Ethel POPOWITZ, an individual and as Trustee of the, 2012

Ethel POPOWITZ, an individual and as Trustee of the..., 2012 WL 11981290...

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2012 WL 11981290 (Nev.) (Appellate Brief)Supreme Court of Nevada.

Ethel POPOWITZ, an individual and as Trustee of the Ethel Popowitz Trust; and Marilyn Popowitz, Appellants,v.

Raymond J. SHAPIRO, an individual; B.A. Sundown, LLC, a Nevada limited liability company;Mountain Vista, LLC, a Nevada limited liability company; Bayside Derivatives, LP, a Nevada

limited partnership; Henrymax, LLC, a Nevada limited liability company, Respondents.

No. 59806.July 13, 2012.

Appeal from the Eighth Judicial District Court, the Honorable Michelle Leavitt Presiding.

Appellants' Opening Brief

Marquis Aurbach Coffing, Albert G. Marquis, Esq., Nevada Bar No. 1919, Micah S. Echols, Esq., Nevada Bar No. 8437,Joshua L. Benson, Esq., Nevada Bar No. 10514, 10001 Park Run Drive, Las Vegas, Nevada 89145, Telephone: (702) 382-0711,Facsimile: (702) 382-5816, for appellants, Ethel and Marilyn Popowitz.

*ii TABLE OF CONTENTS. JURISDICTIONAL STATEMENT .............................................................................................................. 1II. ISSUES ON APPEAL ................................................................................................................................ 2A. WAS IT ERROR FOR THE DISTRICT COURT TO OVERRULE NEVADA LAW AND DISMISSETHEL AND MARILYN'S ALTER EGO CLAIM UNDER THE TWOMBLY AND IQBAL LEGALSTANDARD? ..................................................................................................................................................

2

B. WAS IT ERROR FOR THE DISTRICT COURT TO DISMISS THE ALTER EGO CLAIM “WITHPREJUDICE” WITHOUT AN OPPORTUNITY TO AMEND OR AN OPPORTUNITY TO CONDUCTDISCOVERY? .................................................................................................................................................

2

C. DID THE DISTRICT COURT ABUSE ITS DISCRETION IN FAILING TO ALLOW ETHELAND MARILYN TO AMEND THEIR COMPLAINT AFTER SUBSTANTIAL EVIDENCE WASDISCOVERED SUPPORTING VARIOUS CLAIMS? ..................................................................................

2

D. WAS IT ERROR FOR THE DISTRICT COURT TO IMPOSE SANCTIONS AGAINST ETHEL ANDMARILYN AND THEIR COUNSEL FOR FILING THE ALTER EGO CLAIM? ......................................

2

E. WAS THE BIAS OF THE DISTRICT COURT JUDGE SO EVIDENT AND PERVASIVE THAT ANEW DISTRICT COURT JUDGE SHOULD BE ASSIGNED? ...................................................................

2

III. STATEMENT OF THE CASE ................................................................................................................. 3V. STANDARDS OF REVIEW ..................................................................................................................... 5A. STANDARD OF REVIEW FOR AN ORDER GRANTING A MOTION TO DISMISS WHENLEGAL ISSUES ARE PRESENTED .............................................................................................................

5

B. STANDARD OF REVIEW FOR AN ORDER DENYING A MOTION TO AMEND ............................ 6V. FACTUAL BACKGROUND ..................................................................................................................... 6I. SUMMARY OF ARGUMENT ................................................................................................................... 20*iii VII. LEGAL ARGUMENT .................................................................................................................... 24

A. THE DISTRICT COURT ERRED IN DISMISSING ETHEL AND MARILYN'S ALTER EGOCLAIM UNDER A NEW FEDERAL STANDARD .....................................................................................

24

1. Ethel and Marilyn Satisfied Their Pleading Burden Under Nevada Law. .................................................. 252. The District Court Erred by Applying the Twombly/Iqbal Standards ........................................................ 28B. THE COURT ERRED IN DISMISSING ETHEL AND MARILYN'S CLAIM WITH PREJUDICE ...... 33C. THE DISTRICT COURT ABUSED ITS DISCRETION IN DENYING ETHEL AND MARILYN'SMOTION TO AMEND ...................................................................................................................................

36

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D. IT WAS ERROR FOR THE DISTRICT COURT TO IMPOSE SANCTIONS AGAINST ETHEL ANDMARILYN AND THEIR COUNSEL FOR FILING THE ALTER EGO CLAIM ........................................

47

E. DUE TO THE OBVIOUS BIAS OF JUDGE LEAVITT, THIS CASE SHOULD BE ASSIGNED TO ADIFFERENT DISTRICT COURT JUDGE ....................................................................................................

48

VIII. CONCLUSION ....................................................................................................................................... 53

*iv TABLE OF AUTHORITIESCASESAdamson v. Bowker, 85 Nev. 115, 450 P.2d 796 (1969) ....... 37,44Aktieselskabet AF 21. November 2001 v. Fame Jeans, 525F.3d 8 (D.C. Cir. 2008) .........................................................

30

Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009) ........ 10, 11, 28, 29, 30, 31, 32, 34, 35Bell Atl. Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955(2007) .....................................................................................

0, 28, 29, 30, 31, 32, 34, 48

Chavez v. Robberson Steel Co., 94 Nev. 597, 584 P.2d 159(1978) .....................................................................................

24

Conley v. Gibson, 355 U.S. 41 (1957) .................................. 28, 29Consol. Generator-Nev., Inc. v. Cummins Engine Co., Inc.,114 Nev. 1304, 971 P.2d 1251 (1998) ..................................

2

Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc.,911 F.2d 242 (9th Cir. 1990) ................................................

33

Crucil v. Carson City, 95 Nev. 583, 600 P.2d 216 (1979) ..... 24, 25Cullen v. Auto-Owners Ins. Co., 189 P.3d 344 (Ariz. 2008) . 32Edwards v. Marin Park, Inc., 356 F.3d 1058 (9th Cir. 2004) 35Eminence Capital v. Aspeon, Inc., 316 F.3d 1048 (9th Cir.2003) ......................................................................................

33

Ericson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197 (2007) ........ 29FGA, Inc. v. Giglio, 278 P.3d 490 (Nev. 2012) .................... 48*v Frank McCleary Cattle Company v. Sewell, 73 Nev.

279, 317 P.2d 957 (1957) .....................................................45, 46

Frantz v. Johnson, 116 Nev. 455, 999 P.2d 351 (2000) ........ 5, 6Hay v. Hay, 100 Nev. 196, 678 P.2d 672 (1984) .................. 24Home Sav. Ass‘n v. Aetna Cas. and Sur. Co., 109 Nev. 558,854 P.2d 851 (1993) ..............................................................

33

Kendall v. Visa U.S.A., Inc., 518 F.3d 1042 (9th Cir. 2008) .. 30Langevin v. York, 111 Nev. 1481, 907 P.2d 981 (1985) ........ 24Las Palmas Assoc v. Las Palmas Center Assoc, 235Cal.App.3d 1220 (1991) ........................................................

45, 46

LFC Marketing Group, Inc. v. Loomis, 116 Nev. 896, 8 P.3d841 (2000) .............................................................................

26, 27, 28

Lipshie v. Tracy Inv. Co., 93 Nev. 370, 566 P.2d 819 (1977).................................................................................................

27

Lopez v. Smith, 203 F.3d 1122 (9th Cir. 2000) ..................... 33, 35McCurry v. Chevy Chase Bank, FSB, 233 P.3d 861 (Wash.2010) ......................................................................................

29, 31

Moss v. U,S. Security Serv., 572 F.3d 962 (9th Cir. 2009) .... 29, 30, 33, 34Nelson v. Sierra Constr. Corp., 77 Nev. 334, 364 P.2d 402(1961) .....................................................................................

36

Pack v. LaTourette, 277 P.3d 1246 (Nev. 2012) ................... 5Rehab Choice Inc. v. CLC Healthcare, Inc., 2007 WL1944344 (N.D. Tex. 2007) ....................................................

45

*vi Simpson v. Mars, Inc., 113 Nev. 188, 929 P.2d 966(1997) .....................................................................................

5

Stephens v. Southern Nevada Music Co., 89 Nev. 104, 507P.2d 138 (1973) .....................................................................

6, 36

Stevens v. Premier Cruses, Inc., 215 F.3d 1237 (11th Cir.2000) ......................................................................................

33

RULES

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FRCP 8(a)(2) ......................................................................... 29FRCP 12(b)(6) ....................................................................... 28NRCP 1 ................................................................................. 23NRAP 3A(b)(1) ..................................................................... 1NRCP 4.4(a) .......................................................................... 22NRCP 8(a) ............................................................................. 24NRCP 12(b) ........................................................................... 35NRCP 12(b)(5) ...................................................................... 1, 3, 35NRCP 41 ............................................................................... 22, 35NRCP 41(b) ........................................................................... 35OTHER AUTHORITIESNevada Code of Judicial Conduct ......................................... 51Notice Pleading Restoration Act, S. 1504, 111th Cong.(2009) .....................................................................................

31

Preamble to Nevada Code of Judicial Conduct (2010) .......... 51Sherman Act .......................................................................... 29, 30

*i NRAP 26.1 DISCLOSURE

The undersigned counsel of record certifies that the following are persons and entities as described in NRAP 26.1(a), and must bedisclosed. These representations are made in order that the judges of this court may evaluate possible disqualification or recusal.

1. Appellants are individuals, and as such, no parent corporation exists.

Dated this 13th day of July, 2012.

MARQUIS AURBACH COFFING

By/s/ Albert G. Marquis

Albert G. Marquis, Esq.

Nevada Bar No. 1919

Micah S. Echols, Esq.

Nevada Bar No. 8437

Joshua L. Benson, Esq.

Nevada Bar No. 10514

10001 Park Run Drive

Las Vegas, Nevada 89145

Attorneys for Appellants, Ethel and Marilyn Popowitz

*1 I. JURISDICTIONAL STATEMENT

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Following a four-day jury trial, a verdict was returned wholly in favor of Plaintiffs/Appellants Ethel Popowitz (“Ethel”) and

Marilyn Popowitz (“Marilyn”) and against the sole remaining Defendant, B.A. Sundown, LLC (“B.A. Sundown”). 1 Thus, Etheland Marilyn appealed from a final judgment, which invokes this Court's appellate jurisdiction according to NRAP 3A(b)(1).

