The State of Nevada v. United States Department of The Treasury - Internal Revenue Service

MOTION for Partial Summary Judgment Regarding Four Years of Rent for the Remainder

D. Neb.June 12, 2017

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ADAM PAUL LAXALT Attorney General Joe Vadala Special Counsel Bar. No. 5158 Janet Merrill Senior Deputy Attorney General Nevada Bar No. 10736 State of Nevada Office of the Attorney General 3014 West Charleston Boulevard, Suite 150 Las Vegas, Nevada 89102 (702) 730-7300 (telephone) (702) 822-2611 (facsimile) E-Mail: jvadala@ag.nv.gov jmerrill@ag.nv.gov Attorneys for State of Nevada, ex rel. its Department of Transportation UNITED STATES DISTRICT COURT DISTRICT OF NEVADA THE STATE OF NEVADA, on relation of its Department of Transportation, Plaintiff(s), vs. UNITED STATES DEPARTMENT OF THE TREASURY - INTERNAL REVENUE SERVICE; DARRELL E. JACKSON, a married man; THOMAS M. STRAWN, JR., a married man; ANDREW S. LEVY, a married man; DAVIDSON INVESTMENTS LIMITED PARTNERSHIP, a Nevada limited partnership; JOHN W. BOYER, a married man; MICHAEL ALEXANDER, Trustee of the MICHAEL ALEXANDER LIVING TRUST; NEVADA TITLE COMPANY, a Nevada corporation; L. S. ENTERPRISES, INC., a Nevada corporation d/b/a American Commonwealth Mortgage Co.; EAGLEMARK SAVINGS BANK, a Nevada corporation; STATE OF NEVADA, DEPARTMENT OF EMPLOYMENT, TRAINING & REHABILITATION, EMPLOYMENT SECURITY DIVISION; CITY OF LAS VEGAS; CLARK COUNTY, a political subdivision of the State of Nevada; and all other persons unknown claiming any right, Case No.: 2:16-cv-665-APG-GWF PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING FOUR YEARS OF RENT FOR THE REMAINDER Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 1 of 9 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 title, estate, lien or interest in the real property described in the Complaint, Defendant(s). Plaintiff/Counterdefendant STATE OF NEVADA, ex rel. its DEPARTMENT OF TRANSPORTATION (“Plaintiff” or “State”), by and through undersigned counsel, hereby files its Motion for Partial Summary Judgment and respectfully requests the Court grant summary judgment in favor of the State finding that there is no set of facts or any genuine issue of material fact in dispute supporting an award of $265,000 for four years of rent on the Remainder (infra) as alleged by Defendants/Counterclaimants Darrell E. Jackson, Thomas M. Strawn, Jr., and Andrew S. Levy (collectively “Defendant Landowners”). This Motion is made and based upon FED. R. CIV. P. 56, and the Declaration of Dale R. Keller attached hereto as Exhibit 1, the attached Memorandum of Points and Authorities, the exhibits, papers and pleadings on file herein, and any oral argument the Court may entertain should a hearing be set on said Motion. DATED this 12th day of June, 2017. ADAM PAUL LAXALT Attorney General By: /s/ Janet Merrill _ Joe Vadala Special Counsel Nevada Bar No. 5158 Janet L. Merrill Senior Deputy Attorney General Nevada Bar No. 10736 3014 West Charleston Boulevard, Suite 150 Las Vegas, Nevada 89102 Attorneys for Plaintiff State of Nevada ex rel. its Department of Transportation Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 2 of 9 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES A. INTRODUCTION/STATEMENT OF FACTS/ASSERTIONS On February 16, 2016, the State filed its Verified Complaint in Eminent Domain to condemn a portion of the vacant property located at 1404 Martin Luther King Blvd, Las Vegas, NV, and owned by Defendant Landowners (hereinafter the “Subject Property”). See Docket No. 1, at Exhibit A. The State is condemning 12,137 square feet along the eastern edge of Subject Property or approximately 20% of the total square footage (“Fee Simple Take”). Id. In addition, the State is acquiring a four year Temporary Construction Easement of 1,728 square feet or 0.04 acres (Acquisition Number 041.410TE, hereinafter alternatively referred to as “Temporary Construction Easement”). Since filing the Complaint, the State has deposited with the Clerk of Court $167,000 which includes the State’s estimate for just compensation to acquire the Fee Simple ($158,000) and rent for the State’s use and occupancy of the Temporary Construction Easement area ($9,000). See ECF No. 12 and ECF No. 51. The State has never used or otherwise occupied the unencumbered Remainder (approximately 49,297 square feet). See Exhibit 1, Declaration of Dale Keller, Project Neon Project Manager. Defendant Landowners have and continue to own the unencumbered Remainder (both during Project Neon construction and after). In January 2017, the State began utilizing the Fee Simple and Temporary Construction Easement for Project Neon construction purposes. See Exhibit 1. Shortly thereafter, Defendant Landowners disclosed a new expert report authored by Mr. Tio Federico of the The DiFederico Group. See Second Supplemental Report attached hereto as Exhibit 2. In the Second Supplemental Report, Mr. DiFederico opines that Defendant Landowners have a right to $265,000 in “rent” for a four year period (February 2016 to February 20201) for the unencumbered Remainder. The State respectfully asks the Court to reject and dismiss this damage claim as a matter of law for the reasons set forth herein. First