Real Estate Legal Update

By: R. Duane Frizell, Attorney, Frizell Law Firm

In 2021, real estate has been hot. This article highlights a few of the related legal developments.

Landlord and Tenant. Landlords are undoubtedly pleased with the U.S. Supreme Court’s recent ruling that all residential evictions may now proceed. However, for evictions based on unpaid rent, notices must now include information relating to the availability of rental assistance programs and other statutory protections.

Mediations are no longer required for evictions not related to unpaid rent. Nevertheless, in nonpayment cases, they are still required, and tenants may further stay or even stop such cases with the affirmative defense that they have an application for rental assistance pending or that the landlord has been uncooperative in terms of such assistance. If raised, this defense stays an eviction until the assistance application has been determined. If assistance is granted, the case must be dismissed. A landlord facing foreclosure may avoid some stays, though.

A landlord may not sue for unpaid rent if rental assistance is received. In such a case, if eviction is sought, a landlord may face liability for civil penalties, damages, attorney fees, and costs. If a landlord has been uncooperative in terms of rental assistance, an eviction must be denied, and the landlord may have to pay damages. Most of these statutory provisions will expire on June 5, 2023.

Courts must now automatically seal all files for summary evictions granted during the ongoing COVID-19 emergency. There was an attempt to eliminate summary evictions altogether, but it was unsuccessful. For leases with rent paid monthly, a landlord may not charge a late fee until at least three days have passed since the rent was due. Landlords also must give more advance notice for rent increases.

Airbnb, Vrbo, and Similar Rentals. Clark County, Henderson, Las Vegas and North Las Vegas must now tax and regulate vacation rentals. They must also regulate any person, except for an owner, occupant, or manager, who arranges vacation rentals for a fee. Every person who makes such rentals available must have local government authorization as well as a state business license. Exempt from these regulations are residential units owned or operated by non-restricted gaming licensees and affiliates that are located on land not zoned exclusively residential.

“Tiny Houses.” Large counties and cities8 must now designate at least one zoning district for tiny houses to be classified as accessory dwelling units, one where they are classified as single-family residential units, and one for tiny house parks. Other counties and cities need only have one zoning district for one such classification. Each local government shall provide their own definition of “tiny house,” but units of 400 square feet or less should qualify.

HOAs. With respect to HOA super-priority liens, regardless of when assessments become due, an HOA may not require more than nine months’ worth for full satisfaction of its lien. Moreover, if the holder of the first deed of trust tenders the amount due prior to an HOA foreclosure sale, then that deed of trust is not extinguished, and the purchaser at the sale takes the property subject to it. There was an attempt to extinguish HOA non-judicial foreclosures, but it failed.

Article originally published in Nevada Business Magazine on October 1st, 2021

Arbitration’s Dirty Little Secrets

Article originally published November 1, 2016 on Nevada

By R. Duane Frizell, partner and Jonathan C. Callister, partner, Callister & Frizell

This article is not an attack on the widespread use of arbitration.  Good arbitrators daily shoulder the burden of adjudicating parties’ rights in a manner that is economical and sound.  That said, as with anything, there are risks. Businesses need to consider them before agreeing to arbitration or including arbitration clauses in contracts.  This article is not an attack on the widespread use of arbitration.  Good arbitrators daily shoulder the burden of adjudicating parties’ rights in a manner that is economical and sound.  That said, as with anything, there are risks. Businesses need to consider them before agreeing to arbitration or including arbitration clauses in contracts.

“As a matter of public policy, Nevada courts encourage arbitration and liberally construe arbitration clauses in favor of granting arbitration.”  The same is true in Federal court.  Moreover, unlike mediation, arbitration is generally binding.  Thus, a party cannot usually walk away from or retry an arbitrator’s decision.

The U.S. Supreme Court has noted that the benefits of arbitration may include “lower costs, greater efficiency and speed, and the ability to choose expert adjudicators to resolve specialized disputes.”  Nevertheless, these assumptions do not always hold true.  There are also some additional tradeoffs.

Lower Costs?

Arbitration is not always cheaper than court.  Arbitration filing fees are usually higher.  Furthermore, parties do not have to pay judges, but they do have to pay arbitrators.  That can get expensive, especially if there is more than one.  Large deposits are often required upfront.

Many believe this is offset by arbitration’s shorter and limited discovery (attorney fact-finding).  Hence, the argument goes, attorney time and fees are reduced.  This may be true in some cases, but certainly not all.  Often, a party can convince an arbitrator to allow for as much, or nearly as much, discovery as in a court case.  In addition, although the discovery time is usually shorter, that often only compresses the process, making monthly attorney fees higher over a shortened period of time—with no net savings and perhaps a net loss.

Expert Adjudicators?

It is not uncommon for arbitrators to be attorneys (or even lay persons) without any expert knowledge and with less experience than a judge.  Some industries do have arbitration associations, but even those may not result in better decisions.  Some industry arbitrators bring no special knowledge to the table.  In local trade associations, arbitration outcomes may be influenced by the prestige of local “big wigs,” even without underhanded tactics.  Some associations even allow an arbitrator to throw a party’s attorney out of the room!

The Tradeoffs?

“In bilateral arbitration, parties forgo the procedural rigor and appellate review of the courts ….”  By agreeing to arbitration, parties often unwittingly forgo such rights.  Such parties may be consumers and employees, but they include businesses too.  Generally, an arbitration award can be overturned only when it “was procured by corruption, fraud, or undue means”; “there was evident partiality or corruption”; “the arbitrators were guilty of misconduct”; or if the “arbitrators exceeded their powers.”  This means that arbitrators’ errors of fact and law are commonly left uncorrected.

For all of these reasons, instead of agreeing to or insisting upon arbitration as a matter of course, a business person should critically think about the assumptions and tradeoffs.  Factors to consider include risk management, business objectives, litigation types, arbitration experience, and the size of the business’s and its actual (and potential) adversary’s pocketbooks.  And by all means, talk to an attorney!

Trademarks: Protecting Your Most Valuable Asset

Article originally published on February 1, 2008 By Nevada Business Magazine

Perfume seller Jacqueline Tran of San Jose discovered the hard way that trademarks can be the most valuable asset a company owns. Wanting to cash in on the popularity of online commerce back in the late 1990s, Tran set up several Web sites using versions of the words “perfume” and “bay” as domain names. When she applied for a trademark for Perfumebay with the United States Patent and Trademark Office (PTO), however, she quickly found out that the road to online riches could be filled with dangerous potholes. Online auctioneer, eBay, learned of her application and filed legal opposition stating that perfumebay.comwould infringe upon its company trademark. Founded in 1995 by Pierre Omidyar, eBay has become one of the most recognizable trademarks in the country. With business conducted exclusively on the Internet, the company depends upon customers using that trademark name to connect with its Web site, As a registered trademark of the business, the mark eBay has become a household word that specifically identifies Omidyar’s online business.

