Several of Nevada’s Rules of Civil Procedure require parties, and non-parties, to produce all documents, electronically stored information, and tangible things that are within their “possession, custody, or control.” However, until recently, neither the Rules of Civil Procedure nor the Nevada Supreme Court had defined the scope of this phrase. On July 9, 2020, the Nevada Supreme Court issued a new opinion clarifying that the phrase pertains to all documents, electronically stored information and tangible things: (1) that are within a party’s or non-party’s actual possession; or (2) that the party or non-party has a legal right to obtain. State, Dep’t of Taxation v. Eighth Jud. Dist. Ct. ex rel. Cnty. of Clark, 136 Nev. Adv. Op. 42, 466 P.3d 1281 (July 9, 2020).
Specifically, NRCP 16.1(a)(1)(A)(ii) requires a party to disclose copies “of all documents, electronically stored information, and tangible things that the disclosing party has in its possession, custody, or control and may use to support its claims or
defenses . . . .” Similarly, NRCP 34(a)(1), requires a party to produce copies of all documents, electronically stored information, and tangible things which are within the party’s “possession, custody, or control” and responsive to the adverse party’s written discovery request. Moreover, NRCP 45(a)(1)(A)(iii) requires a non-party to produce all documents, electronically stored information, and tangible things which are within the non-party’s “possession, custody, or control” and are responsive to a subpoena served on the non-party.
There has been much debate over the definition of the phrase “possession, custody, or control” and the lengths parties or non-parties must go to in order to obtain relevant documents that are beyond their physical possession. Often, parties and non-parties relied on federal law for guidance on this issue; however, federal law was not very instructive as there was a split of authority among the federal courts. Several Circuit Courts of Appeal, including the Ninth Circuit Court of Appeal, interpreted the phrase to mean documents in a party’s or non-party’s actual possession, as well as documents that the party or non-party had a legal right to obtain. See, e.g., In re Citric Acid Litig., 191 F.3d 1090, 1107-08 (9th Cir. 1999). Other Circuit Courts of Appeal, like the Second Circuit Court of Appeal, defined the phrase to mean documents within a party’s or non-party’s actual possession or documents that the party or non-party had a “practical ability to produce,” even if there is no legal right to such documents. Shcherbakovskiy v. Da Capo Al Fine, Ltd., 490 F.3d 130, 138 (2d Cir. 2007).
The Nevada Supreme Court has ultimately chosen to adopt the Ninth Circuit’s interpretation of the phrase “possession, custody, or control (actual possession or a legal right to obtain). The Court reasoned that requiring a party to produce documents, electronically stored information, or tangible things that it had the “practical ability” to obtain with good faith efforts would often prove futile where the party lacked the legal right to such documents.
About Sarah Harmon:
Sarah E. Harmon is Of Counsel at Bailey Kennedy and has over 18 years of experience in the areas of appellate advocacy and civil/business litigation, including breach of contract, fraud, legal malpractice, products liability, complex civil litigation, and many other types of business disputes. Her experience with appellate advocacy includes appeals from adverse judgments and orders as well as petitions for extraordinary writ relief. Ms. Harmon can assist clients with obtaining settlements and judgments before going to trial, avoiding errors at trial, and properly preserving issues for an appeal.
If you have any questions about appeals or civil/business litigation, please call or email Sarah Harmon at 702-562-8820 or SHarmon@BaileyKennedy.com. Additional resources can also be found at www.baileykennedy.com/category/articles/ or www.linkedin.com/in/sarahharmonbk.
Disclaimer
The information provided in this article does not, and is not intended to, constitute legal advice. All information, content, and materials available in this article are for general informational purposes only. The information in this article may not constitute the most up-to-date legal information. Any links to third-party websites included in this article are only made for the convenience of the reader, and the author of this article does not recommend or endorse the contents of the third-party sites.
Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein — and your interpretation of it — is applicable or appropriate to your particular situation. Use of, and access to, this article, or any of the links or resources contained herein do not create an attorney-client relationship between the reader and author.
All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed. The content of this article is provided “as is;” no representations are made that the content is error-free.
