RICHARD F. BOULWARE, II, UNITED STATES DISTRICT JUDGE.
Before the Court is Defendants' Renewed Motion for Summary Judgment (ECF No. 135), Plaintiffs' Motion for Summary Judgment (ECF No. 136), Plaintiffs' Supplemental Summary Judgment Brief (ECF No. 159), Defendants' Motion to Strike Portions of Amended Complaint (ECF No. 178), Plaintiffs' Motion for a Hearing (ECF No. 188), and Plaintiffs' Motion for Leave to File Plaintiffs' Supplemental Summary Judgment Brief (ECF
On June 10, 2016, Plaintiffs Gordon Allred, Alvin Najib Mansour, Kevin Najib Mansour, Perry White, and Nenad Zivkovic (collectively, "Individual Plaintiffs"), Marcus & Millichap Real Estate Investment Services of Nevada, Inc. ("M&M"), and Marcus & Millichap Real Estate Investment Services, Inc. ("M&M National") filed a Complaint and Request for Declaratory and Injunctive Relief against Defendants, officials of the Nevada Real Estate Division ("NRED") and Nevada Real Estate Commission ("NREC"). (ECF No. 1). Plaintiffs assert two Section 1983 claims, alleging that a NREC real estate regulation 1) violates the Commerce Clause, and 2) violates the First Amendment. Plaintiffs additionally seek declaratory and injunctive relief.
On July 12, 2017, Plaintiffs filed a Motion for Preliminary Injunction. (ECF No. 47). Defendants filed a Response on July 25, 2017. (ECF No. 58). The Court held a hearing on the Motion on July 26, 2017 and denied the Motion without prejudice with leave to refile, as the administrative hearings which Plaintiffs sought to enjoin were continued from August to December. (ECF No. 63).
On August 25, 2017, Plaintiffs and Defendants filed Cross-Motions for Summary Judgment. (ECF Nos. 71-72). The same day, Plaintiffs also filed a Statement of Material Facts regarding their Motion for Summary Judgment. (ECF No. 74). The parties filed Responses on September 15, 2017. (ECF Nos. 84-85). Replies were filed on September 29, 2017. (ECF Nos. 92, 93). The International Council of Shopping Centers, The Commercial Real Estate Development Association, and National Multifamily Housing Council (collectively, "Interested Parties") filed a Motion for Leave to File Amicus Brief in Support of Plaintiffs on November 10, 2017. (ECF No. 96). The proposed amicus brief is attached to the Motion. (ECF No. 96-1).
On November 14, 2017, Individual Plaintiffs filed Emergency Renewal of Motion for a Temporary Injunction. (ECF No. 100). M&M filed a Joinder on November 15, 2017. (ECF No. 103). Defendants filed a Response to the Motion for Leave to File Amicus Brief on November 16, 2017. (ECF No. 108). Defendants filed a Response to the Emergency Renewal of Motion on November 20, 2017. (ECF No. 111). Plaintiffs filed a Supplemental Brief in Support of the Motion for a Temporary Injunction on December 1, 2017. (ECF No. 113). The Court denied the Emergency Renewal of Motion on December 3, 2017. (ECF No. 115).
On December 4, 2017, Plaintiffs appealed the Court's denial of injunctive relief to the Ninth Circuit. (ECF No. 115). On December 5, 2017, the Ninth Circuit denied Plaintiffs' emergency motion for an injunction pending the appeal of this Court's denial of a motion for preliminary injunction. (ECF No. 119). Plaintiffs voluntarily dismissed their appeal. (ECF No. 120).
On February 6, 2018, the Court held a hearing on the parties' cross-motions for summary judgment. (ECF No. 129). The Court denied each parties' motion without prejudice.
On February 26, 2018, Plaintiffs filed a Motion for Leave to File an Amended Complaint. (ECF No. 131). Defendants responded (ECF No. 138) and Plaintiffs replied (ECF No. 141).
On March 6, 2018, Defendants filed the instant Renewed Motion for Summary
On June 27, 2018, Plaintiffs filed the instant Supplemental Summary Judgment Brief (ECF No. 159) and a Motion for Leave to File Plaintiffs' Supplemental Summary Judgment Brief (ECF No. 160). On September 20, 2018, the Court granted the Motion for Leave to File and set a hearing regarding the motions for summary judgment. (ECF No. 168). The Court denied Plaintiffs' Motion for Leave to File an Amended Compliant without prejudice, such that Plaintiffs could refile the motion after the Court ruled on the pending summary judgment motions.
