Southern Highlands Community Assoc. v. Dist. Ct. (Prem Deferred Trust) C/W 62587 ( 2014 )

 ORDER GRANTING IN PART AND DENYING IN PART
PETITIONS FOR WRITS OF MANDAMUS OR PROHIBITION
These are consolidated original petitions for writs of
mandamus or prohibition challenging district court orders granting and
then denying sequential motions to dismiss for failure to comply with NRS
38.310's arbitration requirements in a real property action.
At foreclosure auctions, Prem Deferred Trust and others
purchased real property located in the Southern Highlands Community.
Afterwards, Southern Highlands Community Association sought to collect
from Prem and other purchasers the full amount of past due assessments,
together with all accrued interest, fees, and other charges. Prem and the
remaining real parties in interest, however, refused to pay, or paid and
now seek to recoup, all sums greater than the amount given superpriority
status by NRS 116.3116(2).
Prem initially sought, on behalf of itself and others similarly
situated, to arbitrate the disputes with Southern Highlands before the
Nevada Real Estate Division (NRED) under NRS 38.310. NRS 38.310
requires claims involving the interpretation of homeowners' association
covenants, conditions, and restrictions (CC&Rs) to be submitted to NRED
for arbitration or mediation before either party may institute a civil action
in district court.' After refusing to rule on the merits of the claims as they
'Although the parties do not, in many cases, adequately identify
which version of the statutes applies to the different facets of their
dispute, the 2009 version of NRS Chapter 38 applies to our consideration
herein of whether NRS 38.310 requires arbitration of the claims in the
complaint. Accordingly, we refer herein to the 2009 statutes unless
otherwise specified.
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pertained to claimants other than Prem, the arbitrator ruled against
Prem. Prem then sued Southern Highlands in district court, seeking to
resolve the disputes as a class action.
Southern Highlands filed a motion to dismiss the class
allegations and all claims that were not individually submitted to NRED
for arbitration or mediation. The district court initially granted Southern
Highlands' motion to dismiss the claims that directly involved the CC&Rs,
and with leave of the court, Prem ultimately filed a second amended
complaint, omitting reference to the CC&Rs. Southern Highlands again
moved to dismiss the class allegations against all plaintiffs except for
Prem, but the district court denied its motion. Southern Highlands
consequently filed the writ petition in Docket No. 61940, seeking a writ of
mandamus or prohibition directing the district court to grant its motion to
dismiss the second amended complaint because the dispute involved the
interpretation of the CC&Rs and thus had to be submitted to NRED for
arbitration or mediation first under NRS 38.310. Prem then filed the writ
petition in Docket No. 62587 in February 2013, belatedly challenging the
district court's February 2012 order dismissing its original complaint
nearly one year earlier.
These writ petitions were consolidated and, as requested,
answers and replies were filed. Having considered the parties' arguments
therein and for the reasons explained below, we grant in part and deny in
part Southern Highlands' petition. We refuse to consider the petition filed
by Prem.
Southern Highlands' petition warrants the court's consideration
Mandamus relief is available to compel an act that is required
by law or to control an arbitrary or capricious abuse of discretion. NRS
34.160; see also Int'l Game Tech., Inc. v. Second Judicial Dist. Court, 124
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Nev. 193, 197, 179 P.3d 556, 558 (2008). 2 Because a writ petition seeks an
"extraordinary remedy, we will exercise our discretion to consider such a
petition only when there is no plain, speedy and adequate remedy in the
ordinary course of law or there are either urgent circumstances or
important legal issues that need clarification in order to promote judicial
economy and administration." Cheung v. Eighth Judicial Dist. Court, 121
Nev. 867, 869, 124 P.3d 550, 552 (2005) (internal quotations omitted).
"[W]hether an appeal is an adequate and speedy remedy necessarily turns
on the underlying proceedings' status, the types of issues raised in the
writ petition, and whether a future appeal will permit this court to
meaningfully review the issues presented." Rolf Jensen & Assocs. v.
Eighth Judicial Dist. Court, 128 Nev. „ 282 P.3d 743, 745-46 (2012)
(internal quotations omitted).
As to Prem's petition, the doctrine of laches bars our
consideration. Laches precludes review of a writ petition when there is an
inexcusable delay in seeking relief, waiver can be implied from the
petitioner's knowing acquiescence in existing conditions, and the real
party in interest is prejudiced thereby. Bldg. & Constr. Trades Council of
N. Nev. v. State ex rel. Pub. Works Bd., 108 Nev. 605, 611, 836 P.2d 633,
637 (1992). By waiting nearly one year after the challenged order was
entered, Prem unreasonably delayed filing its writ petition, which
concerns a complaint that in the interim was amended twice. Because of
2 Because mandamus, rather than prohibition, constitutes the proper
vehicle to challenge the rulings at issue here, we deny Southern
Highlands' alternative request for a writ of prohibition. See NRS 34.320
(noting that prohibition relief is available to address proceedings in excess
of a tribunal's jurisdiction).
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the delay and the current status of the case, we decline to exercise our
discretion to review its petition or the merits of the arguments therein. 3
See State v. Eighth Judicial Dist. Court, 116 Nev. 127, 134-35, 994 P.2d
692, 697 (2000) (concluding that an eleven-month delay alone precluded
consideration of a petition).