Late last year, the United States Court of Appeals for the Ninth Circuit upheld rulings in favor of eBay noting that Tran could not use the mark Perfumebay because it could confuse customers into thinking that it was part of eBay. In protecting its trademark all through litigation, eBay was doing the appropriate thing, according to attorneys who specialize in intellectual property rights. “The brand only exists in the mind of the consumer, but it can be a company’s most valuable asset,” said Lauri Thompson, a shareholder at the law firm of Greenberg Traurig in Las Vegas.

What is a Trademark?

A trademark is a word, symbol or phrase used to identify a specific seller’s or manufacturer’s products from another. It makes it easier for a consumer to discern the origin of a producer and to have confidence in the results of its purchase. For example, an apple on a computer is a pretty good indication that the machine is manufactured by Apple Computer, Inc. and not by Dell Computer. Trademarks can be arbitrary, suggestive, descriptive or generic, but must be distinctive in their capacity to distinguish the product they are associated with. Arbitrary marks, such as Exxon, Kodak or the Nike swoosh, bear no logical relationship to their products but still serve to specifically identify them. Suggestive marks, such as Coppertone, hint at the product without actually naming it. Descriptive trademarks describe a characteristic of the product, such as All Bran or Holiday Inn. Generic marks describe the general category of the product, such as computer or stereo. Any trademark can become generic over time if it becomes the synonymous identifier of a particular type of product, such as Xerox (copiers) or Kleenex (facial tissue). While the first three categories of marks are protected in varying degrees by trademark laws, generic marks are not, because they are colloquial terms that are in general used to describe a type of product.

Trademarks were originally protected by state common law, but in the late 1800s the federal government stepped in with legislation that has steadily expanded over the years. Probably the most comprehensive body of law is the Trademark Act of 1946, also known as the Lanham Act, which defines rights to use marks, outlines the process for registering them, and enumerates the penalties for infringing upon them. “Trademark law exists to avoid confusion among consumers,” said West Allen, partner at Lewis and Roca LLP. “It arises out of the need for consumers to use recognized marks and symbols, such as an indication of source, quality and protection against false endorsement,” he added. Even though the law has been modified a number of times since its inception, more legislation is needed to reflect modern business practices, especially since the advent of the Internet. “Laws are always trailing behind technology,” explained Michael Stein, a partner at Snell & Wilmer law firm in Las Vegas.

Considering how valuable a trademark is to a business, it’s critical that the company do whatever it can to protect it, according to Susan Pitz, an associate with Hale Lane law firm in Las Vegas. Pitz reached a client that, after five years in business, experienced infringement of its trademark when another, competing business appeared with a very similar name. The second business was able to poach customers from Pitz’s client through the confusion that resulted from the similar names and services. “They [the second business] clearly went about using a similar name to trick consumers,” she said. Luckily for her client, Pitz was able to prevent further damage through a cease-and-desist letter, and thus, avoid expensive litigation.

When litigation does occur in cases of infringement (although attorneys admit that it’s rare), the primary standard is to determine whether confusion as to the source of the goods or services has resulted on the part of the consumer. Courts will consider the following:

• Strength and similarity of the marks;• Proximity of the goods;

• Similarity of marketing;

• Evidence of confusion;

• Defendant’s intent.

Although these factors are valuable tools for making a determination, intellectual property cases, such as trademark infringement, can be complex and unique. “It’s a mental challenge because cases hinge on such subtleties,” said Stein.

Aside from infringement, trademark owners can also sue for dilution because of blurring or tarnishment of their mark. A trademark can be blurred if it is used to identify a dissimilar product such as Polaroid shoes or Ralph Lauren cigarettes.

It can be tarnished if it is used in association with an inferior or objectionable product, such as a Bellagio brothel. “Where we have the most risk is because of our privileged gaming licenses referring to other gaming uses or objectionable content online,” Thompson said.

Counterfeiting and Piracy

Some of the largest and most egregious cases of trademark crime involve the overseas manufacture of such products as cigarettes, clothing, jewelry and watches which are branded with well-known trademarks, such as Coach, Rolex or Marlboro, and are then sold abroad or in this country as legitimate goods. “This is becoming more and more of a problem,” according to David Merrill, a partner who specializes in counterfeiting and piracy at Las Vegas-based Bailey Kennedy law firm. “Terrorist groups are using counterfeiting of trademarks to finance terrorist activities,” he said. When consumers buy knock-off goods at a fraction of the expected price, they support the proliferation of this type of crime. “You’re basically stealing from the trademark owner,” Merrill said. If a deal seems too good to be true, it probably is. “The everyday person just thinks that it’s a good deal but there’s a further reaching impact of this,” Merrill cautioned. Trademark counterfeiting and piracy have become ever more sophisticated in recent years, accounting for billions of dollars of revenue worldwide. Aside from eager buyers searching for bargains, the illegal enterprises are emboldened by insufficient law enforcement and the deficit of cases prosecuted under anti-counterfeiting laws. By contrast, the war on drugs is given much more oversight, according to Merrill.

Merrill recalled a typical case of his in which his client was a legitimate cigarette manufacturer whose trademark was being used on counterfeit cigarettes. Although he said that tracking down the people involved is often a difficult undertaking. “I accompanied the U.S. marshal to seize the goods,” he said. Counterfeit goods are often found at swap meets and, in the case of tobacco products, at small cigarette retail establishments. Although Merrill was able to get civil relief for his client without litigation, it represents just one case of many. This type of crime is likely to continue because the profits are large and the penalties almost nonexistent.

Cybersquatting and the Internet

With the proliferation of commerce on the Internet, the bar was raised on both the level of sophistication and the physical reach of trademark infringement. “Nobody realized the extent to which the Internet was going to change business,” Pitz said. “You didn’t think about protecting your rights back then.”

The Internet has expanded the world of trademark law by exposing marks to worldwide marketing channels and consumers in a manner that was previously impossible, according to Allen. The simplest form of infringement is cybersquatting, which is registering, selling or using a domain name in order to profit from somebody else’s trademark. Selling the domain name to the owner of the trademark at a large profit was considered a savvy business move in some circles years ago. The Anti-Cybersquatting Consumer Protection Act of 1999, however, clearly defines this as an illegal activity. As more and more businesses become aware of the value of domain names, this type of infringement is expected to decrease.

More insidious and sophisticated than cybersquatting is the practice of burying trademark names within the meta tags found in the HTML code of Web sites. Invisible to the Web page viewer, the tags contain information that is used by search engines to describe or index a page so that Internet users will be directed there based upon the information included in its description. Although designed to provide such necessary and innocuous information such as who created the page, how often it is updated and which key words represent the content, meta tags have also been used to misdirect Internet users to the wrong sites. If Pepsi were to bury “CocaCola” in the meta tags for its Web site, for example, users of some search engines could be directed to Pepsi when they were intending to go to CocaCola. “It’s no different than changing a sign on the freeway to misdirect people,” said Duane Frizell, as associate with Callister & Reynolds law firm in Las Vegas.