The Court held a hearing on October 10, 2018. (ECF No. 173). The Court permitted supplementation of the record regarding the legislative history of S.B. 69 and took the summary judgment motions under consideration. The Court also granted Plaintiffs' oral motion for reconsideration of its order denying leave to file an amended complaint. The Clerk of Court filed Plaintiffs' amended complaint on October 26, 2018. (ECF No. 175).
On November 15, 2018, Defendants filed the instant Motion to Strike Portions of Amended Complaint. (ECF No. 178). Plaintiffs responded on November 21, 2018 (ECF No. 180) and Defendants replied on November 29, 2018 (ECF No. 181).
On April 24, 2019, the Court held a status conference regarding the status of the case and related case 2:18-cv-02409-RFB-VCF. (ECF No. 187). On July 2, 2019, Plaintiffs filed a Motion for Leave To File. (ECF No. 190).
The Court finds the following facts to be undisputed.
M&M is a subsidiary of M&M National. M&M is headquartered in Calabasas, California and has offices in Las Vegas, Nevada and Reno, Nevada. M&M National is also headquartered in Calabasas, California and it has other subsidiaries throughout the United States. M&M and M&M National service commercial real estate investment needs for clients across the United States.
Plaintiff Gordon Allred is First Vice President of Investments with M&M National. Allred holds a California broker's license and works out of a Millichap office in Ontario, California. He resides in California.
Plaintiff Alvin Najib Mansour is Executive Vice President of Investments with M&M National. He is also president for the Manour Group, which is an entity affiliated with M&M National. Alvin Mansour holds a California broker's license and a Texas broker's license. He works out of a Millichap office in San Diego, California. He resides in California.
Plaintiff Kevin Najib Mansour is Managing Partner for the Mansour Group, which is an entity affiliated with M&M National. Kevin Mansour holds a California salesperson's license and works out of the Mansour Group's San Diego, California office. He resides in California.
Plaintiff Perry White is a Vice President of Investments with M&M National or M&M. White holds a Nevada broker's license and works out of the M&M office in Las Vegas, Nevada. He resides in Nevada.
Plaintiff Nenad Zivkovic is an Associate with M&M National. He is also a Senior Associate for the Mansour Group, which is an entity affiliated with M&M National. Zivkovic holds a Nevada salesperson's license. He works out of Millichap's San Diego, California office. He resides in California.
Defendant Norma Jean Opatik is an NREC Commissioner and has held that position since at least 2015. She holds a Nevada real estate license.
Defendant Neil Schwartz is an NREC Commissioner and has held that position since at least 2013. He holds a Nevada license.
Defendant Wayne Capurro is an NREC Commissioner and has held that position since at least 2016. He was preceded in that position by Sherrie Cartinella, who held that position at the time of the filing of the original complaint. He holds a Nevada license.
Defendant Devin Reiss is an NREC Commissioner and has held that position since at least 2014. He holds a Nevada license.
Defendant Lee K. Barrett is an NREC Commissioner and has held that position since at least 2015. He holds a Nevada license.
Commercial real estate is a national marketplace in which buyers and sellers of real estate often have their offices or company headquarters in states other than where the commercial property is located. Buyers and sellers of commercial property are predominantly sophisticated private and institutional investors.
Commercial brokerage firms, like M&M National, often have offices in multiple states, if not throughout the country. M&M National has offices or subsidiaries or affiliates in most major U.S. cities, with more than 1,600 affiliated commercial real estate agents across the country.
M&M National and M&M ensure that transactions involving Nevada real estate are overseen by a licensed Nevada broker, even where the buyer and seller are not Nevada residents and never enter the state.
The Nevada Real Estate Division ("NRED") is a Nevada state administrative agency. Nev. Rev. Stat. § 645.001. It is managed by a single appointed Administrator. The Nevada Real Estate Commission ("NREC") is a Nevada state administrative commission. At the time of appointment, each NREC Commissioner must have been a Nevada resident for no less than five years and must have been actively engaged in business either as a Nevada real estate broker for three years or as a Nevada broker-salesperson for five years. Nev. Rev. Stat. § 645.090. The NREC acts in an advisory capacity to the NRED, adopts regulations and conducts hearings on matters of enforcement. Nev. Rev. Stat. § 645.050.
