ORDER GRANTING IN PART MOTION FOR SUMMARY JUDGMENT FOR PIONEER HOTEL, INC. COUNTERCLAIM DEFENDANT, AGAINST CHARTWELL ADVISORY GROUP, LTD, COUN-TERCLAIMANT
[Dkt. # 532]
Now before the Court is the Motion for Summary Judgment of Pioneer Hotel, Inc. against Chartwell Advisory Group, Ltd, Counterclaimant. Chartwell asserts three counterclaims against the Pioneer Hotel in its Second Amended Answer and Counterclaim: (1) breach of contract (twenty-second claim), (2) breach of the duty of good faith and fair dealing (twenty-third claim), and (3) unjust enrichment (twenty-fourth claim). The Court finds there are no genuine issues of material fact as to the first two claims and grants summary judgment to the Counterсlaim defendant. As to the unjust enrichment claim, however, genuine issues of material fact exist.
Background
This case concerns taxes owed to the State of Nevada when a gaming casino or restaurant provides a meal to a patron or an employee on a complimentary basis. Apparently, gaming makes people hungry, because tax refund requests for use taxes
However, while closing the window on the collection of use taxes, the Nevada Supreme Court opened a door for the collectiоn of sales taxes on these same complimentary meals. Id. at n.15 (“Still, we do not foreclose the possibility that complimentary meals such as the ones at issue in this case may be subject to sales tax where consideration is properly demonstrated.”). The State pushed through the new doorway. The Nevada Department of Taxation began assessing deficiency amounts for unpaid sales tax.
Legal Standards
Summary judgment is appropriate when “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); see also Anderson v. Liberty Lobby, Inc.,
A moving party bears the initial burden of showing there are no genuine issues of material fact. Horphag Research Ltd. v. Garcia,
“Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Factual disputes that are irrelevant or unnecessary will not be counted.” Anderson,
Choice of Law—Nevada State Law
To determine the applicable substantive law, a federal court sitting in diversity must apply the choice-of-law rules of the forum. Narayan v. EGL, Inc.,
Breach of Contract—the Twenty-second Counterclaim for Relief
Pioneer moves for partial summary judgment in that it challenges Chartwell’s clаims for amounts owed for non-gaming complimentary meals. (It does not address or concede liability for gaming-related complimentary meal refunds.) See Motion at n.l. Pioneer seems to confuse the two types of its own use tax payments in footnote 2 of its motion. Pioneer says it is not moving for summary judgment on “the non-gaming - comp invoice.” The Court finds that to the extent no money refund or credit was actually received, Pioneer is entitled to summary judgment on the contract-based claims. -
To stаte a claim for breach of contract in Nevada, a plaintiff must demonstrate: (1) the existence of a valid contract; (2) that plaintiff performed or was excused from performance;’ (3) that the defendant breached the contract; and (4) that the plaintiff sustained damages. Calloway v. City of Reno,
A contract is ambiguous if its terms may reasonably be interpreted in more than one way, but ambiguity does not arise simply because the parties disagree on how to interpret their contract.” Galardi,
According to the ordinary significance of the terms of the contract, Chartwell would earn a fee equal to a percentage of the “Total Refund” recovered by the casino client. For example, in the PSA between Chartwell and Pioneer Hotel and Gambling Hall (dated December 11,2002), Article 4.A states that: “For complimentary items, Chartwell’s fee for services rendered to Client shall be forty percent (10%) of the Total Refund.” See Joint Appendix Exh. 15. “Total Refund” is defined in Article l.G as follows: “The Total Refund shall include all sales and use, hotel, business ... taxes, plus interest and penalties refunded as a result of the efforts of Chartwell.”
“Refund” has a plain meaning. According to Black’s Law Dictionary (Ninth edition), the first meaning of the term “refund” is: “the return of money to a person who overpaid, such as a taxpayer who overestimated tax liability or whose employer withheld too much tax from earnings.” The second meaning is similar: “the money returned to a person who overpaid.” A refund is a return of money. This much is plain. And because it is plain, the term may be interprеted by a court without resort to extrinsic evidence. A tax refund of a fixed amount of money is the basis upon which the professional services fee was to be calculated: “Chartwell’s fee for services shall be forty percent (10%) of the Total Refund.” Without a tax refund of a specific amount, there was no fee to be calculated. This is a typical agreement ■with typical contingency fee terms based on a typical expectation of likely events. Thе contract makes clear that Chartwell’s fee is dependent upon recovering refund money for its client: “It is understood and agreed that the services rendered by Chartwell are upon a contingent fee basis and, if no amounts are recoverable, Client shall not be indebted to Chartwell for any fees or costs whatsoever.” Article 2.B.
The evidence is undisputed as to the Pioneer Hotel that no tax refund was received in the form of money returned or even a formal credit against future taxes. What they did receive is the benefit of a sales and use tax moratorium until at least 2019. Whether that benefit was due to Chartwell’s efforts or independent actors and events, or a mixture of both, is the
Chartwell offers no evidence to the contrary. Instead, it argues that the economic reality is the equivalent of a refund; that its efforts to pursue use tax refunds, and the resulting events that culminated in the industry-wide settlement agreement and tax moratorium, changed reality such that these Counterclaim defendants did receive a refund. It is the economic equivalent of a refund upon which their fees are due, according to Chartwell. While it may be аn economic reality, this type of a “refund” is beyond the contract definition of the “Total Refund.” The legal reality is that the Counterclaim defendants did not receive a refund of use or sales taxes paid on gaming-related complimentary meals. Because they received no money refund, no genuine issue of material fact remains. No professional services fee was earned.
