Sierra Development Co. v. Chartwell Advisory Group, Ltd.
223 F. Supp. 3d 1098
D. Nev.2016Background
- Chartwell, an accounting firm, contracted with Nevada casinos (including Pioneer) on contingency to pursue refunds of use tax paid on complimentary meals; Chartwell’s fee was a percentage of the “Total Refund.”
- Nevada Supreme Court in Sparks Nugget (2008) held use tax could not lawfully be imposed on complimentary meals, but noted sales tax might apply; the Department of Taxation then assessed sales tax deficiencies against casinos.
- Litigation continued; in 2013 an industry-wide settlement was reached where casinos withdrew refund claims and the State withdrew deficiency claims, accompanied by legislative moratorium on sales tax enforcement for complimentary meals through 2019.
- Pioneer received no cash refund or formal tax credit; instead it obtained the benefit of the moratorium/settlement and refused to pay Chartwell’s invoice for contingency fees.
- Chartwell asserted three counterclaims against Pioneer: breach of contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment.
- The court grants summary judgment to Pioneer on breach of contract and breach of the covenant claims (no money refund was received and no evidence Pioneer thwarted Chartwell), but denies summary judgment on unjust enrichment (genuine factual disputes whether Pioneer retained a benefit conferred by Chartwell).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Chartwell earned contingency fees under the PSA for complimentary meals | Chartwell: the settlement/moratorium is economically equivalent to a refund triggering fees | Pioneer: fees are payable only from an actual money refund or formal credit as defined in PSA | Held: No — contract requires money refund/credit; none was received, so no fee due |
| Whether Pioneer breached the implied covenant of good faith by settling | Chartwell: Pioneer’s settlement evaded the contract spirit and deprived Chartwell of its fee | Pioneer: settlement was instigated/desired by State, allowed by contract (clients could stop claims), and not intended to frustrate Chartwell | Held: No — no evidence Pioneer acted to evade contract; summary judgment for Pioneer |
| Whether unjust enrichment claim is barred by existence of written contract | Pioneer: unjust enrichment unavailable when express contract governs the parties’ rights | Chartwell: benefit conferred (industry-wide settlement/moratorium) differs in kind from contracted-for refund, so unjust enrichment available | Held: Denied — factual issues exist whether Pioneer retained a benefit from Chartwell that would make retention inequitable |
| Choice of law to interpret the PSA | Chartwell: PSA names Pennsylvania law | Pioneer: Nevada has stronger contacts; Nevada law should apply | Held: Nevada law applies (substantial relation; events occurred in Nevada) |
Key Cases Cited
- Sparks Nugget Inc. v. State of Nevada ex rel. Dep’t of Taxation, 124 Nev. 159, 179 P.3d 570 (Nev. 2008) (use-tax holding and note that sales tax might apply to complimentary meals)
- Calloway v. City of Reno, 116 Nev. 250, 993 P.2d 1259 (Nev. 2000) (elements of breach of contract under Nevada law)
- Leasepartners Corp. v. Robert L. Brooks Trust, 118 Nev. 747, 942 P.2d 182 (Nev. 1997) (unjust enrichment and limits when express contract exists)
- Certified Fire Prot. Inc. v. Precision Constr., 128 Nev. Adv. Op. 26, 283 P.3d 250 (Nev. 2012) (elements of unjust enrichment under Nevada law)
- Ellison v. Cal. State Auto. Ass’n, 106 Nev. 601, 797 P.2d 975 (Nev. 1990) (contract construction as a question of law appropriate for summary judgment)
- M & G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (U.S. 2015) (illusory promises doctrine and contract interpretation principles)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S. 1986) (summary judgment standard)
- Celotex Corp. v. Catrett, 477 U.S. 317 (U.S. 1986) (summary judgment burden-shifting)