2011 Legislative Review
By Terry Care

As a lawyer and former legislator, I watched this past session with particular interest and offer this brief summary to members of the bar. Here is a look at what lawmakers took issue with and what is now or will soon become new law in Nevada.

Nevada’s Constitution mandates that the Legislature meet every other year and for no more than 120 days. For a point of reference, consider that lawmakers meet annually in 43 states. Nevada legislators are tasked with completing a large amount of work in a short amount of time—even under optimal conditions. Conditions in 2011 are far from optimal.
Everything indicated that it would be a demanding legislative session:

a prolonged recession worse than any experienced in Nevada in decades;
a projected two-year budget deficit from $1.5 to $3.5 billion, depending on the method of calculation and the calculator’s agenda;
a new governor, elected overwhelmingly, with his repeated promise of no taxes;
a 21-member Senate barely controlled by its 11 Democrats;
an assembly of 26 Democrats and 16 Republicans, a narrower margin than the pre-election 28 to 14;
a constitutional requirement of two-thirds votes in each house for the enactment of any tax; and
21 freshmen lawmakers—a third of the legislature—as a result of term limits.
Oh yeah, and the task mandated every 10 years of redrawing all the lines for Nevada’s congressional and legislative districts, as well as those of the regents and state board of education.

Still, as always, there was hope. Education reform. Job creation. Expanding renewable energy programs. But the betting was that the Legislature and the governor would fail to hammer out their differences during the regular session and that there would be at least one special session to wrap it up, perhaps two or even more. So much for political punditry.

Indeed, owing in large measure to a timely Nevada Supreme Court opinion effectively gutting the Legislature’s 2010 “sweep” of $63 million from the Clean Water Coalition, and thus compelling at least some lawmakers to rethink their position on taxes, the Legislature adjourned on schedule. Not that it was pleasant. Governor Sandoval’s 28 vetoes makes for the third highest tally for a single session in Nevada’s history. The Legislature did pass two reapportionment bills, but the governor rejected both and is content, for now, to let the courts handle that task.

Nevada is often referred to as a “citizen legislature.” Imagine a jury of 63 and a four-month trial, and you pretty much have the idea. As a loose rule, each legislator sits on three committees. This session, there were 1088 bills, some a single page, many several dozen. That’s a lot of reading. What’s more, that’s a lot of time in a committee. (By far, most bills at least receive a committee hearing.) Worse, within the 120-day deadline are other deadlines: a bill must be introduced by a certain date, it must pass out of the committee of the house of origin by a certain date, and so forth. It’s like legislating with a time clock. Plus, that’s a lot of deliberative time lost.

But this background helps explain what lawyers who do not participate in the process often don’t comprehend (there are few lawyers in the legislature). That is, that seemingly good bills, even good bills with no known opposition, die for no discernible or sensible reason, while poor and unworkable public policy slips through. This article is intended as a partial summary of what is now new law and what might interest the members of the bar. 

The effective dates for the bills vary, and this writer treats them all as being effective now. (Unless a bill specifies otherwise, its effective date is October 1 of the year of its passage.) But the practitioner should consult the legislative website for questions on that subject. The reader is better off not knowing how all this happened.

There were, as always, several changes to Nevada’s criminal statutes. Under AB 57, registration of sex offenders will require much more identifying information of the offender.
SB 55 expands the list of crimes for which an offender may be subject in a civil action brought by the attorney general and where the victim is 60 year of age or older.

AB 269 permits a defendant to submit a statement to a grand jury indicating whether there was a preliminary hearing, and, if so, that the evidence presented at the preliminary hearing was considered insufficient to warrant holding the defendant for trial.

AB 284, which makes several changes to statutes governing real property, increases the crime of knowingly making a false representation in a recorded document concerning title to real property from a gross misdemeanor to a class C felony, and a class B felony if such representations consist of a “pattern.”

AB 373 makes it a misdemeanor for someone in possession of real property, and who knows the real property is subject to foreclosure, to destroy the real property and cause the secured party a pecuniary loss. The defendant must do so with an intent to defraud the secured party.

SB 257 stiffens the penalties for graffiti use and now prohibits using graffiti to deface a “protected site” rather than the formerly, more limited, “historic site.”
Under SB 223, it is now a class C felony to willfully and maliciously threaten, intimidate, or terrorize another person by torturing, or unjustifiably maiming, mutilating, or killing a pet, or any dog or cat.

Through SB 376, the legislature elevated to a gross misdemeanor certain technological crimes if committed maliciously.

Perhaps adjusting the numbers for inflation, AB 142 increases the monetary threshold for classification of certain crimes against property.

The legislature was thinking of drivers this session. Under SB 323, new Nevada residents will have 30 days—not 60—to register their motor vehicles, and, pursuant to SB 140, new and old residents alike may not text or use hand-held cell phones while driving. Hands-free devices are acceptable. 

Nor was the legislature unmindful of civil practitioners. AB 398 generated a myriad of changes to commercial tenancy statutes, to include actions for summary eviction and writs of restitution. Attorneys who practice in that area would do well to undertake a little homework. 

