Senate Joint Resolution 14: An Appealing Proposition

By Mark Hutchison and Tick Segerblom


© 2013 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (September 2013, Vol. 34, No. 9). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

In 2013, the Nevada Legislature unanimously passed Senate Joint Resolution 14. This measure will go on the ballot in 2014. It asks the voters to amend the Nevada Constitution to create an appellate court in the state. If a majority of the people vote for the measure in 2014, a court of appeals will become reality in 2015.

If this all sounds familiar, it is because a similar measure was narrowly defeated in 2010. Despite the setback, proponents of this measure, many of them lawyers and judges, recognized the overwhelming need for an appellate court. This article discusses this need, the proposed structure of the court of appeals, and actions the bench and bar can take to help the measure pass.

Why SJR 14 Must Pass in 2014
The primary reason why SJR 14 passed unanimously through the Legislature and with little fanfare is because of the indisputable fact that the Nevada Supreme Court has more cases than it can reasonably handle. Nevada is just one of ten states that does not have a court of appeals, and its population and case filings far exceed the others in that group. The Annual Report of the Nevada Judiciary and an annual report published by the National Center for State Courts entitled “Court Statistics Project, 2012” provide the proof.

Each year, the Nevada Supreme Court handles more cases per justice than almost any other court in the nation. With 2,500 new appeals filed in 2012, each justice has 357 cases to dispose of to keep current—never mind the ongoing cases from preceding years. The American Bar Association recommends that individual justices handle one-third of that number. See American Bar Association, Standards relating to appellate courts: ABA, Judicial Administration Division, Standards of Judicial Administration, v. 3, 1994, § 3.52. The Nevada Supreme Court must deal with each of these cases because, without an intermediate appellate court, the Court must hear all appeals from all final district court judgments across the state, from driver’s license revocations to death penalty cases. As a consequence, the Court must allocate its time among far more cases than most states, resulting in fewer published dispositions (92 opinions in 2012).

The ABA also recommends that courts dispose of 90% of cases within one year. Currently, the Nevada Supreme Court only disposes of 73% of cases within a year and, at 2,500 cases in 2012 and growing, it will have to handle six cases per day to reach the ABA’s proposed standards. What that means in real terms is that each justice or their clerks must read, research, and write a disposition for six cases per day, every day of the week, every day of the year.

To accommodate so many cases, the Nevada Supreme Court has implemented several administrative measures in an effort to handle the load. These measures include: (1) case management of appeals through strictly enforced timeframes; (2) fast-track procedures; (3) panel hearings with only three reviewing justices; and (4) settlement conferences. The Court’s case review process is set forth in detail in the court’s Internal Operating Procedures. Despite these efforts, the court has reached the limit of what it can accomplish under the current one-court system, as demonstrated by the increasing backlog in the court’s case management system.

Ultimately, those who suffer the consequences of this staggering caseload are the litigants seeking resolution before the court. Delays in the appellate process can deny access to justice and discourage business and economic development. For these reasons, the Legislature firmly believes it is time for a court of appeals in Nevada. Below is an overview of how the new court will work to improve appellate justice in Nevada.

The Structure of the Court of Appeals

To minimize cost and maximize efficiency, the new appellate court will take advantage of existing court infrastructure. The structure is as follows: the appellate court will consist of three judges sitting in the existing Supreme Court space in the Regional Justice Center in Las Vegas. In addition, the new appellate court will share a courtroom with the Supreme Court in Carson City. As such, there will be no facility cost and an operating cost of $1.7 million annually, primarily for the new judges and their chambers staff. There will be no need for a new clerk of court or central staff because the court will utilize the existing court resources.

Additionally, the court model is a “push down” system whereby all appeals will still be filed with the Clerk of the Nevada Supreme Court. Under this system, upon the filing of an appeal, the Nevada Supreme Court would receive briefing to determine the issues raised by the appeal and direct the case to either the court of appeals or the Supreme Court.

As to case assignments, the Nevada Supreme Court would retain exclusive jurisdiction over the following case types: (1) death penalty and life sentence cases; (2) appeals raising constitutional claims; (3) all original extraordinary writ petitions within its jurisdiction; (4) appeals raising issues of first impression; (5) appeals that would result in the development of our state’s common law; and (6) appeals that require interpretation of Nevada statutes having statewide application. Also, the Nevada Supreme Court would likely maintain discretionary review of appeals from the Nevada Court of Appeals. Analogizing such discretionary review to that currently provided in cases seeking en banc reconsideration of panel decisions and to similar discretionary review elsewhere, “double appeals” will be infrequent, occurring in approximately 1 to 2 % of all cases.

