992) (providing that a successor judge must conduct a new trial if the
previous judge failed to issue competent findings of fact). And Judge
Walker's order denying post-judgment discovery is not appealable, as it
issued after the final judgment and does not alter any rights in that
judgment. NRAP 3A(b) (setting forth appealable decisions); Gumm v.
Mainor, 118 Nev. 912, 913-14, 59 P.3d 1220, 1221 (2002) (addressing special
orders).
4Yount also argues the district court erred by dismissing certain
causes of action. We have carefully reviewed the record and conclude the
district court did not err by dismissing Yount's claims. See Wells Fargo
Bank, N.A. v. Radecki, 134 Nev. 619, 621, 426 P.3d 593, 596 (2018)
(providing the standard of review for reviewing a judgment following a
bench trial). Specifically, the record supports the finding that Yount failed
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Following a bench trial, we will not overturn the district court's
findings of fact "unless they are clearly erroneous or not supported by
substantial evidence." Wells Fargo Bank, N.A. u. Radecki, 134 Nev. 619,
621, 426 P.3d 593, 596 (2018). We review de novo the district court's
interpretation of court rules. Casey v. Wells Fargo Bank, N.A., 128 Nev.
713, 715, 290 P.3d 265, 267 (2012). Where a Nevada rule is similar to an
analogous federal rule, the cases interpreting the federal rule provide
persuasive authority as to the meaning of the Nevada rule. Vanguard
Piping Sys., Inc. v. Eighth Judicial Dist. Court, 129 Nev. 602, 608, 309 P.3d
1017, 1020 (2013).
The record is devoid of evidence that either CR or Marriner
expressly asserted any counterclaim before or during trial. To the contrary,
CR repeatedly denied asserting a counterclaim. Therefore, the damages
award was appropriate only if CR and Marriner raised and proved claims
against Yount at trial sufficient to support the damages awards. In
to prove damages because he sought, and received, a founder's share, and
the record does not show that Younes share was functionally different from
a share under the PPM. See Saini v. Int'l Game Tech., 434 F. Supp. 2d 913,
919-20 (D. Nev. 2006) (breach of contract); Stalk v. Mushkin, 125 Nev. 21,
28, 199 P.3d 838, 843 (2009) (breach of fiduciary duty); Sanchez v. Wal-Mart
Stores, Inc., 125 Nev. 818, 824, 221 P.3d 1276, 1280 (2009) (negligence);
Edwards v. Emperor's Garden Rest., 122 Nev. 317, 328-29, 130 P.3d 1280,
1287 (2006) (conversion); Bulbman, Inc. v. Nev. Bell, 108 Nev. 105, 111, 825
P.2d 588, 592 (1992) (fraud). Moreover, we have carefully reviewed the
district court's factual findings regarding the additional elements of those
claims and determine that they are supported by substantial evidence. We
therefore affirm the district court's decision to dismiss Yount's claims.
10
assessing this point, we look to the three rules of procedure the parties raise
as a possible basis for the award: NRCP 15(b), NRCP 54(c), and NRCP 8(c).5
NRCP 15(b)
Each party to this appeal argues at length as to whether CR
and Marriner tried a counterclaim at trial by implied consent under NRCP
15(b). Yount contends he was not on notice of a counterclaim; CR and
Marriner repeatedly conceded they had no counterclaim; and any evidence
relevant to a counterclaim was, instead, adduced to address issues expressly
raised by the pleadings. Marriner counters that Yount knew the case
focused on his intentional interference with the contractual relationship
between Cal Neva Lodge and Mosaic and argues that Yount introduced
evidence to minimize his interference with that loan. CR similarly argues
that Younes own evidence was relevant to his interference with the Mosaic
loan and that he did not object to the admission of evidence regarding that
interference.
NRCP 15(b) provides that an issue not raised in the pleadings
may nevertheless be tried by the parties' "express or implied consent," and
that the court should treat such issues "as if they had been raised in the
pleadings." Amending the pleadings to include an issue tried by consent is
not required for the outcome on that issue to be valid.6 NRCP 15(b). We
6We address these rules of procedure as they existed in 2017. The
Nevada Rules of Civil Procedure were amended on March 1, 2019. In re
Creating a Comm. to Update and Revise the Nev. Rules of Civil Procedure,
ADKT 522 (Order Amending the Rules of Civil Procedure, the Rules of
Appellate Procedure, and the Nevada Electronic Filing and Conversion
Rules, Dec. 31, 2018). Those amendments did not substantively change the
language at issue here. See id.6NRCP 15(b) refutes any argument that NRCP 15(a) or 16(b) requires
a party to amend their answer to assert a counterclaim.
