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.
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There is nothing quite like striking out on your own and forming a new firm. But in their enthusiasm to do so, some lawyers forget to pay attention to details. I know this, because someof them later become my clients. What follows is a discussion of some problems that I have seen - over and over again.1."I'm outta here. Who's going with me?"Most small firms and solo practitioners star somewhere else - often at another law firm.Their departure carries with it a host of ethical issues. These include:
Each of these issues must be addressed by a lawyer who contemplates leaving an existing firm. The following resources wil be very helpful if the reader is in that situation. ABA FormalEthics Opinion 99-4 i 4: Ethical Obligations When A Lawyer Changes Firms (9/8/99); Lateral Hires: A Primer To Minimizing Imputed Disqualification; Nevada Lawyer, March 2013;Unfinished Business, Nevada Lawyer, March 2013.2. "But Where Will I Go?"The first stop for many departing lawyers is shared space, with other lawyers, other law firms, or non-lawyers. This is permissible, but presents a host of issues, including:
3. "How Do I Get Their Attention?"The Nevada Supreme Court recently amended the Nevada attorney advertising rules (RPC 7.2, 7.2A and 7.3). ADKT No. 445, filed 11/13/12. These amendments significantlychanged the rules for advertising fees, the requirements for disclaimers, statements of past results, and targeted mail to potential clients. If you are going to advertise, you have to knowthese rules. A good place to start the pursuit of knowledge is the article by Glenn Machado, Assistant Bar Counsel, in the Nevada Lawyer, January 2013.4. "How Far is Too Far?"Lawyer web sites and blogs can be deemed to be advertising. A lawyer who blogs (boasts) about past successes is engaging in commercial speech and is subject to the Bar's advertising rules. Hunter v. Virginia State Bar, Case No. 121472 (Va. S. Ct. 2/28/13). Be careful what you put on Facebook.5. "Sign 'Em Up."Once attorney and client have agreed upon the engagement, a retainer agreement should be executed by the parties. This is mandatory in contingent fee cases (RPC 1.5(c)), but should be done in every case. The retainer agreement does many things. It-· Identifies the client. Do you represent the shareholders, the officers, the directors, the corporation?
A good retainer agreement will cover all these points, and more.6. "Let 'Em Go."When the engagement is concluded, it is important to memorialize the conclusion in a disengagement letter. Nothing fancy; just a letter stating that the matter has concluded, that theattorney-client relationship has ended and that the attorney has no further obligations to the client regarding advice on the matter. This does two things:
In sum, starting a new law firm is exhilarating. I know the feeling. Keeping these issues in mind wil make your solo/small-firm life easier.Mr. Kennedy labored for many years in the vineyards of a large-firm. He now tends the vines on a much smaller estate (Bailey.:.Kennedy) where he advises many solo and small-firmpractitioners. This article is adapted from the CLE presentation made by the author and David Merril to the CCBA on May 8, 2013. If the reader wants copies of any of the materialsreferenced in this article, please e-mail Mr. Kennedy at dkennedy(fbaileykennedy.com.
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.
They say “Green is the new Black,” but in the legal industry, making the change to a sustainable office and work environment can be an overwhelming task. With planning and organization, even the least energy-efficient firm can do its part to conserve.
Though Las Vegas is a relatively new city, many of its firms are in some of its oldest buildings. The decision to go green is not as easy if you are in an older building or are a tenant with little control over the materials used in your office. For those who own their own buildings, major changes can be costly but have effects beyond their long-term energy savings. To best decide how you can green your own office, first identify your reasons.
Why Go Green?
Energy efficiency and sustainability are no longer buzz words used by those in the industry. Clients and employees alike see them as a responsibility of our profession. Among the reasons firms have determined for improving their efforts in these areas are:
At my firm, we had the opportunity to implement energy efficiency when we moved into our new office. There are multiple sources of light for each room, allowing us to turn off the majority of the lights when the room is not being used, but still leave a little ambient lighting on.
When it comes to paper, law firms have traditionally been a paper company’s best friend. But you can reduce your paper consumption and costs considerably when incorporating easy modifications as our firm has done:
Celebrate Earth Day
April 22 is Earth Day. Why not use it as an opportunity to get staff members thinking of ways to go green? Issue a challenge: every person (or team) comes up with one idea to make the office more energy efficient. Your legal administrator can choose the best one and implement it. The winning person or team gets a prize, and it can become an annual firm activity. It’s that easy!
Appoint a Green Leader
Let your staff take control of the initiative. Most associate attorneys, interns and young employees have grown up knowing the importance of conserving energy. You’ll give them a leadership opportunity and allow them to hone their problem-solving skills. Task them with finding fun ways to help everyone develop good habits like:
Some firms encourage friendly competitions between floors or teams to see who can be the most green and they accumulate points for making good choices or receive “penalties” when they forget.
When Your Office Is Not Your Own
If your firm is a leased property, open a dialogue with building management to discuss opportunities for sustainability. Is there an opportunity to negotiate the lease agreement if you make energy-saving modifications? You can also help identify mutually beneficial opportunities that will help management enhance their offerings and both attract and retain tenants.
Implement some or all of the measures firms across the country have taken:
You don’t need to take your firm green in one fell swoop. Even incremental changes can have a big effect in the long run. Taking small steps will eventually lead to a big change…in your organization, your city and your planet. They are worth it!
Alice O’Hearn is the Legal Administrator for Bailey Kennedy, LLP. After working nearly fifteen years as a legal secretary at Lionel Sawyer & Collins, she helped John R. Bailey open his law practice in 2001. That solo practice has evolved into Bailey Kennedy, a 12-lawyer firm with 28 employees and three “Best Places To Work” awards. Alice serves on the Board of Directors for the Las Vegas Chapter of the Association of Legal Administrators. An avid supporter of racing greyhound rescue, she has been a copy editor for the award winning Celebrating Greyhounds Magazine for nine years. Her own recycled racers are named Bailey and Kennedy.