1 2 UNITED STATES DISTRICT COURT 3 DISTRICT OF NEVADA 4
5 MARY JANE BEAUREGARD and JOHN Case No. 2:20-cv-02123-KJD-DJA HUGH SMITH, 6 ORDER – Findings of Fact and Plaintiffs, Conclusions of Law 7 v. 8 CLAYTON SAMPSON, et al., 9 Defendants. 10 11 Presently before the Court is the matter of Beauregard v. Sampson. This Court conducted a 12 three-day bench trial on this matter beginning on January 2nd, 2024. 13 Considering the evidence adduced at trial, the Court makes the following findings and 14 conclusions. Any and all findings of fact set forth herein shall constitute findings of fact even if 15 stated as conclusions of law, and any and all conclusions of law set forth herein constitute 16 conclusions of law even if stated as findings of fact. 17 Consistent with those findings, the Court hereby rules in favor of Mary Jane Beauregard and 18 John Hugh Smith (“Plaintiffs”)1 on all but one claim, and it adopts Plaintiffs’ proposed findings 19 of fact and conclusions of law insofar as they appear below. 20 I. Findings of Fact 21 1. In December 2018, Clayton Sampson had several conversations with Matthew “Eddie” 22 Freeman (“Freeman”) and Plaintiffs concerning their potential involvement in a new MLM 23 business venture to be called “EnvyTV.” 24 2. On or about December 13, 2018, Clayton Sampson, in a phone call, told Beauregard and 25 Freeman that if they invested $100,000 in the new venture Plaintiffs and Freeman would in 26 exchange each receive a 1% ownership interest in EnvyTV, LLC. 27
28 1 Mary Jane Beauregard and John Hugh Smith are and, at all times hereinafter, were husband and wife. 1 3. Clayton Sampson sent two emails to Plaintiffs and Freeman on December 13, 2018, in which 2 he stated that he is writing to “confirm our agreement as we move forward with EnvyTV.” 3 4. In addition to the 2% ownership interest in EnvyTV, Clayton Sampson represented to 4 Beauregard, Smith, and Freeman that they would receive master Affiliate positions in the 5 EnvyTV Affiliate multilevel hierarchy. 6 5. Clayton Sampson further promised Plaintiffs and Freeman that their EnvyTV Affiliate 7 positions would be “grandfathered,” meaning that Plaintiffs and Freeman did not have to 8 comply with requirements of the EnvyTV Affiliate Compensation Plan. 9 6. To further induce Plaintiffs to make their investment, Clayton Sampson promised Plaintiffs 10 that they would have the opportunity to participate in the Sampsons’ future business 11 endeavors. 12 7. To further induce Plaintiffs to make their investment, Clayton and Elisha Sampson concealed 13 from Plaintiffs that the Sampsons were struggling financially at the time they were seeking to 14 form EnvyTV. 15 8. To further induce Plaintiffs to make their investment, Clayton and Elisha Sampson concealed 16 from Plaintiffs that Clayton Sampson planned to file a petition for bankruptcy relief on 17 December 14, 2018. 18 9. In reliance upon the Sampsons’ representations and omissions, on December 14, 2018, 19 Plaintiffs wire transferred $100,000 to Clayton Sampson’s bank account. 20 10. On December 14, 2018, Clayton Sampson filed a petition for bankruptcy relief in California. 21 11. Clayton and Elisha Sampson did not invest any of their own money into EnvyTV. 22 12. Plaintiffs would not have invested $100,000 in EnvyTV had they known about Clayton 23 Sampson’s intention to file for bankruptcy. 24 13. Plaintiffs would not have invested $100,000 in EnvyTV had they known that Clayton 25 Sampson did not invest any of his own money into EnvyTV. 26 14. EnvyTV is a network marketing, or multi-level marketing (MLM) company that sells video 27 streaming services through independent sales representatives called “Affiliates.” 28 15. EnvyTV, LLC is a Nevada limited liability company and Clayton and Elisha Sampson are 1 co-managers. 2 16. At all relevant times, Clayton and Elisha Sampson were solely in control of the business and 3 corporate governance of EnvyTV and they had sole possession of EnvyTV’s bank accounts 4 and financial records. 5 17. At the inception of EnvyTV, LLC, Plaintiffs and Freeman were placed at the three master 6 EnvyTV Affiliate positions immediately below the positions held by Clayton Sampson and 7 Elisha Sampson. 8 18. There were a total of five master Affiliate positions in the EnvyTV Affiliate hierarchy as 9 follows: 10 Affiliate Position 100000 Clayton Sampson/EnvyTV 11 Affiliate Position 100006 Elisha Sampson 12 Affiliate Position 100007 John Smith 13 Affiliate Position 100008 Mary Jane Beauregard 14 Affiliate Position 100012 Eddie Freeman 15 19. Because Plaintiffs’ EnvyTV Affiliate positions were “grandfathered,” these positions were 16 not required to meet sales thresholds or other requirements that apply to other EnvyTV 17 Affiliate positions. 