In their Third Amended Complaint, Ethel and Marilyn made claims against Defendants/Respondents B.A. Sundown, MountainVista LLC (“Mountain Vista”), Bayside Derivatives LP (“Bayside”), Henrymax LLC (“Henrymax”) and Raymond Shapiro

(“Shapiro”) (collectively “Defendants” or “Respondents”). 2 The alter ego claim against Shapiro, Bayside and Henrymax was

dismissed with prejudice pursuant to NRCP 12(b)(5) (which is a central issue on this appeal). 3 Ethel later voluntarily dismissed

the remaining claim against Shapiro. 4 And, the District Court dismissed Marilyn's claim against Mountain Vista on summary

judgment. 5

Because the jury verdict resolved the last remaining claim, it became the final, appealable judgment from which Ethel and

Marilyn appealed. 6 However, *2 Ethel and Marilyn have identified (1) the order dismissing their alter ego claim, and (2) the

order denying their motion for leave to amend as the orders for this Court's review. 7 Since Ethel and Marilyn have properlyappealed from the final judgment, this Court has authority to review the interlocutory order dismissing the alter ego claim and

denying Ethel and Marilyn leave to amend. 8 Therefore, this Court has appellate jurisdiction over this appeal.

II. ISSUES ON APPEAL

A. WAS IT ERROR FOR THE DISTRICT COURT TO OVERRULE NEVADA LAW AND DISMISS ETHEL ANDMARILYN'S ALTER EGO CLAIM UNDER THE TWOMBLY AND IQBAL LEGAL STANDARD?

B. WAS IT ERROR FOR THE DISTRICT COURT TO DISMISS THE ALTER EGO CLAIM “WITH PREJUDICE”WITHOUT AN OPPORTUNITY TO AMEND OR AN OPPORTUNITY TO CONDUCT DISCOVERY?

C. DID THE DISTRICT COURT ABUSE ITS DISCRETION IN FAILING TO ALLOW ETHEL AND MARILYNTO AMEND THEIR COMPLAINT AFTER SUBSTANTIAL EVIDENCE WAS DISCOVERED SUPPORTINGVARIOUS CLAIMS?

D. WAS IT ERROR FOR THE DISTRICT COURT TO IMPOSE SANCTIONS AGAINST ETHEL AND MARILYNAND THEIR COUNSEL FOR FILING THE ALTER EGO CLAIM?

E. WAS THE BIAS OF THE DISTRICT COURT JUDGE SO EVIDENT AND PERVASIVE THAT A NEW DISTRICTCOURT JUDGE SHOULD BE ASSIGNED?

*3 III. STATEMENT OF THE CASE

In the summer of 2007, Shapiro borrowed $300,000 from 80-year-old Ethel and $10,000 from Ethel's 57-year-old daughter,Marilyn. In return, Shapiro provided them with promissory notes from a shell LLC (B.A. Sundown) that never had any assetsor any income. When Shapiro quit making payments in the spring of 2009, Ethel and Marilyn filed suit which included an alterego claim against Shapiro and two of his other LLCs - B.A. Sundown and Mountain Vista. (An additional $100,000 was owedby Mountain Vista, which was later paid.) Shapiro immediately filed a NRCP 12(b)(5) Motion to Dismiss the alter ego claim,and the District Court dismissed the alter ego claim with prejudice.

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The District Court refused to follow Nevada's guiding legal principles and unilaterally adopted the federal pleading standardthat was articulated only ten days before Ethel and Marilyn filed their complaint. To add insult to injury, the District Courtthen sanctioned Ethel, Marilyn and their attorneys and subsequently denied all requests to amend their complaint or modifythe dismissal to “without prejudice.”

Ethel and Marilyn ask this Court to reaffirm Nevada's notice pleading standard and remand this case to an unbiased DistrictCourt judge. Even if this Court were to adopt the heightened federal pleading standard, the District Court committed error byapplying the federal standard before it was adopted by this Court. Of course, any new pleading standard should not be appliedretroactively. Thus, whether or not the new legal standard is adopted, Ethel and *4 Marilyn's alter ego claim - and their otherproposed amendments - should be reinstated and the case should be remanded.

The significant procedural events in this case were as follows:

Date

Event

05/28/09

Original Complaint filed against Shapiro, B.A. Sundown andMountain Vista

07/11/09

First Amended Complaint filed (adding Bayside and Henrymaxas defendants)

09/17/09

Second Amended Complaint filed (adding Exploitation of ElderClaim)

09/18/09

Third Amended Complaint Filed (designating Ethel Popowitz asthe Trustee of her trust)

11/02/09

Hearing on Defendants' Motion to Dismiss Alter Ego Claim

12/21/09

Hearing on Defendants' Motion for Rule 11 Sanctions

04/05/10

Court Denied Ethel and Marilyn's Motion for SummaryJudgment against B.A. Sundown

05/03/10

Order Entered Dismissing Alter Ego Claim with Prejudice

11/24/10

Order Entered Granting Sanctions Against Ethel and Marilyn andtheir Counsel

12/01/10

Order Entered Imposing $5,000 Rule 11 Sanctions Against Etheland Marilyn and Their Counsel

03/14/11

Order Entered Denying Request to Delete “With Prejudice”Language from May 3, 2010 Order

05/09/11

Order Entered Denying Ethel and Marilyn' s Motion to AmendComplaint

05/10/11

Ethel and Marilyn Filed a Petition for Writ Relative to $5,000Sanctions in Docket No. 58305

06/27/11-07/01/11

Jury Trial



09/21/11

Hearing on Ethel and Marilyn' s Motion for Attorneys Fees

09/23/11

This Court Entered a Stay of $5,000 sanctions in Docket No.58305

12/08/11

Appeal Filed

03/19/12

Hearing on Defendants' Motion for Attorney Fees 9

*5 IV. STANDARDS OF REVIEW

A. STANDARD OF REVIEW FOR AN ORDER GRANTING A MOTION TO DISMISS WHEN LEGAL ISSUES AREPRESENTED.

In considering an appeal from an order granting a motion to dismiss for failure to state a claim, this Court applies a rigorous, de

novo standard of review. 10 The court must construe Ethel and Marilyn' s alter ego claim liberally and draw every fair inference

in favor of Ethel and Marilyn. 11 Similarly, this Court reviews questions of law under the de novo standard of review. 12 In the*6 instant case, the dismissal of Ethel and Marilyn's alter ego claim raises a legal issue regarding whether the District Court

erred in applying the wrong legal standard.

B. STANDARD OF REVIEW FOR AN ORDER DENYING A MOTION TO AMEND.

This Court reviews an order denying a motion to amend for an abuse of discretion standard. 13 However, this Court reviews

questions of law under the de novo standard of review. 14 Here, the denial of Plaintiff's Motion to Amend involves legal issuesregarding whether Nevada's recognizes alter ego claims against sister corporations, so the proper standard is, in part, de novo.

V. FACTUAL BACKGROUND

Shapiro, a Las Vegas businessman, defrauded Ethel and Marilyn out of their life savings. Ethel is an elderly widow who spent

58 years as an “old-fashioned housewife” before her husband, Abe, passed away in 2006. 15 Abe took care of everything

financially for the family as Ethel focused on raising their children. 16 When Abe passed away, Abe left Ethel with a house

and a *7 $300,000 loan Abe had made to Shapiro. 17 Marilyn had an outstanding $100,000 loan with Shapiro. These funds

constituted their life savings. 18

Ethel, at 79-years-old, wrote the first check of her life when she went to pay her husband's funeral expenses. 19 Withina year of Abe's death, in the summer of 2007, 80-year-old widow Ethel and her 57-year-old daughter, Marilyn, agreed toShapiro's proposal to roll over their prior loans, totaling $400,000, into one of Shapiro's gas station/mini-marts, as with prior

loans. 20 However, when Ethel and Marilyn went by Shapiro's office to pick up the documentation, they were simply handedthree promissory notes (totaling $400,000) which had been executed by “B.A. Sundown, LLC” and signed by “Raymond

Shapiro, Manager.” 21 Ethel and Marilyn had never agreed to loan money to anyone other than Shapiro, had never heard of

“B.A. Sundown, LLC” and did not even know what a limited liability company was. 22 They asked Shapiro's staff for more



documentation (expecting a deed of trust or other *8 similar documents as with prior loans that Abe Popowitz had made to

Shapiro). 23 Documents were promised, but nothing was ever provided. 24

Nevertheless, Ethel and Marilyn were appeased and felt somewhat assured when the monthly interest-only payments began

arriving and continued to arrive for the next 20 months. 25 Then, in March of 2009, the payments stopped. 26 When that

happened, Marilyn called Shapiro, who told her that he did not have enough money to continue making monthly payments. 27

Since neither Ethel nor Marilyn had ever spoken to Shapiro about “B.A. Sundown, LLC,” 28 Marilyn asked Shapiro for more

information regarding that entity, but Shapiro would not answer any of her questions. 29 Shapiro proposed that Ethel and

Marilyn sign a Loan Modification Agreement deferring all interest payments for a period of three years. 30 Although Ethel andMarilyn did not know it then, discovery later revealed that B.A. Sundown was never capitalized, never had any assets, neverhad any income, and had $504 in its bank account at the time Shapiro asked Ethel and Marilyn to sign the Loan Modification

*9 Agreement. 31 Shapiro, it turned out, had caused B.A. Sundown to spend over $2.2 million that it had borrowed from Ethel

and Marilyn and eight others. 32 Thus, the proposed modification was simply a fraudulent delaying tactic.