The Nevada Court of Appeals would function primarily as an “error correcting” court. Thus, the new court would have jurisdiction over the following case types: (1) civil and criminal appeals that involve correcting an error, reviewing the appellate record, and applying existing law; (2) petitions for post-conviction relief, except death penalty cases; and (3) original proceedings concerning challenges to a district court’s ruling in a criminal case, except death penalty and life sentence cases.

Importantly, the “push down” system would provide for a speedy disposition of case types that ordinary litigants face, such as divorces, personal injury claims, and foreclosures. The establishment of the Nevada Court of Appeals would likely attract more businesses to Nevada as the new court would allow for a quicker resolution of general business disputes and enable the Nevada Supreme Court to publish a greater number of written opinions that provide Nevada businesses with predictability in the interpretation and application of the law.

Why SJR 14 Will Pass in 2014
To make sure SJR 14 is successful, proponents of the bill have already taken action. A Committee for Political Action (PAC) known as “Nevadans for a Court of Appeals” has been formed to raise money and support, with Senators Tick Segerblom and Greg Brower as co-chairs. Each of the attorneys in the Legislature has also signed on as an organizer of the PAC and has pledged support for the effort. Additionally, both the Litigation and Appellate Litigation Sections of the Nevada Bar have formed committees to assist in fundraising and promoting the measure, and the justices of the Nevada Supreme Court have pledged their time and effort to raising awareness about the need for the court.

The bench and bar can also be of great help in making sure SJR 14 passes. The Nevada Supreme Court and those who have pledged to support the effort are forming a “speakers bureau” of justices and attorneys who will present the measure to law firms across the state to help raise money for a publicity campaign leading up to the 2014 election. Additionally, word-of-mouth grassroots efforts can help, particularly because this is a subject about which many Nevadans know little. Therefore, they will rely on their neighbors and friends for information.

Without a court of appeals, the Nevada Supreme Court simply will not be able to efficiently and effectively manage its caseload while also developing Nevada law through published opinions. The numbers do not lie: it is time for a court of appeals in Nevada and it is up to the bench and bar to make it happen in 2014.
For more information and to get involved, please contact Justin Jones at jcjones@hollandhart.com or Seth T. Floyd at sfloyd@mcwlaw.com.

Mark A. Hutchison is a founding member of the law firm of Hutchison & Steffen. Hutchison practices primarily in high-stakes business and complex tort litigation. He serves on the executive board of the Litigation Section of the State Bar of Nevada. He also serves as a Nevada State Senator for District 6.

Tick Segerblom is a sole practitioner whose practice focuses on plaintiff’s employment law. Segerblom was elected to the Nevada State Assembly in 2006 and re-elected in 2008 and 2010. In 2012 Segerblom was elected to the State Senate where he serves as Chairman of the Senate Judiciary Committee. He is also a member of the Uniform Law Commission as a Commissioner from the State of Nevada.


Don’t Cry for Me, Argentena: SB140 and the Strengthening of Attorneys’ Lien Rights in Nevada

By Justin Jones


© 2013 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (September 2013, Vol. 34, No. 9). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

During the 2013 legislative session, the Senate Judiciary Committee boasted the most lawyers as committee members in Nevada history. So it wasn’t too surprising when legislation to restore attorneys’ right to lien their clients’ files sailed through the Nevada Legislature this year and was then signed into law by another attorney, Governor Brian Sandoval.

In 2009, the Nevada Supreme Court issued its decision in Argentena Consolidated Mining Co. v. Jolley Urga Wirth Woodbury Standish, 125 Nev. 527, 216 P.3d 779 (2009), a case closely watched by members of the bar. Argentena arose out of a district court’s order adjudicating an attorney-client fee dispute between a client and its counsel in a personal injury matter.

Near the end of trial, the Jolley Urga law firm negotiated a settlement agreement on behalf of its client; however, Argentena terminated Jolley Urga and claimed that it had not authorized the terms of the settlement agreement negotiated by its counsel. Jolley Urga withheld Argentena’s file as a retaining lien and then filed a motion to adjudicate its attorney’s lien. Argentena argued that the district court could not adjudicate the disputed attorney’s fees because Jolley Urga did not have an enforceable charging lien and Argentena did not consent to the district court’s adjudication of Jolley Urga’s retaining lien.