18 20. Elisha Sampson’s Affiliate position was also grandfathered, and she earned commissions 19 despite never enrolling any Affiliates or making any sales of EnvyTV’s services. 20 21. Plaintiffs’ EnvyTV Affiliate positions, regardless of whether they were “grandfathered,” met 21 the sales thresholds and other requirements set forth in the EnvyTV Affiliate Compensation 22 Plan. 23 22. Following their placement as EnvyTV Affiliates, Plaintiffs were instrumental in building a 24 substantial Affiliate network from which EnvyTV significantly benefited. 25 23. Clayton Sampson and Elisha Sampson never presented Plaintiffs with any documentation 26 evidencing their 1% ownership interest in EnvyTV, nor have they shared any profits of 27 EnvyTV with the Plaintiffs. 28 24. In an email to John Smith in March 2019, Clayton Sampson referred to John Smith as “a 1 minority owner (1%) in [EnvyTV].” 2 25. Several months following Plaintiffs’ investment in EnvyTV, Clayton Sampson became 3 unhappy with Plaintiffs because he did not like the manner in which they were building their 4 EnvyTV Affiliate positions. 5 26. Clayton Sampson and Elisha Sampson did not enroll any EnvyTV Affiliates. 6 27. Clayton Sampson and Elisha Sampson did not sell EnvyTV streaming services to any 7 customers. 8 28. Without any basis, Clayton Sampson placed Plaintiffs’ Affiliate positions on a 30- day 9 suspension in April 2019. 10 29. The EnvyTV Affiliate Agreement governs the relationship between EnvyTV and its 11 Affiliates. The Affiliate Agreement allows a prevailing party in a dispute to recover 12 attorney’s fees. 13 30. Clayton Sampson did not have any contractual right, under the EnvyTV Affiliate Agreement 14 or otherwise, to make changes to Plaintiffs’ Affiliate positions “at any time.” 15 31. Clayton Sampson unilaterally changed the earnings rank for the Affiliate positions held by 16 Plaintiffs based on subjective requirements that were never discussed or agreed to at the time 17 the positions were created. 18 32. Clayton Sampson manually demoted Plaintiffs’ Affiliate positions to a lower earning level 19 (or rank) in the EnvyTV Compensation Plan. 20 33. Clayton Sampson manually changed the earnings rank for Plaintiffs’ EnvyTV Affiliate 21 positions multiple times. 22 34. On or about February 22, 2020, Plaintiffs stopped receiving Affiliate commission payments 23 from EnvyTV. 24 35. Plaintiffs did not resign or otherwise terminate their Affiliate positions. 25 36. Clayton Sampson, acting on behalf of EnvyTV, unilaterally terminated the Plaintiffs’ 26 Affiliate positions. 27 37. The records generated by Multisoft2 show that the earnings rank for Smith’s Affiliate
28 2 Multisoft is specialized MLM software designed for calculating commissions owed to each distributor. During the trial, records generated by the software were used to determine the commissions received by 1 position was changed more than forty times between January 2019 and February 2020. 2 38. The earnings for Plaintiffs’ Affiliate positions decreased when the earnings rank for 3 Plaintiffs’ Affiliate positions was demoted or decreased. 4 39. Clayton Sampson’s unilateral changes to the earnings rank (or level) of the Plaintiffs’ 5 EnvyTV Affiliate positions impacted the amount of commissions paid to the Plaintiffs. 6 40. The earnings for Clayton and Elisha Sampson’s Affiliate positions increased when the 7 earnings rank for Plaintiffs’ Affiliate positions were demoted or decreased. 8 41. The commissions that were previously paid to Plaintiffs’ Affiliate positions (Affiliate 9 Positions 100007 and 100008), were paid to the positions held by Elisha Sampson (Affiliate 10 Position 100006) and Clayton Sampson/EnvyTV (Affiliate Position 100000) after Plaintiffs’ 11 positions were deactivated. 12 42. Clayton Sampson unilaterally and arbitrary terminated Plaintiffs’ EnvyTV affiliate positions. 13 43. The EnvyTV Affiliate Agreement requires written notice to Affiliates of any disciplinary 14 action, suspension, or termination. 15 44. Plaintiffs did not receive any notice or communication from Clayton Sampson or Elisha 16 Sampson or EnvyTV informing them that their Affiliate positions were being involuntarily 17 terminated. 18 45. Plaintiffs’ Affiliate hierarchy continued to grow following the termination of Plaintiffs’ 19 Affiliate positions. 20 46. Commissions continued to be generated by Plaintiffs’ EnvyTV Affiliate positions following 21 the termination of Plaintiffs as EnvyTV Affiliates. 22 47. Clayton Sampson and Elisha Sampson have never shared EnvyTV profits with the Plaintiffs. 