If an adverse order or judgment has been entered against you or your client, and you are considering an appeal but are unsure how to initiate the process, here are three important steps to get you started:
First and foremost, you must determine if the adverse order or judgment is appealable. If the order or judgment resolves all claims, counterclaims, cross-claims, and/or third-party claims alleged by all parties in the action, then you may file an appeal. If, after entry of the adverse order or judgment, some claims still remain unresolved in the action, then you have three options: (1) review Nevada Rule of Appellate Procedure 3A(b)(2)-(10) to determine if the order or judgment entered against you is included in one of the nine categories of non-final judgments and orders for which an appeal lies; (2) file a motion with the district court requesting that the adverse order or judgment be certified as a final judgment pursuant to Nevada Rule of Civil Procedure 54; or (3) file a Petition for Extraordinary Writ Relief with the Nevada Supreme Court requesting that the Supreme Court exercise its discretion to review the interlocutory (non-final) judgment or order.
If the adverse judgment entered against you is appealable, you will likely need to obtain a stay of enforcement of and/or execution upon the judgment. Once written notice of entry of the adverse judgment has been served, the prevailing party is only barred from attempting to enforce and/or execute upon the judgment for thirty (30) days, pursuant to Nevada Rule of Civil Procedure 62(a). To extend the stay for the period of the appeal, you must either post a supersedeas bond for the amount of the judgment entered against you, plus anticipated costs associated with the appeal and anticipated interest on the judgment during the pendency of the appeal, or you must file a motion for a stay with the district court.
Once you have determined that the adverse judgment or order is appealable, and determined that you have the means to post a supersedeas bond or otherwise obtain a stay of execution of the judgment, you are ready to file a Notice of Appeal. The Notice of Appeal must be filed in the district court within thirty (30) days of service of the written notice of entry of the judgment or order. This deadline cannot be stayed or continued; however, this deadline can be tolled by the filing of a motion for judgment pursuant to Nevada Rule of Civil Procedure 50(b), a motion to amend or make additional findings of fact pursuant to Nevada Rule of Civil Procedure 52(b), a motion to alter or amend the judgment pursuant to Nevada Rule of Civil Procedure 59, or a motion for a new trial pursuant to Nevada Rule of Civil Procedure 59. If any of these four motions is timely filed in the district court, then the deadline to commence the appeal is tolled and the Notice of Appeal must be filed within thirty (30) days of service of the written notice of entry of the order resolving the motion.When you file the Notice of Appeal, you must also file a Case Appeal Statement in the district court and pay the Supreme Court filing fee of $250.00. The content for both the Notice of Appeal and the Case Appeal Statement can be found in Nevada Rule of Appellate Procedure.
About Sarah Harmon:
Sarah E. Harmon is Of Counsel at Bailey Kennedy and has over eighteen years of experience in the areas of appellate advocacy and civil/business litigation, including breach of contract, fraud, legal malpractice, products liability, complex civil litigation, and many other types of business disputes. Her experience with appellate advocacy includes appeals from adverse judgments and orders as well as petitions for extraordinary writ relief. Ms. Harmon can assist clients with obtaining settlements and judgments before going to trial, avoiding errors at trial, and properly preserving issues for an appeal.
If you have any questions about appeals, please call or email Sarah Harmon at 702-562-8820 or SHarmon@BaileyKennedy.com. Additional resources can also be found at www.baileykennedy.com/category/articles/ or www.linkedin.com/in/sarahharmonbk.
Disclaimer
The information provided in this article does not, and is not intended to, constitute legal advice. All information, content, and materials available in this article are for general informational purposes only. The information in this article may not constitute the most up-to-date legal information. Any links to third-party websites included in this article are only made for the convenience of the reader, and the author of this article does not recommend or endorse the contents of the third-party sites.
Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein — and your interpretation of it — is applicable or appropriate to your particular situation. Use of, and access to, this article, or any of the links or resources contained herein do not create an attorney-client relationship between the reader and author.
All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed. The content of this article is provided “as is;” no representations are made that the content is error-free.
As a result of the March 1, 2019 amendments to the Nevada Rules of Civil Procedure, there is now an additional step that litigants must take before they can subpoena a witness in Nevada. Under NRCP 45(a)(4), if you wish to subpoena a witness in order to obtain documents, electronically stored information (such as emails, metadata, Excel spreadsheets, and the like), other tangible or physical objects, or even the right to inspect the premises at issue in the litigation, then you must now provide advance notice to all other parties of your intent before serving the subpoena on the witness. Specifically, you must serve all other parties in the action with a notice and a copy of the subpoena at least seven (7) days before service of the subpoena on the witness. The seven-day notice period is designed to permit each party time to make objections to the subpoena and time to seek issuance of a protective order, where necessary.