Trademark Protection

Because the risks of trademark infringement and dilution are very real to many businesses, attorneys emphasize the importance of protecting marks because they are a vital company asset. Ideally a business should first consult a trademark attorney before undertaking the investigative process of adopting a trademark. By doing an extensive search, the attorney can assure the client that the potential mark will not infringe on any others that are already in use. Once a mark is found to be suitable, it should be used in commerce and then registered with the PTO. Initial registrations are issued for 10 years, but in order to avoid cancellation after five years, the business must file an affidavit saying that the trademark is still in use. From then on, attorneys recommend businesses take the following steps to ensure the proper care and feeding of a trademark:

• Give public notice of your trademark rights by using the registered symbols recommended by the PTO.

• Use the mark as an adjective such as Kleenex facial tissue.

• Create a distinct style for the mark through bolding, underlining and capitalization to distinguish it from surrounding text.

• Affix the mark to the products and physical materials related to the business.

Trademark owners need to take responsibility for maintaining their marks by being vigilant against any potential cases of infringement. This is most easily accomplished through a watch service that will regularly check for improper uses online and also monitor new registrations. Business owners should make the effort to educate themselves about their Web pages, rather than leaving all the decisions to their Web masters. To discourage the proliferation of infringement, mark owners should also be willing to enforce violations, even if it means litigation.

For business startups, it makes sense to consult intellectual property specialists as part of the initial business planning process. New enterprises have the advantage of doing things properly by following the rules that will protect their assets and keep them out of court. Having the foresight to plan ahead is critical, according to Pitz. “We try to do things on the front end so you don’t end up in litigation,” she explained.

Industry Focus: Attorneys

Article Originally published April 1, 2016 By Nevada Business Mag

Most industries have experienced an energetic pick up in business as the economy has recovered. Nevada law offices are enjoying an improved economy but are still facing their share of challenges. While clients continue to practice caution after the recession, numbers are showing improvement for lawyers in the Silver State. Top attorneys recently met at the Las Vegas office of City National Bank to discuss factors affecting their practice today, from industry professionalism to the new Court of Appeals.

Connie Brennan, publisher of Nevada Business Magazine, served as moderator for the event. These monthly meetings are designed to bring leaders together to discuss issues relevant to their industries. Following is a condensed version of the roundtable discussion.

How is the economy affecting business?

WILLIAM URGA: We’re still a fragile economy. All the numbers are looking better, but they have to look better. We couldn’t have gotten much worse. People are starting to get more comfortable in using their disposable income. Businesses made it through this tough period and now they’re hanging on. I just don’t feel that the confidence is quite there yet.

JEFF SILVESTRI: You see an increase in some of the business deals and some of the transactions. In litigation, you can sense that people are still pretty cautious about pulling the trigger on filing lawsuits because it’s expensive and they want to work it out any way they can before they start spending the kind of money it costs now to litigate a case.

SAMUEL SCHWARTZ: Bankruptcy filings went from a peak of 2.2 million to just under 900,000 last year. You’re talking about a drop of 60 percent. Looking at the bigger scale Alon, [a hotel-casino project] is stalled now because the credit markets aren’t where they need them to be. Genting, [developer of Resorts World] is struggling on more of a national frame. They’re slowly starting to work, but the Great Wall they’re doing across from the Wynn isn’t moving like it was going to. Fontainebleau is on the market. I see some good redevelopment going on in a lot of the hotels on The Strip. The numbers are going up, but I’m curious to see how well it will go up with those projects stalling again. To me, it’s a sign that we’re still going to go sideways for a while here.

MANDY SHAVINSKY: I’m a real estate lawyer and one of the bread-and-butter components of my practice is leasing work. Now people are taking leasing work and taking the lowest bid, maybe shipping it overseas to have people in other countries do it. It’s a commodity. On the litigation side, things like document review and different things that you learned when you’re a younger lawyer are being shipped out too to the lowest bidders. While that is pretty disconcerting and is a big blow to our business model, if you are a creative problem solver for your clients you can provide some value and solve the problems that they have every day. Those are the kinds of things that will never be commoditized.

JOHN MOWBRAY: The consumer liquidity index is improving, the confidence level is growing, the net worth is growing and is on the upswing, disposable income in Southern Nevada is growing, inflation is low. Oil prices are low, which is good for the traffic coming in. North Dakota leads the nation in growth in the last period report. Colorado is number two and Nevada is number three. We’re right at the top there. Seventy-two percent of the non-farm employment in Nevada is improving. That’s with the tourism and gaming industry. The Las Vegas Convention and Visitors Authority

has projected a 2 million visitor increase in tourism this year over last year. That’s a healthy sign for our economy.

NILE LEATHAM: What we’ve seen in the bankruptcy world is, after the beginning of the recession, there was a lot of activity and a lot of work. That has dropped off significantly in the last couple of years. When the economy was strong, and this is counter-intuitive, Chapter 11 was also very strong. There were people that were venturing capital. They were taking risk. They were doing things to look for opportunities in the economy. I have not seen that as I have in the past.

MICHAEL FEDER: From a litigation side, it seems pretty stable. I’m starting to see different types of cases starting to come out again. We went from all the foreclosure actions, now the number one case you’ll see out there are quiet title actions. The court systems are inundated with those cases.

DAN WAITE: I’m very encouraged. It seems like, from a lender standpoint, money is flowing again. At least it’s loosening up. I’m not a real estate attorney, but our real estate and business attorneys are doing deals again, which for quite a while they were all but shut down. We used to see something a few years ago that you never saw – plaintiffs suing their clients for unpaid fees. An indication to me that things are getting better is you now rarely see that. We have other things to occupy our time.

How has professionalism in your industry changed in the last few years?

SCHWARTZ: The acrimony among the lawyers [is one change], we see it in the Supreme Court, we see that coming through the legal community. There’s just a healthy amount of divide. I hear clients saying, “You’re being too nice.” They’re mistaking professionalism for being nice, and it’s not the same thing. We’re winning, we’re just being professional about it. It’s frustrating.

URGA: I pride myself in being professional. I’ll fight you tooth and nail in the courtroom, but if we can’t have a beer afterwards, something’s wrong. In today’s world, I don’t think it’s quite that way anymore. We’re seeing less professionalism among the attorneys and with the courts, even. That doesn’t help the profession. If the judges would start sanctioning attorneys for some of the things they do, that may make a difference.

SILVESTRI: I’ve seen some of the more effective judges starting to do that. In the state and federal court, they’re admonishing people. It’s also a bigger group. There’s more lawyers. There’s probably less control over how they’re trained and there’s more lawyers who come in from out-of-state. You can sit in court and almost identify, as you’re watching people argue, which lawyer is from Nevada and has been here a long time and which lawyer is here on a one-time case from some other state.