Soon after the payments ceased, Ethel and Marilyn retained the law firm of Marquis Aurbach Coffing (“MAC”). 33 MAC sent

a demand letter to Shapiro indicating an intent to sue Shapiro personally under the alter ego theory. 34 Thereafter, a meetingwas held at Shapiro's request and documents were provided by Shapiro, ostensibly to demonstrate that there was no basis for analter ego claim. Those documents consisted of the following: (1) B.A. Sundown's Operating Agreement; (2) B.A. Sundown'sArticles of Organization; (3) B.A. Sundown's Bank Statement showing a balance of $504.17; (4) B.A. Sundown's CompiledFinancial Statements; and (5) a prior Assignment of the membership interest in B.A. Sundown from Shapiro to another Shapiro

entity (Bayside) which is controlled by another Shapiro entity (Henrymax). 35 Shapiro had executed the Assignment as both

assignor and assignee. 36

*10 Significantly, many documents were lacking. Absent were: (1) any corporate minutes; (2) books and records; (3) theoption to purchase that B.A. Sundown allegedly held; (4) any evidence of capitalization; and (5) any authorizations for Shapiro

to act on behalf of B.A. Sundown. 37 Based principally upon the fact that there was no evidence of capitalization, no minutes ofany corporate meetings, no evidence of anyone other than Shapiro being associated with B.A. Sundown, and an Assignment ofthe Membership Interest where Shapiro signed as both assignor and assignee, Ethel and Marilyn prepared and filed a Complaint,

which included an alter ego claim against Shapiro. 38

Shapiro filed a Motion to Dismiss, 39 contending that the allegations within Ethel and Marilyn's Third Amended Complaintwere insufficient to state a claim, relying solely upon the federal pleading standard set forth by the U.S. Supreme Court in Bell

Atl. Corp. v. Twombly 40 and Ashcroft v. Iqbal. 41 Ethel and Marilyn responded that Nevada is a notice-pleading state where

all that is required is a short and plain statement of the claim and that this Court had never *11 adopted Iqbal. 42 In spite of

this, the District Court adopted the federal pleading standard and granted the Motion to Dismiss. 43



Months after the hearing on Shapiro's Motion to Dismiss, the District Court signed Shapiro's version of the Order which

included the language “with prejudice.” 44 By virtue of signing Shapiro's proposed Order, the District Court dismissed Etheland Marilyn's alter ego claim “with prejudice” even though such relief was never requested by Shapiro and the issue was neverbriefed. In other words, the District Court ruled that Ethel and Marilyn were forever barred from suing Shapiro personallyregardless of what facts might be revealed in discovery. Ethel and Marilyn were not granted leave to amend or the opportunity

to conduct discovery. 45

Thereafter, the District Court, adding insult to injury, granted Shapiro's Motion for Rule 11 sanctions (for filing the alter ego

claim) and ordered MAC, Ethel and Marilyn to pay the $5,000 no later than May 16, 2011. 46

*12 During discovery, additional evidence came to light to support the alter ego claim against Shapiro. Ethel and Marilyn

learned that B.A. Sundown was never involved in any business activity, was never capitalized and never had any assets. 47 Infact, B.A. Sundown's only purpose was to hold a lease/option for Shapiro and one of Shapiro's other companies, I.M. Wolf,

LLC. 48 B.A. Sundown never had its own employees; it operated out of the same business location as Shapiro's 30 other LLCs;

and it never made any income or had any realistic expectancy of income. 49 When asked about B.A. Sundown's business

purpose, Shapiro could only mimic the operating agreement “to engage in any lawful activity.” 50 In running B.A. Sundown,Shapiro never received corporate authorization to execute notes, never met with anyone regarding the terms of the B.A. Sundownoperating agreement, never kept any corporate minutes and never consulted with anyone else regarding B.A. Sundown's business

decisions. 51

After litigation began, Shapiro appointed his friend, James Hodge, as B.A. Sundown's manager. 52 When subsequently askedabout B.A. Sundown, *13 Hodge admitted that he had never looked at B.A. Sundown's financial records, never attended anymeetings, was not a signatory on B.A. Sundown's accounts, had never heard of Bayside Derivatives (the sole member of B.A.

Sundown), and was never paid for acting as manager. 53 When asked at his deposition how he would make business decisions

on behalf of B.A. Sundown, Hodge replied that he would ask Shapiro. 54 In other words, Shapiro dominated and controlledB.A. Sundown at all times, even when a “new manager” took over, and there was never any distinction between Shapiro and

B.A. Sundown. 55

Intending to amend their Complaint to reassert the alter ego claim after discovery of this additional evidence, Ethel and Marilyn

filed a motion to amend the May 3, 2010 Dismissal Order, asking the District Court to delete the words “with prejudice.” 56 TheDistrict Court denied that motion and threatened Ethel and Marilyn's counsel with sanctions if they went forward with the aspect

of their pending Motion to Amend Complaint which sought to reassert the alter ego claim. 57 Faced with this intimidation, Etheland Marilyn withdrew that aspect of their Motion to Amend, but nevertheless went forward with their attempt to amend theComplaint to assert a breach of contract claim against Shapiro, unjust enrichment against Shapiro and one of his other entities(for *14 which B.A. Sundown spent $2.2 million of borrowed money) and an alter ego claim against I.M. Wolf, a corporation

for which B.A. Sundown is a mere instrument to operate its business and conspiracy. 58 At the hearing on the Motion to Amend,the District Court demonstrated open hostility toward Ethel, Marilyn and their counsel, basically concluding that these claims

were nothing but a clever maneuver to reassert the alter ego claim and therefore denied the Motion to Amend in its entirety. 59



As a result, the only claim that remained was a breach of contract claim against B.A. Sundown, a shell company that neverhad assets or income.

To finalize the case so an appeal could be filed, Ethel and Marilyn filed a Motion for Summary Judgment against B.A.

Sundown. 60 Since B.A. Sundown had admittedly executed the promissory notes and defaulted, summary judgment shouldhave been a straightforward proposition. However, the District Court denied that motion without prejudice based upon theasserted defense of commercial impracticability, which was based on the argument that the real estate recession was justification

for not repaying Ethel and Marilyn. 61 Although the District Court acknowledged that such a defense had doubtful validity,

it remarked that the defense should at least have an opportunity to *15 develop this defense in discovery. 62 (This attitudeon the part of the District Court stands in stark contrast to its refusal to allow Ethel and Marilyn the opportunity to conductdiscovery to support their alter ego claim). The District Court remarked that Ethel and Marilyn could renew their motion after

completion of discovery. 63

After completion of discovery, Ethel and Marilyn renewed their Motion or Summary Judgment in an effort to obviate the need

for a jury trial. 64 The istrict Court refused to hear the motion even though the renewed motion was ade within the time period

for dispositive motions. 65 Consequently, Ethel and arilyn were forced to spend four days in a jury trial, which resulted in aerdict in Ethel and Marilyn's favor against B.A. Sundown - a shallow verdict f there ever was one.

After winning the trial, Ethel and Marilyn immediately filed a Motion for Attorney Fees based on the language of the promissory

notes. 66 After a hearing on September 21, 2011, the District Court has failed to rule on the motion. On December 26, 2011,Defendants filed their Motion for Attorney Fees, claiming that they had beat an Offer of Judgment they had served on Ethel

and Marilyn 67 *16 Although Defendants' Offer of Judgment was solely on behalf of the shell company, B.A. Sundown,and contained impermissible conditions requiring dismissal of all other Defendants, including Shapiro, and waiver of Etheland Marilyn's contractual rights, the District Court, at a hearing on March 19, 2012, indicated that the Offer of Judgment was

valid. 68 However, the District Court has never entered an order on either motion.

Shapiro' s Motion for Attorney Fees revealed that Shapiro allegedly spent $490,000 defending this case even though Ethel and

Marilyn simply wanted their $400,000 back. 69 This appeal followed.

Respondents take the position that this is a simple promissory note case and that it is simply “sour grapes” on the part of Etheland Marilyn about a risky investment having gone bad. However, the gaping hole in this argument is that Ethel and Marilynnever agreed to loan money to B.A. Sundown. Shapiro does not even claim that there was such an agreement. Rather, theclear and uncontroverted evidence is that Ethel and Marilyn agreed to loan money to Shapiro for use in one of his gas station/

mini-marts. 70 It was Shapiro who made the decision to deliver to Ethel and Marilyn promissory notes from B.A. Sundown - a

company Ethel and Marilyn had never even heard of prior to that point in time. 71 Ethel and Marilyn were too unsophisticatedto realize that *17 Shapiro could use those promissory notes as shields by contending that Ethel and Marilyn loaned money tothe LLC and that he had no personal liability whatsoever. If this were truly a simple promissory note case, then an agreementwould exist whereby Ethel and Marilyn agreed to loan money to B.A. Sundown - yet there is no such agreement.



Admittedly, Ethel and Marilyn were na%20ive about such transactions. They did not know what an LLC was; they did notknow the significance of receiving promissory notes from an LLC only; they did not know that they should have asked forfinancial statements; and they erroneously assumed that the loan would be like those Abe had made - that is, secured by theassets of a going concern; and they did not confirm that the funds were used in one of Shapiro' s gas station/mini marts as he

had promised. 72 In fact, Ethel had never heard of the name B.A. Sundown until the lawsuit was initiated - highlighting her

vulnerability. 73

*18 Needing funds in order to finance his $45,000 per month lease of vacant land and his option to purchase, 74 Shapiroborrowed $2,247,656 from ten individuals, including $400,000 from Ethel and Marilyn. The following is a list of B.A.

Sundown's liabilities as of December 31, 2009: 75

(The redacted names represent other “lenders” to B.A. Sundown whose identity has been concealed from Ethel and Marilyn.)Shapiro ran those funds through B.A. Sundown, LLC until the entire $2.2 million was exhausted. As of December 31, 2009,

B.A. Sundown's sole asset consisted of $1,203 in its bank account. The members' capital account was listed as follows: 76

*19 This capital account is negative $2,246,453 which is simply the difference between total loans payable, $2,247,656, andthe $1,203 in the bank account. In other words, B.A. Sundown was simply a shell operating on borrowed money.

Although Shapiro stated at his deposition that he had no particular business plan for B.A. Sundown and that he did not knowhow B.A. Sundown might come up with $15 million to exercise the option to purchase, presumably Shapiro did in fact intend,if everything came together, for the development of R Resorts, to step in and purchase the property personally or through oneof his other 30 LLCs. (It would have been easy to have B.A. Sundown assign the option to himself since Shapiro controlledboth sides of the transaction.) Shapiro surely had this intention. Otherwise, paying $2.2 million for the lease and the option topurchase made no sense whatsoever. But he intended to do this, presumably, only if there was a profit to be made by purchasingthe land and developing R Resorts. Had this gone forward, Shapiro would have benefitted handsomely - presumably to thetune of millions of dollars.

