ROSENTHAL, District Judge:
This is an appeal from an injunction against the owner and operators of a Nevada company that inspected homes for construction defects and encouraged homeowners to file claims against their builder under a Nevada statute. Del Webb Communities, Inc., the developer of a retirement community where the company inspected many homes, sued, alleging that the defendants' business practices violated federal and state law. The district court permanently enjoined the defendants from "soliciting and/or performing residential inspections and/or providing inspection reports in ... Del Webb Nevada developments, by means of illegal, unlicensed and false practices, such as the representations, express or implied, that they, or any of them are (1) properly licensed under Nevada law to perform structural inspections; (2) properly licensed under Nevada law ... to perform, provide or communicate inspection reports; and/or (3) are acting
M.C. Mojave Construction
Mojave inspected many homes in Sun City Anthem, a Del Webb retirement community in Henderson, Nevada.
Mojave provided homeowners with engagement letters for several law firms to begin Chapter 40 actions based on defects listed in the inspection reports that Mojave generated. The engagement letters required the homeowners to pay all litigation costs if the homeowners terminated the
Del Webb sued Partington d/b/a Mojave and Wilson in Nevada federal court, seeking damages and injunctive relief. The district court preliminarily enjoined Mojave from conducting further inspections. In ruling on summary judgment motions, the district court held that Mojave's agreements violated Nevada's common-law prohibition against champerty and maintenance, based on Mojave's use of its own funds and resources to instigate and prosecute Chapter 40 actions in which it had no interest and based on the requirement in Mojave's contracts with homeowners that they pay Mojave's fees from the amounts obtained from Del Webb. The district court also held that Mojave was required to have a Chapter 645D license to perform its inspections and that Mojave had falsely represented in its advertising and solicitations that it had such a license.
The district court issued a permanent injunction. The court's findings of fact and conclusions of law included that Mojave committed a tort by violating Nevada's common-law prohibition against champerty; violated the Nevada Deceptive Trade Practices Act by performing inspections without the license required under Chapter 645D; violated both the Nevada Deceptive Trade Practices Act and the Lanham Act by representing that the home evaluations were free and that Mojave was affiliated with Del Webb; and tortiously interfered with Del Webb's warranty contracts with homeowners by instructing Del Webb to communicate only with the lawyers filing the Chapter 40 action. The permanent injunction provided:
The parties resolved the damages claim and stipulated that the permanent injunction was the final judgment. Mojave timely appealed.
We have jurisdiction under 28 U.S.C. § 1292(a)(1). Lonberg v. City of Riverside, 571 F.3d 846, 847-48 (9th Cir. 2009). We will reverse an order of injunction only if the district court abused its discretion. Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1173 (9th Cir.2007). We review factual findings for clear error and legal conclusions de novo. Id.
Rule 65(d) requires an injunction to "state its terms specifically" and "describe
The permanent injunction prohibits the defendants from "soliciting and/or performing residential inspections and/or providing inspection reports ... by means of illegal, unlicensed and false practices." The order identifies three prohibited practices as examples — "such as" — of "illegal, unlicensed and false practices": (1) falsely representing that the defendants are "properly licensed under Nevada law to perform structural inspections; (2) properly licensed under Nevada law to ... perform, provide or communicate inspection reports; and/or (3) are acting as representatives or agents or under the authority of Del Webb." Even with these examples, the general prohibition against using "illegal, unlicensed and false practices" is too vague to be enforceable. The examples of prohibited past conduct do not sufficiently define what additional future conduct will be covered.
The broad prohibition against "soliciting and/or performing residential inspections and/or providing inspection reports ... by means of illegal, unlicensed and false practices" is vacated. We next consider the injunction's specific prohibitions.
During argument, Mojave clarified that it does not challenge the injunction's prohibition on representing that it is affiliated with Del Webb or its parent, Pulte. That portion of the injunction is affirmed.
Mojave does challenge the injunction against representing that it was properly licensed under Nevada law to conduct its inspections. The district court held that Chapter 645D of the Nevada Revised Statutes requires a license for the inspections
Nevada statutes are interpreted according to their plain meaning "unless it clearly appears that the Legislature did not intend such a meaning." City of Reno v. Bldg. & Constr. Trades Council of N. Nev., ___ Nev. ____, 251 P.3d 718, 722 (2011). We must not interpret a statute to "render words or phrases superfluous or make a provision nugatory." S. Nev. Home-builders Ass'n v. Clark Cnty., 121 Nev. 446, 117 P.3d 171, 173 (2005) (internal quotations omitted).