and foremost, it is undisputed that the State has not and will not 1 Oddly, Mr. DiFederico’s Second Supplemental Report does not state the date/month that rent begins to allegedly accrue or is due from the State for the unencumbered Remainder. It is unclear whether Mr. DiFederico opines that rent for the unencumbered Remainder should begin to run from February 2016, the date the Complaint was filed, or begin to run in April 2016, the date Immediate Occupancy was granted. Either way the record is devoid of any factual support that access was entirely or permanently blocked for any period of time much less for four full year. There is no evidence that the State began using the Fee Simple and Temporary Construction Easement Area before January 2017. There is no evidence that Defendant Landowners sought access to the unencumbered Remainder between February 2016 and now, much less sought access and were denied. The record demonstrates unencumbered Remainder is vacant land which has not been used for any purpose, either by the State or the Defendant Landowners. Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 3 of 9 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 occupy or otherwise use the unencumbered Remainder. The State is paying to acquire the Fee Simple take and to rent the Temporary Construction Easement. There is no legal or factual basis requiring the State to pay rent on the unencumbered Remainder when the State is not nor has ever used or occupied the unencumbered Remainder. The crux of Mr. DiFederico’s “rent” claim is that the State is completely blocking access to the unencumbered Remainder by using the Fee Simple take and Temporary Construction Easement areas. This alleged factual assertion is unsupported by the record. Assuming it to be true solely for purposes of the instant Motion, summary judgment in favor of the State is warranted because Defendant Landowners never obtained rent from the unencumbered Remainder. Defendant Landowners have recognized and continue to recognize that their best position is to hold the unencumbered Remainder vacant for future development (as set forth in their own expert’s opinion). The record is replete with evidence that Defendant Landowners abandoned their office development project in early 2009 and chose to hold the unencumbered Remainder vacant. The State has not used the unencumbered Remainder. See Exhibit 1. The State has not prohibited its use or access. Id. Defendant Landowners’ “rent” calculation is pure speculation and unrelated to any actual loss. Accordingly, partial summary judgment in favor of the State is warranted. B. LEGAL ARGUMENT 1. It is Undisputed: The State Has Not and Will Not Occupy the Unencumbered Remainder NRS 37.120 sets forth the legal authority upon which a finder of fact may assess or award compensation or damages to a landowner in an eminent domain action. In particular, NRS 37.120 (3) reads: In all actions in eminent domain, the court shall award just compensation to the owner of the property that is being taken. Just compensation is that sum of money necessary to place the property owner in the same position monetarily as if the property had never been taken, excluding any governmental offsets except special benefits. Special benefits may only offset severance damages and may not offset the value for the property. Just compensation for the property taken by the exercise of eminent domain must include, without limitation, interest computed pursuant to NRS 37.175 and reasonable costs and expenses, except attorney’s fees, incurred by the owner of the property that is the subject of the action. Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 4 of 9 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 (emphasis added). In the Initial Expert Report written by Mr. DiFederico (attached hereto as Exhibit 3), Defendant Landowners opine a right to payment from the State of $10,000 in just compensation or rent for the 1,728 square feet of Temporary Construction Easement because the State is taking the area for the State’s use during the time of the Temporary Construction Easement. The State asserts that the just compensation or “rent” for the State using it is $9,000. Adjudication of the proper amount of rent is warranted because the State is using and occupying the 1,728 square feet for construction purposes and so certain monies are due to Defendant Landowners. The same, however, is not true of the unencumbered Remainder area. The State has not and will not occupy the Remainder area. See Declaration of Dale Keller, at Exhibit 1. The Remainder is not encumbered by the State. Id. Importantly, Defendant Landowners do not assert or otherwise evidence that the State is using the unencumbered Remainder for any purposes. Accordingly and as a matter of law, Defendant Landowners have no right to payment for the unencumbered Remainder. 