The new notice requirement does not alleviate the need to provide the witness with his or her own time period in which to lodge any objections to the subpoena. NRCP 45(c)(2)(B) still provides that the witness may lodge his or her own objection to the subpoena before the time specified for compliance in the subpoena, or within 14 days of service of the subpoena, whichever is earlier. Keep in mind that the court can quash or modify a subpoena if it fails to provide reasonable time for compliance. Thus, it is best practice to provide the witness with at least seven (7) to fourteen (14) days to comply with subpoena, although a longer period of time may be required for subpoenas requesting production of a large quantity of documents or documents containing a significant amount of privileged or confidential information. Therefore, if you are thinking about serving a subpoena for the production of documents, you will need to plan accordingly and make sure to serve your notice of the subpoena at least fourteen (14) to twenty-one (21) days before the compliance deadline in the subpoena, if not earlier.
This notice requirement is not required for subpoenas commanding the appearance of the witness for a deposition, hearing, or trial. However, it likely will be applied to subpoenas duces tecum served on Nevada residents for actions outside of Nevada.
If you have any questions about appeals, please call or email Sarah Harmon at 702-562-8820 or SHarmon@BaileyKennedy.com. Additional resources can also be found at www.baileykennedy.com/category/articles/ or www.linkedin.com/in/sarahharmonbk.
Disclaimer
The information provided in this article does not, and is not intended to, constitute legal advice. All information, content, and materials available in this article are for general informational purposes only. The information in this article may not constitute the most up-to-date legal information. Any links to third-party websites included in this article are only made for the convenience of the reader, and the author of this article does not recommend or endorse the contents of the third-party sites.
Readers of this article should contact their attorney to obtain advice with respect to any particular legal matter. No reader of this article should act or refrain from acting on the basis of information in this article without first seeking legal advice from counsel in the relevant jurisdiction. Only your individual attorney can provide assurances that the information contained herein — and your interpretation of it — is applicable or appropriate to your particular situation. Use of, and access to, this article, or any of the links or resources contained herein do not create an attorney-client relationship between the reader and author.
All liability with respect to actions taken or not taken based on the contents of this article are hereby expressly disclaimed. The content of this article is provided “as is;” no representations are made that the content is error-free.
Whether existing covenants not to compete (“non-competes”) will survive a business acquisition may influence the decision to proceed with the acquisition or may impact the anticipated success underlying the acquisition. Critically, the manner in which the acquisition is structured may determine the validity of non-competes between the acquired company and its employees. Thus, in Nevada, what may make the most sense from a tax perspective may not make the most sense from a business perspective.
An Example
An important client informs you that her company intends to acquire a competitor. The client explains that the primary reason for acquiring the competitor is the established relationships members of the competitor’s sales staff have with valuable customers not currently served by the client’s company. The client anticipates the acquisition will provide the company with immediate access to customers it otherwise had little chance of serving, which in turn will expand the company’s customer base and increase its revenues. The client has been advised that each member of the competitor’s sales staff is subject to a non-compete which essentially prevents him or her from engaging in the same business within the client’s sales area for a period of two years.
The client asks you for your advice on how to structure the transaction. Under the circumstances, it appears to be more advantageous from a tax perspective to acquire the competitor via an asset purchase rather than a merger. You advise the client as such, and the client, who is always in favor of minimizing her company’s tax burden, acquires the competitor via an asset purchase.
Shortly after the acquisition, three of the former competitor’s star salespeople leave the company and start their own business in competition with the company. To make matters worse, these salespeople take many of the customers they have served to their new business. These salespeople have rebuffed your client’s demands that they cease violating their non-competes, stating that they have been advised by their attorney that the non-competes are invalid as a consequence of the acquisition. Did the decision to structure the acquisition as an asset purchase undermine the anticipated benefits of the acquisition? Quite possibly.
The Basics
While it is beyond the scope of this article to explore the nuances of non-competes, some background is in order to provide context for the issue. A non-compete is an agreement in which a person or business agrees not to compete with another person or business for a specific period of time, within a specific geographic area. Non-competes typically arise as part of an employment agreement or in conjunction with the sale of a business.