AB 273 resulted in several amendments and additions to state law regarding rights of a junior lien holder in a foreclosure action. It also revises provisions governing the amount of a deficiency judgment after foreclosure of a mortgage or deed of trust, and limits the amount of certain judgments against guarantors, sureties, or other obligors of obligations secured by real property under certain circumstances. This act, too, invites close examination.

SB 194 “urges” the Nevada Supreme Court to amend Nevada Rule of Civil Procedure 23 to require disclosures to a class member as already mandated by the rule’s federal counterpart.

Be wary of an unlicensed process server with the enactment of AB 156. Not only must a process server be licensed as a process server, but if service is affected by an unlicensed process server then the proof of service is legally insufficient, and a judgment based on proof of such service is void. 

Courtesy of AB 352, it is now a deceptive trade practice to knowingly take advantage of someone with an inability, due to illiteracy or a mental or physical infirmity, to reasonably protect his rights or interests. And equitable relief is available for certain actions for consumer fraud. (Interestingly, the bill passed the Assembly on a party line vote with all Republican voting in opposition. Nonetheless, Republican Governor Sandoval signed it.)

Elsewhere, adoption of SB 300 means a hospital may not collect any amount owed to it for hospital care from the proceeds or potential proceeds of a civil action.
The Legislature approved two uniform acts of note. One, AB 87 (Uniform Interstate Depositions and Discovery Act), provides procedures for Nevada courts to issue subpoenas from out-of-state litigants. The other, the Uniform Collaborative Law Act (AB 91), provides the statutory framework for parties wishing to engage counsel solely for the purpose of seeking resolution, but who may not thereafter engage the same counsel going forward if settlement efforts fail. 

There were several common-interest community bills, and most failed. But two that passed, SB 204 and AB 317, amend provisions for civil actions under NRS Chapter 116 and NRS Chapter 38, respectively. 

Related to housing, discriminatory practices based on sexual orientation, gender identity, or expression are prohibited (SB 368).

As it does every session, the Business Law Section requested all manner of changes to statutes—Chapters 76 through 92A—governing business entities. They are contained in the 72-page SB 405. And gaming figured again in Carson City. AB 294 expands the permitted use of mobile gaming devices to rooms, and SB 218 contains several changes to gaming law, most notably those reflecting the apparently inevitable arrival of Internet gaming. 

Again, this summary is not all-inclusive. No doubt other publications will have their reviews. The reader is encouraged to digest those as well. But for the moment, the best source is likely the legislative website at www.leg.state.nv.us. Most of the committee hearing minutes are available as well.

Terry Care is a former member of the Nevada State Senate, serving District 7 in Clark County from 1998 – 2010. Mr. Care is currently a firm partner at McDonald Carano Wilson’s Las Vegas office and practices in the areas of commercial and complex litigation and government affairs and advocacy.  This e-mail address is being protected from spam bots, you need JavaScript enabled to view it .

The 2011 Nevada Legislative Session ended on June 7, without requiring a special session. The 76th session will be remembered most significantly for the taxation showdown that was averted with just weeks to adjournment. Following the Supreme Court’s ruling in Clean Water Coalition v. M Resort, certain monies from counties were removed from consideration by the State for budgeting purposes leaving a hole ranging from $65 Million to $650 Million in Governor Sandoval’s proposed budget.

Faced with the significant budget hit, the legislature moved quickly toward a compromise which extended all the expiring taxes enacted in 2009 including sales and use taxes and the Modified Business Tax increases. While folks on both sides of the aisle may bristle at either the failure to address systemic issues in Nevada’s revenue or the failure to decrease the tax burden of Nevada’s citizens or businesses, the bipartisan solution provides a counterpoint to political gridlock permeating our governmental processes.

Practitioners in all areas should carefully review new legislation to apprise themselves of the new upcoming regulatory processes and policies. For those who practice before the Gaming Control Board and Gaming Commission, for instance, there are several key pieces of legislation that should be reviewed. This article addresses some of the highlights.

AB 219 arguably will have the most significant impact to non-restricted gaming licensees. The bill requires the Commission to develop and adopt regulations that will create procedures for the retention and tracking of slot machine wagering vouchers and the payment of the respective percentage of the value of such expired slot machine wagering vouchers to this State and to gaming establishments. AB 219 also creates a new policy regarding unredeemed slot machine vouchers. Vouchers will no longer accrue solely to the licensee subject to the Gross Gaming Tax, but rather predominately escheat to the state in a 25 / 75 percentage.

AB 258 concerned “interstate interactive gaming,” aka online poker. The bill became a vehicle for the Commission to establish certain provisions authorizing the licensing and operation of interactive gaming under certain circumstances. In order to fully comport with federal law, any license to operate interstate interactive gaming does not become effective until: (1) the passage of federal legislation authorizing interactive gaming; or (2) the United States Department of Justice notifies the Commission or the State Gaming Control Board that interactive gaming is permissible under federal law.

