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In re Cay Clubs

Supreme Court of Nevada

December 4, 2014

IN RE: CAY CLUBS.
v.
JDI LOANS, LLC; JDI REALTY, LLC; AND JEFFREY AEDER, Respondents. DAVID B. CLARK; ANN CLARK; DONALD W. GILLIS; NELL C. GILLIS; PETER GILLIS; MARY PISCITELLI; THOMAS TEDESCO; KENNETH B. RITCHEY; DEBRA A. RITCHEY; MICHAEL GIANFORTE; KYLE SMITH; NANCY HELGESON; RAYMOND D. REED, II; BRYAN SOPKO; CHRISTOPHER T. WILSON; JAY JADEJA; KETAN PATEL; RAJESH PATEL; PARESH SHUKLA; ROSANNO DELARA; RANDALL J. GOYETTE; RITA M. GOYETTE; JOHN THOMPSON; MICHAEL ZARI; MICHAEL CROUCH; ALEX ARRIAGA; MARIUS SMOOK; JAMES MCNEIL; SUZAN MCNEIL-TUSSON; LOLITA ALVAREZ; AND DOLORES CERALVO, Appellants, IN THE MATTER OF CAY CLUBS. DAVID B. CLARK; ANN CLARK; DONALD W. GILLIS; NELL C. GILLIS; PETER GILLIS; MARY PISCITELLI; THOMAS TEDESCO; KENNETH B. RITCHEY; DEBRA A. RITCHEY; MICHAEL GIANFORTE; KYLE SMITH; NANCY HELGESON; RAYMOND D. REED, II; BRYAN SOPKO; CHRISTOPHER T. WILSON; JAY JADEJA; KETAN PATEL; RAJESH PATEL; PARESH SHUKLA; ROSANNO DELARA; RANDALL J. GOYETTE; RITA M. GOYETTE; JOHN THOMPSON; MICHAEL ZARI; MICHAEL CROUCH; ALEX ARRIAGA; MARIUS SMOOK; JAMES MCNEIL; SUZAN MCNEIL-TUSSON; LOLITA ALVAREZ; AND DOLORES CERALVO, Appellants,
v.
JDI REALTY, LLC; JDI LOANS, LLC; AND JEFFREY AEDER, Respondents

Page 564

[Copyrighted Material Omitted]

Page 565

Petition for en banc reconsideration of a panel opinion in consolidated appeals from a district court summary judgment certified as final under NRCP 54(b) and an order awarding costs. Eighth Judicial District Court, Clark County; Elizabeth Goff Gonzalez, Judge.

Lemons, Grundy & Eisenberg and Alice Campos Mercado and Robert L. Eisenberg, Reno; Gerard & Associates and Robert B. Gerard and Ricardo R. Ehmann, Las Vegas, for Appellants.

Lionel Sawyer & Collins and Charles H. McCrea, Jr., and Lynda Sue Mabry, Las Vegas, for Respondents.

Morris Law Group and Steve L. Morris, Las Vegas, for Amici Curiae.

Saitta, J. We concur: Gibbons, C.J., Hardesty, J., Parraguirre, J., Douglas, J., Cherry, J.

OPINION

Page 566

BEFORE THE COURT EN BANC.[1]

SAITTA, J.:

On March 6, 2014, a panel of this court issued an opinion examining the partnership-by-estoppel doctrine and affirming in part, reversing in part, and remanding a district court order that determined on summary judgment that the doctrine did not apply. Because this case involves a substantial precedential and public policy issue, we now grant en banc reconsideration to consider an issue that the prior opinion did not directly address: whether the partnership-by-estoppel doctrine must be based on a transaction between the complainant and the purported partnership. NRAP 40A(a). We thus withdraw the March 6 opinion and issue this opinion in its place. After considering the necessity of a transaction and the other aspects of establishing a partnership-by-estoppel claim, we affirm in part, reverse in part, and remand.[2]

After purchasing condominiums at a resort named Las Vegas Cay Club, the appellants (hereinafter the purchasers) filed suit against approximately 40 defendants, including Cay Clubs and respondents Jeffrey Aeder; JDI Loans, LLC; and JDI Realty, LLC. The purchasers alleged that: (1) Cay Clubs ran Las Vegas Cay Club, (2) Cay Clubs inflated the condominiums' value by advertising that it would develop Las Vegas Cay Club into a luxury resort, (3) Cay Clubs' marketing materials represented that it was in a partnership with JDI Loans and JDI Realty (collectively, the JDI entities), and (4) the purchasers bought condominiums and engaged in other transactions on the belief that the purported partnership provided the expertise and resources to execute Las Vegas Cay Club's transformation. They claimed that Cay Clubs and others engaged in actionable wrongdoings while abandoning the plan to improve Las Vegas Cay Club and leaving the purchasers with " worthless property." The purchasers asserted that Aeder and the JDI entities were liable for these actionable wrongdoings under NRS 87.160(1)--a statute that codifies the partnership-by-estoppel doctrine. However, Aeder and the JDI entities prevailed on a motion for summary judgment with respect to their liability under NRS 87.160(1) and the other claims asserted against them.