DUANE FRIZELL: I noticed that the judges that are more willing to hold the counsels to be respectful get a better result. It would be great if the judges could continue to set the example, not only in terms of the rules and applying them, but in the courtroom when they make their rulings, the way they treat counsel, the way they treat the witnesses. That sets a tone in the courtroom.

JOHN STEFFEN: I think we’re all aware how people view our reputation. National polls show that lawyers are some of the most despised people on Earth. I think that we all try to do a better job to make sure when we counsel clients that we’re not overselling, that we’re realistic in what the outcome will be and what it will cost. All of us here much prefer when we see that we’re dealing with an opposing counsel that’s experienced versus a young litigator that’s just trying to make a name for himself. It comes down to training and having more integrity in how we teach and help inspire young lawyers.

FEDER: I talk to young lawyers all the time and a comment I make to them is, “All you have is your reputation.” At times, you might have a client that is pushing you. They have to understand that you practice here everyday and you have to maintain that [reputation]. Some of the younger attorneys have a privileged perspective; they think because they went to law school, they know it all. You have to bring them down to reality.

How have generational issues factored in?

SHAVINSKY: There is an increasing number of people who, for whatever reason, may not want to put the amount of work in [traditionally expected of lawyers]. I’ve noticed that doesn’t mean they’re not smart. It doesn’t mean that they don’t want to work hard and put out a good work product. They just don’t want the lifestyle that they perceive a lot of the partners having. Part of what’s resulted for all of us is we have to come up with more flexible ways to accommodate someone who is a good lawyer, great with people, can do good work, but doesn’t want to have to put in the time over seven to 10 years to generate the kind of business to become a partner in a firm.

FEDER: Not everyone wants to be a partner or shareholder member of the firms. People just want to continue working, so they know that expectation from the get go. Some people don’t have the gift of gab. They can’t just go out and take control of a room, but they can garner business by their work product, for the stuff they put together and how well they do. They can start garnering business off of that.

ANTHONY MARTIN: You have to have some form of professional development and inclusion program that allows you to be adaptive and flexible in how you manage the expectations of your attorneys. You don’t have to be stuck to your desk with a library that doesn’t really exist anymore, except for in the cloud, to be able to do your job as an attorney effectively, especially when your clients expect you to be plugged 24 hours a day, seven days a week. You have to have that flexibility. We just hired an of counsel, and there is a business plan before they walk in the door that says this is what we expect of you. Be very proactive, but also be inclusive and communicative so they meet your expectations. It’s not as easy as you need to bill 2,000 hours a year and we’re just going to let you get there. It’s giving them the tools to a professional development program. Also, recruiting people from atypical places so you have a much more diverse workforce when it comes to demographics. That’s part of the problem with law firms. They keep going to the same well instead of expanding that pool.

URGA: I understand that the younger people want to have more time out doing other things, but we’re professionals. You’re supposed to do the best you can for your client. If that takes more than eight hours, you better do it. Otherwise, you’re not doing what you’ve taken an oath to do. The oath is to represent your client to the best of your ability, and your ability doesn’t always run nine to five.

SILVESTRI: The challenge is, where I was a young lawyer, we sat at our desks. You got there at seven in the morning and you stayed there because there was no other way to get your work done. Now we have to work with younger lawyers and acknowledge that they can sit at home on their laptop from eight in the morning until noon, come in and work maybe from noon to six, then go home, have dinner with their families, pick up their laptop and work again. As long as the work’s done and the client’s happy, that’s okay.

How do you manage client expectations?

MARTIN: Technology allows you to be plugged wherever you are in the world. In the new normal, it’s instant gratification. It’s training, not only the new generation to meet that expectation, but training us as leaders for succession planning. To understand that, we have to allow flexibility to occur because not every client works nine to five. You have to be available all the time, effectively.

SHAVINSKY: The challenge with getting back to your clients immediately, you start typing out a response that you think is well-versed and incorporates the answers that they want, and you go back and read it and say, “You know, I need to think about this.” If I don’t go back and redo this email or at least try to flush these issues out, I’m going to give them bad advice and that’s a bigger disservice than not getting back to them in half an hour. They need an immediate response, but they also don’t need the wrong information. It’s a very difficult judgment call to figure out when to do that and when not to do that. I know we’ve all sent emails we wish we could take back because it wasn’t exactly what we meant to say in the spur of the moment to try and get back to somebody.

FRIZELL: Managing expectations is a big part of our practice in terms of having an open conversation [with clients]. From the very beginning, I like to sit down with my clients and say, “We want to provide you the best service. I know that you want immediate responses, but you have to understand that sometimes I’m going to be in court or in deposition, meaning I’m not going to be able to meet with you right then. I am going to take your email, your text message, your voicemail and I’m going to get back to you as soon as I can, but I want to have a very good conversation when we do.” Helping to manage expectations helps them feel that, yes, they are being validated that they’re important, but at the same time understanding that you have limitations.

How have your fee structures changed?

SILVESTRI: You can get clients to agree to a flat fee structure, or you can find some alternative fee structure that they understand what the cost is going to be and we don’t have to itemize everything we do, but those are pretty hard to put together.

URGA: One of the frustrating things is, if I’m talking to one of my partners or an associate, you can only bill for one attorney. It makes it artificial because you’re still going to talk to that attorney because that attorney is the one who’s done the research or has had a case similar to that. It’s becoming much more difficult for my practice to keep track of all the costs. Plus, you’ve got in-house counsel for all these companies that look at everything. I mean everything. So you’re dealing with a different world. Lawyers now, with format billing, are having to spell out everything.

MARTIN: We have a pricing committee that forms these types of AFAs (alternative fee structures) for companies that we work with, but we still are required to itemize everything we do for purposes of justifying the bill if we seek a fee award, or something of that nature, in court. We wish it was as simple as the flat rate. We could just go ahead and say it’s $3,000 for a statement of position. That’s a standard flat fee commoditization of a particular task, but not every task can be commoditized. Some things do require hourly thinking and hourly analysis.

WAITE: There’s been a lot of discussion over recent years about alternative billing tools and mechanisms and the death of the billable hour. Maybe the commoditization of routine, repetitive work, you might be able to structure a flat fee that’s a win-win situation, but many of us here are litigators. I don’t know what your experience is, but mine is that it’s extremely difficult to be predictive of what’s going to happen in litigation. What you do when a client is asking for some sort of a fee is you have to estimate on the high side. Then you risk pricing yourself out of the market. It just doesn’t work.

How has the Court of Appeals affected the industry?

STEFFAN: Our appellate partner said that it’s a game changer. What used to take two or three years with the Supreme Court, he just got his first decision back in six months from the time he filed his opening briefs. Clients are now a lot more apt to use that vehicle, file appeals and take that risk, when they know that it’s timely.