Under Nevada law, an individual may not conduct business as a commercial real estate broker or broker-salesperson in Nevada unless they obtain a Nevada license. Nev. Rev. Stat. § 645.230. Nevada law permits out-of-state licensed real estate brokers cooperating with Nevada brokers to engage in real estate transactions. Nev. Rev. Stat. § 645.605. Pursuant to this statute, "[t]he Administrator [of the Real Estate Division] shall have authority to issue certificates authorizing out-of-state licensed brokers to cooperate with Nevada brokers, and the [Nevada Real Estate] Commission shall have authority to promulgate rules and regulations establishing the conditions under which such certificates shall be issued and canceled...."
Under Nevada law, a real estate broker with a Nevada license "shall have and maintain a definite place of business within the State, which must be a room or rooms used for the transaction of real estate business, or such business and any allied businesses, and which must serve as the office for the transaction of business under the authority of the license, and where the license must be prominently displayed." Nev. Rev. Stat. § 645.550.
No Plaintiff or M&M agent or broker has ever been disciplined or subject to discipline for violating the requirement to have an office in Nevada to hang their license. No Plaintiff or M&M agent or broker has sought or requested from NRED a broker's license that did not require an in-state presence but where the broker could hang her or his license with a local cooperating broker. NRED initiated and pursued disciplinary action against Plaintiff Allred for violating Sections 645.230 and 645.235 for engaging in commercial real estate business conduct without having a Nevada license as a real estate broker, broker-salesperson or salesperson and without having a cooperative certificate from NRED. Plaintiff Allred was ultimately found by NREC to have violated Nevada law and was ordered to pay $301,639.89 in fines and fees.
NRED initiated and pursued two disciplinary actions against Plaintiff White. The first was initiated for violating Section 645.235 by assisting another person in engaging business activity that requires a license, permit, certificate or registration under Chapter 645 even though the person did not have a license, permit, certificate or registration and for violating Section 645.252 by not exercising reasonable skill and care regarding a real estate transaction. Plaintiff White was ultimately found by the NREC to have violated Nevada law and was ordered to pay $16,624.33 in fines and fees. NRED pursued a second disciplinary action against Plaintiff White for violating Section 645.235 by assisting another person in engaging business activity that requires a license, permit, certificate or registration under Chapter 645 even though the person did not have a license, permit, certificate or registration. Plaintiff White was ultimately found by the NREC to have violated Nevada law and was ordered to pay $5,811.79 for this second violation.
NRED initiated and pursued disciplinary action against Plaintiff Alvin Mansour for violating Sections 645.230 and 645.235 for engaging in commercial real estate business conduct without having a Nevada license as a real estate broker, broker-salesperson or salesperson and without having a cooperative certificate from NRED. Plaintiff Alvin Mansour was ultimately found by NREC to have violated Nevada law and was ordered to pay $30,811.79 in fines and fees.
NRED initiated and pursued disciplinary action against Plaintiff Kevin Mansour for violating Sections 645.230 and 645.235 for engaging in commercial real estate business conduct without having a Nevada license as a real estate broker, broker-salesperson
NRED initiated and pursued disciplinary action against Plaintiff Zivkovic for violating Section 645.235 by assisting another person in engaging business activity that requires a license, permit, certificate or registration under Chapter 645. Plaintiff Zivkovic was ultimately found by NREC to have violated Nevada law and was ordered to pay $30,811.79 in fines and fees.
There is no disputed or undisputed evidence indicating that any Plaintiff in this case has been charged with or had action taken against them for violating the requirement for a licensed Nevada broker to have a room or office in Nevada in which their license hangs.
Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show "that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a);
A litigant must have "standing" in order to "maintain a lawsuit in federal court to seek redress for a legal wrong."
The injury in fact element is the "first and foremost" of the standing elements.
Plaintiffs have asserted a few arguments in support of their motion and in response to Defendants' motion. First, Plaintiffs
Defendants have asserted opposing arguments in support of their motion and in response to Plaintiffs' motion. First, the Defendants argue that Plaintiffs do not have standing to challenge the Nevada statutes regarding the cooperative certificate and the requirement that Nevada brokers maintain a Nevada office. Second, Defendants argue that Nevada does not unlawfully burden out-of-state residents or brokers in violation of the Dormant Commerce Clause.
The Court finds that Individual Plaintiffs have standing to challenge only Nevada's licensing statutes as they apply to out-of-state brokers seeking to conduct real estate business within the state. The undisputed facts establish that Individual Plaintiffs are all engaged in commercial real transactions involving clients conducting interstate business and seeking to purchase property in Nevada. Individual Plaintiffs have suffered an injury in fact. All Individual Plaintiffs have had enforcement proceedings brought against them and judgments entered against them for violating Nevada law regarding out-of-state residents or brokers engaging commercial real estate transactions in Nevada without a Nevada license or cooperative certificate. These enforcement actions and judgments can be traced directly back to the challenged conduct—the inability of out-of-state brokers to practice in Nevada without a Nevada license or cooperative certificate. Finally, if the Court were to find that Nevada's requirement for a real estate broker to obtain a Nevada license before engaging in interstate commercial real estate transactions in Nevada was unconstitutional, it would result in this Court enjoining enforcement of the state agency's judgments against Individual Plaintiffs.
