Judge Flanagan upholds July Order v. Aaron Katz

Judge Flanagan upholds July Order v. Aaron Katz

  • September 22, 2016

September 21, 2016. Washoe District Judge Patrick Flanagan upholds July Order requiring Aaron Katz to pay IVGID its attorney’s in the sum of $226,466.80.

 On July 15, 2016, after five years of litigation, Washoe District Judge Patrick Flanagan entered an order awarding IVGID its attorney’s fees in the amount of $226,466.80 plus other court costs in the amount of $2,925.95. Within days after the award, Mr. Katz engaged counsel and filed a motion to alter or amend judgment, asking Judge Flanagan to undo his order awarding attorney’s fees. IVGID opposed the motion and the court entered an order on September 21, 2016, denying Mr. Katz’s challenge.

In stern, but somewhat colorful language, Judge Flanagan reiterated that the court has authority to award attorney’s fees against a party who has brought a frivolous or vexatious claim. A “frivolous” claim is one that is both baseless and made without a reasonable and competent inquiry. “Vexatious” is defined as an action without reasonable cause or excuse other than to harass for annoy. The court concluded:

“…this Court can find no other explanation for [Mr. Katz]’s actions other than to unnecessarily prolong this litigation with baseless and unreasonable claims.” …

“Throughout this litigation, [Mr. Katz] has shown that the motives for his claims were nothing more than to harass and burden the Defendant with excessive public records requests. In addition, [Mr. Katz]’s actions throughout this litigation have been nothing short of appalling and a waste of judicial resources. Again, by his actions, [Mr. Katz] has led this court to one undeniable conclusion: this was a frivolous lawsuit.”

The court’s entire order can be read here: katz-v-ivgid_order-09-21-16.

Is the HOA super-priority fight over?

  • September 19, 2016

During the economic downturn we saw many Homeowner’s Associations (“HOA”) pursue foreclosure against member homeowner’s for failure to pay assessments. Nevada state law provides HOAs with a super priority lien right entitling HOAs to recover nine months of dues in the event of a foreclosure sale.

In September 2014, the Nevada Supreme Court in SFR Investments Pool 1, LLC v. U.S. Bank, N.A., 334 P.3d 408, ruled that when an HOA forecloses on an assessment lien, that super priority lien right actually wipes out a mortgage lender because it is deemed a right that is senior to the mortgage loan.

foreclosuresuperleinhoaThis means that the purchaser at an HOA lien foreclosure sale could pick up a property for the amount of past due assessment (often only a few thousand dollars) and take the property free and clear of any mortgage lien.

For obvious reasons, lenders were not too happy about this interpretation of the law and in 2015, the Nevada legislature amended provisions of Chapter 116 (which governs HOAs and common interest communities) to allow lenders to “opt-in” to receive notice of HOA foreclosure sales.

Lenders receiving notice of HOA lien foreclosure sales could then bring the assessments current, avoid being wiped out by the sale and could then pursue their own foreclosure sale on the mortgage.

Since the SFR decision, a battle has raged in the courts regarding the nuances of that decision. On August 12, 2016, the United States Court of Appeals for the Ninth Circuit in Bourne Valley Court Trust v. Wells Fargo Bank, NA, definitively held that the Nevada “opt-in” statute facially violates a lender’s constitutional due process rights under the Fourteenth Amendment to the Federal Constitution, and remanded the case for further proceeding consistent with that decision.

It is interesting to note that the Ninth Circuit also found that long standing statutory language found in NRS Chapter 107 which applies notice requirements for defaults under a deed of trust to foreclosure notices of HOA liens, “would impermissibly render the express notice provisions of Chapter 116 entirely superfluous.” Bourne Valley at P. 11.

The dissenting opinion vehemently disagreed with this application of what is knowns as the “surplusage cannon” (which provides a framework for statutory interpretation that, in essence, suggests that words do have meaning and they would not have been used in a statute if they were not intended).

The Ninth Circuit Bourne Valley decision follows several decisions by the Nevada Supreme Court that favor lenders in this epic battle over lien rights.

While the Bourne Valley decision my signal the beginning of the end of the battle, there is no doubt there is more to come, if not from the courts then perhaps from the Nevada legislature which will meet in 2017.

**This post originally appeared in the Sierra Sun/Tahoe Bonanza.