Chartwell advances several arguments to the contrary. First, it argues that the Piоneer Hotel exchanged their right to a money refund for legislative relief. But it was never finally determined that the Pioneer Hotel were entitled to a cash tax refund of any amount. What it did exchange is the uncertainty of litigation over use vs. sales taxation on gaming-related complimentary meals, on the one hand, for the certainty of no additional liability looking backward or looking forward at least until 2019.
Chartwell simply argues that the Sparks Nugget decision required the Department of Taxation to pay the use tax refund to the Pioneer Hotel.
Chartwell also argues that this Court has already ruled that the term “refund” is ambiguous in the ruling on the motion to dismiss by the Hon. Richard F. Boulware, II. (p. 22:5-11, Tab “0,” Chart-well’s Combined Appendix). However, thаt ruling concerned whether it was at least plausible that the settlement agreement benefits constituted a refund. It was a plausible theory. However, it was a conclusion without the benefit of an evidentiary record. That ruling for purposes of a motion to dismiss does not bind the Court now for summary judgment. Moonin v. Nevada ex rel. Dept. of Public Safety Highway Patrol,
The motion for summary judgment is granted on the breach of contract claim in favor of the Pioneer Hotel.
Breach of the Duty of Good Faith and Fair Dealing—the Twenty-third Counterclaim for Relief
Every contract in Nevada contains an implied duty of good faith and fair dealing and essentially forbids arbitrary, unfair acts by one party that disadvantage the other. Frantz v. Johnson,
Chartwell asserts that the Pioneer Hotel evaded the spirit of the contract and interfered with Chartwell’s performance. Specifically, the Pioneer Hotel did so by settling the refund claims with the Department of Taxation. In Chartwell’s view, the settlement relieved the State from making a cash payment but allowed the Pioneer Hotel to realize the economic value of Chartwell’s work.
In support of its claim, Chartwell points to no particular bit of evidence. The problem with Chartwell’s argument is that the settlement was desired by the State of Nevada, encouraged by Chartwell (as suggested by Exh. 30), and required the independent approval of the state legislature in the form of tax moratorium legislation. The State of Nevada desired a global settlement of all use tax refund cases. The legality of imposing sales tax deficiencies to offset use tax refunds was uncertain. Test cases had been instituted and decisions had been issued at the trial court level. The Nevada appellate courts had yet to weigh in. Statute of limitations issues existed. The State of Nevada might have ultimately won approval of its sales tax deficiency program. In that case it would hаve traded the right to collect use taxes for the right to impose even higher sales taxes and completely offset any refund liability. Or it could have lost. (After all,
Instead of upping the ante on a high stakes legal bet, the State of Nеvada sought to settle the uncertainty of the past taxation issues. To make it work, the casinos withdrew their use tax claims and the State withdrew its' sales tax deficiency claims and its right to offset one against the other. Perhaps the casinos were more willing to gamble on a favorable outcome in the appellate courts, so the State offered additional value. The Governor’s Office used its persuasion on the Legislature to pass a tax moratorium until 2019. That offеred potential value to the casinos and restaurants going forward, making the global settlement more attractive. In short, it was a global settlement at the instigation of the State. It required the agreement of the State. It required legislation to be considered and passed by the Legislature. There is no evidence that it was a settlement at the instigation of the Pioneer Hotel. Nor is there evidence that it was something the Pioneer Hotel could have accomplished on their own just to frustrate Chartwell’s ability to collect its contingency fee. There is no evidence that demonstrates the Pioneer Hotel evaded the spirit of the Chartwell contracts or interfered with Chartwell’s performance.
Finally, the contracts provided that the Pioneer Hotel were free to stop pursuing use tax refunds at any time without owing Chartwell a fee. There is no genuine.issue of material fact to support Chartwell’s claim of breach of the duty of goоd faith and fair dealing. The motion for summary judgment is granted on the breach of the duty of good faith and fair dealing in favor of the Pioneer Hotel.
Unjust Enrichment—the Twenty-Fourth Counterclaim for Relief
Unjust enrichment occurs when one party confers a benefit on a second party which accepts and retains the benefit under circumstances such that it would be inequitable to retain the benefit without paying for its value. Certified Fire Prot. Inc. v. Precision Constr.,
The evidence creates genuine issues of material fact concerning whether the Pioneer Hotel received a valuable benefit in the form of the State settlement agreement and tax moratorium conferred upon them by the efforts of Chartwell and for which it would be unjust to retain without payment to Chartwell. The motion for summary judgment is denied on the unjust enrichment claim against the Pioneer Hotel.
Conclusion
Summary judgment is granted in favor of the Counterclaim defendant Pioneer Hotel on the Twenty-second and Twenty-third Counterclaims based on contract. Summary judgment is denied on the Twenty-fourth Counterclaim based on unjust enrichment.
Notes
. See e.g., N.R.S. 372.185 ("1. An excise tax is hereby imposed on the storage, use or other consumption in this State of tangible personal property purchased from any retailer on or after July 1, 1955, for storage, use or other consumption in this State at the rate of 2 percent of the sales price of the property. 2. The tax is imposed with respect to all property which was acquired out of state in a transaction that would have been a taxable sale if it had occurred within this State.”).
. The use tax / sales tax dichotomy can be thоught of as two sides of the same tax coin. "The Nevada use tax is complementary to the sales tax imposed on retail purchases made in this state.” Harrah's Operating Co. v. State, Dep't of Taxation, — Nev. -,
. In the absence of a contract provision, Nevada courts apply the "substantial relationship” test. Consol. Generator—Nev., Inc. v. Cummins Engine Co.,
. The argument oversimplifies the legal questions facing the courts. See e.g., Sparks Nugget,