The text of Chapter 645D makes its application to Mojave's inspections clear. Chapter 645D requires "[a]ny person who... engages in the business of, acts in the capacity of, or advertises or assumes to act as an inspector" to obtain a certificate from the State of Nevada. NRS 645D.160(1). An "inspector" is "a person who examines any component of a structure and prepares or communicates an inspection report." NRS 645D.080. An "inspection report" is "an analysis, opinion or conclusion, regarding the condition of a structure, that is ... [p]rovided after an inspection, in a written report, for or with the expectation of receiving compensation for the report; and ... [d]esigned to describe and identify the inspected systems or structural components of the structure, their physical condition, any material defect and any recommendation for evaluation by another person." NRS 645D.070.
Mojave's argument that it did not provide inspection reports "with the expectation of receiving compensation for the report," see NRS 645D.070(1), is unpersuasive. Mojave acknowledged that its business plan was to be paid for its inspection work through the proceeds that homeowners received from the Chapter 40 claims. Mojave's contracts required the homeowner to pay its fees and expenses out of the Chapter 40 payments received from the homebuilder. The contracts assigned the homeowners' right to those payments to Mojave if the homeowners were unable to collect the full cost of inspection. Mojave did, therefore, expect ultimately to receive compensation for its inspection reports.
NRS 645D.100 contains eight express exceptions. Mojave relies on the exception for any "person who provides an estimate of cost, repair or replacement of any improvements upon real estate." NRS 645D.100(6). Mojave argues that the "[c]ost of repair or replacement estimates in construction defect claims were all Mojave's reports ultimately were used for, if they were used at all." Mojave's argument is not supported by the language of the exception, which focuses on the person who provided the inspection report and not on how the report was ultimately used. Nor is Mojave's argument supported by the record, which shows that the inspection reports identified structural deficiencies but did not provide cost estimates to repair or replace them. The exception under section 645D.100(6) does not apply.
Mojave's remaining arguments have no basis in Chapter 645's text. Mojave first contends that Chapter 645D applies only to inspections conducted for real-estate sales. The statute explicitly excepts certain inspections unrelated to real estate sales, which would be unnecessary if the statute covered only sales-related inspections.
Mojave's argument that Del Webb lacked standing to challenge its practices is also unpersuasive. NRS 41.600(1) provides that "[a]n action may be brought by any person who is a victim of consumer fraud." Nev. Power Co. v. District Court, 120 Nev. 948, 102 P.3d 578, 583 n. 7 (2004) (per curiam). NRS 41.600(2)(e) includes in the definition of "consumer fraud" a "deceptive trade practice as defined in NRS 598.0915 to 598.0925, inclusive." NRS 598.0923(1) makes it a deceptive practice knowingly to conduct one's "business or occupation without all required state, county or city licenses."
Mojave argues that Del Webb was not "a victim of consumer fraud" because Del Webb is neither a consumer of Mojave's services nor a business competitor. The statute does not support this argument. The statute allows "any person" who is a "victim of consumer fraud" to sue. NRS 41.600(1). The word "consumer" modifies "fraud," but does not limit "any person" or "victim." See W. Surety Co. v. ADCO Credit, Inc., ___ Nev. ____, 251 P.3d 714, 716-18 (2011) (declining to limit "any person" in another Nevada statutory private right of action for similar reasons). NRS 41.600(2) defines the kinds of actions that constitute "consumer fraud" not by referring to a certain type of victim, but by cross-referencing other NRS sections defining deceptive trade practices and other offenses. See NRS 41.600(2).
Mojave acknowledges that a "victim of consumer fraud" need not be a "consumer" of the defendant's goods or services. See S. Serv. Corp. v. Excel Bldg. Servs., 617 F.Supp.2d 1097, 1100 (D.Nev.2007) (allowing a business competitor to sue under
The standing issue turns on whether Mojave's business practices "directly harmed" Del Webb. S. Serv. Corp., 617 F.Supp.2d at 1099-1100. The district court found that Mojave's "illegal structural inspections and provision of reports based thereon and misrepresentations of authority to perform such services and of a relationship with Del Webb in dealing with the public has damaged Del Webb's relationship with consumers and threatens to continue to harm Del Webb's business, reputation and good will and to exposure to Chapter 40 litigation based on illegal inspections and inspection reports." Neither in its briefing nor at oral argument did Mojave challenge this finding or explain why it was insufficient to establish the direct injury needed to give Del Webb standing to sue.
Because Nevada law provides a basis for the specific prohibitions Mojave challenges, it is unnecessary to address whether the Lanham Act provides an additional and similar statutory basis for granting the same relief.