MOWBRAY: I’ve got this report for the latter six months of last year. It’s a push down model. You still file like the old way, then the [Supreme Court] decides what is going to go down to the Court of Appeals. They were assigned 500 cases and disposed 304, which is a disposition rate of 61 percent. That’s pretty good. With only being operational for six months, the number of pending appeals with the court, as a whole, went from 1,985 down to 1,739, a decrease of more than 12 percent.

SILVESTRI: It’s helping the Supreme Court get its backlog down and it’s getting cases adjudicated through the Supreme Court more quickly as well.

URGA: They started with the Appellate Court having a very limited number of things they could really hear. I have a feeling after about a year they’re going to start pushing more of them down.

WAITE: One of my partners said the Supreme Court is still very much crushed, but what this has demonstrated is that a panel of three judges can very effectively handle 500 to 600 cases a year. The next step is if a panel of three can handle 500 to 600 cases a year, a panel of six can handle twice as much. That’s probably what’s coming next.

Protect Your Small Business

Article Originally published on

Lately, more and more clients ask what they can do to protect their small businesses. Most understand that corporations and limited liability companies (LLCs) may shield them from personal liability for the debts and other obligations of the business; however, they seem to be unclear as to how the law works in the opposition direction. How can an owner protect their small business from claims for their own personal liabilities?

Owners should start the legal planning for their businesses and asset transfers before they even form a company. Nevada law limits a person’s ability to transfer assets to businesses they own in an effort to avoid their personal creditor’s claims.1 A creditor may disgorge assets from a person’s business if the person transferred those assets “[w]ith actual intent to hinder, delay or defraud [the] creditor” or “[w]ithout receiving a reasonably equivalent value in exchange for the transfer.” 2 Creditors routinely file lawsuits against businesses that receive such transfers, although, as discussed below, certain types of trusts may impede creditors’ efforts.

Business owners must not operate their businesses as their own “alter egos.” An owner’s personal creditor may reach the business’s assets when an alter-ego situation, such as the following, exists: “(1) commingling of funds; (2) undercapitalization; (3) unauthorized diversion of funds; (4) treatment of [business] assets as the individual’s own; and (5) failure to observe corporate formalities.” 3

In Nevada, barring fraudulent transfer or alter ego, a small business owner’s creditor generally may not touch the assets of the owner’s business, if it is an LLC or corporation. With respect to LLCs, the creditor is usually limited to a charging order—obtained after a judgment—which only allows for collection on distributions actually made.4 “A judgment creditor . . . is only entitled to the judgment debtor’s share of the profit and distributions, takes no interest in the LLC’s assets, and is not entitled to participate in the management or administration of the business.” 5 The result is the same for most small corporations; the creditor may generally only execute on the owner’s stock (ownership interest) if the corporation is publicly traded or has 100 or more shareholders.6 Although LLC and corporate assets are similarly protected, LLCs are often preferred for small businesses because corporations require various formalities, such as annual meetings, and the annual fees for Nevada corporate business licenses have recently increased to be $300 more than for other entities.

Nevada residents (and even non-residents) may also protect their businesses by transferring ownership to a Nevada Asset Protection Trust (NAPT).7 NAPTs allow a trust’s creator to be the beneficiary.8 The creator may manage and invest the NAPT’s assets, including business entities transferred to the NAPT, so long as a Nevada resident trustee has the unfettered discretion to approve trust distributions to the creator (as a beneficiary).9 An NAPT may also cut short the time that a creditor has to bring an action for alleged fraudulent transfers, and such a trust may prevent the creator’s creditor from obtaining any trust distributions.10 Assets transferred to the NAPT should be located in Nevada. Nevada law protects NAPT property and assets located in Nevada, including real estate, from judgment collection.11 These protections do not extend to any property or businesses located in another state.

While it has become easier to form a business without the assistance of an attorney, taking advantage of the laws protecting a business (from formation on) have never been more complex. Business owners should always consult an attorney to take full advantage of these laws.

By R. Duane Frizell, partner and Jonathan C. Callister, partner, Callister & Frizell

Real Estate: Selected Updates from the Nevada Legislature and Nevada Courts

By: R. Duane Frizell, Attorney, Frizell Law Firm

Notices of HOA Redemptions 

Technical compliance may not be required in notices of homeowner association (HOA) redemptions. In 2014, the Supreme Court held that HOAs had a “superpriority” lien that, when foreclosed, extinguished a first deed of trust and vested title in the foreclosure sale purchaser “without equity or right of redemption.” In 2015, the Nevada Legislature quickly created such a right. It gave the original owner and other lienholders 60 days to redeem the property by paying certain amounts and serving a notice of redemption together with a certified copy of their deed or deed of trust. This year, the court determined that “technical compliance” with the notice procedures was not required when the purchaser had actual knowledge of the original owner’s intent. (Here, the entity conducting the sale sent the purchaser an email.) The lack of a certified copy of the deed did not defeat the right to redeem either. 

Notices of HOA Defaults 

Notice must go to the address in the deed of trust, but then again, alternative notice may be permissible. The Supreme Court held that, in an HOA foreclosure sale, the HOA violated statutory requirements when it sent a notice of default to a lender at an address other than the one designated in the deed of trust. Even so, the court also concluded that such a requirement would not necessarily be mandatory if the lender received timely notice by “alternative means” and suffered no “prejudice” as a result.

Notices of Commercial Lease Defaults 

A primary tenant’s actual notice may be sufficient, and a subtenant may not need notice at all. The Court of Appeals held that although a commercial landlord did not “strictly comply” with a lease’s notice requirements, it could still terminate the lease because the primary tenant had “actual notice” of the default. It further held that even though the landlord violated the lease’s terms by failing to give the subtenant notice, the lease could still be terminated because the subtenant was not a third-party beneficiary of the lease. 

Homestead Exemptions 

Equity increased, but protection decreased. The Legislature increased the homestead exemption from $550,000 to $605,000. It also changed the general rule that, apart from holders of liens recorded prior to a homestead declaration, judgment creditors may not execute upon proceeds of a homestead’s sale. Now, this exemption only applies when the seller reinvests the proceeds into a like-kind property that will be declared the new homestead; the seller identifies the new homestead within 45 days after the sale; and the seller takes possession of the new homestead within 180 days.

Tax Sales for Abandoned Properties 

Owners get less time. The Legislature created an expedited procedure for the sale of abandoned property with delinquent property taxes. Now, the county treasurer need only give 45- days’ advance notice of the sale, instead of the regular 90 days. The owner of the property will also only have a one-year redemption period, instead of the regular two years. 

Perpetual Charitable Trusts and Property Arrangements 

There is an unlimited time allowed for these. The Legislature has provided that, unlike most private agreements, charitable trusts and other property arrangements may now exist in perpetuity.

