Zap's Electrical, LLC v. Monarch Construction, LLC

Opinion

1 UNITED STATES DISTRICT COURT 2 DISTRICT OF NEVADA 3 * * *

4 ZAP’S ELECTRICAL, LLC, Case No. 3:19-CV-00603-CLB

5 Plaintiff, ORDER RE: COURT’S AUGUST 9, 2023 ORDER 6 v. [ECF No. 119] 7 MONARCH CONSTRUCTION,

8 Defendant.

9 10 This case involves an action filed by Plaintiff Zap’s Electrical, LLC (“Zap’s”) against 11 Defendant Monarch Construction (“Monarch”) and counterclaims asserted by Monarch 12 against Zap’s. Currently pending before the Court is briefing regarding whether a previous 13 order entered by the district court is binding as law of the case and whether there were 14 questions of fact for the jury. (ECF No. 119). For the reasons stated below, the Court finds 15 that the case should proceed to trial on Zap’s claims and Monarch’s counterclaims. 16 I. PROCEDURAL HISTORY 17 On July 31, 2019, Zap’s filed the instant lawsuit against Monarch. (ECF No. 1.) 18 Zap’s claims arise from an alleged contract between Zap’s and Monarch related to 19 construction work which occurred when Zap’s was not a licensed contractor in the state 20 of Nevada. (Id.) After the case was transferred to the unofficial northern division of the 21 District of Nevada, District Court Judge Robert C. Jones was assigned as the presiding 22 judge with the undersigned magistrate judge assigned to oversee pretrial matters. (ECF 23 No. 22.) In its complaint, Zap’s alleged three claims for relief: (1) breach of contract; (2) 24 promissory estoppel; and (3) unjust enrichment. (Id. at 3-5.) As to the first claim, Zap’s 25 alleges Monarch breached a contract between the parties by refusing to pay Zap’s the 26 full amount upon completion of the construction project. (Id. at 3.) Next, Zap’s alleges it 27 is entitled to recoup the reasonable amount of benefits obtained by Monarch based on 1 for work completed. (Id. at 4.) Finally, Zap’s alleges Monarch inequitably retained the 2 payment for completing the project and Zap’s is entitled to recoup the reasonable amount 3 of benefits obtained by Monarch based on the doctrine of unjust enrichment. 4 On August 26, 2019, Monarch filed their answer and asserted counterclaims 5 against Zap’s alleging: (1) breach of contract; (2) unjust enrichment; (3) promissory 6 estoppel; and (4) conversion. (ECF Nos. 8, 15.) Monarch’s first counterclaim alleges 7 Zap’s breached a contract between the parties by failing to pay Monarch after Monarch 8 performed under the contract. (Id. at 4-5.) Monarch’s second counterclaim alleges Zap’s 9 received benefits which were due to Monarch and which Monarch is entitled to recover to 10 prevent Zap’s unjust enrichment of Zap’s. (Id. at 5-6.) Next, Monarch alleges promissory 11 estoppel entitles Monarch to a portion of the proceeds from the construction work in 12 connection with the work performed by both parties. (Id. at 6-7.) Finally, Monarch alleges 13 Zap’s was not entitled to any of the proceeds from the construction work and therefore, 14 by keeping the funds, converted the proceeds to the exclusion of Monarch. (Id.) 15 In October of 2019, the Court entered an initial scheduling order and discovery 16 plan. (ECF No. 24.) Following numerous amendments to the scheduling order, the 17 deadline to file dispositive motions was set for December 9, 2020. (ECF No. 58.) 18 Accordingly, Zap’s filed its motion for summary judgment on December 9, 2020. (ECF 19 No. 59.) On December 30, 2020, Monarch filed its motion for summary judgment. (ECF 20 No. 63.) In response to Monarch’s motion, Zap’s filed a motion to strike Monarch’s motion 21 as untimely. (ECF No. 65.) 22 On September 9, 2021, the district court entered an order ruling on the parties’ 23 competing motions for summary judgment and Zap’s motion to strike. (ECF No. 68.) In 24 the order, the district court granted Zap’s motion to strike Monarch’s motion for summary 25 judgment as it was filed “nearly three weeks after the deadline.” (Id.) The district court 26 then turned to the merits of Zap’s motion for summary judgment. First, the district court 27 considered whether Zap’s had shown that there “was–and still is–an enforceable 1 sufficient to show that a reasonable juror would find the parties agreed to the terms of the 2 alleged agreement and therefore denied summary judgment after concluding a genuine 3 issue of material fact existed with respect to this issue. (Id. at 8-9.) 