"Champerty" generally refers to an agreement in which "`a person without interest in another's litigation undertakes to carry on the litigation at his own expense, in whole or in part, in consideration of receiving, in the event of success, a part of the proceeds of the litigation.'" Schwartz v. Eliades, 113 Nev. 586, 939 P.2d 1034, 1036 (1997) (per curiam) (quoting Martin v. Morgan Drive Away, Inc., 665 F.2d 598, 603 (5th Cir.1982)). "Maintenance" refers to a person assisting in litigation in which he has no interest. Vosburg Equip. v. Zupanoic, 103 Nev. 266, 737 P.2d 522, 523 (1987); see also In re Primus, 436 U.S. 412, 424 n. 15, 98 S.Ct. 1893, 56 L.Ed.2d 417 (1978) ("Put simply, maintenance is helping another prosecute a suit [and] champerty is maintaining a suit in return for a financial interest in the outcome...."). The law on champerty and maintenance begins in antiquity with the Greek view that even a party's advocate
Del Webb did not assert champerty as a contract defense. Nor is Del Webb a party to the allegedly champertous agreements between Mojave and its homeowners. The district court nonetheless held that under Nevada common law, Del Webb had a valid tort claim for champerty and maintenance for which damages and equitable relief could be awarded.
"The task of a federal court in a diversity action is to approximate state law as closely as possible in order to make sure that the vindication of the state right is without discrimination because of the federal forum." Gee v. Tenneco, Inc., 615 F.2d 857, 861 (9th Cir.1980). Federal courts should "hesitate prematurely to extend the law ... in the absence of an indication from the [state] courts or the [state] legislature that such an extension would be desirable." Torres v. Goodyear Tire & Rubber Co., 867 F.2d 1234, 1238 (9th Cir.1989) (certifying a products liability question to the Arizona Supreme Court while recognizing the modern trend favoring expansion of products liability); see also Ryan v. Royal Ins. Co. of Am., 916 F.2d 731, 744 (1st Cir.1990) ("[L]itigants who reject a state forum in order to bring suit in federal court under diversity jurisdiction cannot expect that new trails will be blazed.").
We conclude that there was no secure basis for the district court to predict that the Nevada Supreme Court would recognize a common-law tort cause of action for damages or equitable relief asserted by a stranger to an allegedly champertous agreement.
The district court concluded that NRS 1.030, which provides that "[t]he common law of England, so far as it is not repugnant to or in conflict with the Constitution and the laws of the United States, or the constitution and laws of this state, shall be the rule of decision in all courts of this state," requires the application of the common law of champerty as it existed before July 3, 1776 unless the Nevada Supreme Court had expressly rejected it. NRS 1.030 does not call for the rigid application of common law as it existed before July 3, 1776. Rather, courts must interpret the common law in light of relevant conditions, which "are not the conditions which existed when the United States Constitution was adopted, or when Nevada gained statehood, or even when NRS 1.030 was first enacted, but conditions which exist today." Rupert v. Stienne, 90 Nev. 397, 528 P.2d 1013, 1017 (1974).
Nevada courts have long recognized that many of the conditions recognized as the basis for champerty and maintenance regulation no longer exist. The first Nevada Supreme Court case considering champerty acknowledged that the "English doctrine of maintenance arose from causes peculiar to the state of society in which it was established," and that although once "rigorously enforced, ... this rigor has... been relaxed [because] ... [t]he apprehension that justice would be trodden
The Gruber court noted that legal reforms such as the statute of frauds and statute of limitations "have all taken place since the law of maintenance was enacted; and all these have contributed to prevent groundless and vexatious litigation." Gruber, 23 P. at 862. Nevada has enacted statutes, rules, and codes of conduct that serve purposes previously addressed by the doctrines of champerty and maintenance. See NEV. R. CIV. P. 11; NEV. R. PROF'L CONDUCT 3.1 (requiring attorneys not to "defend a proceeding, or assert or controvert an issue therein, unless there is a basis in law and fact for doing so that is not frivolous"); D.R. Horton, Inc. v. Green, 120 Nev. 549, 96 P.3d 1159, 1162 (2004) (recognizing unconscionability as a bar to a contract's enforcement). Other state courts have relied on similar developments to abolish champerty and maintenance altogether.
The consistent trend across the country is toward limiting, not expanding, champerty's reach.
There was no adequate basis, in short, for the federal district court, applying Nevada law, to recognize a tort claim for champerty as a basis for issuing the injunction in this case. Although the injunction is affirmed in part, that affirmance is not based on the district court's conclusion that the common law of champerty supported this relief.
The district court's injunction is
Each party will bear its own costs on appeal.
Neither Lum nor Gruber recognized a tort claim for champerty and maintenance. Subsequent case law developments make them poor support for expanding the doctrines. Other Nevada Supreme Court cases on champerty have not addressed whether it gives rise to a tort cause of action. See Schwartz, 939 P.2d at 1036-37 (holding that the challenged agreement was not champertous because the plaintiff had an interest in the suit); Vosburg Equip., 737 P.2d at 523-24 (same); Aeroville Corp. v. Lincoln Cnty. Power Dist. No. 1, 71 Nev. 320, 290 P.2d 970, 972 (1955) (same).