Addressing Southern Highlands' writ petition will prevent the
district court from adjudicating matters that must first be submitted to an
arbitrator or mediator, thereby advancing the interests of judicial
economy. Cheung, 121 Nev. at 869, 124 P.3d at 552. While we generally
review district court orders challenged in a writ petition for an arbitrary
or capricious abuse of discretion, we nevertheless review issues of law,
including statutory interpretation, de novo, even in the context of a writ
petition. Int'l Game Tech., 124 Nev. at 197-98, 179 P.3d at 558-59.
Some of the claims in the second amended complaint fall within the scope
of NRS 38.310's arbitration and mediation requirement
Southern Highlands asserts that all of the claims in the
second amended complaint must be dismissed under NRS 38.310 to the
extent that they are brought by parties who failed to first submit the
claims to an arbitrator or mediator, because the claims all involve the
3 As a result, we do not address Prem's argument that NRS 38.310
violates the separation of powers doctrine under the Nevada Constitution.
Moreover, we note that in asserting its constitutional argument, Prem and
the remaining real parties in interest failed to comply with NRAP 44,
which requires a party who asserts a constitutional challenge to a statute
in a proceeding before this court in which the state is not a party to give
written notice to the clerk of this court, so that the clerk can certify the
fact to the attorney general. See In re Candelaria, 126 Nev. „ 245
P.3d 518, 522 (2010) (providing that a failure to comply with NR.AP 44 is
an independent basis for summarily rejecting a constitutional argument).
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interpretation or administration of the CC&Rs and the lien statute, NRS
116.3116(2). Prem and the remaining real parties in interest argue that
they complied with NRS 38.310 or are not required to comply. They
contend that the principle of vicarious exhaustion excuses those parties
who did not arbitrate or mediate their claims because Prem arbitrated on
their behalf. Prem and the remaining real parties in interest also argue
that requiring numerous parties to submit their claims to an arbitrator or
mediator is futile.
While we disagree with Southern Highlands that any
interpretation of NRS 116.3116(2) necessarily involves reference to the
CC&Rs and arbitration under NRS 38.310, we agree that NRS 38.310
requires the dismissal of some, but not all, of the claims in the second
amended complaint. We disagree with Prem and the remaining real
parties in interest's contentions that NRS 38.310 was satisfied or that it
was futile to adhere to the statute's requirements.
NRS 38.310 governs disputes requiring interpretation, application, or
enforcement of the CC&Rs
Before instituting a civil action requiring the interpretation,
application, or enforcement of CC&Rs, the matter must be submitted to
arbitration or mediation before the NRED:
1. No civil action based upon a claim
relating to:
(a) The interpretation, application or
enforcement of any [CC&Rs] applicable to
residential property or any bylaws, rules or
regulations adopted by an association; . . .
may be commenced in any court in this State
unless the action has been submitted to mediation
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or arbitration pursuant to the provisions of NRS
38.300 to 38.360, inclusive . . . .
NRS 38.310(1) (2009) (amended 2013) (emphases added). Thus, if an
action involves ascertaining the meaning of the language in the CC&Rs or
"bylaws, rules or regulations," the action is within the scope of NRS
38.310's mediation and arbitration requirement. See Black's Law
Dictionary 837 (8th ed. 2004) (defining "interpretation" as "the
ascertainment of meaning to be given to words"); see also We The People
Nev. ex rel. Angle v. Miller, 124 Nev. 874, 881, 192 P.3d 1166, 1170 (2008)
(explaining that this court interprets unambiguous language "in
accordance with its plain meaning"). Any action based on such claims that
were not arbitrated or mediated must be dismissed: "A court shall dismiss
any civil action which is commenced in violation of the provisions of
subsection 1." NRS 38.310(2) (2009) (amended 2013).
While Southern Highlands asserts that adjudicating the
second amended complaint requires looking to the CC&Rs, Prem and the
other remaining real parties in interest argue that the district court will
look only to Southern Highlands' periodic budget, nothing else, to resolve
the claims about Southern Highlands' imposition and collection of
assessments. Resolving NRS 38.310's effect on the second amended
complaint requires an inquiry into the complaint's substance and the
substantive laws relevant to the lien-related allegations and claims
asserted. See Nev. Power Co. v. Eighth Judicial Dist. Court, 120 Nev. 948,
960, 102 P.3d 578, 586 (2004) (indicating that a complaint is evaluated for
its substance).
As noted, the claims here are primarily based on the assertion
that Southern Highlands is charging Prem, the remaining real parties in
interest, and the other class members with items that they are not
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obligated to pay under NRS 116.3116(2). 4 The first subsection of NRS
116.3116 provides associations with a statutory lien upon the property for
unpaid assessments and certain penalties, fines, fees, interest, and other
charges. 5 NRS 116.3116(1) permits an association's declaration to alter
which assessments or other charges may form the basis of the statutory
lien. See also NRS 116.3102(j)-(n) (2009) (amended 2011). The
"'[d]eclaration' means any instruments, however denominated, that create
a common-interest community," which may include the CC&Rs. NRS
116.037. Thus, the CC&Rs may establish which assessments and charges
an association is authorized to impose and which imposed assessments
and charges form the basis of the lien. As a result, where parties dispute
the validity of the charges imposed or the lien's amount under NRS
116.3116(1), those questions cannot be resolved without referencing the
CC&Rs, the declaration, or other governing documents.