4 Following this determination, the district court considered Monarch’s argument that 5 even if a contract did exist, the contract was illegal pursuant to NRS 624.320 because 6 Zap’s was not a licensed contractor in the state of Nevada at the time the agreement was 7 formed. (Id.) Although Zap’s conceded the contract between the parties was illegal, Zap’s 8 argued two exceptions applied through which Zap’s could still recover under the terms of 9 the contract: substantial compliance and the Magill test. (Id.) 10 The district court addressed these exceptions in turn. With respect to the 11 substantial compliance exception, to fit within this exception, the party must have 12 “substantially complied” with Nevada’s contractor licensing statutes. Eagle Rock 13 Contracting, LLC v. National Security Technologies, LLC, No. 2:14-cv-01278-GMN-NJK, 14 2017 WL 372977, at *3 (D. Nev. Jan. 25, 2017). The district court concluded that Zap’s 15 had failed to substantially comply with the statute. The district court noted that, in contrast 16 to other cases where this exception applied, Zap’s did not have any licenses in Nevada, 17 did not own the constructed properties, and did not function as a passive financier. (ECF 18 No. 68 at 10.) In sum, the district court found “no case applying Nevada law has extended 19 the substantial compliance doctrine as far as [Zap’s sought] to stretch it.” (Id.) 20 Next, the district court considered whether Zap’s could enforce the alleged contract 21 under the Magill test. In Magill v. Lewis, the Nevada Supreme Court found that an illegal 22 contract could still be enforceable where the following four-factor test weighs in favor of 23 such enforcement: 24 [1] the public cannot be protected because the transaction has been completed, [2] where no serious moral turpitude is involved, [3] where the 25 defendant is the one guilty of the greatest moral fault and [4] where to apply 26 the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied. 27 333 P.2d 717 (Nev. 1958). In reviewing the factors, the district court held that “the general 1 rule–that an illegal contract is unenforceable–should not be altered here.” (ECF No. 68 at 2 11.) In explaining why the exception would not apply, the district court stated its 3 conclusion as to each factor but did not elaborate on the reasoning for its conclusions 4 save for a brief discussion of the fourth factor. (Id.) 5 Finally, the district court noted neither the substantial compliance nor the Magill 6 exception can apply where the violations of the licensing statute where “blatant, 7 substantial, and repeated.” (Id. (citing Loomis v. Lange Fin. Corp., 865 P.2d 1161, 1165 8 (Nev. 1993).) The district court found that “while [Zap’s] may have innocently began 9 working on the Projects thinking that its application for license and partnering with 10 licensed contractors was sufficient, that cannot be true after [the Nevada State 11 Contractor’s Board (“NSCB”)] informed them of violations” and Zap’s continued to work 12 on the project. (Id.) Therefore, the district court concluded neither exception could apply 13 to work performed after NSCB’s notice and denied Zap’s motion for summary judgment. 14 (Id.) 15 Following the order on the motions for summary judgment, both parties consented 16 to proceed before the undersigned magistrate judge. Therefore, on August 24, 2022, the 17 case was referred to the undersigned magistrate judge on consent in accordance with 28 18 U.S.C. § 636(c). After participating in an unsuccessful settlement conference, the Court 19 entered an order setting the case for trial. (ECF No. 100.) 20 Per the Court’s order regarding trial, the parties filed various documents. (Id.) Of 21 significance to the issues at bar, Monarch filed a document entitled a “Memorandum” in 22 support of its statement of the case. (ECF No. 110.) In this memorandum, Monarch raised 23 – for the first time – the issue of whether the district court’s order related to Monarch’s 24 motion for summary judgment was binding as law of the case and precluded Zap’s claims 25 from being presented to the jury. (Id.) Monarch argued the district court’s findings that the 26 contract at issue is illegal and neither exception described above applied prohibited Zap’s 27 from any recovery because these rulings were binding under the law of the case doctrine. 1 No. 119.) At the hearing, the Court ordered the parties to submit supplemental briefing on 2 the issues raised by Monarch’s memorandum to determine what, if any, claims could 3 proceed to trial. (Id.) Specifically, the Court ordered to the parties to brief: 4 (1) Whether the district court’s order, (ECF No. 68), is law of the case, and, if so, whether the factual findings in that order are binding; and 5 (2) Whether, despite those decisions appearing to be legal decisions, 6 such decisions can be presented to the jury. 7 (Id.) 8 On August 30, 2023, Zap’s filed its opening brief arguing that the district court’s 9 order is not law of the case and does not preclude Zap’s from presenting its claims to the 10 jury. (ECF No. 120.) Zap’s also asserted that if the district court’s order is law of the case, 11 Monarch’s counterclaims should likewise be dismissed. (Id.) 12 On September 5, 2023, Monarch responded. (ECF No. 121.) Monarch asserts that 13 the district court’s order is law of the case and “applying the law-of-the-case doctrine will 14 allow this Court to rule without second-guessing, re-litigating or undermining the 15 consistency of earlier decisions in this case.” (ECF No. 121 at 1-6.) Monarch also argues 16 its counterclaim would survive and proceed to trial even if the district court’s order is 17 deemed law of the case because the counterclaims are based on a separate contract. 18 (Id. at 7-8.) 