Jolley Urga responded that Sarman v. Goldwater, Taber & Hill, 80 Nev. 536, 396 P.2d 847 (1964), authorized district courts to adjudicate fee disputes irrespective of an attorney’s lien based on the district court’s incidental powers. Jolley Urga’s motion to adjudicate was not a novel one—to the contrary, attorneys and judges had relied on Sarman to support adjudication of attorney’s liens for years.

The district court granted Jolley Urga’s motion to adjudicate its lien; however, the Nevada Supreme Court disagreed, finding that “absent an enforceable charging lien or the client’s request or consent to the district court’s adjudication of a retaining lien, the district court is without jurisdiction to adjudicate an attorney-client fee dispute in the underlying action.” Argentena, 216 P.3d at 781.

Without the option of adjudicating an attorney’s lien in the underlying action after Argentena, attorneys only remaining option was to file a new action to enforce the lien. This course was not only costly to the attorneys, requiring the drafting of initial pleadings and payment of court filing fees, but also a burden on the courts, as a new judge would be compelled to hear the fee dispute without the institutional knowledge retained by the judge in the underlying case.

To address these issues, Tom Standish of Jolley Urga worked with Senate Judiciary Committee Chair Tick Segerblom during the 2013 legislative session to craft legislation, SB140, that would restore the ability of attorneys and courts to adjudicate many attorney’s liens in the underlying matter.

SB140 modifies NRS 18.015 to clarify that an attorney has, not only a statutory charging lien on a client’s claims, but also a statutory retaining lien in civil actions on the client’s “file or other property properly left in the possession of the attorney by the client.” The lien attaches not only to original files, but also to copies of the attorney’s file “if the original documents received from the client have been returned to the client.”

SB140 supersedes Nevada common law and provides that a retaining lien may be adjudicated by the court in the underlying matter at the request of the attorney asserting the lien rather than only by request or consent of the client. Now, instead of having to file a separate action, an attorney can simply file a motion to adjudicate his or her lien in the underlying action after five days’ notice to the client of the lien.

To address concerns raised by attorney-legislators, SB140 also clarifies that exercise of a statutory retaining lien cannot be construed as inconsistent with an attorney’s professional responsibilities to the client.

While the default effective date for implementation of new laws is October 1, the Nevada legislature accelerated the effective date for SB140 to July 1, 2013. Perhaps more importantly, the legislation makes clear that its provisions regarding attorney’s liens applies to attorney’s fees “incurred by a client for services rendered before, on or after July 1, 2013.” In other words, an attorney seeking to enforce lien rights is not limited to fees incurred after the effective date of the legislation, but rather may include all fees previously incurred.

There will probably always be disputes between attorneys and their clients over fees. With the enactment of SB140, though, lawyers, clients, and judges at least now have clear, statutory guidance regarding an attorney’s right to enforce liens against clients who fail to pay outstanding fees.

Justin Jones is a partner at Holland & Hart LLP practicing in the area of commercial litigation. Mr. Jones recently completed his first session as a Nevada State Senator where he served as one of five attorneys on the Senate Judiciary Committee.


Benefit Corporations: A Marriage of Opportunity and Community

By Mark Gardberg


© 2013 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (September 2013, Vol. 34, No. 9). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

Nowadays, it seems for every Gordon Gecko (mantra: “greed is good”), there is a Ben Cohen or Jerry Greenfield (of Ben & Jerry’s fame)—businesspeople who consciously pair an eye for the bottom line with a commitment to community, philanthropy, and other social and civic-minded values. For this growing species of entrepreneur, there is a new type of Nevada entity, the “benefit corporation.” AB 89 (2013).

A benefit corporation is a hybrid of for-profit and non-profit concepts. To be clear, a benefit corporation is a for-profit entity, meaning benefit corporations issue shares, seek a pecuniary gain, and pay out dividends to shareholders—unlike non-profits formed under NRS Chapter 82.

However, benefit corporations must also serve the “general public benefit.” AB 89 §§ 5, 14(2). The law does not define what is a “general public benefit,” and one person’s idea of serving the public good may be another’s abomination, as both sides of the pro-choice/pro-life debate would probably agree. Assembly Bill 89 does not take sides or define “general public benefit” in a traditionally liberal or conservative or in a Democrat or Republican way.