But there is always a risk associated with an option. When a person purchases an option, they have to pay a sum of money,and they are taking the risk that it might not be desirable or feasible to actually exercise the option and fork over the purchaseprice when the time arrives. If that occurs, they risk losing all the money they paid for the option. But Shapiro, by borrowing$2.2 million from other people and providing them with promissory notes from a shell LLC, took no risk whatsoever. He was

gambling with other people's *20 money where they stood to lose and he stood to gain. Heads I win - tails you lose. 77

In other words, this is not a simple promissory note case. Fraud was committed by Shapiro at the moment he provided Etheland Marilyn with promissory notes from an assetless LLC and when he later took the position that Ethel and Marilyn' s onlyrecourse was against that LLC. Through this scheme, Shapiro defrauded Ethel and Marilyn of their life savings.

VI. SUMMARY OF ARGUMENT.

This case represents a miscarriage of justice on three separate levels. The first miscarriage began when Shapiro defrauded Etheland Marilyn, two elderly women with zero business experience, out of their life savings by borrowing $400,000 and giving



them promissory notes from a shell company (B.A. Sundown), which was never capitalized, never had any assets, and simplyserved as a vehicle by which Shapiro spent money he had borrowed from others.

Discovery revealed that Shapiro is the Bernie Madoff of Nevada. What was the source of the interest-only payments that were

paid to Ethel and Marilyn from August, 2007 to February, 2009? Money borrowed from others. 78 *21 Shapiro made interestpayments to Ethel and Marilyn for a period of time, luring them into thinking that they had made a sound investment. But

Shapiro used money borrowed from others to make those payments. 79 This is just what Bernie Madoff did. Madoff dupedinvestors by paying them a “return” which was actually money invested by other investors. Similarly, Shapiro duped lenders bypaying them a “return” which was actually money loaned by other lenders. Ethel and Marilyn are embarrassed by how easilythey were misled by Shapiro, but they were not the only ones.

The second miscarriage of justice occurred when Ethel and Marilyn sought justice within the Nevada judicial system and werevictimized by the ruthless aggression of Shapiro's chosen counsel, Pat Lundvall. Even before the lawsuit was filed, Lundvallthreatened Ethel and Marilyn with Rule 11 sanctions if they dared to name Shapiro as a defendant, and she followed throughwith those threats. She also sought sanctions against Ethel and Marilyn's counsel, in an attempt to intimidate counsel intowithdrawing from the case. Among other things, Lundvall ran up $490,000 in attorney fees and costs defending a case in which

Ethel and Marilyn were simply seeking a return of their $400,000. 80

*22 As if this was not enough, the third (and most crucial) miscarriage of justice occurred when the District Court dismissedEthel and Marilyn's alter ego claim against Shapiro and dismissed the claim “with prejudice” under the heightened federalpleading standard which has never been adopted in Nevada. Months later, the District Court signed an order dismissing thealter ego claim “with prejudice” under the pretense of NRCP 41 - which was inapplicable as Defendants moved for dismissal

under NRCP 12(b). 81 The District Court also refused to alter that decision despite overwhelming evidence to support the alterego claim. The District Court then granted Shapiro's subsequent Motion for Rule 11 Sanctions assessing $5,000 in attorneyfees against Ethel and Marilyn as well as their attorneys for bringing the alter ego claim. The District Court showed evident

bias in Shapiro's favor. 82

*23 The District Court's errors were compounded with subsequent errors. irst, it was error to dismiss the alter ego claim. Thiserror was compounded hen the District Court dismissed that claim with prejudice. That error was in urn compounded when theDistrict Court denied Ethel and Marilyn's Motion to mend Complaint after substantial evidence was discovered demonstratingiability on the part of Shapiro and several of his other LLCs. All of these rrors were further compounded when the DistrictCourt ordered Rule 11 anctions against Ethel and Marilyn for filing the alter ego claim in the first lace.

Rule 1 of the Nevada Rules of Civil Procedure provides that, “These rules... shall be construed and administered to securethe just, speedy and inexpensive determination of every action.” From the moment that the district court dismissed Ethel andMarilyn's alter ego claim with prejudice until now, the standards of Rule 1 have been ignored. Ethel and Marilyn are not lookingfor a pound of flesh. They simply want justice. They want their money back and other damages that they have suffered as aresult of Shapiro's fraud.

*24 VII. LEGAL ARGUMENT







A. THE DISTRICT COURT ERRED IN DISMISSING ETHEL AND MARILYN'S ALTER EGO CLAIM UNDER ANEW FEDERAL STANDARD.

For more than 50 years, attorneys and judges have abided by this Court's pronouncement that, “Nevada is a notice-pleading

jurisdiction and liberally construes pleadings to place into issue matter which is fairly noticed to the adverse party...” 83 To

plead a claim for relief a party must include (i) a statement of the claim, and (ii) a demand (or prayer) for relief. 84 Undernotice-pleading, the “complaint must set forth sufficient facts to establish all necessary elements of a claim for relief...so that

the adverse party has adequate notice of the nature of the claim and the relief sought.” 85

Nevada's notice-pleading standard permits pleading conclusions of law or conclusions of fact “so long as the pleading gives fair

notice of the nature and basis of the claim.” 86 In Crucil, the plaintiff alleged the defendant had actual knowledge of a hazardous

condition. 87 Whether a party has actual knowledge is a conclusion. 88 This Court accepted the pleading of a conclusion *25

and found the complaint “was sufficient on its face to set forth a valid claim upon which relief could be granted.” 89 This Courtemphasized that:

A pleading need only contain “a short and plain statement of a claim showing that the pleader is entitled to relief”, N.R.C.P.8(a). In this regard, the pleading of conclusions, either of law or fact, is sufficient so long as the pleading gives fair notice

of the nature and basis of the claim. 90

By alleging that the defendant had actual knowledge of the downed condition of the stop sign, Crucil gave fair notice to the

defendant of the nature and basis of the negligence claim. 91 “Discovery and other pretrial procedures may disclose relevantstatements and possibly other facts which would be sufficient to support the conclusion that the city had knowledge of the

downed sign.” 92 “For pleading purposes, though, appellants' complaint satisfie[d] the requirements of N.R.C.P. 8.” 93

1. Ethel and Marilyn Satisfied Their Pleading Burden Under Nevada Law.

Ethel and Marilyn satisfied their burden for pleading their alter ego claim by asserting the following allegations:• Shapiro operates his business ventures through over 30 different LLCs;

*26 • B.A. Sundown failed to make the required payments under the B.A. Sundown I Note and the B.A. Sundown II Notesto Ethel and Marilyn;

● At the time of B.A. Sundown's formation, Shapiro owned all membership interests in B.A. Sundown; however, as assignorand assignee, Shapiro transferred his interests in B.A. Sundown to other entities he controls;

Shapiro controlled B.A. Sundown;

● Shapiro influenced and governed B.A. Sundown;

● Shapiro had a unity of interest and ownership with B.A. Sundown such that Shapiro was inseparable from B.A. Sundown;

● B.A. Sundown was undercapitalized to the extent that it could not meet its obligations; and

● Adherence to the corporate fiction of B.A. Sundown would result in an injustice to Ethel and Marilyn allowing Shapiro,

through his operation of more than 30 LLCs from the same business location, to simply walk away. 94






This Court has consistently held that the following factors must be met in order to establish an alter ego claim:(1) the corporation must be influenced and governed by the person asserted to be the alter ego;

(2) there must be such unity of interest and ownership that one is inseparable from the other; and

(3) the facts must be such that adherence to the corporate fiction of a separate entity would, under the circumstances, sanction

[a] fraud or promote injustice. 95

*27 Importantly, “[t]here is not a litmus test for determining when the corporate fiction should be disregarded; the result

depends on the circumstances of each case.” 96

Undercapitalization, where it is clearly shown, is an important factor in determining whether the doctrine of alter ego shouldbe applied. However, in the absence of fraud or injustice to the aggrieved party, it is not an absolute ground for disregarding

a corporate entity. 97

Accordingly, in the presence of fraud or injustice to the aggrieved party (i.e., non-payment of a promissory note),

undercapitalization is a vital and perhaps absolute ground for disregarding the corporate entity. 98 Nevada's recognition that“undercapitalization” is an important factor, along with Nevada's recognition that “[t]here is no litmus test for determiningwhen the corporate fiction should be disregarded; the result depends on the circumstances of each case,” justifies Ethel andMarilyn's filing of their alter ego claim.

Shapiro set up shell LLCs with no capitalization, no stock, no corporate documents, and acted as the sole member. 99 Shapiro

ignored his obligation to keep corporate records. He borrowed $2.2 million but never generated even one dollar of revenue. 100

While generating no revenue, B.A. Sundown burned *28 through $2.2 million of borrowed funds. 101 As the sole memberof the shell, single-purpose LLCs, Shapiro operated nearly 30 different LLCs from the same business location and shared

employees among his LLCs. 102 To hide deeper from personal liability, Shapiro transferred his interests in B.A. Sundown to

his other LLCs without consideration. 103 Shapiro operated his LLCs as facades for his personal business.

