Offers of Judgment in Construction Defect Cases in Nevada

Posted on March 21, 2014

By: Robert L. Thompson

Offers of Judgment in Nevada are governed by Nevada Revised Statute 17.115 and Nevada Rule of Civil Procedure 68. At any time, up to ten days before trial, any party may serve on one or more of the parties, a written offer to allow judgment to be taken in accordance with the terms and conditions of the offer. The opposing party has ten business days to either accept or reject the written offer. If the party rejects the offer but then receives a verdict that is less than the offer at trial, the party that made the offer may be entitled to recover their post-offer fees and costs through trial, including attorney fees. Utilizing such Offers of Judgment can be an effective way to entice the parties to settle before taking a case to trial.

On paper, an Offer of Judgment would seem ideal in a construction defect case due to the large amount of expert fees that are involved. Serving a homeowner with one might make them reconsider the risks of taking a case to trial, since they could be faced with the developer's fees and costs should they recover a smaller verdict at trial. However, there have been ambiguous interpretations of the rule largely due to the fees and costs that are associated with NRS 40.655, which governs awards of fees and costs for construction defect allegations, and NRS 18.020, which generally governs the awards of fees and costs for prevailing parties in Nevada civil lawsuits. For example, a developer could issue an Offer of Judgment to a homeowner which is greater than the verdict received at trial. Nevertheless, if the homeowner receives a judgment in their favor, although smaller than the Offer of Judgment, he or she can argue that as prevailing parties in the lawsuit, fees and costs should be awarded pursuant to NRS 40.655 and NRS 18.020. When added to the verdict the total may overcome the amount that was included in the Offer of Judgment. As such, the homeowner will claim that he or she beat the Offer of Judgment, and the defense would not be entitled to any fees and costs associated with NRS 17.115 and NRCP 68.

The Nevada Supreme Court recently weighed in on this issue in Gunderson v. D.R. Horton, 130 Nev., Advanced Opinion 9 (February 24, 2014). In Gunderson, 40 homeowners brought a complaint for construction defects against D.R. Horton. Prior to trial, D.R. Horton issued individual Offers of Judgment to all 40 homeowners based on the extent of each of their property's respective defects. 39 of the homeowners rejected those offers. The jury awarded each homeowner $66,300 in damages, which was below each of the previously made Offers of Judgment. Following the verdicts, both Plaintiffs and D.R. Horton brought motions for costs and attorney's fees, with D.R. Horton arguing they were entitled to fees under NRS 17.115 and NRCP 68. Plaintiffs claimed they were entitled to fees and costs under NRS 40.655 and NRS 18.020. The district court awarded D.R. Horton post-offer fees and costs, but refused to award attorney fees, and both sides filed appeals to the Nevada Supreme Court.

The Supreme Court ruled that NRS 40.655 does not preclude the application of the penalty provisions of NRCP 68 and NRS 17.115, which govern Offers of Judgment in civil cases. Additionally, the Court ruled that when an offeree rejects a valid Offer of Judgment but fails to obtain a more favorable verdict, NRS 17.115 and NRCP 68 preclude the offeree from collecting fees and costs after the service of the offer. The Court held that the homeowners were not entitled to any fees and costs under NRS 18.020 or NRS 40.655. Essentially, the Court ruled that Nevada's Offer of Judgment statute supersedes Chapter 40.

This ruling will benefit general contractors and subcontractors in future construction defect cases because it will bring additional force to Nevada's Offer of Judgment rule. Previously, attorneys for the homeowners would disregard reasonable Offers of Judgment because they believed they could overcome any verdict after additional fees and costs were awarded pursuant to Chapter 40. As such, general contractors and subcontractors would also have to calculate the individual homeowners' Chapter 40 fees and costs into the Offer of Judgment. Since the Nevada Supreme Court has now ruled that the Offers of Judgment will supersede any prevailing party fees and costs under NRS 18.020 and 40.655, the attorney for the homeowners will have to take extra precautions to advise their clients that Chapter 40 protections no longer apply. This ruling should be utilized by counsel during settlement negotiations as an effective tool to counter the Chapter 40 entitlement arguments that are often made by opposing counsel.

Robert L. Thompson is an Associate with Kring & Chung, LLP's Las Vegas, NV office. He can be reached at (702)260-9500 or rthompson@kringandchung.com.