Article originally published in Nevada Business Magazine

Industry Focus: Attorneys

Article originally published in Nevada Business Magazine

The legal profession is unique in that it touches nearly every other industry at some point. As a result, businesses have a range of opinions regarding those that practice law. For attorneys in Nevada, reputation, professionalism and client expectations are all vital issues for the industry moving forward. Recently, legal executives met at the Las Vegas office of City National Bank to discuss their industry.

Connie Brennan, publisher and CEO of Nevada Business Magazine, served as moderator for the event. The magazine’s monthly roundtables bring together leaders to discuss issues relevant to their industries.

How big of an issue is reputation and professionalism within this industry?

John Steffen: What concerns me most, and a challenge that we all face, is the reputation of lawyers in general. We have lost, perhaps, our most valuable asset as problem solvers. We’re referred to as counselors of law but we do too little counseling, too little problem solving and often jump in a hurried way into protracted, needless and costly litigation, which is often a disservice for a client. That’s probably my biggest concern.

William Urga: I think we’ve lost a lot of the ability to pick up a phone and talk to each other and try to resolve issues. You see more antagonistic-type comments being made. Even in court, while you’re there arguing, instead of arguing to the judge and talking about the law, the issues or the facts, you somehow are turning on the attorney a lot. That is troublesome because we are more than used car salesmen; we’re a profession and we should act like professionals. That’s something we need to be pushing everyday. That’s a big deal for me. I think being a professional is very important. Your word is your bond, and you stick with it.

Michael Feder: I agree with you and I’ll tie that into one of the things I think we’re not doing as well as we used to, and it’s tied into professionalism. One of the things we’re having a harder time doing, and I’m seeing a lack of in younger attorneys, is that lack of professionalism because they’re not being trained. They’re not being trained how to act with other attorneys, interact with other attorneys or even clients. It’s something we need to start focusing again on, taking the time with younger attorneys so they understand what it means to be an attorney and be a professional.

Barbara Buckley: I do think professionalism is a big issue. I had a younger attorney go to court this week, and the older, more mature, attorney engaged in some trash talking of her and her abilities. The flip side of that is, I think lawyers like us, when we argue against a younger lawyer, need to, at the end of it, stick our hand out and say, “Congratulations, what a good job you did.” That is how you [create] the type of lawyers we want to see.

Glen Truitt: There’s a civility issue that’s been creeping up in Nevada. I’m not sure if it belongs to the young lawyers or the older lawyers, but there is a civility problem. I think it does start with senior lawyers to cut it out and not carry grudges. I’ve got people that it’s easy to be mad at, but it does go to us to try and lead the way, even if in the face of our own colleagues being spirited or uncivil, to try to respond in a civil way, to not propagate. Young lawyers will see that and they just think that’s the way to win. We have to stop because we’re getting a reputation.

Joshua Reisman: I don’t perceive a lack of civility in the Nevada bar and perhaps [it’s] because I practiced in New York before I came to Nevada. In all honesty, I’ve litigated against most of you, you’ve all been collegial toward me and I believe I’ve been collegial towards you. I’ve never had a problem getting an extension if necessary. I very rarely had people that have lied to me or misrepresented something. I don’t sense it and yes, we have to confirm things in writing, but I think that’s just the nature of a larger bar. There truly was a time where everybody really knew each other—not just as colleagues but as friends—and you could do things on a handshake. But, the fact that you can no longer do things on a handshake, that you don’t necessarily know each other and have a built up level of trust, that doesn’t mean you’re not civil towards one another.

Do judges play a role in professionalism?

Buckley: I help manage, mentor and guide 55 attorneys, and the majority of them practice in family court. I do reserve a little of my criticism for the judges because, in federal [or] civil court, they would not put up with the type of things you see everyday in family court. It is a shame for litigants to have to go into courtrooms that are less than professional. I blame lawyers, of course, for their conduct but I also lay some blame at the judiciary. Having an elected judiciary, sometimes they don’t wanna come down on folks. But, we’ve seen great examples of elected judges who, in a very kind way, ensure that civility reigns in our courtrooms. That’s what every person has the right to expect in a court they attend.

Urga: I’ve harped on the judges in the past. If they’d start sanctioning people for doing that kind of thing, I think it would stop or slow down.

What kind of expectations does the digital age place on this industry?

Jeff Silvestri: They know you’ve got a cell phone, email and now text. My clients [contact me on my] work phone, then my cell phone, then I get a text, then I get an email. They want to hear back from you and it’s hard to keep up with those demands when you’re trying to service your other clients and run a practice. What they’re asking for is a lot more than just, “I’ve got a problem [so] I’m calling you now.” They want you to come to them and say, “You’ve got a problem,” or, “I see something that you might do differently.” So you’re [going to need] more of the counseling that they’re looking for and if you can’t provide all of it, they’re gonna go find another lawyer.

Joel Henriod: I think the biggest challenge right now, both in the law and then administrating business of a legal practice, is maintaining a sense of balance and perspective. [Maintaining] balance between the needs of clients, the market and the inventory of services that the firm provides so that you maximize efficiency. [You must have] balance between putting in enough resources to maintain excellence in what you already do, but investing enough in the future and the capacities of the future. [You must maintain] perspective between true growth opportunities and those things that are really a shiny new tool of the day.

Has the way attorneys bill clients changed in recent years?

Silvestri: Clients want their jobs done fast, cheap, quick, good and professional and lawyers are compensated by the hour. Our incentives aren’t always in line with our clients’ incentives and that creates a big problem. You see a lot of clients bringing work in-house where they can manage their costs and manage their work a lot more efficiently because I don’t think lawyers are necessarily responding as fast as we should to what our clients are asking for.

Ron Thompson: The flat fee billing system, billed hours, relatively speaking, in our industry [is] a new concept. We all hear about the flat fee billing concept and how it’s gonna take the industry back or the old system of retainers that were not refundable. But, you’ve got to wonder if the answer is a return to the past because the billed hour does create a perverse conflict of interests that we can’t resolve.

Mandy Shavinsky: We just hired a pricing manager at my firm, because lawyers are not great business people, as we all know. These folks take a look at different flat fee models and different things we’ve done in the past, with input from us, to try to predict what the correct flat fee should be. The interesting thing is, in ninety percent of the cases where people ask for a flat fee, you put an enormous amount of work into different structures, and the client comes back and says, “Well, how about you just give me a 10 percent discount?”

Henriod: We found that it may work to flat fee particular services in a case even if you can’t flat fee the entire case itself. For instance, you can flat fee consultation but not all of the motion work that may need to be done, not knowing what’s gonna happen in the case. But, I can flat fee what it’s going to cost to call me at any time you need to. Generally, that works out over time. Most clients don’t exploit it but what that does is, at least, caps their cost foregoing the expense of giving you a call.