19 In reply, Zap’s reiterates its arguments from the opening brief and asserts Monarch 20 did not address the case law cited by Zap’s related to law of the case. (ECF No. 122.) 21 The Court will analyze each issue in turn. 22 II. ANALYSIS 23 A. Law of the Case 24 First, the Court must determine whether the district court’s findings are binding and 25 therefore preclude Zap’s claims from being presented to the jury under the law of the case 26 doctrine. Here, the district court’s order was a denial of Zap’s motion for summary 27 judgment. (ECF No. 68.) After considering the parties’ briefs and conducting extensive 1 independent research, the Court finds that the district court’s order is not binding under 2 the law of the case doctrine. 3 Pursuant to Ninth Circuit case law, “the denial of a summary judgment motion is 4 never law of the case because factual development of the case is still ongoing.” Peralta 5 v. Dillard, 744 F.3d 1076, 1088 (9th Cir. 2014). Denial of summary judgment may result 6 from a factual dispute at the time. Id. That dispute may disappear as the record develops. 7 See Shouse v. Ljunggren, 792 F.2d 902, 904 (9th Cir.1986) (citing Preaseau v. Prudential 8 Ins. Co. of Am., 591 F.2d 74, 79–80 (9th Cir.1979)). 9 In Peralta, the Ninth Circuit upheld the decision of a district court granting the 10 defendants judgment as a matter of law although it had previously refused to grant 11 defendants’ motion for summary judgment. Id. In so doing, the Ninth Circuit expressly 12 overruled Federal Insurance Co. v. Scarsella Bros., 931 F.2d 599 (9th Cir.1991), “[t]o the 13 extent that Scarsella Bros. purported to hold that the law of the case doctrine bars district 14 courts from reconsidering pretrial rulings.” The Ninth Circuit reasoned that: 15 “Pretrial rulings, often based on incomplete information, don't bind district judges for the remainder of the case. Given the nature of such motions, it 16 could not be otherwise. At the summary judgment stage, for example, trial 17 courts ask only whether there could be a material issue of fact. They must draw all inferences in the non-movant's favor, see Anderson v. Liberty 18 Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986), and rest their rulings on the evidence that they think could be introduced at trial. 19 But when considering whether to grant judgment as a matter of law, they look only at the evidence actually introduced at trial. 20 Peralta, 744 F.3d at 1088. 21 In Fred Segal, LLC v. CormackHill, LP, the Ninth Circuit found a district court 22 “erroneously” held that its denial of the plaintiff’s partial motion for summary judgment 23 operated as “law of the case,” requiring it to grant final judgment to defendants. 821 F. 24 Appx 783, 786 (9th Cir. 2020). The court explained that a denial of summary judgment is 25 only “a ruling that [a party] could hypothetically prove some set of facts that would support 26 his claim,” not a conclusive determination of that claim. Id. (citing Peralta, 744 F.3d at 27 1088). The Ninth Circuit held that the district court's summary judgment ruling did not 1 preclude Fred Segal, LLC from providing new or different evidence and law to support its 2 argument. Id. Therefore, because the district court’s order, (ECF No. 68), was a denial of 3 summary judgment for the plaintiff, the Court finds the order does not bind it as the law of 4 the case. Fred Segal, LLC, 821 F. Appx. at 786. 5 B. ISSUES OF FACT 6 As the district court’s order, (ECF No. 68), does not bind the Court as law of the 7 case, the Court now turns to whether there are questions of fact to be submitted to the 8 jury. As noted in the district court’s order, both parties agree that the contract, if it exists, 9 is illegal pursuant to Nevada law. (ECF No. 68 at 9.) However, the existence of the 10 contract itself is a question of fact for the jury. Whitemaine v. Aniskovich, 183 P.3d 137, 11 141 (2008) (per Nevada law, the question of contract formation is a question of fact). 12 Additionally, whether a second contract was formed is necessary to try Monarch’s 13 counterclaims. 14 Moreover, the Court agrees with Zap’s that the Magill test includes questions of 15 fact which should be presented to the jury.1 As discussed above, in Magill v. Lewis, the 16 Nevada Supreme Court found that an illegal contract could still be enforceable where the 17 following four-factor test weighs in favor of such enforcement: 18 [1] the public cannot be protected because the transaction has been completed, [2] where no serious moral turpitude is involved, [3] where the 19 defendant is the one guilty of the greatest moral fault and [4] where to apply 20 the rule will be to permit the defendant to be unjustly enriched at the expense of the plaintiff, the rule should not be applied. 21 22 333 P.2d 717 (Nev. 1958). 23 Zap’s argues the Court’s treatment of these issues on summary judgment did not 24 appear to be based on a comprehensive review of the evidence presented at that time, 25 “much less on additional evidence that Zap’s may present at trial.” (ECF No. 120 at 3.)

