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Archon Corporation v. Eighth Judicial District Court of State of Nevada

Supreme Court of Nevada

December 21, 2017

ARCHON CORPORATION; PAUL W. LOWDEN; AND SUZANNE LOWDEN, Petitioners,
v.
THE EIGHTH JUDICIAL DISTRICT COURT OF THE STATE OF NEVADA, IN AND FOR THE COUNTY OF CLARK; AND THE HONORABLE JOSEPH HARDY, JR., DISTRICT JUDGE, Respondents, and STEPHEN HABERKORN, AN INDIVIDUAL, Real Party in Interest.

         Original petition for a writ of mandamus or prohibition challenging the denial of a motion to dismiss based on tolling of the statute of limitations. Petition denied.

          Dickinson Wright PLLC and John P. Desmond, Justin J. Bustos, and Kenneth K. Ching, Reno, for Petitioners.

          Sklar Williams PLLC and Stephen R. Hackett and Johnathon Fayeghi, Las Vegas, for Real Party in Interest.

          BEFORE DOUGLAS, GIBBONS and PICKERING, JJ.

          OPINION

          PICKERING, J.

         This original writ proceeding raises the question of when it is appropriate to exercise our discretion to grant extraordinary relief in the form of advisory mandamus. Petitioners ask us to direct the district court to vacate and reconsider its order denying their motion to dismiss, without applying the doctrine of cross-jurisdictional class-action tolling to their statute of limitations defenses. We decline to grant writ relief for three reasons. First, the district court did not consider the statute-based argument petitioners make to this court because petitioners failed to cite the statute until the hearing on their motion to dismiss, after the briefing on their motion had closed. Second, our clarification of the law would not alter the district court's disposition because the district court had alternative grounds for its decision. Finally, the district court denied the motion to dismiss without prejudice. Its decision to defer final decision on petitioners' statute of limitations defenses pending further factual and legal development strikes us as sound and not the proper basis for extraordinary writ relief.

         I.

         Real party in interest Stephen Haberkorn owned exchangeable, redeemable, preferred stock in petitioner Archon Corporation. In 2007, Archon redeemed its preferred stock for $5, 241 per share. The redemption led investors to file three separate lawsuits against Archon in Nevada federal district court. In each, the plaintiffs asserted that Archon had miscalculated the redemption price and should have paid $8.69 per share. Two of the suits, both by institutional investors, were resolved on summary judgment awarding damages based on a redemption price of $8.69 per share. See D.E. Shaw Laminar Portfolios, LLC v. Archon Corp., 755 F.Supp.2d 1122, 1128-29 (D. Nev. 2010), affd, 483 Fed.App'x 358 (9th Cir. 2012). The third suit was a class action in which the named plaintiff, David Rainero, sought contract-based damages on behalf of himself and other preferred stockholders, including Haberkorn, for the correctly calculated redemption price. In 2013, based on the summary judgments won by the institutional investors, the federal district court granted partial summary judgment to Rainero, holding that Archon should have paid all of its preferred shareholders $8.69 per share to redeem their stock.

         Federal courts have limited subject matter jurisdiction. The Rainero complaint laid claim to federal jurisdiction under 28 U.S.C. § 1332(d)(2), which creates federal jurisdiction for certain class action suits provided the amount in controversy exceeds $5 million. See Rainero v. Archon Corp., 844 F.3d 832, 836 (9th Cir. 2016). After losing on liability at partial summary judgment, Archon moved to dismiss the Rainero suit for want of subject matter jurisdiction. Archon argued that the class members owned 1, 439, 270 shares of preferred stock, making the amount in controversy $4, 964, 042, less than the $5 million required for federal jurisdiction by 28 U.S.C. § 1332(d). The federal district court agreed. On September 29, 2014, it granted Archon's motion to dismiss, a ruling the Ninth Circuit affirmed in late 2016. Archon, 844 F.3d at 841.

         Haberkorn filed the complaint underlying this writ petition on February 29, 2016, after the district court's dismissal but before the Ninth Circuit affirmed. Haberkorn's state court complaint overlaps Rainero's federal court complaint in that it includes allegations that Archon shortchanged its preferred stockholders when it calculated the redemption price for their stock in 2007. But Haberkorn's complaint differs from Rainero's in that Haberkorn alleges rights as both a common and preferred stockholder; adds as defendants Paul and Suzanne Lowden, who are Archon's officers, directors, and majority stockholders; alleges that Archon's miscalculation of the redemption price invalidates the redemption, meaning that Haberkorn's ownership rights, including rights to dividends, have continued to accrue; and asserts claims for a variety of alleged wrongs, including breaches of fiduciary duty associated with Archon's allegedly wrongful reverse stock split and the deregistration that followed in 2011, Archon's nondisclosure in 2012 that it had suffered a final judgment declaring it to have miscalculated the 2007 redemption price, and its unequal treatment of certain preferred stockholders. On these bases, suing individually and not on behalf of a class, Haberkorn seeks a declaratory judgment, compensatory and punitive damages, restitution for unjust enrichment, and an accounting.

         Petitioners Archon Corporation and the Lowdens (collectively, Archon) moved to dismiss Haberkorn's complaint under NRCP 12(b)(5). The motion asserted that Haberkorn waited too long to file suit and the statute of limitations had run on all of his claims. Haberkorn countered that the pendency of the class action in federal court tolled the statute of limitations and that, even if it didn't, Archon's ongoing breaches caused ongoing harm, making it improper to dismiss the complaint for failure to state a claim. At oral argument on the motion to dismiss, Archon argued for the first time that NRS 11.500, reprinted infra note 1, supported dismissal.

         The district court denied Archon's motion to dismiss. Its order summarizes its reasons as follows:

(1) general class action tolling applies; (2) under these circumstances, cross jurisdictional tolling also applies; (3) the remaining arguments in favor of, or against, dismissal, would be more appropriately raised in a Motion for Summary Judgment, in particular Defendants' argument that Plaintiff knew or should have known of various public record filings; (4) the Court could not rule on NRS 11.500 at this time, as it was not raised in the briefs; and ...

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