11
review a district court's determination under this rule for an abuse of
discretion. See State, Univ. & Cmty. Coll. Sys. v. Sutton, 120 Nev. 972, 987-
88, 103 P.3d 8, 18-19 (2004) (addressing a motion to amend); see also 6A
Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice
and Procedure § 1493 (3d ed. 2010) (whether an issue has been tried by
implied consent is reviewed for an abuse of discretion). By way of example,
we have previously determined an issue was tried by consent where the
plaintiff questioned witnesses regarding the issue and argued it extensively
on the merits. I. Cox Constr. Co. v. CH2 Invs., LLC, 129 Nev. 139, 142-43,
296 P.3d 1202, 1204 (2013). In another case, we concluded an issue was
tried by consent where the parties explored the issue during discovery, the
defendant raised the issue in opening arguments, and the plaintiff referred
to it as an issue in the case and did not object to the court admitting evidence
regarding the issue at trial. Poe v. La Metropolitana Compania Nacional
de Seguros, 76 Nev. 306, 353 P.2d 454 (1960).
Nevertheless, implied consent can be "difficult to establish as it
depends on whether the parties recognized that an issue not presented by
the pleadings entered the case at trial." 6 Federal Practice and Procedure
§ 1493. If evidence relevant to the implied claim is also relevant to another
issue in the case, and nothing at trial indicates that the party who
introduced the evidence did so to raise the implied claim, courts will
generally not find that the parties tried the issue by consent. Id. "The
reasoning behind this view is sound since if evidence is introduced to
support basic issues that already have been pleaded, the opposing party
may not be conscious of its relevance to issues not raised by the pleadings
unless that fact is made clear." Id.
12
For example, in Luria Brothers & Co. v. Alliance Assurance Co.,
780 F.2d 1082, 1088 (2d Cir. 1986), the United States Court of Appeals for
the Second Circuit addressed a case where the district court sua sponte
awarded the defendants $900,000 in restitution in an indemnity lawsuit.
The court addressed implied consent under FRCP 15(b), which turns "on
whether [the parties] recognized that the issue had entered the case at
trial." Id. at 1089. The court acknowledged that, generally, "consent may
be implied from failure to object at trial to the introduction of evidence
relevant to the unpled issue." Id. Based on that, the court determined, the
evidence relevant to the unpleaded restitution issue was also relevant to a
properly pleaded issue and the plaintiffs failure to object, therefore, did not
imply consent "absent some obvious attempt to raise [the unpleaded
issues]." Id. In reaching this conclusion, the circuit court explained that
the record lacked comments "( lsufficient to warn [the party] that the trial
judge was considering restitution of payment." Id. The court explained that
the plaintiff "should have been entitled, through normal pretrial discovery,
to explore . . . possible defenses to restitution. The absence of any
opportunity to do so constitutes sufficient prejudice to warrant reversal of
that part of the district court's order.. . . ." Id. at 1090.
In the present case, the record does not show that the parties
tried a counterclaim by implied consent. CR and Marriner failed to mention
a counterclaim or propose a damages award in either their motions for
summary judgment or their pretrial proposed findings of fact and
conclusions of law. CR affirmed at trial that they had not advanced any
counterclaim, only affirmative defenses, and Marriner did not contradict
CR's characterization of the trial. Moreover, CR and Marriner never made
an obvious attempt to raise a counterclaim at trial, and the trial judge gave
13
no indication, before his ruling, that he was considering awarding damages
against Yount. Although evidence was adduced regarding Yount's
involvement with the IMC and its efforts to undermine the Mosaic loan, this
evidence was relevant to the affirmative defenses that Yount helped cause
any damages he claimed. See, e.g., Las Vegas Fetish & Fantasy Halloween
Ball, Inc. v. Ahern Rentals, Inc., 124 Nev. 272, 275, 182 P.3d 764, 766 (2008)
(holding that, to prove unclean hands to bar the opposing party's claim for
relief, it must be shown that the opposing party acted unconscientiously,
unjustly, or without good faith in the transaction); Shuette v. Beazer Homes
Holdings Corp., 121 Nev. 837, 859-60, 124 P.3d 530, 546 (2005)
("[c] omparative negligence applies . . . to conduct that proximately
contributes to an injury's causation," and "mitigation issues exist when the
wrongdoer attempts to minimize the damages owed by showing that the
harmed person failed to take reasonable care to avoid incurring additional
damages"). And we agree with the above authorities that, because this
evidence was relevant to pleaded issues, Yount's failure to object to the
evidences admission at trial does not support a conclusion that he
consented to, or was on notice of, the trial of an unpleaded counterclaim for
damages. See Luria Bros., 780 F.2d at 1089-90; 6 Federal Practice and
Procedure § 1493.