23 48. Clayton Sampson and Elisha Sampson have launched various other Envy-related business 24 ventures, including EnvySolutions, EnvyCares, EnvyConnect, EnvySocial, and an online 25 Envy crypto currency business. 26 49. EnvySolutions and EnvyCares sell products and services through Affiliates similar to 27 EnvyTV. 28 Plaintiffs. 1 50. The EnvySolutions Affiliate compensation plan is substantially similar to EnvyTV’s Affiliate 2 compensation plan. 3 51. The video streaming service previously operated as EnvyTV is now operated by the 4 Sampsons as “TCC Media Player.” 5 52. Clayton Sampson and Elisha Sampson never gave Plaintiffs an opportunity to participate in 6 their other Envy-related business ventures as promised. 7 53. Clayton Sampson and Elisha Sampson have generated profits and revenues through the other 8 Envy-related business ventures since January 1, 2019. 9 54. Clayton Sampson and Elisha Sampson have not produced documents showing their earnings 10 generated from their other Envy-related business ventures. 11 55. Subsequent to forming EnvyTV, Clayton Sampson published one or more posts on social 12 media claiming to have millions of dollars from his Envy-related companies. 13 56. Subsequent to forming EnvyTV, Clayton Sampson published a post on social media claiming 14 to be a billionaire. 15 57. Clayton Sampson and Elisha Sampson have never shared with Plaintiffs any profits 16 generated from their other Envy-related business ventures. 17 58. Plaintiffs expected to share in the profits of EnvyTV, LLC and the Sampson’s other business 18 ventures when they invested $100,000. 19 59. Despite claiming that Plaintiffs never acquired an ownership interest in EnvyTV, Defendants 20 have not returned to Plaintiffs their $100,000 investment in EnvyTV. 21 60. Eddie Freeman assigned to Plaintiffs all of his claims related to his 1% interest in EnvyTV, 22 LLC. 23 61. Plaintiffs have suffered lost EnvyTV Affiliate commissions based upon Clayton Sampson’s 24 unilateral demotions of Plaintiffs’ Affiliate rank. 25 62. Between the date Plaintiffs’ Affiliate positions were terminated (February 2020) through July 26 10, 2021, Beauregard and Smith’s former EnvyTV Affiliate positions generated commissions 27 of $50,692 and $51,340, respectively. At this earnings level, the two positions would have 28 earned a combined total of $121,380 in commissions (“Past Commissions”) from the date of 1 termination (February 2020) through October 11, 2021. 2 63. The income stream from a multi-level marketing position can last over a period of years. It is 3 not uncommon for a MLM position to generate earnings for more than ten (10) years. 4 64. Plaintiffs have estimated the future earnings of their EnvyTV Affiliate positions over a 5 seven-year period from October 12, 2021, forward at the same earnings level used in 6 calculating their Past Commissions (i.e., assuming no growth). Using a discount rate of nine 7 percent (9%), the present value of the commissions generated from Plaintiffs’ EnvyTV 8 Affiliate positions over a seven-year period is $389,132 (“Future Commissions”). 9 65. Because the Sampsons’ terminated Eddie Freeman’s Affiliate Position, Plaintiffs’ Future 10 Commissions would likely be more than $389,132 because commissions generated by 11 Freeman’s Affiliate position would have rolled-up to Plaintiffs’ Affiliate positions. If 12 commissions from Freeman’s Affiliate position are included, the present value of Plaintiffs’ 13 Future Commissions would be $452,000. 14 66. Plaintiffs have suffered damages related to their percentage of ownership or lost opportunity 15 to participate in the Sampsons’ other business ventures. Defendants have not produced 16 documents that show the profits generated from their other business ventures. 17 67. Plaintiffs have incurred attorney’s fees in prosecuting their claims. 18 68. Plaintiffs have incurred court costs and expenses in prosecuting this lawsuit. 19 II. Conclusions of Law 20 1. The court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a) because the parties 21 are completely diverse and the amount in controversy exceeds $75,000 exclusive of interest 22 and costs. 23 a. Breach of Contract 24 1. Plaintiffs seek to hold Defendant EnvyTV liable for breach of contract on two separate 25 contracts. 26 2. Under Nevada law, the plaintiff in a breach of contract action must show (1) the existence of 27 a valid contract, (2) a breach by the defendant, and (3) damage as a result of the breach. 28 Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892, 899 (9th Cir. 2013). 