In addition to a general public benefit, benefit corporations may also serve “specific public benefits.” The non-exhaustive list contained in AB 89 of specific public benefits includes helping low-income individuals; protecting the environment (e.g., clothing seller Patagonia is now a California benefit corporation); supporting arts, sciences, and education; promoting health; and fundraising for other benefit corporations. AB 89 § 7.  Any specific aims must be set forth in the benefit corporation’s articles. Id. at §§ 11, 14.)

Why start a benefit corporation? If you were a budding Blake Mycoskie, founder of TOMS shoes, a $250 million company that’s distributed 10 million shoes to the developing world and made thirty-something Mr. Mycoskie a multi-millionaire, you would pitch your idea to investors as the chance to do good and keep alive the promise of profits on the back end. What the investor loses in tax deductions (had she contributed to a non-profit) may be recouped many times over in dividends. A savvy investor, meanwhile, may use a benefit corporation to push her charitable agenda forward, knowing the company cannot easily stray from the investor’s vision once its purposes are enshrined in the articles of the corporation.

The reality is that most for-profit corporations sponsor charity events from time to time. Everyone has seen charity t-shirts resembling NASCAR uniforms. Sometimes corporate motives are altruistic, but sometimes sponsorship is about marketing and public relations. Benefit corporations put generating profits and public-mindedness on a more equal playing field, giving officers, directors, and the company license to consciously pursue both aims.

Context
Benefit corporations have not always been freely allowed by law. Benefit corporations evolved on the east coast several years ago. Currently, a version of AB89 has been adopted in nineteen states. The movement is a belated response to case law in Delaware putting shareholders’ interests above all other concerns. In Revlon Inc. v. MacAndrews & Forbes Holdings, Inc., 506 A.2d 173, 182-85 (Del. 1985), the court held that in certain situations, such as when a takeover is inevitable, the board of directors must put “maximization of stockholder profit” above all other interests. The directors become “auctioneers” charged solely with “getting the best price for the stockholders.” If, for example, the highest bidder was planning massive layoffs, the board would still have no choice but to approve the deal because shareholder interests trump employee interests.

The Nevada State Legislature long ago repudiated that approach. On any action, directors and officers of Nevada corporations may expressly consider “constituencies” other than shareholders, including employees, suppliers, creditors, and customers, the Nevada and national economies, community and societal interests, and the corporation’s short-term and long-term interests. NRS 78.138(4). Neither shareholders nor any other constituency must be “dominant” over any other. NRS 78.138(5).

As a result, there is arguably less need for benefit corporations in Nevada than elsewhere. Nevertheless, officers and directors of benefit corporations are not just permitted to consider other constituencies—they must do so. AB 89 §§ 15, 17. Moreover, although ordinarily no particular constituency must dominate, if a benefit corporation states in its articles that a specific public benefit has priority, that purpose must be paramount. Id. at § 15.

Third-party standard and reporting
Although AB89 does not dictate what a benefit corporation’s general and specific public benefits must be, it does seek some objectivity. A benefit corporation does not have to hire a social performance auditor, but it must self-evaluate its performance according to a “third-party standard” developed by an independent, transparent, and knowledgeable third party. AB 89 §§ 5, 9. The benefit corporation must describe and publish that self-evaluation in an annual report delivered to all shareholders and posted on its website or otherwise made available to the general public. Id. § 19.

Failure; immunities
What happens if a benefit corporation fails to achieve the desired public benefits? Assembly Bill 89 allows certain shareholders, but not the general public, to bring a “benefit enforcement proceeding” seeking relief. AB 89 § 18(2). A successful proceeding would usually result in only injunctive relief and attorneys’ fees. Id. § 18(3)-(4). That is because a primary aim of the law is to insulate the corporation and directors from liability for any alleged failure to achieve the desired benefit(s). Assembly Bill 89 holds the corporation and directors harmless from monetary damages if they fail to achieve such benefit(s). Id. §§ 15(6)(b), 18(3). More generally, directors’ actions are subject to the protective business judgment rule and directors are expressly immune from liability for any action if they considered all relevant constituencies and complied with their other statutory duties, such as the fiduciary duty of loyalty. Id. § 15(6)(a).

Creating a benefit corporation
Assembly Bill 89 takes effect on January 1, 2014. AB 89 § 23. While some people will form new benefit corporations, others may simply want to convert existing legal entities into a benefit corporation. Assembly Bill 89 suggests an existing Nevada corporation can transform itself simply by amending its articles and stock certificates to comply with the law’s requirements. Id. §§ 12(1), 20. Prior to doing so, shareholders must approve the transformation by a “minimum status vote,” which is generally a two-thirds vote of each class and series of shareholders, including those that otherwise have no voting rights. Id. §§ 6, 12(1). Termination of benefit corporation status requires that same vote. Id. § 13.

