Reisman Sorokac Proudly Announces New Members

Reisman Sorokac is proud to announce that Jacqueline Walton, Esq., and Robert R. Warns III, Esq., have been named Members of the firm.

Ms. Walton focuses her practice in the areas of real estate, government affairs and corporate matters. She has been practicing in Nevada for 10 years and joined the firm in 2011. Ms. Walton has also been selected to the Mountain States Super Lawyers “Rising Stars” list for four years running, and has been named a “Legal Elite” by Nevada Business Press. She is a 2016 graduate of Las Vegas Metro Chamber of Commerce’s highly-selective “Leadership Las Vegas” program.

Mr. Warns concentrates his practice in state and federal courts, administrative agencies, and private mediations and arbitrations, focusing on complex commercial litigation.  He has been an active trial lawyer in Nevada since 2010, when he joined Reisman Sorokac.  Mr. Warns has been selected to the Mountain States Super Lawyers “Rising Stars” list for four consecutive years, and he has been named a “Legal Elite” by Nevada Business Press.

Is your Business in Order for the New Year?

In the New Year, it is once again time to re-assess your businesses. In assessing the “tidiness” of non-tax business issues in the New Year, the following is a brief list of items to take into consideration: (1) updating any lists of shareholders, members, managers, officers and directors; (2) amending governing documents; (3) examining leases to ensure compliance with renewals and deadlines; (4) preparation of corporate minutes and resolutions to reflect transactions and decisions from the past year; and (5) new operating tax laws that may change how you wish to do business (for 2018, you should consult your tax professional regarding the Tax Cuts and Jobs Act).

Another component of “tidying” your Nevada business is to preserve the “corporate veil.” In general, corporations and limited liability companies offer liability protection to its ownership and/or management through what is known as the “corporate veil.” In general, this means that a creditor cannot pursue the assets of a member or manager of a limited liability company, or a shareholder, director or officer of a corporation for the debts of the entity. However, this “corporate veil” can be pierced, or set aside, by the courts.

Without the corporate veil in place, your business is susceptible to the alter ego doctrine, which is also known as “piercing the corporate veil.” This is a legal doctrine by which courts set aside the corporate protections of a corporation or limited liability company to hold its ownership or management personally liable under certain circumstances.

In order to assess whether a stockholder, member, officer, director or manager acted as an alter ego of an entity, the court examines the following factors: (a) whether the entity is influenced and governed by such stockholder, member, officer, director or manager; (b) whether there is such a unity of interest and ownership that the entity and such stockholder, member, officer, director or manager are inseparable from each other; and (3) whether adherence to the corporate fiction of a separate entity would sanction fraud or promote injustice.

While there is no bright-line test, there are certain practices that a business can adopt, such as keeping separate bank accounts and records for each entity, preventing the commingling of funds and adhering to the governing documents and corporate formalities.

Contact our firm with your Nevada business law needs.

Nevada Business Law Blog

 

 

Jacqueline Walton, Esq. brings you timely and relevant legal topics to consider for your growing business in her quarterly Business Law Blog. She draws on her years of experience representing Nevada business owners in the areas of real estate, government affairs and corporate matters.

2017 Legal Awards Results Are In!

We are pleased to announce Reisman Sorokac is well represented in the 2017 legal awards season.

The 2017 Legal Elite award list published by Nevada Business Press includes Joshua Reisman, Elizabeth Sorokac, Jacqueline Walton and Robert Warns.  Legal Elite includes the top 4 percent of peer-recognized attorneys in the region.

The 2017 annual list of Mountain States Super Lawyers™ once again includes Joshua Reisman, Jacqueline Walton and Robert Warns.

This is Joshua Reisman’s fifth consecutive year being selected to the Super Lawyers list. The Super Lawyers list recognizes no more than five percent of attorneys in each state.

This year marks the fourth consecutive year Jacqueline Walton and Robert Warns were selected to the Super Lawyers’ Rising Stars list.  The Rising Stars list recognizes no more than 2.5 percent of attorneys in each state.

Super Lawyers, part of Thomson Reuters, is a listing of outstanding lawyers from more than 70 practice areas who have attained a high-degree of peer recognition and professional achievement. This selection process includes independent research, peer nominations and peer evaluations.

Join us in congratulating our attorneys on their selections!

Welcome to the “All-or-Nothing” Era in Enforcing Non-compete Agreements

The Nevada Legislature is currently considering legislation that would codify the Nevada Supreme Court’s standards concerning the enforceability of non-compete agreements. In brief, non-compete agreements are now entirely unenforceable if any of their terms are deemed unreasonable.  We explore these standards in our recent article, “Welcome to the ‘All-or Nothing’ Era in Enforcing Non-compete Agreements” recently published in Communiqué, the official publication of the Clark County Bar Association. Read the full article here.