26 1 Although Zap’s makes only a passing reference to the substantial compliance 27 exception, the Court finds that applying the exception implicates factual questions because it involves evaluating factually whether the actions taken by Zap’s are sufficient 1 Zap’s states that it “intends to present evidence that, contrary to Defendant’s assertions 2 to the contrary, Defendant, from the inception of the parties’ relationship, was fully aware 3 that Zap’s was not licensed in Nevada.” (Id.) As to the third factor, Zap’s argues that “the 4 determination of the parties’ relative moral fault is one that should not be definitively made 5 until the finder-of-fact hears all the evidence and judges the credibility of witnesses on 6 each side.” (Id.) Additionally, as to the fourth factor, “[w]hether there has been unjust 7 enrichment is essentially a question of fact.” In re Sunrise Suites, Inc., 2007 WL 9728691, 8 *3 (D. Nev. Mar. 30, 2007) (citing Leasepartners Corp. v. Robert L. Brooks Trust Dated 9 Nov. 12, 1975, 113 Nev. 747, 756, 942 P.2d 182, 187 (1997); Unionamerica Mortgage & 10 Equity Trust v. McDonald, 626 P.2d 1272, 1274 (1981)). Therefore, the Court agrees that 11 there are questions of fact for the jury with respect to the Magill test. 12 Finally, the district court’s order, (ECF No. 68), noted that neither exception can 13 apply where the violations of the licensing statute where “blatant, substantial, and 14 repeated.” (ECF No. 68 at 11 (citing Loomis, 865 P.2d at 1165).) However, the Court finds 15 whether the violations were “blatant, substantial, and reported” also presents a question 16 of fact for the jury. 17 Accordingly, as the district court’s order, (ECF No. 68), does not bind the Court as 18 law of the case and there are questions of fact for a jury, the Court finds Zap’s claims 19 should proceed to trial. Additionally, Monarch represented to the Court at the calendar 20 call that its counterclaims are based on a separate contract. Therefore, these claims 21 would proceed to trial regardless of whether Zap’s claims are precluded by the district 22 court’s order, (ECF No. 68). (ECF No. 119.) However, as any alleged separate contract 23 would involve the same parties, a trial on the counterclaims would involve much, if not all, 24 of the evidence and testimony which would be used to try Zap’s claims. Therefore, as a 25 matter of judicial economy, proceeding as to both Zap’s claims and Monarch’s 26 counterclaims in the same trial is prudent. 27 /// 1| Ill. CONCLUSION 2 IT IS THEREFORE ORDERED that Zap’s claims and Monarch’s counterclaims 3 shall proceed to a jury trial consistent with the above. 4 IT IS SO ORDERED. . 5 DATED: October 20, 2023. 6 UNITED STATES\MAGISTRATE JUDGE 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 oO