4 To
the extent that Prem and the other owners challenge Southern
Highlands' ability to impose assessments, fees, or costs, statutes from
years prior to 2009 might apply. But the resolution of this writ petition
does not require us to examine Southern Highlands' imposition of
assessments or other charges. Rather, this writ petition only requires that
we ascertain whether Prem is challenging the validity or amount of such
charges. Accordingly, we express no opinion regarding the validity or
amount of any charges or which version of what statutes might apply to
determine the validity or amount of the charges.
5 Either
the 2007 or 2009 version of NRS 116.3116 may apply in the
underlying case when considering the amounts of the superpriority lien
and its effect upon this litigation. This question, however, is beyond the
scope of this writ petition, and we thus decline to address it. The 2009
changes to NRS 116.3116 are immaterial for the purposes of this writ
petition, and we thus refer herein to that version of NRS 116.3116.
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NRS 116.3116(2)(c) provides that the association's lien has
priority over certain other security interests,
to the extent of the assessments for common
expenses based on the periodic budget adopted by
the association pursuant to NRS 116.3115 which
would have become due in the absence of
acceleration during the 9 months immediately
preceding institution of an action to enforce the
lien.
(Emphasis added.) Southern Highlands argues that in ascertaining the
final amount of the lien under NRS 116.3116(2), the district court
ultimately must look to the CC&Rs to determine the nature and extent of
the assessments. The district court agreed with Prem and the remaining
real parties in interest's contention that the determination of the priority
and amount of Southern Highlands' liens, as they relate to the second
amended complaint's claims, require reference to the periodic budget and
not to the CC&Rs.
Prem and the remaining real parties in interest's contention
oversimplifies the relationship between NRS 116.3116(2) and the
remainder of the statutory scheme. As discussed above, the CC&Rs may
affect the amount of an assessment. To the extent that the priority
language defines the amount of the lien entitled to superpriority based on
the assessments for common expenses under a periodic budget, the budget
is also a matter that the CC&Rs can affect. Although the budget is
defined generally by NRS 116.3115 and NRS 116.31151, both statutes
provide that the declaration "[may] impose[ ] more stringent standards"
for a budget than the statutory standards. NRS 116.3115(1) (2009)
(amended 2011); NRS 116.31151(1) (2009). Thus, the CC&Rs can affect
the budget and the assessments for common expenses based on the
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budget, thereby affecting the amount of the lien entitled to superpriority
status under NRS 116.3116(2).
Having concluded that the CC&Rs may affect both the validity
and the amount of an association's lien under NRS 116.3116(1) and thus
the amount entitled to superpriority under NRS 116.3116(2), we must
necessarily conclude that, if a party disputes the association's periodic
budget and assessments or the validity or amount of an association's lien,
such disputes necessarily involve resort to or interpretation of the
association's CC&Rs or other governing documents, which triggers NRS
38.310(1) and requires NRED mediation or arbitration prior to civil
litigation. See Hamm v. Arrowcreek Homeowners' Ass'n, 124 Nev. 290,
296, 183 P.3d 895, 900 (2008) (holding that where the dispute would
require the district court to interpret the CC&Rs, the action must first be
submitted to NRED mediation and arbitration). But if the party does not
dispute the validity or amount of an association's lien or the monthly
assessment derived from the association's periodic budget, then no resort
to the CC&Rs is necessary and the matter may proceed in the district
court. 6 Cf. id. Thus, in this dispute, we must review whether the district
court arbitrarily or capriciously abused its discretion when it concluded
that the underlying claims in the amended complaint were not subject to
NRED mediation or arbitration under NRS 38.310(1).
6 In this regard, NRS 116.3116(2) gives a specified portion of the
association's lien priority over NRS 116.3116(2)(b) security interests. If no
challenge is brought to the association's budget or assessments or the
validity or amount of its lien, then tabulating the statutorily mandated
superpriority amount, or determining the statutory effect of the various
lien priorities subsequent to a foreclosure, would generally not involve
interpreting the CC&Rs.
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The second amended complaint included claims that are premised on
NRS 116.3116(2) and, thus, involve the interpretation of the CC&Rs
Here, the second amended complaint includes the following
causes of action: (1) declaratory relief concerning Southern Highlands'
liens under NRS Chapter 116, (2) "[b]reach of NRS 116.3116(2)," (3)
negligence per se, (4) injunctive relief, (5) negligent misrepresentation,
and (6) conversion. In addition, it included allegations that Southern
Highlands made "excessive demands . . . for claimed assessment[s]" and
"false demands, improper liens and improper collection and retention of
assessments," the result of which was the collection of lien amounts that
exceeded the amounts permitted by NRS 116.3116. These allegations
were incorporated into each claim. Although Prem and the remaining real
parties in interest assert in their answer to the writ petition that their
primary contention questions whether an association may assess more
than the NRS 116.3116(2) superpriority lien amount after a first deed of
trust on the property has been foreclosed, it appears that their second
amended complaint contains additional assertions about the validity and
amount of the assessments.