In Nevada, plaintiffs asserting an alter ego claim routinely allege the three factors set forth in LFC Marketing. Here, Etheland Marilyn went beyond this and alleged undercapitalization and self-dealing by Shapiro. Ethel and Marilyn submit that theirallegations were sufficient as a matter of law and that dismissal of the alter ego claim was error. This error was compounded

when the District Court failed to give Ethel and Marilyn an opportunity to amend or to conduct discovery. 104

2. The District Court Erred by Applying the Twombly/Iqbal Standards.

Until recently, the federal pleading standard was similar to Nevada' s notice-pleading standard. 105 In 2009, the United StatesSupreme Court revised its dismissal standard under Fed. R. Civ. P. 12(b)(6), permitting dismissal *29 unless the claim is

plausibly based upon the factual allegations in the complaint - a more difficult standard to satisfy. 106 First, in Twombly,the court addressed Rule 8(a)(2) pleading requirements in the context of a conspiracy claim under Section 1 of the ShermanAct. The Court explained in Twombly that a plaintiff must plead a set of facts “plausibly suggesting (not merely consistent

with)” a Sherman Act violation to survive a motion to dismiss. 107 Twombly cautioned that it was not outright overruling the

foundational “notice pleading” case construing Fed. R. Civ. P. 8(a)(2). 108

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The Ninth Circuit subsequently noted that the Supreme Court “appeared to signal that Twombly should not be read as effecting

a sea change in the law of pleadings.” 109 In Ericson v. Pardus, a Supreme Court case decided shortly after Twombly, the Court

noted that “[s]pecific facts are not necessary” for pleadings to satisfy Rule 8(a)(2). 110 Much confusion accompanied the lower

*30 federal courts' initial engagement with Twombly. 111 First, Twombly contained some indications that the Court intended

to limit its holding to Sherman Act cases. 112 The Ninth Circuit concluded that, at least for purposes of antitrust cases, Twombly

abrogated the usual “notice pleading” rule. 113 The D.C. Circuit noted disagreement among the circuits about Twombly's import

and concluded that the case “leaves the long-standing fundamentals of notice pleading intact.” 114

On May 18, 2009 - ten days before Ethel and Marilyn filed their alter ego claim - the U.S. Supreme Court set forth a “two-pronged” approach to 12(b) motions: (1) the court should identify and ignore all “conclusions” from the complaint not entitledto be taken as true for the purposes of a motion to dismiss; and (2) the court should apply the “plausibility” standard to the

complaint's remaining allegations. 115

*31 Twombly and Iqbal have been the subject of much criticism. United States senators and state courts have both rejectedthis new and drastic change in pleading requirements. Following Iqbal, Senator Arlen Specter introduced a bill to turn theclock back by reinstating “the standards set forth by the Supreme Court of the United States in Conley v. Gibson [notice-

pleading].” 116 Moreover, the Washington Supreme Court refused to replace its notice-pleading standard with the federal

plausibility standard, 117 reasoning that the federal plausibility standard was predicated on policy determinations specific tofederal trial courts, holding that neither party had demonstrated that the federal “policy determinations hold sufficiently true in

the Washington trial courts to warrant such a drastic change in court procedure.” 118 The Washington Supreme Court notedthat even if the policy considerations were present, the court would be hesitant to effectively rewrite the pleading standard based

on policy considerations. 119 The appropriate forum for revising the rules is the rule-making process, which permits policy

considerations to be raised, studied, and argued in the legal community and the community at large. 120 (Contrast this cautionedapproach with the District Court's decision to unilaterally change Nevada's rules.)

*32 Importantly, only the Nevada Supreme Court can revise or reconsider its prior interpretation of the rules through aproceeding on this Court's administrative docket, even if a lower court believes that subsequent events may call into question a

prior interpretation. 121 This Court has never adopted the drastic change in court procedure as outlined in Twombly and Iqbal,and the District Court's attempt to override long-standing Nevada law was clear error.

Without warning or an opportunity for Ethel and Marilyn to comply with new the federal “plausibility” standard, 122 the DistrictCourt decided to overrule Nevada's notice-pleading standard and dismissed Ethel and Marilyn's alter ego claim with prejudice.

Yet, only this Court has the authority to revise or reconsider its prior interpretation of the rules. 123 The District Court's dismissalwas based upon an erroneous view of the law. Ethel and Marilyn's alter ego *33 claim satisfied Nevada's notice-pleadingstandard - an argument Defendants never disputed.

B. THE COURT ERRED IN DISMISSING ETHEL AND MARILYN'S CLAIM WITH PREJUDICE.

The District Court compounded its error by dismissing Ethel and Marilyn's alter ego claim with prejudice. Nevada favors a

trial on the merits of a claim. 124 Courts overwhelmingly agree that “[d]ismissal without leave to amend is improper unless it

is clear, upon de novo review, that the complaint could not be saved by any amendment.” 125 In fact, when granting a motionto dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was

made, unless amendment would be futile. 126 The Ninth Circuit has “repeatedly stressed that the court must remain guided by

‘the underlying purpose of Rule 15...to facilitate decision on the merits, rather than on the pleadings or technicalities.” 127




*34 Leave to amend is essential where a significant change, with broad reaching implications, alters the court's pleading

practice. 128 In Moss, the Ninth Circuit concluded that the complaint was insufficient under Twombly and Iqbal, but held that

the plaintiffs should have the opportunity to amend their complaint, noting that the pleading standards had recently changed: 129

Prior to Twombly, a complaint would not be found deficient if it alleged a set of facts consistent with a claim entitling the plaintiffto relief. See Conley, 355 U.S. at 45-46, 78 S.Ct. 99. Under the Court's latest pleadings cases, however, the facts alleged in acomplaint must state a claim that is plausible on its face. As many have noted, this is a significant change, with broad-reachingimplications. See, e.g., A. Benjamin Spencer, Plausibility Pleading, 49 B.C. L. Rev. 431, 433 (2008) (characterizing Twombly

as an abrupt and significant departure from the long-standing tradition of liberal notice pleading in the federal courts). 130

Ethel and Marilyn filed their alter ego claim 10-days after this Court's Iqbal decision - without this Court's guidance regarding

Iqbal's impact on Nevada state court pleadings. 131 Yet, despite Defendants never requesting a dismissal with prejudice either in

their Motion to Dismiss or at the hearing, the District Court took it upon itself to dismiss the alter ego claim with prejudice. 132

*35 Certainly, Plaintiffs should be given an opportunity to replead if this Court were to adopt this heightened pleading standard.

The District Court clearly abused its discretion in dismissing the alter ego claim with prejudice. Not only do courtsoverwhelmingly hold that dismissal with prejudice is improper at such an early stage, but the District Court's *36 significantdeparture from Nevada's notice-pleading requirements warranted dismissal without prejudice in order to give Ethel and Marilynan attempt to satisfy the District Court's new standard. The District Court's dismissal with prejudice deprived Ethel and Marilynof their day in court and a decision based on the merits.

Moreover, Defendants never even requested a dismissal with prejudice. The issue was neither briefed by the parties, noraddressed by the parties or the District Court at the November 2, 2009 hearing. Rather, Shapiro' s counsel slipped the “withprejudice” language into the proposed Order. The District Court then signed that Order and later refused to modify it. Dismissalwith prejudice was clear error.

C. THE DISTRICT COURT ABUSED ITS DISCRETION IN DENYING ETHEL AND MARILYN'S MOTION TOAMEND.

Through discovery, Ethel and Marilyn gathered a wealth of evidence supporting the alter ego claim as well as additionalclaims against Shapiro, Bayside Derivatives, Henrymax, LLC and I.M. Wolf, another entity operated and controlled by Shapiro.Therefore, Ethel and Marilyn filed a Motion for Leave to Amend their Complaint.

A district court's decision denying leave to amend is reviewed under an abuse of discretion standard. 133 In the absence of

attempts to delay on bad faith on the part of the movant, leave to amend should be freely given. 134 If a court *37 refusesto grant leave without a reason - especially when underlying facts and circumstances relied upon may be a proper subject ofrelief appearing - the denial is not an exercise of discretion; it is an abuse of that discretion and inconsistent with the spirit of

the Nevada Rules of Civil Procedure. 135

Discovery revealed the following evidence which justified amending the complaint:

● B.A. Sundown was never involved in a business (other than the lease/option which was a financial obligation, not a

business). 136

● B.A. Sundown was never capitalized. 137


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● B.A. Sundown never had any assets except the option (which is actually a liability). 138

● B.A. Sundown never had any income or expectancy of income. 139

● B.A. Sundown never had a separate business location from Shapiro. 140

• All of Shapiro's companies work out of the office at 2460 Professional Court, Suite 120, under the name Continental Group,

which is not a separate entity, but simply a name used to identify all of Shapiro's LLCs. 141

*38 ● B.A. Sundown never had its own employees. 142

● Everyone who worked at Shapiro's office worked for him and took instructions from him. 143 (Cheryl Huseby, office manager,repeatedly referred to herself as “working for Mr. Shapiro” as opposed to working for B.A. Sundown or one of the other 20

plus entities working out of that office.) 144

● B.A. Sundown was formed exclusively by Shapiro and for Shapiro. 145

● There is no subscription agreement whereby the sole member of B.A. Sundown, LLC agreed to capitalize the company and

no capital was ever paid in. 146

● There are no organizational minutes. 147

● Shapiro could not say what the business purpose was for forming B.A. Sundown except, “to engage in any lawful activity.” 148

● Shapiro Family Trust, the only founding member of B.A. Sundown, gave no consideration for its 100 membership units. 149

● There are no minutes whereby Shapiro was elected manager. 150

*39 • There are no minutes of any membership meetings or manager meetings. 151

• Shapiro decided on his own which one of his LLCs would be the signer of the Promissory Note for Ethel and Marilyn's

money. 152

• Shapiro never received corporate authorization to execute Ethel and Marilyn's Promissory Notes on behalf of B.A.