1 3. First, the Court concludes that a valid and enforceable contract (hereinafter “email contract”) 2 was formed, between Plaintiffs and EnvyTV, when Plaintiffs wire transferred $100,000 to 3 Clayton Sampson’s bank account, based on Defendant Clayton Sampson's December 13, 4 2018, email. 5 4. Second, the Court concludes that the Affiliate Agreement, between Plaintiff John Smith and 6 EnvyTV, is a valid and enforceable contract. 3 7 5. Both contracts are enforceable as written under Nevada law and must be interpreted and 8 applied according to their plain and unambiguous terms. See Ellison v. California State Auto. 9 Ass'n, 797 P.2d 975, 977 (Nev. 1990). 10 6. The terms of the email contract make clear that Plaintiffs Mary Jane Beauregard and Eddie 11 Freeman would each receive a 1% ownership interest in EnvyTV for a total of $100,000, 12 John Smith would receive a 5th level Affiliate position in EnvyTV, Eddie Freeman would 13 receive a 4th level Affiliate position in EnvyTV, and Ditto would receive a 6th level affiliate 14 position in EnvyTV.4 15 7. The Court concludes that Defendant EnvyTV breached the terms of the email contract when it 16 terminated Plaintiffs’ Affiliate positions in February 2020 without notice. 17 8. As Plaintiffs’ $100,000 investment was never returned to them, the Court concludes that 18 Plaintiffs suffered monetary damages as a result of EnvyTV’s breach. 19 9. The terms of the Affiliate Agreement clearly state that when the decision is made to terminate 20 an affiliate, EnvyTV will inform the affiliate, in writing, of their termination.5
21 3 At trial, it was never fully established whether Plaintiff Mary Jane Beauregard signed an Affiliate Agreement; however, based on Defendant Clayton Sampson’s assertions at trial, everyone in EnvyTV 22 must have an Affiliate Agreement to be paid. In addition, Clayton Sampson repeatedly tried to contradict the terms of the email contract by introducing terms from the Affiliate Agreement. The Court infers this 23 as Clayton Sampson’s belief that the Affiliate Agreement is binding on Plaintiff Mary Jane Beauregard. 24 4 During trial, there was confusion surrounding who owned Ditto’s 6th level affiliate position. John Smith believed it was owned by himself and Eddie Freeman. However, by the end of trial it was uncontested 25 that Mary Jane Beauregard was receiving commissions from the position. 26 5 At trial, the Affiliate Agreement was offered into evidence, with neither party contesting the document’s authenticity. However, the quality of the exhibit makes it impossible to read the last part of the sentence 27 relating to notice of termination. The exact language is as follows: “When the decision is made to terminate Affiliate, Company will inform the Affiliate in writing at the address in the Affiliate’s file that 28 the (unreadable).” Based on trial testimony, the Court believes the unreadable language to be “termination has occurred.” 1 10. At trial, Defendant Clayton Sampson admitted to failing to inform Plaintiffs that their Affiliate 2 positions were terminated. 3 11. The Court concludes that Defendant EnvyTV breached the terms of the Affiliate Agreement 4 when it terminated Plaintiffs’ Affiliate positions in February 2020 without notice. 5 12. As Plaintiffs stopped receiving commissions after their positions were terminated without 6 notice, the Court finds that Plaintiffs suffered monetary damages as a result of Defendant 7 EnvyTV’s breach. 8 13. The Court finds that judgment is appropriate for Plaintiffs, against Defendant EnvyTV, on their 9 breach of contract claim. 10 b. Fraudulent Misrepresentation 11 1. Under Nevada Law, Plaintiffs have the burden of proving each and every element of their 12 fraudulent misrepresentation claim by clear and convincing evidence: (1) a false 13 representation made by Defendants; (2) Defendants’ knowledge or belief that its 14 representation was false or that Defendants have an insufficient basis of information for 15 making the representation; (3) Defendants intended to induce Plaintiffs to act or refrain from 16 acting upon the misrepresentation; and (4) damage to Plaintiffs as a result of relying on the 17 misrepresentation. Barmettler v. Reno Air, Inc., 956 P.2d 1382, 1386 (Nev. 1998). 18 2. The evidence shows that Defendant Clayton Sampson made one or more false 19 representations to Plaintiffs with the knowledge and belief that the representation was false. 20 Specifically, although Plaintiffs were told that they would receive a 5th and 6th level Affiliate 21 position in EnvyTV, Defendant Clayton Sampson was under the belief that he could 22 unilaterally change the earnings rank for these positions at any time. 23 3. Defendant Clayton Sampson’s representation was made as part of a contract between 24 Defendant EnvyTV and Plaintiffs. Thus, the Court concludes that the representation was 25 made with the intent to induce Plaintiffs to pay Defendants $100,000. 