For example, the requested declarations concerning the
validity and amount of the "claimed liens" and Southern Highlands'
budget involve interpreting the CC&Rs, subjecting them to NRS 38.310's
mediation or arbitration requirement. The requested declarations which
only concern statutes and other authorities, however, are not subject to
MRS 38.310's mediation and arbitration requirement. 7
7 Our recent opinion in SFR Investments Pool 1, LLC v. U.S. Bank,
N.A., 130 Nev. , 334 P.3d 408 (2014), addresses some of the issues
relating to these requests for declaratory relief.
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The remaining claims seek damages or relief relating to
alleged "Unlawful Lien Amounts" or Southern Highlands' "false" or
"improper" demands and receipt thereof, which purportedly violated NRS
116.3116(2). These claims not only dispute superpriority amounts and
whether the remaining amounts have been foreclosed, but they also attack
the validity of the assessments, collection fees, and other charges forming
the basis of Southern Highlands' liens. These claims thus involve a
determination of what the proper lien amounts were. Since lien amounts
may be affected by the CC&Rs, NRS 38.310 requires these claims to be
mediated or arbitrated before they are brought in district court.
Accordingly, with the exception of the declaratory relief claims
that concerned authorities beyond the CC&Rs and their relationship to
Southern Highlands' liens, the causes of action in the second amended
complaint involve the interpretation of Southern Highlands' CC&Rs. Such
claims are within NRS 38.310's arbitration or mediation requirement.
Thus, inasmuch as these claims were brought on behalf of parties who did
not submit them to an arbitrator or mediator, unless an exception applies,
NRS 38.310 precludes the district court's consideration of these claims as
they pertain to those parties, and these claims must be dismissed.
NRS 38.310 was violated
Having concluded that NRS 38.310 bars various claims in the
second amended complaint if they are unmediated and unarbitrated, we
now turn to Prem and the remaining real parties in interest's contention
that they have fulfilled or are excused from fulfilling NRS 38.310's
requirement because (1) Prem submitted all of the claims on behalf of
itself and the class to an arbitrator, (2) Prem vicariously exhausted the
class members' duty to arbitrate or mediate their claims pursuant to NRS
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38.310, and (3) administrative exhaustion of the class members' claims
was futile. We disagree.
Prem did not actually submit the class's claims
The contention that the plaintiffs other than Prem, including
the class, actually submitted their claims for arbitration because Prem
attempted to present class claims to the arbitrator is premised on a loose
and unconventional construction of the term "submit." The term "submit"
means "[go end the presentation of further evidence in (a case) and tender
a legal position for decision." Black's Law Dictionary 1466 (8th ed. 2004).
Thus, the term "submitted," as it appears in NRS 38.310, requires a party
to do more than file a claim with an arbitrator or mediator. It requires a
party to present its claim to the arbitrator or meditator for a resolution.
Here, the record shows that when Prem attempted to bring
claims on behalf of others in a class by means of a motion for class
certification, the arbitrator denied the motion and refused to rule on the
merits of the claims as they pertained to parties other than Prem.
Therefore, the claims as they related to parties other than Prem were not
submitted to the arbitrator and the arbitration only concerned the claims
as they were submitted on behalf of Prem. Thus, when Prem submitted
its claims for resolution by the arbitrator, it did not fulfill NRS 38.310's
requirement on behalf of others.
Prem did not vicariously exhaust •the remaining real parties in
interest's or the class's claims
The second argument is that Prem, by arbitrating its own
claims, vicariously fulfilled the remaining real parties in interest's and the
class members' duty to mediate or arbitrate their claims. To support this
contention, Prem and the remaining real parties in interest proffer cases
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which concern two circumstances in which vicarious exhaustion can occur.
However, neither circumstance is present here.
Outside of circumstances that authorize vicarious exhaustion,
individualized exhaustion of administrative remedies is generally
required. See Arctic Slope Native Ass'n v. Sebelius, 583 F.3d 785, 794
(Fed. Cir. 2009) (holding that except in limited circumstances "the [United
States] Supreme Court and the lower courts have held that a party that
has not exhausted administrative remedies is not eligible to be a class
member"). In addition, vicarious exhaustion is not allowed when a statute
requires individual parties to exhaust administrative remedies. See U.S.
Xpress, Inc. v. N.M. Taxation & Revenue Dep't, 136 P.3d 999, 1003 (N.M.
2006) (refusing to allow vicarious exhaustion under a statute whose plain
meaning required individual plaintiffs to exhaust administrative
remedies); see also Pourier v. S.D. Dep't of Revenue & Regulation, 778
N.W.2d 602, 605-06 (S.D. 2010) (holding that a statute requiring an
individual taxpayer seeking relief to complete administrative remedies
precludes the application of vicarious exhaustion).
The first circumstance that Prem and the remaining real
parties in interest identify is when a party shares "a community of
interest" with a party who has exhausted its administrative remedies.