Welcome to the “All-or-Nothing” Era in Enforcing Non-compete Agreements

By Joshua H. Reisman, Esq. and Glenn M. Machado, Esq.

In Golden Road Motor Inn, Inc. v. Islam, 132 Nev. Adv. Op. 49, 376 P.3d 151 (2016), the Supreme Court of Nevada directly addressed the issue of whether Nevada courts can judicially modify an unreasonable non-compete agreement in order to render the agreement enforceable. The majority of the Court, in a four to three en banc decision, concluded where a non-compete provision is unreasonable, “the agreement is wholly unenforceable, as [the Court] do[es] not modify or ‘blue pencil’ contracts.” Id. at 153. The dissent lamented this “draconian all-or-nothing rule [which] invalidates the entire contract if any part of the non-compete agreement is overly broad.” Id. at 164. Golden Road’s holding impacts not only the drafting of future non-compete agreements, but it also raises serious concerns regarding the viability of existing non-compete agreements governing both current and former employees.

While non-compete agreements by their very nature restrain trade, they are permitted to “protect the business and good will of the employer.” Hansen v. Edwards, 83 Nev. 189, 191, 426 P.2d 792, 793 (1967). However, a “restraint of trade is unreasonable, in the absence of statutory authorization or dominant social or economic justification, if it is greater than is required for the protection of the person for whose benefit the restraint is imposed or imposes undue hardship upon the person restricted.” Id. at 191–92, 426 P.2d at 793. In analyzing the reasonableness of non-compete agreements, the Supreme Court of Nevada has focused on three types of restrictions: (1) time; (2) geographic; and (3) future work. See, e.g., Ellis v. McDaniel, 95 Nev. 455, 596 P.2d 222 (1979).

Golden Road involved, in part, the Atlantis Casino Resort Spa’s attempt to enforce a non-compete agreement against a former casino host. The non-compete agreement prohibited the former host from working, in any capacity, for any gaming business within 150 miles of the Atlantis for a period of one year.

The district court found the non-compete agreement to be unreasonable as the 150-mile restriction was deemed unnecessary to protect the Atlantis’ interests and the employment restriction was so broad that the employee could not even work as a custodian in any casino within the restricted area.

The Court, in affirming the district court, rejected Atlantis’ argument that, instead of outright voiding the non-compete agreement, the overbroad provisions should be judicially modified. The Court noted that Nevada law holds that an “unreasonable provision renders the non-compete agreement wholly unenforceable[,]” and explained that the Court has “long refrained from reforming or ‘blue penciling’ private parties’ contracts.” Golden Road, 376 P.3d at 156. The majority gave three policy reasons against modifying or blue penciling non-compete agreements: (1) to avoid trampling the parties’ contractual intent; (2) to preserve judicial resources (by not turning the court into attorneys after the fact); and (3) to disincentivize employers from intentionally drafting unreasonable agreements. See id. at 157-59.

Despite these policy justifications, Golden Road leaves current employers in a precarious position. As to new employees, going forward their non-compete agreements better be perfect. As to current and former employees, the employer may be stuck dealing with an unenforceable agreement.

For purposes of drafting new employee non-compete agreements, while there is “no inflexible formula for deciding the ubiquitous question of reasonableness[,]” (Ellis, 95 Nev. at 458-59, 596 P.2d at 224), Nevada precedent does provide some guidance. For example, the longest time restriction allowed by the Court appears to be two years. See id. at 459-60, 596 P.2d at 225. As to geographic restrictions, they should be limited to the territory in which the business has established customer contacts and good will. See Camco, Inc. v. Baker, 113 Nev. 512, 520, 936 P.2d 829, 834 (1997).

Further, the restriction on future employment must be necessary to protect the employer’s interests. For example, in Ellis, the Court narrowed a total prohibition on practicing medicine as the doctor’s subsequent employment was as an orthopedic specialist, while his former employer solely practiced general medicine. Accordingly, the two practices were not in competition with one another. See Ellis, 95 Nev. at 459, 596 P.2d at 224-25.

It also seems advisable for the non-compete agreement to include a severability clause reflecting the parties’ intent that, should any language be deemed unreasonable, the offensive language should be stricken. Golden Road did not address the issue of whether a severability clause could save an otherwise unenforceable non-compete agreement. Notably, such a clause does assuage the Court’s expressed concern regarding trampling the parties’ contractual intent. Further, at least one other jurisdiction has applied a severability clause to excise offending language from a non-compete agreement. See, e.g., SWAT 24 Shreveport Bossier, Inc. v. Bond, 808 So. 2d 294, 309 (La. 2001). There appears to be no downside to including such a provision, and it has the potential to salvage a non-compete agreement should a court have concerns with any of its terms.