Corporations and other entities, such as limited-liability companies, can also become a benefit corporation by undergoing a conversion, merger, or share exchange pursuant to the relatively simple steps in NRS Chapter 92A. AB 89 §§ 6, 12(2)-(5). Under the most likely of those acts—a conversion—the existing entity would internally approve a “plan of conversion” by the minimum status vote as described above and file “articles of conversion” with the Nevada Secretary of State. NRS 92A.105, 92A.205. Note that a Nevada non-profit corporation cannot convert to a benefit corporation, but a professional corporation may do so. See NRS 92A.105(1). Moreover, if a for-profit Nevada corporation transforms itself into a benefit corporation, shareholders voting “no” have dissenters’ rights entitling them to be bought out at fair value. AB 89 § 12(1), NRS 92A.300 et seq.

If an ordinary, for-profit corporation converts itself into a benefit corporation, there should be no tax impact. For example, a pre-conversion C corporation would remain taxed as such post-conversion.

Mark Gardberg is an attorney with Lionel Sawyer & Collins in Las Vegas, Nevada and a contributor to Bishop and Zucker on Nevada Corporations and Limited Liability Companies. His practice areas are corporate law, real estate law, and transactional matters. He can be reached at (702)-383-8888 or mgardberg@lionelsawyer.com.


The Homeowner’s Bill of Rights—Nevada’s Foreclosure Process Changes for the Benefit of Homeowners

By Troy Atkinson


© 2013 This article was originally published in the printed magazine COMMUNIQUÉ, the official publication of the Clark County Bar Association. (September 2013, Vol. 34, No. 9). All rights reserved. For permission to reprint this article, contact the publisher Clark County Bar Association, Attn: COMMUNIQUÉ Editor-in-Chief, 725 S. 8th St., Las Vegas, NV 89101. Phone: (702) 387-6011.

In the ongoing struggle between homeowners and lenders, the Nevada State Legislature previously enacted laws to assist homeowners once the foreclosure process is formally initiated, most notably the creation of the Nevada Foreclosure Mediation Program. NRS 107.086. The legislature also enacted laws protecting homeowners post-foreclosure, including limitations on a lender’s right to obtain a deficiency judgment and limitations on the amount a lender may recover in an action for deficiency judgment. See, e.g., NRS 40.455, 40.459, and 40.4636.

The Legislature’s latest efforts in the foreclosure crisis provide protections for homeowners prior to the formal initiation of foreclosure, a time when many Nevada homeowners are engaged in a struggle with a lender whose actions are haphazard, at best, and often allegedly intentionally designed to make the homeowner fail.

Senate Bill 321, known as the “Homeowner’s Bill of Rights,” becomes effective October 1, 2013. This act prohibits many common lender practices that have thwarted homeowners’ efforts to avoid foreclosure. Senate Bill 321 places substantial new duties on lenders before they may lawfully initiate foreclosure. Also, SB 321 provides a private right of action, including injunctive relief, for homeowners who are victims of lender violations of the act.

Common lender practices making legislative action necessary
Homeowners who attempt to negotiate with lenders often describe a nightmarish process, riddled with misinformation, in which they jump through the same hoops over and over to no avail. In June 2013, the plaintiffs in a class action lawsuit against Bank of America produced affidavits from six former Bank of America employees and one former contractor testifying that the hurdles placed in front of homeowners were intentional. In In Re Bank of America Home Affordable Modification Program (HAMP) Contract Litigation, U.S. Dist. Ct. of Mass., Case 1:10-md-02193, Docs. 210-1 through 210-6, the witnesses testify that Bank of America instructed employees to delay or deny applications for foreclosure alternatives utilizing tactics that included:

  • Telling homeowners that documents were missing when they were actually received
  • Producing fictitious reasons to close thousands of backlogged applications in a single day (termed a “blitz”)
  • Changing and falsifying information to justify denying an application
  • Telling homeowners their file is “under review” when the file remained untouched for months
  • Wrongfully denying qualifying homeowners government modifications that would offer lower payments in favor of modifications that carry higher interest rates benefiting Bank of America
  • Giving employees cash bonuses and/or gift cards for placing a certain number of homes in foreclosure during a given month while terminating employees who questioned Bank of America’s ethics