Leff v. City of Monterey Park, 267 Cal. Rptr. 343, 348 (Ct. App. 1990)
(internal quotations omitted). California appellate courts have applied the
"community of interest" standard when the parties challenge an agency's
decision and when the parties' interests on the disputed issue are
identical. Friends of Mammoth v. Bd. of Supervisors, 502 P.2d 1049, 1062-
63 (Cal. 1972) (allowing vicarious exhaustion in the context of a challenge
to the grant of a land use permit), disapproved of on other grounds by
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Kowis u. Howard, 838 P.2d 250, 254 (Cal. 1992); see Tarkington v. Cal.
Unemployment Ins. Appeals Bd., 92 Cal. Rptr. 3d 131, 143 (Ct. App. 2009)
(allowing vicarious exhaustion for union members in a dispute about
whether they were eligible for unemployment benefits during a labor
lockout); Leff, 267 Cal. Rptr. at 347-48 (allowing vicarious exhaustion in
the context of a challenge to the grant of a land use permit).
The second circumstance is when a statute contemplates post-
administrative-procedure class actions and thus excuses class members
from pursuing administrative remedies. For example, Title VII of the
Civil Rights Act of 1964 and the Washington State Tort Claims Act
authorize vicarious exhaustion of administrative remedies. Albemarle
Paper Co. v. Moody, 422 U.S. 405, 414 n.8 (1975) (holding that the Civil
Rights Act of 1964's legislative history demonstrates an intent to allow
vicarious exhaustion); Foster v. Gueory, 655 F.2d 1319, 1323 (D.C. Cir.
1981) (allowing vicarious exhaustion in a claim brought pursuant to the
Civil Rights Act of 1964); Oatis v. Crown Zellerbach Corp., 398 F.2d 496,
498-99 (5th Cir. 1968) (allowing the same); Oda v. State, 44 P.3d 8, 12
(Wash. Ct. App. 2002) (holding that the Washington State Tort Claims
Act's administrative notice requirement allows for class action claims to be
brought on behalf of parties who did not exhaust administrative
remedies). Thus, vicarious exhaustion may occur if the parties' interests
with regard to the challenged issue are identical or if otherwise authorized
by statute.
Because of NRS 38.310's plain language, neither circumstance
is present here. As we explained above, NRS 38.310(1) prohibits the
commencement of any "civil action based upon a claim relating to. . . [t]he
interpretation, application or enforcement of any [CC&Rs]" if the claim is
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not mediated or arbitrated. NRS 38.310(1) (2009) (amended 2013).
Furthermore, this statute states that "[a] court shall dismiss any civil
action which is commenced in violation of the provisions of subsection 1."
NRS 38.310(2) (2009) (amended 2013). In a statute, 'shall" is mandatory
unless the statute demands a different construction to carry out the clear
intent of the legislature." Leyva v. Nat'l Default Servicing Corp., 127 Nev.
, 255 P.3d 1275, 1279 (2011) (quoting State of Nev. Emps. Ass'n v.
Daines, 108 Nev. 15, 19, 824 P.2d 276, 278 (1992)).
"NRS 38.310 expresses Nevada's public policy favoring
arbitration of disputes involving the interpretation and enforcement of
CC&Rs." Hamm v. Arrowcreek Homeowners' Ass'n, 124 Nev. 290, 299, 183
P.3d 895, 902 (2008). Therefore, this statute's use of the term "shall"
establishes a mandatory requirement that each CC&R-based claim be
mediated or arbitrated and prevents district courts from considering an
unmediated and unarbitrated CC&R-based claim. 8 Because it does not
authorize any exception to its mediation or arbitration requirement, NRS
38.310's language precludes the theories of vicarious exhaustion proffered
8 Though the dissent identifies a potentially meritorious policy issue
relating to the efficiency and practicality of requiring each member of a
potential class to arbitrate its CC&R-based claims before joining a class-
action lawsuit, we cannot interpret NRS 38.310 to adopt the dissent's
preferred policy because such a holding would require a deviation from
NRS 38.310's plain meaning. See Williams v. United Parcel Servs., 129
Nev. 302 P.3d 1144, 1148 (2013) (refusing to deviate from the
plain meaning of a statute and rejecting arguments that would require the
court to read additional language into the statute); see also Diamond v.
Swick, 117 Nev. 671, 677, 28 P.3d 1087, 1090 (2001) (observing that "[this
court's] business does not include filling in alleged legislative omissions
based on conjecture as to what the legislature would or should have done"
(internal quotations omitted)).
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by Prem and the remaining real parties in interest. Therefore, Prem's
completion of arbitration does not vicariously apply to the class's claims.
As a result, the remaining real parties in interest and class members who
did not submit their claims for mediation or arbitration did not comply
with NRS 38.310. Thus, the district court erred by not dismissing the
claims brought by and on behalf of those who did not fulfill MRS 38.310's
mediation or arbitration requirement.
Administrative exhaustion of the remaining real parties in interest's
or the class's claims was not futile
The third argument is that the remaining real parties in
interest's and the class members' claims are excused from NRS 38.310's
administrative exhaustion requirement because administrative
adjudication of their claims would be futile. Prem and the remaining real
parties in interest contend that arbitration is futile because an arbitrator
declined to hear their class claims on the purported grounds that he
lacked jurisdiction. They argue that NRED arbitration is inadequate
because there are not enough arbitrators to resolve the class members'
claims quickly enough to allow them to participate in a class action.