The Court finds that M&M and M&M National lack standing to change the licensing statutes. M&M and M&M National can establish no injury traceable to the statutes, which regulates the licensure of individuals. No enforcement judgments have been or could be entered against these entities. Nor can M&M and M&M National exert associational standing on behalf of affected brokers, as such standing is reserved for unions and similar organizations whose "purpose is the protection and promotion" of a population or industry.
The Court also finds that none of Plaintiffs have standing to challenge Nevada Revised Statutes ("N.R.S.") Section 645.550. None of Plaintiffs have established an injury in fact related to this particular statute. Only one of Individual Plaintiffs, Mr. White, has a Nevada broker's
Moreover, the Court finds that a favorable decision on the constitutionality of this statute would not redress the primary injury of Plaintiffs. Plaintiffs' essential argument is that out-of-state licensed brokers should be able to practice and conduct real estate transactions in Nevada for out-of-state clients without obtaining a Nevada broker license or a cooperative certificate. Plaintiffs have not offered disputed or undisputed facts establishing the burden placed upon out-of-state brokers with a Nevada broker's license of having to maintain an office or room in Nevada. Thus, even if the Court were to find that the requirement was unconstitutional, this finding would not result in a favorable outcome for Plaintiffs, since the injury Individual Plaintiffs have suffered derives from their failure to have a Nevada broker's license or cooperative certificate and not from their failure to maintain an office in Nevada as a Nevada-licensed real estate broker. The Court therefore finds that Plaintiffs do not have standing to challenge N.R.S. § 645.550.
The Court finds that Nevada's statutes requiring a Nevada broker's license or a cooperative certificate to engage in commercial real estate transactions in Nevada do not violate the Dormant Commerce Clause.
There are two potential analytic standards that may apply in dormant Commerce Clause analysis. First, if a statute or law discriminates against out-of-state economic interests on its face, it is "virtually per se invalid" and "will survive only if it `advances a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives.'"
The Court first addresses the appropriate standard to apply to its analysis of this issue and finds that the
Applying the
Additionally, the Court finds that the burden is not excessive as any professional who would seek to competently and adequately represent a client involved in a real estate transaction in Nevada would necessarily need to know and understand Nevada real estate or property law. Plaintiffs have not established—nor could they—that a real estate professional would not need to be knowledgeable of and professionally conversant in Nevada real estate law to adequately facilitate real estate transactions that were consistent with Nevada law. Plaintiffs have not established—nor could they—that property law in Nevada (or any other state) was so generic and common that knowledge of another state's law by licensure would make one fully knowledgeable of all the essentials and nuances of Nevada property law.
Finally, the Court rejects Plaintiffs' singular focus on the cooperative certificate without consideration of the entire statutory scheme as a basis for establishing a constitutional violation. The fact that Nevada, in its discretion, permits out-of-state licensed brokers to conduct real estate business in limited circumstances does not ipso facto create a constitutional basis or requirement for the state to grant out-of-state licensed brokers the same authority to Nevada-licensed brokers. This exercise of discretion does not curtail or alter the state's ability to regulate real estate professionals whether residents or not who engage in real estate business in Nevada subject to Nevada's property law.
Defendants argue that certain portions of Plaintiffs' Amended Complaint, filed with leave of Court on October 26, 2018, exceed the scope of the Court's leave to amend. Defendants invoke Rule 12 of the Federal Rules of Civil Procedure, which empowers this Court to strike from the pleading "any redundant, immaterial, impertinent, or scandalous matter." Fed. R. Civ. P. 12(f).
The Court granted Plaintiffs leave to amend in order to raise the issue of N.R.S. Section 645.550 and its relationship to the cooperative certificate. The Court specifically stated that it would "allow for amendment as it relates to adding a challenge to Section 555" and that it would not consider the addition of "other types of challenges." (ECF No. 179 at 12). The Court did not approve the addition of unrelated facts and a renewed First Amendment claim in the Amended Complaint. The Court therefore grants Defendants' Motion to Strike Portions of Amended Complaint in regard to the First Amendment claim.