As to current employees presently operating under likely unenforceable non-compete agreements, the agreements should, if possible, be “updated.” Continued at-will employment is sufficient consideration to uphold a non-compete agreement. See Camco, 113 Nev. at 517, 936 P.2d at 832. Thus, the employer can simply insist that the at-will employee’s non-compete agreement be modified to ensure its enforceability. If the employment is for a set term, however, the employer should offer additional monetary consideration to amend the non-compete agreement. Obtaining cooperation from current employees may actually not be very difficult because the amended agreement will likely be less restrictive than the original agreement.

Golden Road’s all-or-nothing rule is especially problematic where an employer needs to enforce a pre-existing, unreasonable non-compete agreement against a competing former employee. Golden Road leaves the employer little in the way of argument in favor of enforcement, including: (1) if applicable, a severability clause that might allow the agreement to be edited; (2) if the offending term is ambiguous, it might be open to reformation (with the caveat that ambiguous terms are usually construed against the drafter); and, arguably, (3) Golden Road should not be applied retroactively to preclude the blue penciling of non-compete agreements that predated the decision.

The last option is admittedly a “Hail Mary” argument, but support for the argument is found within the Golden Road opinion. A judicial decision potentially applies prospectively if it establishes a new principle in law—either by overruling clear past precedent on which litigants may have relied or by deciding an issue of first impression whose resolution was not clearly foreshadowed. In this regard, the dissent in Golden Road noted that the Court had previously engaged in judicially modifying preliminary injunctions (enforcing non-compete agreements) to make restrictions on the employee reasonable. See 376 P.3d at 165. And, even the majority approvingly cited a treatise that suggested that courts in Nevada had the discretion to modify or blue pencil the terms in a non-compete agreement. See id. at 159 n. 10. Accordingly, it can be argued that Golden Road decided an issue of first impression whose resolution was not clearly foreshadowed. This argument presents an uphill battle, however, as the majority emphasized that it has “long refrained from reforming or ‘blue penciling’ private parties’ contracts”—indicating that the Court was not establishing any new principle in law. Id. at 156.

Joshua H. Reisman, Esq. is a member and founder of Reisman Sorokac. He concentrates his practice in state and federal courts, administrative agencies, and private mediations and arbitrations, focusing on complex commercial litigation. He manages the firm’s litigation efforts from inception through trial, post-judgment, and appeal.

Glenn M. Machado, Esq. concentrates his practice in the areas of commercial litigation and professional responsibility. For over ten years, Mr. Machado was an Assistant Bar Counsel for the State Bar of Nevada, where he handled all aspects of the attorney-discipline process and wrote numerous articles for Nevada Lawyer.

This article was originally published in the in Communiqué, the official publication of the Clark County Bar Association. (March 2017).”  Please include a hyperlink back to your article to the issue page at https://www.clarkcountybar.org/communique/march-2017/.

InjuryLoans.com Files Lawsuit Against the Nevada Financial Institutions Division

InjuryLoans.com, a Las Vegas based company, filed a lawsuit against the Nevada Financial Institutions Division after a change of position of the agency’s licensing requirements. The lawsuit states, “The FID’s inconsistent and unreasonable interpretation and application of NRS licensing requirements … have worked to decimate Injuryloans’ cashflow, exacerbate Injuryloans’ liabilities, and suffocate Injuryloans’ business, business opportunities and potential for growth.” Please read the Las Vegas Review Journal article here.

Joshua H. Reisman Appears as Legal Analyst on Fox News Program

Mr. Reisman appeared as a legal analyst on the Fox News program “Bob Massi is the Property Man,” discussing the Las Vegas real estate market. Watch the video here.

Court Rules Nype Due $2.6 Million in Development Case

“Following an eight-year legal battle, an investment consultant who played a key role in the development of Las Vegas City Hall and Bonneville Transit Terminal was won a $2.6 million judgment against Las Vegas Land Partners, LLC….Joshua Reisman, Nype’s trail counsel, estimated that, due to seven years of pre-judgment interest, the judgment in Nype’s favor will amount to approximately $3.6 million.” (Business Press P3, April 20, 2015) Please see the full article here.

Elizabeth M. Sorokac Attends Celebration of Nevada’s 150th Anniversary of Statehood

On Friday, May 1, 2015, a time capsule was buried by Gov. Brian Sandoval and former Lt. Gov. Brian Krolicki at the Springs Preserve. Elizabeth Sorokac, a member of the Springs Preserve Foundation Board of Trustees, attended the burial in celebration of Nevada’s 150th Anniversary of Statehood. Please see the article here.