When an attempt to exhaust administrative remedies would
be futile or the administrative process is inadequate, a party may be
excused from a requirement to exhaust an administrative remedy.
Malecon Tobacco, LLC v. State ex rel. Dep't of Taxation, 118 Nev. 837, 839,
59 P.3d 474, 476 (2002) (holding that administrative exhaustion is not
required when it is futile); see also Fernandez v. Chertoff, 471 F.3d 45, 58
(2d Cir. 2006) (holding that administrative exhaustion may be excused if
"the agency cannot provide effective relief'). Though Prem and the
remaining real parties in interest treat them as a single concept, futility
and inadequacy are separate exceptions to the administrative exhaustion
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requirement. Randolph-Sheppard Vendors of Am. v. Weinberger, 795 F.2d
90, 107 (D.C. Cir. 1986). Futility occurs when "the agency will almost
certainly deny any relief either because it has a preconceived position on,
or lacks jurisdiction over, the matter." Id. Inadequacy occurs when "the
agency has expressed a willingness to act, but the relief it will provide
through its action will not be sufficient to right the wrong." Id.
NRCP 23 provides a right for parties to pursue claims in
district court as a class. NRCP 23(a)-(b). This right "is a procedural right
only, ancillary to the litigation of substantive claims." Deposit Guar. Nat'l
Bank of Jackson, Miss. v. Roper, 445 U.S. 326, 332 (1980) (holding that the
analogous FRCP 23 does not establish a substantive claim or right); see
also Vanguard Piping Sys., Inc. v. Eighth Judicial Dist. Court, 129 Nev.
, 309 P.3d 1017, 1020 (2013) (stating that "federal cases
interpreting [an analogous Federal Rule of Civil Procedure] are strong
persuasive authority") (internal quotations omitted)). Because class
actions are a procedural device and because a plaintiff has discretion
about whether to use this device, class actions do not affect jurisdiction.
See Vaile v. Eighth Judicial Dist. Court, 118 Nev. 262, 275, 44 P.3d 506,
515 (2002) (holding that "[p]arties may not confer jurisdiction upon the
court by their consent when jurisdiction does not otherwise exist"). Thus,
a party's decision to use or forego this procedural right does not change a
court's subject matter jurisdiction over its claim.
Since a party's use of a procedural device does not alter a
court's subject matter jurisdiction, Prem's attempt to submit claims as a
class action does not affect an NRED arbitrator's ability to hear the
individual claims. Thus, the arbitrator's order disclaiming jurisdiction in
this case does not actually reflect a lack of jurisdiction or establish futility
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for two reasons. First, the arbitrator incorrectly relied on NRS 38.255(3)
to conclude that he may not hear class claims. Because this statute
governs court-annexed arbitration and not NRED arbitration, see NRS
38.250(1), the rule does not govern an NRED arbitrator's ability to hear
the class claims. An NRED arbitrator may still hear each class members'
claims on an individual basis. Second, a statute or administrative rule
preventing the use of class actions only limits the procedure and not the
substance of the claims brought before the arbitrator. See Roper, 445 U.S.
at 332. Therefore, a procedural bar to the use of class action claims does
not change the subject matter jurisdiction of an arbitrator.
Similarly, because a class action is a procedural device that is
ancillary to substantive claims, it is not a type of claim or relief. See id.
Therefore, any limitation on the use of a class action would not prevent
consideration of a claim that is properly brought or relief based on the
claim.
An NEED arbitrator has authority to adjudicate claims
relating to the "interpretation, application or enforcement of any
[CC&Rs]." NRS 38.310(1) (2009) (amended 2013). Therefore, an NRED
arbitrator is authorized to hear and to grant relief based on the remaining
real parties in interest's claims and the class members' claims which
involve the interpretation of CC&Rs. The fact that the procedural limits
on arbitration may prevent the litigants from arbitrating as a class does
not deprive the arbitrator of jurisdiction or preclude the arbitrator from
granting the requested relief. As a result, administrative exhaustion is
not futile and the administrative process is not inadequate because NRED
arbitrators can resolve the claims brought by the remaining real parties in
interest and the claims brought on behalf of the class members.
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Conclusion
Accordingly, we grant in part and deny in part Southern
Highlands' petition and deny Prem's petition. We direct the clerk of this
court to issue a writ of mandamus that instructs the district court to (1)
vacate its order denying Southern Highlands' motion to dismiss the claims
in the second amended complaint; (2) determine who among the parties
submitted their claims to an arbitrator or meditator under NRS 38.310;
and (3) dismiss the claims identified herein that are brought by parties
who have not submitted their claims to arbitration under NRS 38.310,
without prejudice to the ability of those parties to submit their claims to
arbitration before bringing the claim again or to file an amended
complaint that does not challenge the validity or amount of Southern
Highlands' liens or the monthly assessment derived from its periodic
budget.
Gibbons
)09-724L, C.J.
J.
J.
J.