Provided that other conditions are met, NRS 87.160(1) imposes partnership liability on a party where, with the party's " consent[]," there is a representation that the party is a " partner" and another party has " given credit" to the purported " partnership." In addressing these consolidated appeals, we clarify the meaning and application of NRS 87.160(1).[3] We conclude that the statute may impose partnership liability where there is a representation of a joint venture rather than a partnership, that the consent required for partnership by estoppel may be manifested expressly or may be fairly implied from the liable party's conduct, that the meaning of the statute's phrase " given credit" is not limited to the extension of financial credit, and that the reliance on the representation of a partnership or joint venture must be reasonable. Moreover, the statute may impose partnership liability with respect to any claims that implicate the element of reasonable reliance on which the

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partnership-by-estoppel doctrine is based. In light of these clarifications, we conclude that the district court erred in granting the JDI entities summary judgment as to their liability under NRS 87.160(1).

FACTS AND PROCEDURAL HISTORY

Based on the purchasers' evidence and allegations below, Cay Clubs appears to be a business that developed and sold condominiums at a resort called Las Vegas Cay Club. As indicated in the purchasers' allegations and Aeder's deposition testimony, Aeder created and managed the JDI entities, which extended financial support for the development of Cay Clubs' properties. The purchasers alleged that they entered into purchase agreements for Las Vegas Cay Club condominiums and engaged in related transactions with Flamingo Palms Villas, LLC, which Cay Clubs allegedly created and controlled. According to their allegations and supporting affidavits, the purchasers engaged in these transactions (1) after reviewing marketing materials, which advertised that Las Vegas Cay Club would be improved and developed into a luxury resort and which represented a partnership between Cay Clubs and the JDI entities; and (2) on the belief that the partnership relationship between Cay Clubs and the JDI entities provided the experience and financial wherewithal to develop the advertised luxury resort.

Believing that Cay Clubs disingenuously abandoned the plan to improve Las Vegas Cay Club and fraudulently took the purchasers' money, the purchasers filed suit against approximately 40 defendants, including Cay Clubs, Aeder, and the JDI entities. The claims included, but were not limited to, fraudulent misrepresentation, securities violations, deceptive trade practices, civil conspiracy, and fraudulent conveyances of money. Additionally, the purchasers pleaded that the JDI entities and Aeder were liable under NRS 87.160(1), Nevada's partnership-by-estoppel statute, for the wrongdoings of Cay Clubs.

After answering the complaint, Aeder and the JDI entities filed a motion for summary judgment. They contended that there was an absence of evidence to support the complaint and that the parol evidence rule and the purchase agreements prevented the purchasers from relying on evidence of representations of a partnership. They maintained that NRS 87.160(1) did not apply to the purchasers' tort-based claims because the statute imposed liability only for claims sounding in contract. They also argued that the statute did not apply to any of the claims because it conditioned liability on the extension of financial credit, which was not extended by the purchasers. Moreover, they maintained that NRS 87.160(1) could not be used to impose liability against Aeder and the JDI entities because the purchasers transacted solely with Flamingo Palms Villas and not with the purported partnership between Cay Clubs, Aeder, and the JDI entities on which their partnership-by-estoppel claim was based.

The purchasers opposed the motion. Submitting additional evidence in support of their complaint, they argued that issues of fact remained with respect to Aeder's and the JDI entities' liability, especially with respect to their liability under NRS 87.160(1). We reserve a more detailed discussion of the purchasers' evidence for our analysis of whether genuine issues of material fact remained with respect to Aeder's and the JDI entities' liability under NRS 87.160(1).

After a hearing, the district court granted the motion for summary judgment in favor of the JDI entities and Aeder upon finding that no genuine issues of material fact remained as to their liability for any of the asserted claims, including the partnership-by-estoppel claim under NRS 87.160(1). In so doing, it specifically noted that a " reference to a 'strategic partner'" in the marketing materials was insufficient for partnership by estoppel.

The order granting summary judgment was later certified as final under NRCP 54(b). In addition, the district court awarded costs to the JDI entities and Aeder. These consolidated appeals followed. A panel of this court issued an opinion affirming in part, reversing in part, and remanding a district court order granting summary judgment. After the panel denied the JDI entities' petition

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for rehearing, the JDI entities petitioned for reconsideration.

DISCUSSION

The parties' argument on appeal


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