2. Defendant Landowners Never Used the Remainder and Therefore An Award of Four Years of Rent is Unavailable as a Matter of Law Assuming en arguendo, Defendant Landowners are asserting that the State’s use of the 1,728 square feet Temporary Construction Easement has damaged their ability to use the unencumbered Remainder during the construction period, then Defendant Landowners must prove actual, non- speculative damages and that the State caused the damage or rental loss. It is an embedded legal doctrine that a plaintiff may only be awarded damages in actual losses. See e.g. Winchell v. Schiff, 124 Nev. 938, 944-45, 193 P.3d 946, 950 (Nev. 2008) (“the jury’s award of $210,000 must be remitted to reflect Winchell’s actual losses”); Semenza v. Nevada Med. Liability Ins. Co., 104 Nev. 666, 668, 765 P.2d 184, 186 (Nev. 1988) (explaining that a professional malpractice action must be dismissed when a plaintiff has not suffered an actual injury). This holds true in eminent domain actions. As set forth in NRS 37.120(3), an award of “[j]ust compensation is that sum of money necessary to place the property owner in the same position monetarily as if the property had never been taken.” In other words, Defendant Landowners need to prove that the State somehow “took” the Remainder and Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 5 of 9 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 that “but for” the State’s actions they would have obtained rent from the Remainder. Defendant Landowners must evidence that the unencumbered Remainder has been damaged by State action; that they have incurred losses. See Steilacoom Lake Imp. Club Inc. v. Washington State of Dep’t of Nat. Res. WA, 138 F. App’x 929, 934 (9th Cir. 2005) (“SLIC’s inverse condemnation claim fails because inverse condemnation requires the government activity to be the direct or proximate cause of the landowner’s loss.”). Here there are no losses. As evidenced by the State’s prior dispositive motion, the record is devoid of any disputed fact that Defendant Landowners would have obtained rent “but for” the State’s construction project. On February 1, 2017, the State filed a Motion for Partial Summary Judgment relating to Defendant Landowners’ Counterclaim for Pre-Condemnation Damages Relating to Alleged Rental Loss. See ECF No. 69. In that Motion, the State set forth the legal basis to reject and dismiss Defendant Landowners’ claim for rent on the Subject Property between June 2010 and February 2016. Id. On February 23, 2017, Defendant Landowners disclosed the instant Second Supplemental Report which demands rent for the Remainder over the course of four more years from February 2016 to February 2020. For purpose of efficiency and economy, the State incorporates in its entirety the arguments set forth in its Motion filed on February 1, 2017. The evidence disclosed to-date by Defendant Landowners fundamentally and fully contradicts their allegations that Project Neon’s construction caused them to lose any rental income for the unencumbered Remainder. The simple, undisputed fact of the matter is that Defendant Landowners never obtained any rent from the Subject Property or the Remainder. The evidence unequivocally demonstrates that Defendant Landowners abandoned their development concept to build an office building in early 2009. The law does not permit Defendant Landowners to obtain a windfall from the State for nonexistent rent between June 2010 and February 2016. Likewise the law does not permit Defendant Landowners to obtain a windfall from the State for nonexistent rent between February 2016 and February 2020. As such, Defendant Landowners’ claim for phantom lost rents should be dismissed and partial summary judgment in favor of the State granted. /// /// Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 6 of 9 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3. Even if Defendant Landowners Can Proffer Evidence of Some Lost Rent on the Remainder (Which They Cannot), There are No Facts Supporting an Award of Four Years of Rent Not only must damages relate to actual losses, any award or calculation must be reasonably certain; they may not be speculative. Clark Cty. Sch. Dist. v. Richardson Const., Inc., 123 Nev. at 397, 168 P.3d at 97 (Nev. 2007); Shakopee Mdewakanton Sioux Cmty. v. FBCV, LLC, No. 2:10-CV-10 JCM RJJ, 2011 WL 4527177, at *6 (D. Nev. Sept. 26, 2011) (“However, an award of speculative damages is inappropriate.”) (citing to McClaran v. Plastic Industries, Inc., 97 F.3d 347, 361-62 (9th Cir. 1996)); Lee v. Enter. Leasing Co.-W., LLC, 30 F. Supp. 3d 1002, 1019 (D. Nev. 2014) (“As such, the Court has no reasonable basis on which to find or calculate actual damages and any attempt to do so would be improperly speculative.”). Defendant Landowners do not and cannot refute the fact that the State did not even begin using the Temporary Construction Easement until January 2017. See Exhibit 1, Declaration of Dale Keller. Mr. DiFederico’s Second Supplemental Report includes a photo from January 2017 of a certain crane parked within the boundaries of the Temporary Construction Easement, a proper use of the easement. See Exhibit 2, at LEVY 000993. No “use” pictures are provided before January 2017 because the State did not use or occupy the Fee Simple take or Temporary Construction Easement area before then. See Exhibit 1. The State obtained the right to use the Temporary Construction Easement after the Court granted the State’s Motion for Immediate Occupancy on April 4, 2016. Id. However, the State did not begin utilizing the Fee Simple take and Temporary Construction