Saitta
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cc: Hon. Susan Scann, District Judge
Adams Law Group
Brownstein Hyatt Farber Schreck, LLP/Las Vegas
Eighth District Court Clerk
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HARDESTY, J., with whom CHERRY, J., agrees, dissenting:
I would allow the class action to proceed, as Prem, by
arbitrating its claim, has vicariously exhausted the remaining real parties
in interest's and putative class members' arbitration or mediation
remedies prerequisite to filing a civil action. In making this
determination, I disagree with the majority's characterization of the
vicarious exhaustion doctrine and their conclusion that NRS 38.310
precludes any application of that doctrine.
The exhaustion doctrine provides agencies with an
opportunity to defend or correct their actions, discuss legal issues with
claimants, and otherwise attempt to settle controversies out of court.
Mesagate Homeowners' Ass'n u. City of Fernley, 124 Nev. 1092, 1099, 194
P.3d 1248, 1252-53 (2008). But there are circumstances where this policy
is not implicated and thus need not be a barrier to court access. For
example, in multi-party litigation or class actions where all claims are so
similar that a decision on any one of them can be imputed to all, there is
no need for each plaintiff to separately exhaust remedies or for the same
legal question to be repeatedly brought and decided. In such situations,
courts have repeatedly ruled that one plaintiff may exhaust
administrative remedies on behalf of other plaintiffs. See, e.g., Foster v.
Gueory, 655 F.2d 1319, 1322-23 (D.C. Cir. 1981); Phillips v. Klassen, 502
F.2d 362, 369 (D.C. Cir. 1974); Friends of Mammoth v. Bd. of Supervisors,
502 P.2d 1049, 1062-63 (Cal. 1972), disapproved of on other grounds by
Kowis v. Howard, 838 P.2d 250 (Cal. 1992); Tarkington v. Cal.
Unemployment Ins. Appeals Bd., 92 Cal. Rptr. 3d 131, 143 (Ct. App. 2009);
Leff v. City of Monterey Park, 267 Cal. Rptr. 343, 348 (Ct. App. 1990).
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Moreover, where all similarly situated plaintiffs have claims that would
generate the same discussion and the agency has already utilized its
opportunity to address and resolve the issue out of court, it would be
inefficient to require all plaintiffs to exhaust their administrative
remedies before proceeding to the courts. Tarkington, 92 Cal. Rptr. 3d at
143; Local 186, International Pulp, Sulphite and Paper Mill Workers v.
Minn. Mining & Mfg. Co., 304 F. Supp. 1284, 1289 (N.D. Ind. 1969). Here,
where the real parties in interest, putative class members, and Prem
share the same legal question, applying the vicarious exhaustion doctrine
would speed efficient litigation without depriving Southern Highlands of
its opportunity to settle the legal questions out of court as it has already
taken and discarded that opportunity.
Moreover, this result would not run afoul of NRS 38.310.
Southern Highlands argues, and the majority agrees, that this statute
unambiguously requires each class member to exhaust his or her
administrative remedies as a prerequisite to participating in a class
action. On this point, law from other jurisdictions is instructive in
illustrating that such is not the case.
In federal courts, vicarious exhaustion is generally applied in
class action situations unless the requirement at issue is jurisdictional.
Compare Blackmon-Malloy v. U.S. Capitol Police Bd., 575 F.3d 699, 704-
05 (D.C. Cir. 2009), with Oatis v. Crown Zellerbach Corp., 398 F.2d 496,
498-99 (5th Cir. 1968). In Blackmon-Malloy, the court held that if a
requirement is jurisdictional each plaintiff must fulfill the requirement
prior to bringing civil suit; otherwise, the court is without subject matter
jurisdiction over the case. 575 F.3d at 704-05. However, the Blackmon-
Malloy court and other federal courts have repeatedly held that for a
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requirement to be jurisdictional such intent must be clearly expressed
through strong language within the statute itself, and that absent such
language courts should presume the requirement is not jurisdictional. Id.;
see Arbaugh v. Y&H Corp., 546 U.S. 500, 515-16 (2006); Chen v. Bell-
Smith, 768 F. Supp. 2d 121, 148-50 (D.C. Cir. 2011); Solis v.
Communications Workers, 766 F. Supp. 2d 84, 97 (D.C. Cir. 2011). In
Blackmon-Malloy, for example, the statute under review, which was held
to be jurisdictional, was titled "{jurisdiction" and expressly stated that the
district court only had jurisdiction if the employee had first completed
counseling in accordance with the statute. 575 F.3d at 705.
Although many courts at the state level have not thoroughly
addressed the question of whether administrative remedies prerequisite to
a civil action are jurisdictional in nature, some jurisdictions have analyzed
the language of a particular state statute in determining whether a
statutory requirement applies to all plaintiffs. In Arizona Department of
Revenue v. Dougherty, the Arizona Supreme Court held that where the tax
code required that "each claim for refund" meet certain prerequisites, but
did not specifically require each taxpayer in a class action to complete the
requirements, vicarious exhaustion was permissible so long as a class
representative had met the requirements. 29 P.3d 862, 866-67 (Ariz.