SB 218—submitted by the Gaming Control Board—affects licensees. The Commission may now develop regulations for the operation and registration of “hosting centers,” which serve as centers for the operation of certain gaming systems. Additionally, the Commission now will have authority for licensing service providers, who generally perform certain services on behalf of another licensed person who conducts nonrestricted gaming operations or an establishment licensed to operate interactive gaming; or provide services or devices which patrons of licensed establishments use to obtain cash or wagering instruments. The bill also simplifies the process for slot route operators when a change in the business entity occurs.

Additionally, not every limited partner of a limited partnership and every member of a limited-liability company that holds a state gaming license needs to be licensed individually. Only limited partners with more than a five percent ownership interest in a limited partnership need to be licensed.

The legislature also tackled a longtime issue in AB 459 by revising the boundaries of the Las Vegas Boulevard gaming corridor to include several new areas. Consequently, if a proposed establishment is located in the newly revised gaming corridor and is not already in a gaming enterprise district, the location may now be designated as falling within a gaming enterprise district without the need for a hearing before the Gaming Commission.

AB 279 permits the Commission to adopt regulations providing for independent testing laboratories to be utilized by the Gaming Board to inspect and certify gaming devices, equipment and systems.

As indicated, most of these policy changes will require Commission and Control Board development of regulations, and practitioners and licensees should avail themselves of the opportunity to weigh in on these matters as they come up throughout the next biennium.

Jesse Wadhams is a member of Jones Vargas’ Government Affairs Practice Area. Mr. Wadhams also represents clients before the Nevada Legislature. He is admitted to practice in Nevada, California and the District of Columbia.

With public opinion of banks at an all-time low and Nevada’s foreclosure rate consistently ranking at the top of the nation, it was no surprise that banks had a hard time finding a friend at the 2011 legislature. The result of that hostile environment was AB 273, which makes substantial changes to the mechanisms available to banks to pursue deficiency judgments following foreclosure.

For homeowners, AB 273 creates several additional protections in new residential loans. First, AB 273 limits the amount of a lender’s judgment against a homeowner by any private mortgage insurance (PMI) proceeds that the lender receives. Second, for second mortgages, if a junior lienholder assigns the right to pursue a deficiency judgment to another party, such as a collection agency, the assignee’s recovery will be limited to the amount it paid for the right to pursue the deficiency judgment. Third, junior lienholders must now bring any action seeking a deficiency judgment within six months following a foreclosure sale rather than the six years permitted under prior law.

In its zeal to protect homeowners, however, the legislature included language that severely impairs the ability of commercial lenders to recover money owed to them on secured loans. Under NRS 40.495, a secured lender had the right to pursue an action against a guarantor who expressly waived the protections of the one action rule under NRS 40.430 without first foreclosing on the real property securing the obligation.

AB 273 amends NRS 40.495 to require that a court hold a hearing to determine the fair market value of the real property as of the date of commencement of the action. The court may not award damages that exceed the difference between the indebtedness and the fair market value of the property, i.e., the deficiency.  The legislature did not expressly abrogate the ability of a guarantor to waive protections under the one action rule. However, in practice, AB 273 renders a waiver of the one action rule meaningless because the guarantor will receive the very same benefits of the one action rule by limiting damages to the deficiency amount.

In addition, AB 273 limits a lender that acquired a loan from another party from obtaining a judgment in excess of the difference between the indebtedness and the fair market or the consideration paid for the right to pursue the judgment. Thus, if a bank acquired the assets of a failed bank, for example, it is limited to recovering the amount it paid for the acquired loans, even if substantially less than the indebtedness.

Lending institutions across Nevada are now grappling with how AB 273 will affect their existing loans and future lending practices. During the hearings on AB 273, its sponsor made clear that the bill was not retroactive and recognized the dangerous precedent of impairing existing contracts. With regards to the homeowner protections, AB 273 expressly states that it only applies to “an obligation secured by a mortgage, deed of trust or other encumberance upon real property” on or after July 1, 2011.

The modifications regarding actions against guarantors of commercial loans, however, were not limited to loans made after July 1, 2011, but rather to any “action against a guarantor” after July 1, 2011. The limitations regarding acquired loans went into effective immediately upon signature by Governor Sandoval.

The Nevada Constitution expressly bars legislation that impairs existing contractual obligations, and parties have successfully challenged legislation on this basis in the past. Already, commercial borrowers are attempting to use AB 273 to limit the amount of a judgment for purchased loans and to limit actions against guarantors. One can expect that banks facing such arguments will fight back by bringing constitutional challenges to AB 273’s retroactive provisions. However, until the legislation is struck down (or amended), banks will be faced with making tough choices regarding loans in default under the cloud of uncertainty created by AB 273.

Justin C. Jones is a partner in the Las Vegas office of Holland & Hart LLP. His practice focuses on complex commercial and real estate litigation, including representation of several banking institutions. Special thanks to Brian G. Anderson and others at Holland & Hart for assisting with research for this article.