Easement area for construction purposes until on or about January 16, 2017. Id. Accordingly, prior to January 16, 2017, it is undisputed that access to the unencumbered Remainder was available. Id. The record is void of any evidence that access to the unencumbered Remainder was unavailable prior to January 16, 2017. Therefore, Mr. DiFederico’s conclusion that four years of rent to the unencumbered Remainder is due to Defendant Landowners is wholly without any factual support. Any damages must be limited to Defendant Landowners’ proffer of evidence that access was, in fact, blocked and damages accrued to the Remainder as a result. Any other position is wholly speculative, contrary to case law and statute, and must be denied. /// Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 7 of 9 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 C. CONCLUSION The State did not occupy or otherwise use the unencumbered Remainder and so unlike the Temporary Construction Easement area, the State is not required to pay any rent for the unencumbered Remainder. Likewise Defendant Landowners have failed to proffer any evidence that the unencumbered Remainder was actually damaged or sustained any loss by any alleged inability to access it. The law does not permit a damages award when a party is not damaged. Accordingly, partial summary judgment in favor of the State and rejecting the unsupported $265,000 “rent” claim is warranted. DATED this 12th day of June, 2017. ADAM PAUL LAXALT Attorney General By: /s/ Janet Merrill _ Joe Vadala Special Counsel Nevada Bar No. 5158 Janet L. Merrill Senior Deputy Attorney General Nevada Bar No. 10736 3014 West Charleston Boulevard, Suite 150 Las Vegas, Nevada 89102 Attorneys for Plaintiff State of Nevada ex rel. its Department of Transportation Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 8 of 9 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CERTIFICATE OF SERVICE I HEREBY CERTIFY that, on the 12th day of June, 2017 and pursuant to FED. R. CIV. P. 5, I served via CM/ECF and/or deposited for mailing in the U. S. Mail a true and correct copy of the foregoing PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT REGARDING FOUR YEARS OF RENT FOR THE REMAINDER postage prepaid (if necessary) to the following: BRIAN C. PADGETT, ESQ. AMY L. SUGDEN, ESQ. JEREMY B. DUKE, ESQ. Law Offices of Brian C. Padgett 611 South Sixth Street Las Vegas, Nevada 89101 Attorneys for Defendants Alexander, Boyer, Davidson Investments Limited Partnership, Jackson, L.S. Enterprises, Inc., Levy and Strawn DANIEL G. BOGDEN United States Attorney District of Nevada MARK E. WOOLF Assistant United States Attorney 333 Las Vegas Boulevard South, Ste. 5000 Las Vegas, Nevada 89101 Attorneys for United States Department of the Treasury - Internal Revenue Service /s/ L.M. Kapcia _ An employee of the Attorney General’s Office of the State of Nevada Case 2:16-cv-00665-APG-GWF Document 112 Filed 06/12/17 Page 9 of 9 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 1 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 2 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 3 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 4 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 5 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 6 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 7 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 8 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 9 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 10 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 11 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 12 of 13 Case 2:16-cv-00665-APG-GWF Document 112-1 Filed 06/12/17 Page 13 of 13 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 1 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 2 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 3 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 4 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 5 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 6 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 7 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 8 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 9 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 10 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 11 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 12 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 13 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 14 of 15 Case 2:16-cv-00665-APG-GWF Document 112-2 Filed 06/12/17 Page 15 of 15 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 1 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 2 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 3 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 4 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 5 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 6 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 7 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 8 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 9 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 10 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 11 of 12 Case 2:16-cv-00665-APG-GWF Document 112-3 Filed 06/12/17 Page 12 of 12