2001) (emphasis omitted) (internal quotations omitted). Conversely, in
U.S. Xpress, Inc. v. New Mexico Taxation & Revenue Department, the
statute at issue expressly mandated that "the taxpayer" take certain steps
prerequisite to litigating a claim, and therefore, the New Mexico Supreme
Court held that vicarious exhaustion of the requirement was not possible
as the statute expressly required each class member to meet the
requirements. 136 P.3d 999, 1002-03 (N.M. 2006) (internal quotations
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omitted). The Supreme Court of South Dakota likewise held that
vicarious exhaustion was impermissible where the statute expressly
required each "taxpayer seeking recovery" to follow procedure. Pourier v.
S.D. Dep't of Revenue and Regulation, 778 N.W.2d 602, 605 (S.D. 2010)
(emphasis omitted) (internal quotations omitted). While this area of law
remains unsettled, these cases nevertheless provide a framework for
determining this question.
Here, the issue is whether each real party in interest and each
putative class member must fulfill the requirements of NRS 38.310 before
the class action may proceed. NRS 38.310 is titled "Limitations on
commencement of certain civil actions," and states:
1. No civil action based upon a claim
relating to:
(a) The interpretation, application or
enforcement of any covenants, conditions or
restrictions applicable to residential property or
any bylaws, rules or regulations adopted by an
association; or
(b) The procedures used for increasing,
decreasing or imposing additional assessments
upon residential property,
may be commenced in any court in this State
unless the action has been submitted to mediation
or, if the parties agree, has been referred to a
program pursuant to the provisions of NRS 38.300
to 38.360, inclusive, and, if the civil action
concerns real estate within a planned community
subject to the provisions of chapter 116 of NRS or
real estate within a condominium hotel subject to
the provisions of chapter 116B of NRS, all
administrative procedures specified in any
covenants, conditions or restrictions applicable to
the property or in any bylaws, rules and
regulations of an association have been exhausted.
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2. A court shall dismiss any civil action
which is commenced in violation of the provisions
of subsection 1.
The statute expressly precludes "a claim" from being brought
"unless the action" was first submitted to alternative dispute resolution
and, if the action implicates NRS Chapter 116, administrative procedures
have been exhausted. NRS 38.310(1) (emphasis added). Neither in the
title nor in the text does the statute state that such actions are required
before the court may have jurisdiction or that the requirements are
jurisdictional in nature. Moreover, the statute never refers to the
person(s) bringing the action, but instead refers to requirements that must
be satisfied as to "(the] claim" or "the action" before it may proceed to
court. Thus, on its face, the statute does not require that each plaintiff
and class member exhaust his or her administrative remedies before
bringing a class action. Rather, a fair reading of the statute suggests that
so long as administrative remedies have been exhausted as to that claim,
the court may hear the case.
Furthermore, NRS 116.4117(1), a provision referenced by NRS
38.310(1), states that "any person or class of persons suffering actual
damages. . . may bring a civil action for damages or other appropriate
relief," subject to NRS 38.310. (Emphasis added.) This language seems to
contemPlate class actions, and, unlike NRS 38.310, refers to a "person or
class of persons" while NRS 38.310 refers only to a "claim" or "action."
This further suggests that the Legislature did not intend NRS 38.310's
requirements to extend to each class member and that vicarious
exhaustion by a class representative is possible, as NRS 116.4117(1) both
contemplates class actions and implies that the Legislature would have
used more specific language to impart NRS 33.310's requirement on
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individual class members had it wished to do so. Because the majority's
reading of NRS 30.310 undermines if not eliminates any realistic
possibility of a class action, that holding is contrary to NRS 116.4117(1).
Given that statutes should be construed as a whole and in harmony with
one another, the majority's conclusions also run counter to well-
established legal canon. See Canarelli v. Eighth Judicial Dist, Court, 127
Nev. „ 265 P.3d 673, 677 (2011); Buclavalter u. Eighth Judicial
Dist. Court, 126 Nev. 200, 202, 234 P.3d 920, 922 (2010); see also Antonin
Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal
Texts 167-69, 180-82 (2012).
Here, Prem brought the claim on behalf of itself and all class
members. Prem attempted to submit the class action to arbitration and,
when that failed, Prem individually proceeded through arbitration and
then brought the class action to court. Given that Pram's claims are
representative of the legal questions common to the class as a whole and
that Prem exhausted its administrative remedies, vicarious exhaustion
should apply to allow the class action to proceed.' Moreover, allowing
such actions to proceed presents little danger of claims circumventing the
administrative process because, prior to certifying the class, the court
must evaluate the commonality and typicality of the claims of the
individual class members so that only those members whose claims mirror
'There may be some hesitancy to apply the doctrine of vicarious
exhaustion as the facts of this case do not fall squarely under
administrative law. The parties do not question whether this case is truly
administrative in nature, and I do not consider whether the doctrine of
vicarious exhaustion is inapplicable to cases arguably falling outside of
administrative law.
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the claims of the class representative(s) will fall within the class. To hold
otherwise only serves, as a practical matter, to preclude the possibility of a
class action lawsuit against homeowners' associations and would therefore
increase litigation and impede—if not prohibit—access to the courts. Such
a result turns the policy behind the exhaustion of remedies doctrine on its
head. It is cases such as this, where a large class of plaintiffs share a
common interest in resolving a narrow legal question, that the vicarious
exhaustion doctrine would seem to best serve public policy and judicial
economy.
Accordingly, I dissent.
. J.
Hardesty
I concur:
J.
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