Key elements of SB 321
Direct contact with homeowners required prior to initiating foreclosure
Senate Bill 321 requires that at least thirty days prior to recording a notice of default and election to sell (“NOD”), the document that formally starts the non-judicial foreclosure process, or filing a lawsuit for judicial foreclosure, the lender must contact the homeowner to explore alternatives to foreclosure. The lender must advise the homeowner of their right to request a subsequent meeting with the lender that, if requested, must take place within fourteen calendar days. An attorney may represent the homeowner during this process. If a homeowner cannot be contacted, the lender must show attempts to contact via mail and via telephone (at least three different times at different hours on different days) before the lender may record an NOD or sue for judicial foreclosure.

Timelines to review documents imposed on lenders
If a homeowner applies for an alternative to foreclosure, such as a modification or short sale, the lender must provide written acknowledgement that the application was received within five business days. The acknowledgment must disclose that the lender has thirty days to either deny the application or make a written offer for a foreclosure alternative to the homeowner. This provision outlaws the common lender practice of allowing files to sit for several months without review while the homeowner risks losing their home to foreclosure or having their application rejected without review once the documents submitted become outdated.

If the homeowner’s application is not complete, the lender must list any deficiencies in writing and allow at least thirty days for the homeowner to cure the deficiencies. Under this provision, it is unlawful for lenders to request documents from homeowners with unreasonably short deadlines (such as 24 hours) and then denying the homeowner’s application if they do not meet the deadlines.

Homeowners may appeal a denial of assistance
If a homeowner’s application for a foreclosure alternative is denied, the lender must send a written statement providing the reasons for denial. This statement must advise the homeowner that they may appeal the denial, provide instructions for requesting an appeal, and allow at least thirty days for an appeal to be requested. If requested, the appeal process must be completed within thirty days. The lender may not record an NOD or sue for judicial foreclosure until the timeline for appeal passes or, if an appeal is requested, fifteen days after the appeal process concludes.

Single point of contact
When a homeowner applies for a foreclosure alternative, the lender must provide a “single point of contact” to communicate with the borrower, coordinate receipt of all documents associated with the homeowner’s application, identify any missing documents, adequately inform the homeowner of the application status, and ensure that the homeowner is considered for all foreclosure alternatives offered by the lender. This provision outlaws the common lender practice of providing vague updates through a call center – updates which are often inconsistent between representatives of the lender.

Homeowners sued for judicial foreclosure may elect mediation

If a lender records an NOD or sues for judicial foreclosure, assuming the lender has complied with the requirements of SB 321, the homeowner may elect mediation if the property is their primary residence. Prior to SB 321, only homeowners in non-judicial foreclosure could elect mediation. Now, all homeowners facing foreclosure on their primary residence will be able to participate in Nevada’s foreclosure mediation program.

“Arms length affidavits” in short sales are prohibited

Of substantial importance to homeowners attempting to short sell is SB 321’s prohibition of an “arms length affidavit.” Short-sale approval terms generally require the parties to execute an affidavit stating that the homeowner will not lease the property or purchase the property from the short-sale buyer. Senate Bill 321 prohibits these affidavits, allowing Nevada homeowners to negotiate with the short-sale buyer to remain in the property as a tenant or buy their property back after the short sale closes.

Private right of action for violations of SB 321

If a lender attempts to move forward with foreclosure (i.e. record an NOD, notice a foreclosure sale, or sue for judicial foreclosure) in violation of SB 321, a homeowner may seek injunctive relief. Senate Bill 321 also provides a private right of action for homeowners damaged by material violations of this act. If the violations are intentional or reckless, a court may award the greater of treble damages or $50,000. Attorneys’ fees and costs may also be awarded.

Homeowners will need attorneys to protect their new rights
Although SB 321 provides significant new rights to homeowners in default on a mortgage note, it will be difficult for homeowners to understand these rights and the revised foreclosure process without legal advice. Homeowners should not expect a lender to fully advise them of their rights and the lender’s newly proscribed duties. Of course, homeowners should not seek injunctive relief or damages for violations of SB 321 without an attorney. Homeowners should obtain legal counsel once they default on a mortgage note to ensure their new rights are protected.

Troy Atkinson is a founding partner of Atkinson & Watkins, LLP. He formally represented lenders in foreclosure litigation at Snell & Wilmer, and has represented homeowners with distressed properties since 2009. He can be reached at 702-562-6000 or at tatkinson@atkinsonwatkins.com.