Sundown. 153

• Two years before “borrowing” Ethel and Marilyn's money, Shapiro had caused B.A. Sundown to enter into a lease of vacant

land for $45,000/month. 154

• A year before “borrowing” Ethel and Marilyn's money, Shapiro had caused B.A. Sundown to enter into an Option to Purchasethat vacant land. The option cost was $400,000, and the purchase price ranged from $15 to $19 million (depending upon when

the option was exercised). 155



• All lease payments, the option cost and investor's monthly payments (over $2 million) were paid for with money Shapiro

borrowed from Ethel, Marilyn and eight others. 156

• According to Shapiro, B.A. Sundown had no source of funding to ever purchase the property, and Shapiro had no idea how

the option would be exercised. 157

• Another Shapiro company, I.M. Wolf, LLC, owned an adjoining parcel and planned to develop “R Resorts,” which wasanticipated to include the land upon which B.A. Sundown held the option. In *40 other words, the Lease and Option were for

the sole benefit of I.M. Wolf, LLC and its sole owner, Shapiro. 158

• After Shapiro terminated B.A. Sundown's Option to Purchase on March 10, 2010, he turned around and negotiated a Right

of First Refusal for the same land on behalf of I.M. Wolf. 159

More evidence came to light. In the spring of 2010, James Hodge suddenly replaced Shapiro as Manager of B.A. Sundown onthe Secretary of State records. The facts surrounding this replacement serve as a glaring example of how Shapiro influencedand governed B.A. Sundown:• The only reason that James Hodge became Manager of B.A. Sundown is because Shapiro asked him to assume this position

after this lawsuit was filed. 160

• When asked the business purpose for making Hodge Manager, Shapiro could not answer the question. 161

• When asked who made the decision to make Hodge the manager, Shapiro responded that he “imagines” it was the membership

of B.A. Sundown, but then said he could not recall who makes up that membership. 162

• No one but Shapiro spoke to Hodge about becoming Manager of B.A. Sundown. 163

• As manager of B.A. Sundown, Hodge admitted he had never done anything. 164

*41 • At his deposition, Hodge did not know the identity of members of B.A. Sundown. 165

• Hodge never attended any B.A. Sundown meetings. 166

● Hodge never looked at B.A. Sundown's financial records. 167

● Although Hodge was supposedly the Manager, B.A. Sundown's attorney claimed Hodge was not a representative of B.A.

Sundown. 168

● Even though he was supposedly the Manager, Hodge was never a signatory on any bank account for B.A. Sundown. 169

● In spite of the fact that Hodge was named as the Manager of B.A. Sundown in March 2012, Hodge knew nothing about an

offer of judgment B.A. Sundown served on Ethel and Marilyn in November 2010. 170

Note: Text of footnote 170 missing in original document



● At his deposition, Hodge testified that he had never heard of Bayside Derivatives, the sole member of B.A. Sundown,

LLC. 171

• Hodge was never paid anything as Manager of B.A. Sundown 172

• If considering a business decision on behalf of B.A. Sundown, Hodge would ask Shapiro what to do. 173

*42 Thus, the appointment of Hodge as Manager was a transparent attempt by Shapiro to distance himself from B.A. Sundown.The result, however, is an unequivocal demonstration that Shapiro has always been in total control of B.A. Sundown.

Based upon this newly discovered evidence, Ethel and Marilyn sought to amend their Complaint. In their proposed AmendedComplaint, Ethel and Marilyn asserted claims against Shapiro, B.A. Sundown, I.M. Wolf, Henrymax and Bayside Derivatives,which included the following: (1) alter ego, breach of contract, unjust enrichment, conspiracy and punitive damages againstShapiro; (2) alter ego, unjust enrichment and conspiracy against I.M. Wolf; and (3) alter ego and conspiracy claims against

Bayside Derivatives and Henrymax, LLC. 174 Abusing its discretion and contrary to the spirit of the Nevada Rules of Civil

Procedure, the District Court denied Ethel and Marilyn' s Motion to Amend in toto with the following Order: 175

The court having reviewed the pleadings and after hearing oral argument hereby DENIES the Motion to Amend Complaint. TheCourt has reviewed the proposed amended complaint and determines that any amendment by the Plaintiff to add the additionalcauses of action and new entities would be futile. Accordingly leave to amend is DENIED. Allum v. Valley Bank, 849 P.2d297. Further, the Court having reviewed the pleading in its entirety concludes that [sic] Plaintiffs most recent attempt to amendthe complaint is simply an attempt to circumvent the court's prior ruling regarding the alter ego claim. All the allegations inthe new pleading attempt to pierce the corporate veil of B.A. *43 Sundown, and to introduce a new entity, I.M. Wolf, LLC

wherein Nevada has never recognized such an attempt as proper. 176

In other words, the District Court concluded that Ethel and Marilyn's “attempt to amend the complaint is simply an attempt

to circumvent the court's prior rulings regarding the alter ego claim.” 177 This statement comes from the District Court's priorerroneous ruling and its prejudgment of the issues, not a ruling on the merits. Thus, the District Court clearly abused itsdiscretion.

In denying leave to amend, the District Court never assessed the relevant question on the motion to amend: whether claimsfor relief had been stated. Instead, the District Court pre-judged the case and determined that Ethel and Marilyn's claims for

breach of contract, unjust enrichment and conspiracy were attempts to plead around the alter ego doctrine. 178 In coming tothis erroneous determination, the District Court ignored the fact that it was Shapiro who borrowed Ethel and Marilyn's money.Ethel and Marilyn never agreed to loan money to B.A. Sundown. They made the loan to Shapiro. The loan was for the benefit ofShapiro and his companies. The moment when Shapiro provided Ethel and Marilyn with a promissory note from B.A. Sundown

is when the fraud was committed. But none of this mattered to the District Court. 179

*44 Moreover, Shapiro, as the owner of I.M. Wolf, was unjustly enriched when Ethel and Marilyn's monies were used

solely for I.M. Wolf's gain, without I.M. Wolf incurring any liability. 180 Although the District Court found that these claimswere designed to circumvent the prior alter ego dismissal, the District Court never explained how breach of contract, unjustenrichment and conspiracy claims are the same as an alter ego claim.

A party should be “afforded an opportunity to test his claim upon the erits,” rather than being denied amendment based upon the

District Court's biased opinions. 181 The finder of fact, not the District Court judge, must etermine whether Shapiro and Etheland Marilyn had a contract, to what extent hapiro received benefits and whether there was a conspiracy. Denying the Motion to





Amend, based on speculation that Ethel and Marilyn were attempting o circumvent the alter ego dismissal, the District Courtcommitted an abuse of iscretion.

Additionally, the District Court abused its discretion in denying Ethel and Marilyn's amendment to assert an alter ego claimagainst I.M. Wolf - an entity owned and controlled by Shapiro. As alleged in the proposed Amended Complaint, B.A. Sundownwas merely an instrumentality, agency, conduit, or adjunct of I.M. Wolf in accomplishing Shapiro and I.M. Wolf's dream of

building R Resorts. 182 Stated differently, I.M. Wolf and B.A. Sundown's *45 personalities were merged. Overwhelmingauthority in Nevada and California holds that where a corporate entity is “so organized and controlled, and its affairs are soconducted, as to make it merely an instrumentality, agency, conduit, or adjunct of another corporation,” alter ego liability

extends to the controlling corporation. 183 The equities of holding a controlling corporation liable have been well stated:

[I]t would be unjust to permit those who control companies to treat them as a single or a unitary enterprise and then assert

their...separateness in order to commit frauds and other misdeeds with impunity. 184

Here, the District Court denied Ethel and Marilyn's amendment as futile because “Nevada has never recognized such an attempt

as proper.” 185

Contrary to the District Court's statement, for more than 50 years, Nevada has recognized that one corporation may be the

alter ego of another. 186 In Frank McCleary Cattle Company, this Court held that “under [the] circumstances, the trial courtwas justified in disregarding the corporate fiction *46 and in holding the cattle company to be the alter ego of the timber

company.” 187 Thus, one corporation was held to be the alter ego of another. 188 This Court explained that where one corporateentity is “so organized and controlled, and its affairs are so conducted, as to make it merely an instrumentality, agency, conduit,

or adjunct of another corporation,” alter ego liability extends to the controlling corporation. 189

Here, Ethel and Marilyn alleged that B.A. Sundown was organized and controlled, and its affairs conducted, as to make it merelyan instrumentality, agency, conduit, or adjunct of I.M. Wolf in obtaining ownership of property for the purpose of building

R Resorts. 190 B.A. Sundown and I.M. Wolf shared the following, among other things: (1) employees; (2) rental space; (3)

corporate manager; (4) interests in adjoining property; and (5) a unity of interest - the building of R Resorts. 191 R Resorts wasI.M. Wolf's project - I.M. Wolf held 50% of the land, applied for zoning, submitted documents to the county, made the plans and

wanted to incorporate the land on which B.A. Sundown had an option to purchase. 192 Shapiro and I.M. Wolf conjured up a planto form an *47 empty LLC (B.A. Sundown) which would enter into the Option to Purchase with borrowed money that Shapiro

and I.M. Wolf would not have to repay. 193 In actuality, B.A. Sundown was signing documents on behalf of I.M. Wolf - acting

as a mere conduit. 194 Both entities, I.M. Wolf and B.A. Sundown, were controlled and directed by one person - Shapiro. 195

Insulating I.M. Wolf would defeat the alter ego theory in its entirety, allowing individuals to create multiple LLCs and rundifferent aspects of a single venture through each one. This Court has previously recognized the validity of Ethel and Marilyn'sclaim. Thus, the District Court abused its discretion in denying Ethel and Marilyn's Motion to Amend their Complaint.

D. IT WAS ERROR FOR THE DISTRICT COURT TO IMPOSE SANCTIONS AGAINST ETHEL AND MARILYNAND THEIR COUNSEL FOR FILING THE ALTER EGO CLAIM.

In their pending Petition, Docket No. 58305, Ethel and Marilyn have set forth their argument that it was error for the DistrictCourt to find that Ethel and Marilyn and their counsel violated Rule 11 resulting in $5,000 in sanctions. Suffice it to say, sinceit was error to dismiss Ethel and Marilyn' s alter ego claim, it was certainly error to impose Rule 11 sanctions for asserting thatclaim. At the very least, Ethel and Marilyn's performed a reasonable inquiry and had a good faith basis for asserting that claim.Beyond that, Ethel and *48 Marilyn's incorporate their arguments set forth in Supreme Court Docket No. 58305.



E. DUE TO THE OBVIOUS BIAS OF JUDGE LEAVITT, THIS CASE SHOULD BE ASSIGNED TO ADIFFERENT DISTRICT COURT JUDGE.

On remand, a case can be assigned to a new judge where there are instances of judicial misconduct. 196 Here, the District Courtshowed evident bias in favor of Shapiro at every stage of the litigation and assumed a protective attitude in Shapiro' s favorthroughout this case. Among other things, the District Court:

• Took it upon itself to change Nevada Law by applying the Twombly standard.

• Made the contention that there are cases dismissing alter ego claims under the Twombly standards 197 even though there areno such cases.