Truitt: There’s the chance that a transaction or compliance matter will explode into something four or five times [as large, but it] is pretty limited, so we try to create modules. Our least common denominator, our least popular approach is hourly billing. If we go on long enough, we’ll try to be creative. You want to create that rapport, you want to try to be a problem solver. First you have to understand what the problem is in their business. There is a big investment but if you say, “Look, we’re gonna go for 90 days, or 60 days, to figure out what you need and if we can work out an alternative fee arrangement, we’ll try to get there.” There’s a two-way trust. Them paying up front for the initial work is important. If they won’t pay, then they just want a discount.

Feder: It’s very difficult, in litigation, to forecast everything that’s going to happen. The judge or your opposing counsel can change so many different things. I’ve seen where I’ve tried to flat fee and, you always overestimate, and the moment the client realizes, “Oh, I’m paying more in a flat fee than what really happened.” Clients will come back after a flat fee and say, “Let’s go back to hourly.” A lot of times our clients don’t want to do the flat fees because [of] some of the uncertainties as well.

Are the pro bono needs of the community being met?

Buckley: The short answer is no. The state bar and supreme court Access to Justice Commission just did a legal needs assessment. While we have a large number of lawyers serving the business community and high-income folks, the situation on the lower end of the spectrum is much different. In the study, it quantified the legal need and showed that 3 out of 4 people in legal need are getting turned away to go to court themselves. While, in some sense, I feel legal aid and the infrastructure has improved a lot in the thirty years I’ve been with legal services, the number of people who are at or below 200 percent of poverty is just a staggering number. There’s probably 150 clients right now on our waiting list. These are people who are screened both financially and for merit, so the legal needs are pretty staggering.

Duane Frizell: For me [the biggest challenge is] being able to keep up with the demand for legal services, and I think that’s especially true for those that are not proficient or not fully proficient in the English language, and even more especially true for pro bono clients. A large part of my clientele are Chinese speakers and the legal needs they have go beyond my practice areas. Being able to find competent legal counsel to represent them, and to advise them, in their language can be very difficult. I also speak limited Spanish and recently, through legal aid, I had an appeal of a Spanish-speaking client in rural Nevada, and before the Nevada Supreme Court, we were successful. Between my limited Spanish and some translators, I was able to effectively represent this client. However, the case has been remanded back to district court. Unfortunately, we’re having a very difficult time locating Spanish-speaking council that will take this case pro bono in rural Nevada.

How has the legal industry changed in recent years?

Thompson: I think one of the things that’s interesting is the advent of the cannabis industry. I know everybody here is aware of the problems it’s creating for the banking industry, being able to handle the cash involved. It’s not just for the owners of the cannabis businesses, but it’s also their landlords, their lenders. I suspect some of us have runners running all around the city with large volumes of cash. It’s just a matter of time before some sort of crime happens that affects our industry. Congress has been sitting on a bill for a long time, but I think it’s a hole right now that is going to be a problem at some point in the future.

Truitt: My practice was 100 percent healthcare until two years ago, and then a cannabis transaction walked in the door. It has been transformative, not only for the city but for the profession. There was some concern when the bar said, “Hey, are you sure you can do this? Can you bank this money?” We’ve worked our way through that. There’s a tremendous opportunity to lead. In Nevada, we are one of just a handful of recreational use jurisdictions. People look to us to lead. We’ve had a tremendous amount of success. We’ve had the best first year of any jurisdiction that legalized. We beat our tax target by a double-digit percentage, $74 million last month. We need to serve that business community, they need it. It’s highly regulated, just like healthcare. It’s transformed the way we practice law, because it’s a very unique market and I’m grateful for it because it’s brought jobs, it’s brought a ton of work, a ton of transactions. It’s been a real boon to the professional economy here and we’re in the lead, nationally. There are Nevada lawyers speaking nationally at cannabis conventions.

Has the commoditization of legal service been an issue?

Shavinsky: The economy is much better today than it was two years ago. Notwithstanding that fact, I still think one of the biggest challenges facing the legal industry is the increasing commoditization of legal services. Work that used to be done by associates, paralegals or even young partners is now being done by document review companies overseas or packaged up and done by companies that don’t necessarily specialize in core legal services. It’s something that we have to learn to deal with. It really emphasizes the fact that, if you’re like everybody else, you’re gonna fall further and further behind. You have to build really strong relationships with your clients and maintain those relationships. You have to be accessible, more responsive and your clients have to see the value that you add to them, to their practice and their lives. If they don’t, you’re going to look just like everybody else and it’s that much easier to go to somebody else who’s charging less.

Silvestri: My concern and issues are similar, dealing with shifting customer and client demands. For the firms that are all in this room, we deal mostly with businesses and they have different ways they want to do business now than they had three, four, five or ten years ago. If you can’t differentiate yourself, create value and help them in a different way, they’re gonna find somebody else. Lawyers aren’t necessarily good marketers or business development people. We’re not likely to necessarily get out, go have meetings and develop those relationships. That’s a huge problem, especially as companies take more work in-house or send it overseas. The work that used to come to us on a regular basis might not be there so you’ve got to find ways to provide different kinds of value to clients.

馬馬虎虎 (“Horse, Horse, Tiger, Tiger”) Avoiding Mediocrity with Your Chinese Clients

The Chinese say, “horse, horse, tiger, tiger.” Neither one nor the other. Mediocre. An understanding of pertinent issues helps U.S. businesses avoid mediocrity in the important Chinese market. Between 2000 and 2015, Nevada’s Asian population doubled.2 In the U.S. as a whole, from 2007-2015, the number of employees at Chinese-owned businesses increased 30 fold.3 From April 2017 to March 2018, Chinese nationals purchased $30.4 billion in residential property, the most of any nationality.4

Many know that, in China, the number 8 is good (prosperity), and the number 4 is bad (death). But business people need to know more than that. It would be an oversimplification to say that all Chinese have the same level of U.S. business acumen; however, I have observed certain trends, especially for those from the People’s Republic of China (PRC).

Deal Closing: One issue is getting the deal “inked.” Given their country’s non-independent, nascent legal system, PRC nationals often view professionals, such as attorneys, accountants and real estate agents, as unnecessary. Instead, they tend to rely on their relationships (關係). With this focus, they may disregard legal formalities or opt for simple write-ups of general terms. Businesses have been sold with nothing more than scribbled terms on the back of scratch paper. Misunderstanding the importance of U.S. contract clauses, Chinese manufacturers have fallen prey to unfavorable terms in multi-million dollar deals.

Another issue is getting the cash—Chinese nationals’ preferred method of payment. Limitations are imposed as part of the PRC’s “Anti-Corruption Campaign” (反腐运动), which some say targets those disfavored by the regime.5 This campaign frightens off Chinese investors who do not want to run against the political winds or get branded as “corrupt” for simply investing in the U.S. The campaign also limits capital flow. Chinese nationals may only transfer a total of $50,000 out of China per year and may only withdraw $15,000 from Chinese banks when they are overseas.6 Getting money out of China can be extremely complex, especially if the amounts exceed general limits.