Underscoring this lack of implied consent is the lack of
consensus on which counterclaim was tried. Judge Flanagan linked the
damages award to unclean hands and intentional interference with
contractual relations in his oral findings, without addressing the elements
14
of either.7 Judge Polaha's order, however, simply sidestepped naming a
counterclaim. And, on appeal, Marriner argues he is entitled to the
damages due to intentional interference with contractual relations, while
CR argues that Judge Flanagan misspoke regarding an interference with
contractual relations and that it instead proved damages based on Yount's
tortious interference with a prospective economic advantage.
Even assuming, arguendo, that CR and Marriner proved their
entitlement to damages on either of these counterclaims, a more troubling
fact prevents affirmance here. Namely, the evidence adduced at trial failed
to establish the amount of damages or Yount's individual culpability for the
project's failure. See Frantz v. Johnson, 116 Nev. 455, 469, 999 P.2d 351,
360 (2000) ([A] party seeking damages has the burden of providing the
court with an evidentiary basis upon which it may properly determine the
amount of damages."); see also J.J. Indus., LLC v. Bennett, 119 Nev. 269,
274, 71 P.3d 1264, 1267 (2003) (addressing intentional interference with
contractual relations); Las Vegas-Tonopah-Reno Stage Line, Inc. v. Gray
Line Tours of S. Nev., 106 Nev. 283, 287-89, 792 P.2d 386, 388-89 (1990)
(addressing damages under a claim for wrongful interference with
prospective economic advantage). At trial, the parties introduced numerous
emails and substantial testimony regarding Yount's involvement with the
IMC. But that evidence did not detail CR's and Marriner's actual monetary
losses resulting from the project's failure. Significantly, trial testimony
made only passing speculative references to those amounts because no
discovery was conducted regarding the testimony. See Mort Wallin of Lake
7Because we determine the parties did not try a counterclaim by
implied consent, we need not address whether the affirmative defense of
"unclean hands" can also constitute a claim for relief.
15
Tahoe, Inc. v. Commercial Cabinet Co., 105 Nev. 855, 857, 784 P.2d 954, 955
(1989) (providing that, while a party need not prove exact damages, an
evidentiary basis for the amount awarded must exist). CR's post-trial
motion for lost management fees only accentuates that they failed to
present adequate evidence as to project-loss damages during trial. And the
evidence of Yount's involvement with the IMC did not show whether, or the
degree to which, Yount was directly involved in undermining the Mosaic
loan—a fact Marriner acknowledged to some extent during closing
argument. Likely because of the lack of evidence on this point, the district
court, while clearly holding Yount culpable, did not explain why Yount, as
opposed to the IMC or others, should be liable for those damages or how the
court arrived at the award's amount. Under these facts, it would be unfair
to determine the parties tried a counterclaim by implied consent and unjust
to uphold the damages award against Yount.
In reaching our decision, we are persuaded by the Second
Circuit's observation that when a counterclaim has not been tried by
implied consent, the defending party is robbed of its "entitle[ment], through
normal pretrial discovery, to explore [the counterclaim]. The absence of any
opportunity to do so constitutes sufficient prejudice to warrant reversal of
that part of the district court's order.. . . ." Luria Bros., 780 F.2d at 1090.
Likewise here, while we do not opine as to the merits of any potential
counterclaim against Yount, the absence of opportunity to conduct discovery
specific to the counterclaim was prejudicial and warrants reversal of the
damages award.8 See id.8In
light of our decision, we need not reach Yount's additional
arguments on this point.
16
Although we conclude the district court erred by finding a
counterclaim and awarding damages, and the error warrants reversal of
that award, we briefly address both NRCP 8(c) and NRCP 54(c) and explain
why neither of those rules warrant upholding the damages award here.
NRCP 8(c)
CR argues that NRCP 8(c) allows the district court to convert
CR's affirmative defense of unclean hands into a counterclaim for tortious
interference with a prospective economic advantage. CR implies that Judge
Flanagan misspoke by basing the damages award on intentional
interference with contractual relations and that a fair reading of the ruling
"makes cleae it was based upon tortious interference with a prospective
economic advantage, and CR asserts that the evidence supports the award
in CR's favor on such a claim. Marriner takes a broader approach, arguing
that NRCP 8(c) allows a court to treat an affirmative defense as a plea for
affirmative relief where justice so requires and that the facts here support
affirmative relief.
NRCP 8(c) addresses affirmative defenses and allows the court
to treat an affirmative defense as a counterclaim if the party "mistakenly
designated" the counterclaim as an affirmative defense. In addressing
FRCP 8(c), the United States Court of Appeals for the District of Columbia
Circuit explained that
affirmative defenses made in response to a pleading
are not themselves claims for relief. True, [FRCP]
8(c)(2) provides a potential mechanism for
extending jurisdiction to an improperly pled
claim . . . . But several of our sister circuits have
held that a request for relief that amounts to no
more than denial of the plaintiffs demand is
properly considered an answer, not a separate
17
claim for affirmative relief that expands the court's
jurisdiction.