26 4. Because Defendant Clayton Sampson unilaterally terminated Plaintiffs’ EnvyTV Affiliate 27 position without notice and never returned their $100,000 investment, the Court concludes 28 that Plaintiffs suffered monetary damages as a result of relying on Defendant Clayton 1 Sampson’s misrepresentation. 2 5. The Court finds that judgment is appropriate for Plaintiffs, against Defendant Clayton 3 Sampson, on their fraudulent misrepresentation claim. 4 c. Fraud by Non-Disclosure (NRS 90.570) 5 1. Pursuant to Section 90.570(2) of the Nevada Revised Statutes, in connection with the offer to 6 sell, sale, offer to purchase or purchase of a security, a person shall not, directly or indirectly, 7 make an untrue statement of a material fact or omit to state a material fact necessary in order 8 to make the statements made not misleading in the light of the circumstances under which 9 they are made. Hable v. Godenzi, No. 2:22-CV-02012-GMN-BNW, 2023 WL 8653185, at 10 *8 (D. Nev. Dec. 12, 2023); Nev. Rev. Stat. § 90.570. 11 2. As defined in Section 90.295 of the Nevada Revised Statutes, a “security” can mean 12 participation in a profit-sharing agreement, a limited partnership interest, an interest in a 13 limited-liability company, or investment contract. Nev. Rev. Stat. § 90.295. 14 3. The Court finds that the contract between the parties falls within the statutory definition of a 15 “security.” See Nev. Rev. Stat. § 90.295. 16 4. The Court finds that Defendant Clayton Sampson directly omitted to Plaintiffs the material 17 fact that he could change the earnings rank for their positions at any time. By omitting this 18 fact, Defendant Clayton Sampson made the terms of the contract misleading in light of the 19 circumstances under which they were made—that Plaintiffs would receive 5th and 6th level 20 Affiliate positions in EnvyTV. 21 5. The Court finds that judgment is appropriate for Plaintiffs, against Defendant Clayton 22 Sampson, on their NRS 90.570 (fraud by non-disclosure) claim. 23 d. Breach of Fiduciary Duty and Conspiracy 24 1. Plaintiffs seek to hold Defendants liable for breach of fiduciary duty and conspiracy. 25 2. A claim for breach of fiduciary duty customarily has three elements: (1) existence of a 26 fiduciary duty, (2) breach of the duty, and (3) damages as a result of the breach. Guzman v. 27 Johnson, 483 P.3d 531, 538 (Nev. 2021). 28 3. It is generally recognized that joint venturers owe to one another fiduciary duties. Leavitt v. 1 Leisure Sports Incorporation, 734 P.2d 1221, 1224 (Nev. 1987). 2 4. A joint venture is a contractual relationship in the nature of an informal partnership wherein 3 two or more persons conduct some business enterprise, agreeing to share jointly, or in 4 proportion to capital contributed, in profits and losses. Radaker v. Scott, 855 P.2d 1037, 1040 5 (Nev. 1993). 6 5. Although the terms of the email contract make clear that Plaintiffs would receive an 7 ownership share in EnvyTV, the contract is silent as to whether Plaintiffs would jointly share 8 in any losses EnvyTV accrued; and the Affiliate Agreement is also silent as to whether 9 Plaintiffs agreed to share in any losses. Furthermore, no evidence was produced at trial that 10 Plaintiffs did in fact agree to share in any losses. 11 6. The Court concludes that because no joint venture existed, Defendants owed no fiduciary 12 duties to Plaintiffs. 13 7. In Nevada, an actionable civil conspiracy consists of a combination of two or more persons 14 who, by some concerted action, intend to accomplish an unlawful objective for the purpose of 15 harming another, and damage results from the act or acts. Consol. Generator-Nevada, Inc. v. 16 Cummins Engine Co., 971 P.2d 1251, 1256 (Nev. 1998) (quotations omitted). Direct evidence 17 is not required to establish a conspiracy, but circumstantial evidence may be relied upon. 18 Sheriff, Humboldt Cnty. v. Lang, 763 P.2d 56, 59 (Nev. 1988) (quotations omitted). 19 8. At trial, Plaintiffs failed to offer any evidence that Defendants Clayton and Elisha Sampson 20 acted in concert with one another with the intent to defraud Plaintiffs. Although Defendants 21 were co-managers of EnvyTV, the facts adduced at trial show that Elisha Sampson was 22 mostly unaware of Clayton Sampson’s business activities. Clayton Sampson testified that all 23 company decisions are made by him and that only he can terminate or demote an Affiliate 24 position. As the record stands, Plaintiffs have no evidence to support their claim of 25 conspiracy. 