• Dismissed Ethel and Marilyn's alter ego claim without giving leave to amend or an opportunity to conduct discovery.• Dismissed Ethel and Marilyn's alter ego claim with prejudice.

• Imposed sanctions against Ethel and Marilyn and their counsel for asserting the alter ego claim.

• Refused to grant summary judgment against B.A. Sundown (because it wanted to give Shapiro the opportunity to conductdiscovery as to commercial impracticability even though it would not allow Ethel and Marilyn to conduct any discovery as

to alter ego). 198

*49 ● Allowed Shapiro time to conduct discovery on a baseless, non-applicable defense of commercial impracticability(which does not apply to promissory notes as a matter of law) but quickly dismissed Ethel and Marilyn's alter ego claim underthe federal pleading standard - a standard Nevada has never adopted.

● Threatened Ethel and Marilyn's counsel with further sanctions if they attempted to reassert the alter ego claim. 199

● Denied Ethel and Marilyn' s Motion for Leave to Amend without any justifiable basis. 200

● Lamented that Defendants were “put at an incredible disadvantage when Plaintiffs' persisted in attempting to overturn the

dismissal with prejudice.” 201

● Refused to order Defendants to reveal the names of other lenders to B.A. Sundown, so their depositions could be taken, even

though Defendants claimed, as their defense, that those other lenders had agreed to Shapiro' s requested deferment. 202

● Refused to sign an order shortening time so that Ethel and Marilyn's Re-noticed Motion for Summary Judgment onDefendants' “commercial impracticability” defense could be heard before trial in retaliation for Ethel and Marilyn filing a

Petition for Writ with this Court. 203

*50 ● When refusing to hear Ethel and Marilyn's re-noticed Motion for Summary Judgment, the district court commented,

“you're trying to prevent them from going forward with[out] any defense at all.” 204

● Threatened Ethel and Marilyn with mistrial and further sanctions if they compared Shapiro to Bernie Madoff saying, “I

thought that was the most outrageous thing.” 205



● The district court raised the appearance of impropriety by judging Marilyn during Marilyn's testimony by opining that Marilyn

was “pretending” during her testimony and that it was “almost embarrassing.” 206

• When counsel wanted to cross-examine Shapiro regarding certain redacted documents and other investors, the district courtresponded, “I would prefer that you would not call the witness on the stand a liar while he's sitting there. He has testified underoath, we have sworn testimony, and now you're saying we don't know whether its true. I mean, are you accusing him of perjury

now?” 207 The district court's comments concerning Shapiro stand in stark contrast to its prior statements accusing Marilyn of“pretending” while testifying to the extent that it was “embarrassing.”

• At trial, the district court refused to allow Ethel and Marilyn ask any question about the “other investors” despite Shapiro's

entire trial theme being based upon these “other investors.” 208 From opening statements, Shapiro's theme was that Ethel and

Marilyn were trying to “elbow their way to the front of the line and to be paid before the other investors in this case.” 209

• At trial, the district court refused to allow Ethel and Marilyn ask the investors' identities and whether these “other investors”were *51 “friends” or “family,” but later allowed Lundvall to ask the question after she had objected and prohibited Plaintiffs'

from inquiring into the same information. 210

The Judicial Canons are designed to guide the Nevada judiciary to maintain the highest standards of judicial conduct and to

provide a basis for regulating judicial conduct. 211 Relevant to actions outlined above, the District Court violated the judicialcanons that require judges to: (1) comply with the law; (2) promote confidence in the judiciary by avoiding impropriety and “theappearance of impropriety;” (3) demonstrate impartiality and fairness; (4) refrain from bias and prejudice, (5) ensure parties

the right to be heard; and (6) require disqualifications whenever impartiality might reasonably be questioned. 212

The foregoing acts on the part of the District Court constitute far more han decisions that are adverse to Ethel and Marilyn.These acts demonstrate hat the District Court made up its mind when the case began to protect Shapiro. Ethel and Marilyncannot explain why the District Court was so hostile toward hem, but the record leaves no doubt about the District Court's bias.Justice is not available to Ethel and Marilyn in Judge Leavitt's courtroom. For this *52 reason, on remand, Ethel and Marilynrespectfully request that this Court include instructions that this case be assigned to a different District Court judge.

*53 VIII. CONCLUSION

In the interest of justice, Ethel and Marilyn respectfully request that this Court reverse the district court with respect to:• The dismissal of the alter ego claim;

● The imposition of sanctions;

● The denial of Ethel and Marilyn's Motion for Leave to Amend their Complaint;

● Any ruling the district court might make relating to attorney fees; and

● All rulings restricting Ethel and Marilyn's rights to conduct discovery.

Ethel and Marilyn further request that this case be remanded with instructions to the Clerk to reassign this case to a differentDistrict Court judge and allow Ethel and Marilyn to file an amended complaint that conforms to the evidence and includesan alter ego claim.



Footnotes1 Appellants' Appendix (“AA“) 16:03324-03327.

2 AA 1:00034-00041.

3 AA 16:03311-03314.

4 AA 16:03306-03310.

5 AA 16:03300-03305.

6 AA 16:03324-03327.

7 AA 16:03311-03314; AA 16:03320-03323.

8 See Consol. Generator-Nev., Inc. v. Cummins Engine Co., Inc., 114 Nev. 1304, 971 P.2d 1251, 1256 (1998).

9 The District Court has not yet issued an order on this Motion for Attorney Fees.

10 Pack v. LaTourette, 277 P.3d 1246, 1248 (Nev. 2012).

11 Simpson v. Mars, Inc., 113 Nev. 188, 929 P.2d 966 (1997).

12 Frantz v. Johnson, 116 Nev. 455, 471, 999 P.2d 351, 361 (2000) (citations omitted).

13 See Stephens v. Southern Nevada Music Co., 89 Nev. 104, 105, 507 P.2d 138, 139 (1973) (reviewing a district court's decision to

deny a motion to amend for an abuse of discretion).

14 Frantz, 116 Nev. at 471, 999 P.2d at 361 (citations omitted).

15 AA 9:01918-01919.

16 Id.

17 AA 9:01921-01922.

18 As noted previously, one of Shapiro's LLCs, Mountain Vista, also owed $100,000 to Ethel which was later paid.

19 AA 9:01921.

20 AA 7:01439.

21 AA 4:00908, 00910 & 00923; explained at AA 7:01440.

22 Id.

23 Id.

24 Id.

25 Id.

26 Id.

27 Id.

28 Id.

29 Id.

30 Id.

31 AA 3:00445.

32 AA 7:01624 (submitted in paper form due to Confidentiality Agreement).

33 AA 7:01441.

34 AA 3:00598-0599.

35 AA 3:00416-00453.

36 AA 3:00441.

37 Id.

38 AA 1:00034-00041.

39 AA 2:00274-00288. Bayside and Henrymax were movants as well.

40 550 U.S. 544, 127 S.Ct. 1955 (2007).

41 556 U.S. 662, 129 S.Ct. 1937 (2009).

42 AA 2:00296; AA 6:01208-01211.

43 AA 2:00336.

44 AA 2:00331-00332; AA 2:00336.

http://www.westlaw.com/Link/Document/FullText?findType=Y&serNum=1999025261&pubNum=0000661&originatingDoc=I6a20aa448f5311e4b86bd602cb8781fa&refType=RP&fi=co_pp_sp_661_1256&originationContext=document&vr=3.0&rs=cblt1.0&transitionType=DocumentItem&contextData=(sc.Search)#co_pp_sp_661_1256










45 As it turned out, Ethel and Marilyn were able to gather an abundance of evidence to support their alter ego claim, but Shapiro was

successful in precluding Ethel and Marilyn from conducting much of their requested discovery on the basis that alter ego was no

longer part of the case.

46 AA 4:00714-00715; AA 6:01381. This sanctions issue has been challenged by both Ethel and Marilyn and by MAC, by writ petition

and is docketed in this Court as Case No. 58305.

47 AA 7:01425-01432.

48 AA 7:01425. (Shapiro claims the option as an asset, but $15 million would have been required to exercise that option, and B.A.

Sundown had nothing but borrowed money.)

49 AA 7:01425-01432.

50 AA 7:01426.

51 Id. at 01425-01432.

52 AA 7:01429.

53 AA 7:01429-01430.

54 AA 9:01845.

55 AA 7:01430.

56 See generally AA 6:01202-01264.

57 AA 6:01401-01402.

58 AA 7:01415-01462.

59 AA 14:03072-03081.

60 AA 4:00895-00923.

61 AA 5:01064-01076.

62 AA 14:03072-03081.

63 AA 5:01077.

64 AA 8:01626-01851.

65 See AA 15:03102-03107.

66 AA 12:02526-02544.

67 AA 13:02761-02979.

68 AA 14:02980-03013; AA 15:03234.

69 AA 13:02761-02979.

70 AA 7:1440.

71 Id.

72 AA 7:01437-01443; AA 8:1682-01683.

73 AA 8:01677.

74 AA 8:01771.

75 AA 7:01624.

76 AA 7:01623.

77 Even if there had been an agreement between Ethel and Marilyn on the one hand and B.A. Sundown on the other hand, the alter

ego claim should have been available to Ethel and Marilyn. The fact remains that B.A. Sundown was controlled and dominated by

Shapiro, he ran it for his own personal benefit, and the capitalization was zero. Thus, even if fraud had not been committed, even if

there had been a contractual agreement between Ethel and Marilyn and B.A. Sundown, the alter ego claim should still exist.

78 AA 10:02065-02066; 7:01624.

79 Id.

80 The number of instances where Lundvall exceeded ethical limits of appropriate advocacy are almost too numerous to mention. Among

other things, she continually threatened Ethel and Marilyn and their counsel (AA 2:00346-00393; AA 13:02761-02979); she accused

65-yr old Marilyn (at her deposition) of “coming on” sexually to Shapiro even though Shapiro said at his deposition that no such

thing ever happened (AA 8:01712; AA 8:01749); she asked Marilyn's brother, Ken, at his deposition, if he had anything to do with

the recent burglary of Shapiro's house, even though Shapiro, at his deposition, said he had no reason to suspect Ken (AA 11:02320;

AA 8:01749). These tactics obviously violated NRCP 4.4(a) which reads: “In representing a client, a lawyer shall not use means

that have no substantial purpose other than to embarrass, delay, or burden a third person, or use methods of obtaining evidence that

violate the legal rights of such a person.”