Akiachak Native Cmty. v. U.S. Dep't of Interior, 827 F.3d 100, 107 (D.C. Cir.
2016) (internal quotation marks and alterations omitted). Thus, while a
counterclaim may entitle the defendant to affirmative relief, an affirmative
defense generally does not. See id. at 107-08; see also Riverside Mem'l
Mausoleum, Inc. v. UMET Tr., 581 F.2d 62, 83 (3d Cir. 1978) ("A
counterclaim may entitle the defendant in the original action to some
amount of affirmative relief; a defense merely precludes or diminishes the
plaintiffs recovery. Although the facts underlying some defenses might also
support a counterclaim, not all counterclaims are valid defenses. The two
concepts are distinct and must be kept so.").
Here, to the extent CR and Marriner argue they mistakenly
designated counterclaims as affirmative defenses below, this is belied by the
record. CR in particular repeatedly denied asserting any counterclaims
against Yount and affirmed that it had only asserted affirmative defenses,
including during closing arguments. Marriner likewise asserted that the
evidence regarding the Mosaic loan supported his defense that Yount
caused his own damages, without mentioning a counterclaim or claiming an
entitlement to damages.
To the extent CR argues the district court correctly read into
the trial a counterclaim for a tort that neither the parties nor the judge ever
named at trial, and to the extent Marriner argues that justice requires
treating his affirmative defense as a pleading for affirmative relief, this
argument fails for the reasons we rejected affirming under NRCP 15(b).
Specifically, where Yount—without warning of the possible damages
award—did not have the opportunity to present evidence or argument to
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(0) I947A 401.
counter those damages, justice does not weigh in favor of converting an
affirmative defense to a counterclaim.
NRCP 54(c)
CR contends NRCP 54(c) also supports affirmance, as it allows
a district court to award a party the relief to which they are entitled—even
where the party fails to request such relief. Marriner more particularly
argues that NRCP 54(c) allows relief for intentional interference with a
contract here because the claim was tried and proven at trial.
NRCP 54(c) states, in pertinent part, that every final judgment
other than a default judgment "shall grant the relief to which the party in
whose favor it is rendered is entitled, even if the party has not demanded
such relief in the party's pleadings." This court has explained that the rule
"implements the general principle of (NRCP] 15(c), that in a contested case
the judgment is to be based on what has been proved rather than what has
been pleaded." Magill v. Lewis, 74 Nev. 381, 387-88, 333 P.2d 717, 720
(1958) (internal quotation marks omitted). In short, if an "issue was raised
and tried, the court [is] empowered by NRCP 54(c) to grant the relief
granted, if such relief was legally warranted." Grouse Creek Ranches v.
Budget Fin. Corp., 87 Nev. 419, 427, 488 P.2d 917, 923 (1971).
The threshold question here, therefore, is whether CR and
Marriner in fact tried a counterclaim during the proceedings. For the
reasons set forth above, we conclude the parties did not try a claim against
Yount, and, therefore, NRCP 54(c) does not entitle CR and Marriner to
relief.9
9Again,
we note CR and Marriner's alleged damages were not
adequately explored at trial. As to CR, Radovan testified to a damages
amount but provided no supporting documentation and did not testify to
1.9
CONCLUSION
NRCP 15(b) allows a party to try a counterclaim by implied
consent. NRCP 8(c) and 54(c) provide additional grounds on which a district
court may, under certain circumstances, award relief in the absence of a
claim or counterclaim. Here, the district court sua sponte awarded
respondents damages. The record, however, does not show the parties tried
a counterclaim by implied consent or that respondents were otherwise
entitled to the awarded damages.'0 Accordingly, we conclude the district
court abused its discretion by awarding damages to CR and Marriner based
upon an untried counterclaim and reverse the damages award. As the
how he calculated the amount, and CR's post-trial motion seeking to add
millions to the amount awarded at trial demonstrates that trial evidence on
that issue was severely lacking. As to Marriner, although he argues various
documents sufficiently established his damages, he only introduced the
evidence to defend against Younes claims and to support his defenses, not
as support for a damages request.
loIn light of our decision, we need not address the remaining
arguments on appeal. And, as the parties do not address the district court's
attorney fees awards, we decline to address them. See Powell v. Liberty
Mut. Fire Ins. Co., 127 Nev. 156, 161 n.3, 252 P.3d 668, 672 n.3 (2011)
("Issues not raised in an appellant's opening brief are deemed waived.").
20
record supports the district court denying relief on Yount's claims, we affirm
that portion of the decision. We remand to the district court for further
proceedings consistent with this opinion.
J.
Silver
We concur:
C.J.
Gibbons
J
Hardesty
J.
Parraguirre
J
Stiglich
J.
Cadish
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103 I 447A