26 9. The Court finds that judgment is appropriate for Defendants on Plaintiffs’ breach of fiduciary 27 duty and conspiracy claim. 28 1 e. Suit Against Control Persons and Aider Under Nevada Securities Act (NRS 2 90.660(4)) 3 1. Pursuant to NRS 90.660(4), Plaintiffs seek to hold Defendant Elisha Sampson jointly and 4 severally liable for Defendant Clayton Sampson’s securities fraud. 5 2. Under Section 90.660(4) of the Nevada Revised Statutes, a person who directly or indirectly 6 controls another person who is liable under NRS 90.570, a partner, officer or director of the 7 person liable, a person occupying a similar status or performing similar functions, any agent 8 of the person liable, an employee of the person liable if the employee materially aids in the 9 act, omission or transaction constituting the violation . . . are also liable jointly and severally 10 with and to the same extent as the other person, but it is a defense that the person did not 11 know, and in the exercise of reasonable care could not have known, of the existence of the 12 facts by which the liability is alleged to exist. Nev. Rev. Stat. § 90.660(4). 13 3. Evidence produced at trial fully established that Clayton Sampson and Elisha Sampson are 14 the co-owners and co-managers of EnvyTV. 15 4. As Clayton Sampson is individually liable for securities fraud under NRS 90.570, Elisha 16 Sampson, being a person occupying a similar status as Clayton Sampson—a co-owner and 17 co-manager of EnvyTV—is also liable for securities fraud. See Nev. Rev. Stat. § 90.660(4). 18 5. The Court finds that judgment is appropriate for Plaintiffs, against Defendant Elisha 19 Sampson, on their NRS 90.570 (fraud by non-disclosure) claim. 20 f. Recission Under Nevada Uniform Securities Act (NRS 90.660(1)(d)) 21 1. Plaintiffs seek statutory rescission of the email contract. 22 2. Rescission is an equitable remedy which totally abrogates a contract and which seeks to place 23 the parties in the position they occupied prior to executing the contract. Bergstrom v. Est. of 24 DeVoe, 854 P.2d 860, 861 (Nev. 1993). 25 3. The purpose of this is to prevent harm to the defendant; the defendant should not by 26 rescission sacrifice the benefits of the agreement and at the same time not be restored the 27 benefits he previously conferred upon the plaintiff. Id. 28 4. The Court finds that, while rescission is a valid form of relief, it would not fully compensate 1 Plaintiffs for their monetary damages. Therefore, the Court determines that rescission is not 2 warranted under the facts presented. 3 g. Piercing the Corporate Veil/Alter Ego 4 1. Plaintiffs seek to hold Defendants Elisha and Clayton Sampson liable for the acts of 5 Defendant EnvyTV. 6 2. In Nevada, the elements for finding an alter ego are: (1) the corporation must be influenced 7 and governed by the person asserted to be the alter ego; (2) there must be such unity of 8 interest and ownership that one is inseparable from the other; (3) the facts must be such that 9 adherence to the corporate fiction of a separate entity would, under the circumstances, 10 sanction a fraud or promote injustice. LFC Mktg. Grp., Inc. v. Loomis, 8 P.3d 841, 846-47 11 (Nev. 2000). 12 3. As Defendant Clayton Sampson testified that all company actions are made by him, it is 13 undisputed that he influences and governs EnvyTV. Although not to the same degree as 14 Defendant Clayton Sampson, Elisha Sampson also influences and governs EnvyTV. Elisha 15 Sampson is EnvyTV’s bookkeeper and manages the company’s finances and bank accounts. 16 4. At trial, Plaintiffs produced the 2019 K-1s for Clayton Sampson and Elisha Sampson, 17 conclusively proving that they own a portion of EnvyTV. Furthermore, Clayton Sampson and 18 Elisha Sampson both testified that they are owners of EnvyTV. Defendants’ ownership of 19 corporate shares is a strong factor favoring unity of ownership and interest. See id. at 847. 20 5. Here, Defendants completely abused the corporate form by using corporate funds for their 21 individual obligations. Money from EnvyTV was used to make payments on Defendants’ car 22 loans and home mortgage, cover expenses such as dry cleaning and food, and purchase a 23 boat. Adhering to the corporate fiction of EnvyTV as a separate legal entity would promote 24 injustice.6 25 6. The Court concludes that EnvyTV is the alter ego of Defendants Clayton Sampson and 26 Elisha Sampson, and therefore, are jointly and severally liable for the acts of Defendant 27 EnvyTV. Specifically, Defendant EnvyTV’s breach of contract.
