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April 2011

Las Vegas Partner Robert Schumacher Wins Motion for Summary Judgment for Contractor

The Las Vegas construction Partner Robert E. Schumacher recently won Summary Judgment in Clark County District Court in favor of a Las Vegas contractor.  Gordon & Rees's client was awarded over $570,000.00 in judgment as a result, including attorney’s fees, costs, and pre-judgment interest.

The dispute stemmed from the April 2008 sale of Gordon & Rees’s client’s contracting business to Defendant in which Defendant agreed to acquire and assume the name and good will, ongoing and future public works jobs, liabilities and costs, and a fleet of vehicles and other equipment.  Defendant argued the arrangement was a strategic alliance, whereas Gordon & Rees’s client viewed it as a sale of the business.  The total purchase price was to be $875,000.00, not including the parties each getting 50% of the net profits on the remaining jobs after Defendant took a 4% administrative fee.  When Defendant did not make all the required payments, Gordon & Rees’s client filed a Complaint to which Defendant responded by filing a counterclaim seeking a determination that it owed nothing to Gordon & Rees's client. 

Desiring to avoid the costs of litigation, the parties made several attempts at settlement.  The parties drafted a settlement agreement and several hundred thousand dollars were paid by Defendant to Gordon & Rees's client.  However, one issue ultimately prevented final settlement—the veracity of Defendant’s job cost reports.  The parties were supposed to each get 50% of the net profits, but Defendant was unable to ensure the accuracy of its reports.  Moreover, evidence suggested some job and labor costs were wrongly allocated by Defendant to the projects taken over from Gordon & Rees’s client. 

In March 2010, the parties again attempted to reach a settlement—this time through the district court’s business court settlement program.  With the assistance of a settlement judge, the parties were able to agree on a “settlement process” that included the use of a third-party neutral expert who would audit the job cost reports and whose findings would be binding on the parties.  The parties split the cost of the neutral expert.  The parties also stipulated that the award would have a floor of $50,000.00 and a ceiling of $500,000.00. 

In September 2010, after extensive review of documents provided to him by the parties, the third-party neutral expert issued a report finding that Defendant owed Gordon & Rees’s client an additional $529,379.70.  Defendant argued the expert's analysis was flawed and sought to cross-examine the expert regarding his methodology and by requesting supplemental information regarding the basis for his findings.  In response, Gordon & Rees filed a Motion to Enforce Settlement on behalf of its client.  The court granted the motion finding that the expert’s findings were binding on Defendant.  However, the court did not enter judgment in the amount of the neutral's finding on the grounds that the parties had not agreed to such a term in the settlement. 

With the court having found that the expert’s report would be binding at trial, Gordon & Rees’s client continued to try to settle the matter.  When Defendant continued to balk at the finality of the third-party neutral expert’s findings, Gordon & Rees’s client served Defendant an offer of judgment in the amount of $499,999.00, or $1 less than what Gordon & Rees’s client was entitled to pursuant to the findings and court ruling.  In Nevada, if a party rejects an offer of judgment and then fails to prevail in an amount greater than the offer, then the party who rejected the offer cannot get attorney’s fees or costs and may be required to pay the attorney’s fees and costs of the party who made the offer of judgment from the date of the offer.  Defendant did not accept the Offer of Judgment and so Gordon & Rees filed a Motion for Summary Judgment on the basis that since the expert’s findings were binding, there were no genuine issues of material fact remaining for trial. 

The court found that pursuant to the agreement of the parties and the findings of the neutral expert, Gordon & Rees’s client was entitled to an award in the amount of $500,000.00 and granted Summary Judgment in that amount.  The Court denied summary judgment to Defendant on its Counterclaim.  Since the amount awarded to Gordon & Rees’s client as the prevailing party was greater than the offer of judgment, Gordon & Rees filed a Motion for Attorney’s Fees and Costs pursuant to the offer of judgment statutes.  The court found Defendant’s decision to reject the offer of judgment was unreasonable and awarded Gordon & Rees’s client over $70,000.00 in attorney’s fees, costs, and pre-judgment interest, making at total award of $570,827.33, plus per diem interest.

 

Robert E. Schumacher



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