Business Formation: PRC nationals often prefer corporations because of their lack of familiarity with LLCs and other business entities. They may hear of the favorable tax treatment of S-Corporations, but non-resident aliens may not be S-Corp. shareholders.7 For Nevada state business licenses, the annual fee for a corporation is $500; the fee for other business types is only $200.8

Real Estate: Under the Foreign Investment in Real Property Tax Act (“FIRPTA”), a buyer of real estate may be liable for taxes realized by the seller, if the seller is a non-resident foreign national and if 15 percent of the sales price is not withheld.9 The foreign seller also faces difficulties in getting the withholding reduced or refunded. FIRPTA problems are legion when sales are closed informally, without escrow. Even closing through an escrow company does not guarantee FIRPTA compliance. Many U.S. real estate professionals do not fully comprehend FIRPTA’s landmines.

Immigration: Many Chinese nationals hope to get a green card by investing money in the U.S. through the EB-5 visa program. However, EB-5 requirements are rigid, including a minimum investment of $1 million ($500,000 if in a targeted employment area), and the investment must create at least 10 full-time positions for qualifying employees.10 Chinese investors need to plan ahead before sinking their money into any business venture.

Understanding issues like these helps companies provide services that are customized to Chinese business (and legal) needs.

Article originally published in Nevada Business Magazine

1 – In addition to his J.D. degree, Mr. Frizell has a B.A. in Chinese and an M.A. in Asian Studies. He is bilingual in English and Mandarin Chinese.
2 – Las Vegas Sun (May 29, 2015).
3 – Pew Research Center (Dec. 14, 2017).
4 – National Association of Realtors (2018).
5 – The Economist (Dec. 13, 2014).
6 – PRC State Administration of Foreign Exchange (Dec. 30, 2017).
7 – 26 U.S.C. § 1361(b)(1)(C).
8 – NRS 76.130.
9 – 26 U.S.C. § 1445(a).
10 – 8 C.F.R. § 204.6.

Anatomy of a Lawsuit

This is a brief outline of a lawsuit. Bear in mind: Each case is different; the possible procedural issues are infinite; there are numerous court rules and statutes that give rise to numerous, different procedural possibilities; and it is impossible to predict all of the procedural issues that may arise in a given case.

In general, however, there are three stages to litigation: (1) the pleading stage; (2) the discovery stage; and (3) the trial stage. In addition, there may be settlement negotiations and an appeal. Each of these items is discussed in more detail below.

Stage 1—Pleadings

In its strictest sense, the term “pleadings” refers to a Plaintiff’s complaint and a Defendant’s response. In the pleading stage, the Plaintiff files a complaint and serves process (court papers) upon the Defendant. The Defendant then has three general options: ignore the complaint and file no response; file an answer; or file a motion to dismiss (or other motion). If the Defendant ignores the complaint, the Plaintiff could get a default and default judgment against them. From a financial perspective, that would be the cheapest way for a Plaintiff to dispose of the lawsuit. If, as in most cases, the Defendant simply files an answer, the pleading stage would be over and the case would move into the discovery stage. If, on the other hand, the Defendant files a motion to dismiss (or other motion), the Plaintiff would, at a minimum, have to file an opposition to the motion (along with a brief supporting its position) and perhaps appear for a hearing in court. If the court ultimately denied Defendant’s motion, they would have to file an answer, and the case would then move into the discovery stage. (Some courts require the case to go to discovery even if a motion is pending.) For the pleading stage, Defendants’ filing a motion to dismiss or other motion would be the most expensive scenario.

Stage 2—Discovery

“Discovery” refers to the time when attorneys collect evidence and identify witnesses. Attorneys request documents and information, they serve subpoenas on third parties, and they take depositions. The discovery stage begins soon after Defendant files their answer. At that time, the attorneys meet and discuss a potential discovery plan (i.e., dates, events, documents, witnesses, and deadlines for discovery). Usually, the parties agree on a plan and submit it to the court, which ultimately accepts or rejects it. Regardless, the court will ultimately issue a discovery order. The parties may then “discover” information, documents, and other items. Right off the bat, the parties must disclose relevant documents, witnesses, and other information to each other. They may also request additional documents and information from other parties in the form of written discovery requests, including interrogatories, requests for production, and requests for admission. They may take the depositions of other parties or even non-parties, such as fact witnesses. They may request documents from non-parties in the form of subpoenas. In the discovery stage, the parties disclose relevant experts—such as appraisers, accountants, economists, and the like—along with their experts’ reports. (Experts are not cheap.) In discovery, the parties may file all sorts of motions, such as motions to compel discovery responses from the other side, motions for protective order to keep them from having to disclose documents or information, motions for summary judgment to get rid of some or all of the opposing party’s claims or defenses, and so forth. Discovery is generally the longest and most expensive stage of litigation.

Stage 3—Trial

The trial stage begins after discovery closes. Most of the trial stage is spent preparing for trial, including culling all the file documents, identifying and marking exhibits, subpoenaing witnesses to appear at trial, reviewing deposition transcripts, outlining direct and cross-examinations of witnesses, preparing legal briefs, preparing questions for the jury panel, outlining opening statements and closing arguments, and so forth. There may be some motions filed in the trial stage, such as motions in limine to keep documents and information out of evidence (and away from the jury). Finally, there is the trial. Trials generally consist of the following: a hearing on pre-trial motions and other trial matters, jury selection, opening statements, Plaintiff’s presentation of evidence and witnesses, Defendant’s presentation of evidence and witnesses, closing arguments, and jury deliberations. Oral motions are made and ruled upon by the court throughout the trial. Trials require a lot of work in a short period of time. Thus, while the trial stage may not be as expensive as the discovery stage as a whole, it usually will result in very large monthly bills.

Settlement Negotiations

The overwhelming majority of civil cases settle. Throughout all three stages of litigation, settlement negotiations may (and usually do) occur. Parties can settle anytime, even after trial. Nevertheless, in order to settle, the parties must agree to settle, and they must agree to the terms of settlement. It is often said that “a bad settlement is better than a good trial.” One reason is the expense. Litigation is extremely expensive. Regardless of what stage a case is in, a settlement stops the case dead in its tracks. In this manner, parties can minimize their attorney fees and court costs. Settlement also allows the parties to control the result. No one can guarantee what a judge or jury will do. There is always a gamble in taking a case to trial. With a settlement, that uncertainty is eliminated.


After the final decision is rendered at trial, the aggrieved party (usually the party that lost) may file an appeal. The procedure for an appeal is completely different. An appeal is brought before an appellate court, while the three stages of litigation discussed above are brought before a trial court. An appeal usually does not involve as much time (or expense) as a case in the trial court. However, avoiding an appeal is another benefit of settlement.

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