28 6 The corporate bank records of the income and expenditures are in evidence; however, Plaintiffs have not provided the Court with a summary total of corporate funds used for personal expenses. 1 h. Breach of Implied Covenant of Good Faith and Fair Dealing 2 1. Plaintiffs seek to hold Defendants liable for breaching the implied covenant of good faith and 3 fair dealing. 4 2. An implied covenant of good faith and fair dealing is recognized in every contract under 5 Nevada law. Pemberton v. Farmers Ins. Exchange, 858 P.2d 380, 382 (Nev. 1993). Where 6 the terms of a contract are literally complied with but one party to the contract deliberately 7 countervenes the intention and spirit of the contract, that party can incur liability for breach 8 of the implied covenant of good faith and fair dealing. Hilton Hotels Corp. v. Butch Lewis 9 Prods., Inc., 808 P.2d 919, 922–23 (Nev. 1991). 10 3. As stated previously, Defendant EnvyTV breached the terms of the email contract and 11 Affiliate Agreement when it terminated Plaintiffs’ Affiliate positions in February 2020 12 without notice. 13 4. The Court finds that Defendant EnvyTV’s actions constitute a breach of the implied covenant 14 of good faith and fair dealing. Furthermore, as Defendant EnvyTV is the alter ego of 15 Defendants Clayton and Elisha Sampson, they are also liable for breaching the implied 16 covenant of good faith and fair dealing. 17 5. The Court finds that judgment is appropriate for Plaintiffs, against Defendants, on their 18 breach of implied covenant of good faith and fair dealing claim. 19 i. Exemplary Damages (NRS 42.005) 20 1. Plaintiffs seek to recover punitive damages from Defendants Clayton and Elisha Sampson 21 pursuant to NRS 42.005. 22 2. Except as otherwise provided in NRS 42.007, in an action for the breach of an obligation not 23 arising from contract, where it is proven by clear and convincing evidence that the defendant 24 has been guilty of oppression, fraud or malice, express or implied, the plaintiff, in addition to 25 the compensatory damages, may recover damages for the sake of example and by way of 26 punishing the defendant. Nev. Rev. Stat. § 42.005(1). 27 3. As Defendant Clayton Sampson is guilty of common law and securities fraud, the Court finds 28 that punitive damages are appropriate. 1 4. As Defendant Elisha Sampson is guilty of securities fraud, the Court finds that punitive 2 damages are appropriate. 3 j. Attorney’s Fees 4 1. Plaintiffs seek to recover their attorney’s fees incurred in prosecuting their claims. 5 2. Pursuant to NRS 90.660(1)(d), reasonable attorney’s fees and costs may be recovered against 6 an individual found guilty of violating NRS 90.570. See Nev. Rev. Stat. § 90.660(1)(d). 7 3. In a lawsuit where the plaintiff presents different claims for relief that involve a common 8 core of facts or are based on related legal theories, the district court should not attempt to 9 divide the request for attorney’s fees on a claim-by-claim basis. Ambat v. City & Cnty. of 10 San Francisco, 757 F.3d 1017, 1032 (9th Cir. 2014) (simplified). Instead, the court must 11 focus on the significance of the overall relief obtained by the plaintiff in relation to the hours 12 reasonably expended on the litigation. Id. 13 4. The Court finds that Plaintiffs are entitled to reasonable attorney’s fees and costs because 14 their claims share a common core of facts, and they achieved overall success at trial. 15 k. Request for Accounting and Constructive Trust 16 1. Plaintiffs request a full accounting of EnvyTV and EnvySolutions, as well as a constructive 17 trust be imposed. Currently, the Court finds that imposing a constructive trust, without a full 18 accounting, is premature. 19 2. An equitable accounting is essentially a legal action or equitable remedy, designed to compel 20 a defendant to account for and pay over money owed to the plaintiff but held by the 21 defendant. Muney v. Arnould, 524 P.3d 491 (Nev. 2023) (unpublished disposition) 22 (simplified). 23 3. A necessary prerequisite to the right to maintain a suit for an equitable accounting, like all 24 other equitable remedies is the absence of an adequate remedy at law. Barnes v. Kris Henry, 25 Inc., No. 20-17141, 2022 WL 501582, at *1 (9th Cir. Feb. 18, 2022) (quotations omitted). 26 4. The Court finds that Defendants have insufficiently produced evidence that allows the Court 27 to determine the current value of Plaintiffs’ 2% ownership in EnvyTV. Without this 28 information, the Court cannot accurately determine the appropriate amount of compensatory 1 damages. 2 5. The Court concludes that a comprehensive accounting of Defendants’ accounts and records 3 related to EnvyTV is needed. 