There exists a common misconception that covenants not to compete are not enforceable. While this may be true in some jurisdictions, it is not true in Nevada. In Nevada, non-competes are enforceable so long as they do not impose “any greater restraint than is reasonably necessary to protect the business and goodwill” of the person or entity benefitted by the non-compete. Hansen v. Edwards, 426 P.2d 792, 793 (1967). The primary considerations in determining the reasonableness of a non-compete are (1) the duration of the restriction and (2) the geographic scope of the restriction. Id. Nevada courts have, in fact, found enforceable non-competes restricting the activities of physicians and, yes, accountants. See id.; see also Sheehan & Sheehan v. Nelson Malley and Co., 117 P.3d 219 (Nev. 2005).
Although not per se unenforceable, non-competes are disfavored by the law, and courts will strictly construe them. Consequently, care must taken by employers and sellers of businesses who desire the protection afforded by non-competes to craft the non-competes in such a manner so as to maximize the likelihood of enforcement. This is another topic altogether.
Mergers, Asset Purchases, And The Assignability Of Non-Competes
In a situation involving the acquisition of a business with existing non-competes, the structure of the transaction could determine the enforceability of the non-compete. Two relatively recent Nevada Supreme Court decisions have brought the issue to light.
In Traffic Control Services, Inc. v. United Rentals Northwest, Inc., 87 P.3d 1054 (Nev. 2004), the Nevada Supreme Court addressed whether a covenant not to compete could be assigned when a business was acquired by means of an asset purchase. The Court held that, because non-competes are personal in nature, they are “unassignable as a matter of law, absent the employee’s express consent.” Id. at 1058. Consequently, the Court held that in order for a non-compete to be assignable, there must be (1) an express clause permitting the assignment of the covenant and (2) additional and separate consideration given in exchange for the covenant itself (i.e. something more than continued employment must be given by the employer in consideration for the assignability. Ordinarily, courts will not inquire into the adequacy of consideration; as such, a nominal payment (e.g. $50 or $100) or some other additional benefit should be sufficient). Id. at 1059. Since the non-compete lacked these requisites, the Court effectively invalidated the non-compete, holding that it could not be assigned to the acquiring entity.
Five years later, the Nevada Supreme Court addressed the issue in the context of a merger and reached a different result. See HD Supply Facilities Maintenance, Ltd. v. Bymoen, 210 P.3d 183 (Nev. 2009). In Bymoen, the court recognized the “hard-and-fast distinction” between mergers and asset purchases. Unlike asset purchases, mergers are creatures of statute in which two entities effectively become one, with the surviving entity having all the contractual rights and liabilities of the entity merged into it. Based upon this principle specific to mergers, the Court held that the restrictions on the assignability of covenants not to compete applicable to asset purchases do not apply to mergers and found the non-competes enforceable.
An application of these principles to the example above reveals that the client’s tax driven decision to structure the acquisition as an asset purchase may have undermined the very purpose for the merger. Unless the non-competes contained provisions in which the (former) competitor’s salespersons agreed to the assignability of their non-competes and received independent consideration for them (provisions that are often missing from non-competes), the non-competes would be deemed unassignable and thus unenforceable by the company. This would leave the salespeople free to compete with the company and take with them the customers who were the primary reason for the acquisition.
The client potentially could have prevented the loss of these customers if the competitor had been acquired through a merger because the non-competes would vest with the client’s company regardless of whether there was a specific assignability provision and independent consideration. As indicated above, however, a merger would have caused unfavorable tax consequences.
As the above illustrates, when it comes to non-competes, good tax planning may lead to unintended, and ultimately unfavorable consequences in a business acquisition if the legal consequences of a particular structure are not considered.
This article is for general informational purposes only. It is not intended as professional counsel and should not be used as such. As legal advice must be tailored to the specific circumstances of each case, nothing provided herein should be used as a substitute for advice of competent counsel. Your use of the information contained in this article does not create an attorney-client relationship between you and the author or Bailey Kennedy, LLP.
Joshua M. Dickey is a shareholder in the Las Vegas-based firm Bailey Kennedy. His legal practice focuses on complex civil litigation, including disputes in such areas as commercial law, corporate law, business torts, and constitutional law. He is a member of the State Bar of Nevada’s disciplinary board and is on the editorial staff of the Nevada Civil Practice Manual. Reach Joshua Dickey by calling 702-562-8820 or email JDickey@BaileyKennedy.com.