4 6. As previously stated, the email contract makes clear that Plaintiffs would have the 5 opportunity to participate in Defendants’ other Envy-related businesses. However, 6 Defendants have not produced any documents showing the earnings generated from their 7 other Envy-related business ventures. Without this information, the Court cannot accurately 8 determine the appropriate amount of compensatory damages. 9 7. The Court concludes that a comprehensive accounting of Defendants’ various other Envy- 10 related business ventures, including EnvySolutions, EnvyCares, EnvyConnect, EnvySocial, 11 and an online Envy crypto currency business, is needed. 12 III. Damages 13 1. The Court finds that, under the email contract, Defendants are entitled to keep Plaintiffs’ 14 $100,000 investment in EnvyTV. 15 2. The Court finds that Plaintiffs are entitled to $121,380 in compensatory damages, with 16 interest, for their breach of contract claim, arising from unpaid Affiliate earnings from 17 February 2, 2020, through October 11, 2021. 18 3. The Court finds that Plaintiffs are entitled to $353,000 in compensatory damages, with 19 interest, for their breach of contract claim, arising from unpaid Affiliate earnings from 20 October 12, 2021, through October 11, 2028. 21 4. The Court finds that the question of prejudgment interest is not easily determined and 22 requires additional briefing. The Court finds that NRS 17.130 may not be the governing 23 statute for determining prejudgment interest, but rather NRS 99.040 is. See Wilson v. Pac. 24 Maxon, Inc., 714 P.2d 1001, 1002 (Nev. 1986). Moreover, the Court believes that different 25 interest rates may be applicable for assessing prejudgment interest under NRS 99.040, based 26 on when commissions were due. See Nev. Rev. Stat. § 99.040(1). 27 5. The Court finds that Plaintiffs are entitled to punitive damages. However, the Court will 28 determine the amount to be awarded once Defendants undertake a full accounting. 1 6. The Court finds that Plaintiffs are entitled to reasonable attorney’s fees and costs. However, 2 the Court requires additional briefing before awarding them. 3 7. The Court finds that Plaintiffs are entitled to recuperate $8,175 in arbitration expenses and 4 $8,500 for discovery abuse, as awarded by Magistrate Judge Albregts. 5 IV. Conclusion 6 Accordingly, IT IS HEREBY ORDERED that, consistent with these findings and 7 conclusions, judgment shall be entered in favor of Plaintiffs, against Defendants, on their breach 8 of contract claim. 9 IT IS FURTHER ORDERED that, consistent with these findings and conclusions, 10 judgment shall be entered in favor of Plaintiffs, against Defendant Clayton Sampson, on their 11 common law fraud claim. 12 IT IS FURTHER ORDERED that, consistent with these findings and conclusions, 13 judgment shall be entered in favor of Plaintiffs, against Defendants Clayton and Elisha Sampson, 14 on their securities fraud (NRS 90.570) claim. 15 IT IS FURTHER ORDERED that, consistent with these findings and conclusions, 16 judgment shall be entered in favor of Defendants, on Plaintiffs’ breach of fiduciary duty and 17 conspiracy claim. 18 IT IS FURTHER ORDERED that, consistent with these findings and conclusions, 19 judgment shall be entered in favor of Plaintiffs, against Defendants, on their breach of implied 20 covenant of good faith and fair dealing claim. 21 IT IS FURTHER OREDERED that within fourteen (14) days from the date of this order, 22 Plaintiffs shall file a new damages summary. The motion should adequately address the question 23 of prejudgment interest. Defendants will then have seven days to respond, and Plaintiffs will 24 have seven days to file a reply. 25 IT IS FURTHER ORDERED that within fourteen (14) days from the date of this order, 26 Plaintiffs shall file a motion for attorney’s fees and costs. The motion should contain a detailed 27 breakdown of the hours spent on the litigation and the price billed per hour. Defendants will then 28 have seven days to respond, and Plaintiffs will have seven days to file a reply. ] IT IS FURTHER ORDERED that within thirty (30) days from the date of this order, 2 | Defendants shall produce a full accounting of all corporate and personal financial records related to EnvyTV, EnvySolutions, EnvyCares, EnvyConnect, EnvySocial, and EnvyCrypto. Failure to 4| comply with the Court’s order will result in enhanced punitive damages. 5 FINALLY, the Court will issue a damages judgment once it has received all requested 6 | briefings and information. 7 8 | Dated this 31" day of January 2024. om 10 KentJ.Dawson SS 11 United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
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