81 AA 2:00274-00288.



82 Among other things, the District Court refused to allow Ethel and Marilyn to conduct any discovery regarding the identity of other

individuals who, like Ethel and Marilyn, had loaned money to Shapiro and received promissory notes from B.A. Sundown (AA

10:02096-02097). After Defendants at trial made the theme of their case that the other lenders had agreed to the deferment, so Ethel

and Marilyn should be forced to agree as well, the District Court refused to allow Ethel and Marilyn to ask about those other investors

(AA 9:02103-02116). The District Court also refused to grant Ethel and Marilyn's summary judgment against B.A. Sundown even

though it was admitted that interest only payments had ceased in March, 2009 - instead forcing Ethel and Marilyn to go through a one-

week jury trial to obtain a judgment against a shell LLC (AA 5:01055-01056). The District Court refused to hear Ethel and Marilyn's

timely re-filed Motion for Summary Judgment (AA 15:03103-03106); and at trial, the District Court prejudged Marilyn's testimony

when it accused her of “pretending as though she knows nothing” and opining that Marilyn's testimony is “almost embarrassing” (AA

9:01970-01971).

83 Chavez v. Robberson Steel Co., 94 Nev. 597, 599, 584 P.2d 159, 160 (1978); see also Langevin v. York, 111 Nev. 1481, 907 P.2d

981 (1985).

84 NRCP 8(a).

85 Hay v. Hay, 100 Nev. 196, 198, 678 P.2d 672, 674 (1984).

86 Crucil v. Carson City, 95 Nev. 583, 585, 600 P.2d 216, 217 (1979).

87 Id.

88 Id.

89 Id.

90 Id. (emphasis added) (citations omitted).

91 Id.

92 Id. (emphasis added).

93 Id.

94 AA 1:00036-00039.

95 LFC Marketing Group, Inc. v. Loomis, 116 Nev. 896, 904, 8 P.3d 841, 846-847 (2000).

96 Id. (emphasis added).

97 Lipshie v. Tracy Inv. Co., 93 Nev. 370, 377, 566 P.2d 819, 823 (1977).

98 See id.

99 Id.; see also AA 7:01425-01432.

100 AA 3:00416-00453 (submitted in paper form only due to Confidentiality Agreement).

101 Id.

102 AA 3:00455-00508; see 7:01425-01432.

103 AA 3:00441.

104 AA 2:00334-00345.

105 Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

106 See Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949 (2009) (“To survive a motion to dismiss, a complaint must contain sufficient

factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ A claim has factual plausibility when the

plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct

alleged.”) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955 (2007)); Moss v. U.S. Security Serv., 572 F.3d

962, 972 (9th Cir. 2009) (“As many have noted, this is a significant change, with broad-reaching implications.”); McCurry v. Chevy

Chase Bank, FSB, 233 P.3d 861, 863 (Wash. 2010) (describing Iqbal as a “drastic change in court procedure.”).

107 Id. at 557, 127 S.Ct. 1955.

108 See id. at 561-62, 127 S.Ct. 1955.

109 Moss, 572 F.3d at 968.

110 Ericson v. Pardus, 551 U.S. 89, 93, 127 S.Ct. 2197 (2007) (citing Twombly (quoting Conley) for that proposition).

111 Moss, 572 P.3d at 968.

112 Twombly, 550 U.S. at 553 (“We granted certiorari to address the proper standard for pleading an antitrust conspiracy through

allegations of parallel conduct...”); Id. at 554-555 (“This case presents the antecedent question of what a plaintiff must plead in order

to state a claim under § 1 of the Sherman Act.”); Id. at 558-559 (discussing the expense of discovery in antitrust cases.”).

113 Kendall v. Visa U.S.A., Inc., 518 F.3d 1042, 1047 n. 5 (9th Cir. 2008) (stating that, at least for the purposes of antitrust cases, Twombly

abrogated the usual “notice pleading” rule.).

114 Aktieselskabet AF 21. November 2001 v. Fame Jeans, 525 F.3d 8, 15 & n.3 (D.C. Cir. 2008).



























115 Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950 (2009).

116 Notice Pleading Restoration Act, S. 1504, 111th Cong. (2009).

117 McCurry, 233 P.3d at 864.

118 Id. At 863 (emphasis added).

119 Id.

120 Id. at 864.

121 See Cullen v. Auto-Owners Ins. Co., 189 P.3d 344, 347 (Ariz. 2008) (“Because this Court has the final say in the interpretation

of procedural rules, only this Court can revise or reconsider its prior interpretation of the rules, even if a lower court believes that

subsequent events may call into question a prior interpretation.”).

122 Although the District Court remarked at a subsequent hearing that it had given Ethel and Marilyn an opportunity to amend their

complaint (AA 6:01386), this is not true. Ethel and Marilyn did file First, Second and Third Amended Complaints, but these were

filed for other reasons and all three pre-dated the November 2, 2009 hearing on Defendants' Motion to Dismiss the Alter Ego Claim.

123 See Cullen v. Auto-Owners Ins. Co., 189 P.3d 344, 347 (Ariz. 2008) (“Because this [State Supreme] Court has the final say in the

interpretation of procedural rules, only this Court can revise or reconsider its prior interpretation of the rules, even if a lower court

believes that subsequent events may call into question a prior interpretation.”).

124 Home Sav. Ass‘n v. Aetna Cas. and Sur. Co., 109 Nev. 558, 563, 854 P.2d 851, 854 (1993).

125 Moss, 572 F.3d at 972; Eminence Capital v. Aspeon, Inc., 316 F.3d 1048, 1053 (9th Cir. 2003); Stevens v. Premier Cruses, Inc., 215

F.3d 1237, 1239-1240 (11th Cir. 2000).

126 Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 246-247 (9th Cir. 1990).

127 Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc) (ellipses in original). In this case, the District Court commented at the

February 14, 2011 hearing that it recalled having granted Ethel and Marilyn leave to amend their alter ego claim. However, a review

of the record reveals that no such leave was granted. See AA 5:01384-01414.

128 Moss, 572 F.3d at 972.

129 Id.

130 Id.

131 AA 1:00001-00006.

132 See AA 2:00274-00288; AA 2:00334-00335. The District Court made several statements which indicate confusion on its part. Months

after the hearing on Shapiro's Motion to Dismiss, during the hearing of Ethel and Marilyn's Motion for Reconsideration, the issue

of whether dismissal should have been with or without prejudice was discussed for the first time. During that hearing, the District

Court for the first time articulated a basis for dismissing the alter ego claim with prejudice and in doing that relied upon the wrong

legal standard:

“THE COURT: Well, the rules - Rule 41 makes it pretty clear that it would have been with prejudice. I mean, I have to assume that

you know what the rules are.” (AA 4:00688).

However, Shapiro had moved for dismissal under NRCP 12(b), not NRCP 41. These two types of dismissal and implications are

distinct and separate. Dismissal under NRCP 41(b) is “a sanction, to be imposed only in extreme circumstances.” Edwards v. Marin

Park, Inc., 356 F.3d 1058, 1065 (9th Cir. 2004). By its plain language, dismissal under NRCP 41(b) is for a party's failure to comply

with “these rules or any order of the court.” On the other hand, dismissal under NRCP 12(b)(5), tests the legal sufficiency of the

complaint and, as outlined above, should be without prejudice unless the court determines that the pleading could not possibly be

cured by the allegations of other facts. Lopez v. Smith, 203 F.3d 1122, 1130 (9th Cir. 2004).

Later, during a hearing on February 14, 2011, the District Court commented that it recalled giving Ethel and Marilyn numerous

opportunities to comply with the Iqbal standard. (AA 6:01387). However, no such leave was ever granted.

At the December, 21, 2009 hearing on Defendants' Motion for Sanctions, the District Court commented that Ethel and Marilyn's last

minute effort to avoid sanctions by voluntarily dismissing their alter ego claim “has no legal effect.” AA 14:03080. However, five

months later, the District Court attempted to justify “with prejudice” by referencing that voluntary dismissal. (AA 15:03202-03203).

At the February 14, 2011 hearing, the District Court stated, “the Court gave you grant to leave to amend several times... You can't

plead it no matter how many times I give you to plead it... I gave you four times to try.” AA 6:01387-01388. In fact, no leave to

amend was ever given Ethel and Marilyn.

133 Nelson v. Sierra Constr. Corp., 77 Nev. 334, 343, 364 P.2d 402, 406 (1961).

134 Stephens v. Southern Nevada Music Co., 89 Nev. 104, 507 P.2d 138 (1973).

135 Adamson v. Bowker, 85 Nev. 115, 121, 450 P.2d 796, 800 (1969).

136 AA 8:01771.

137 AA 8:01781-01782 and 01786.



























138 AA 8:001778 at p. 99-100.

139 AA 8:01776 and 01778.

140 AA 8:01745-01746.

141 AA 8:01815.

142 AA 8:01817-01818.

143 AA 8:01815 and 01817.

144 See 8:01813-01828.

145 Id.; AA 3:00416-00441.

146 AA 8:01752.

147 AA 8:01752 and 01751 (Shapiro testified all minutes were produced; thus, the lack of minutes evidences that there were no minutes.

When asked about organization minutes, Shapiro merely stated “I don't know” if they exist.).

148 AA 8:01786.

149 Id. 8:01786-01787.

150 Id.

151 Id.

152 AA 7:01437-01443.

153 AA 8:01779.

154 AA 8:01771.

155 AA 8:01773; AA 3:00416-00453.

156 See AA 3:00416-00441; AA 10:02065-02066; AA 7:01624.

157 AA 8:01773-01775

158 AA 10:02165-02167.

159 AA 10: 02168-02175.

160 AA 8:01789; AA 8:01839-01840.

161 AA 8:01751.

162 Id.

163 AA 8:01840.

164 Id.

165 Id.

166 AA 8:01841

167 Id.

168 Id.

169 AA 8:01842.

170 AA 8:01843.

171 AA 8:01844.

172 AA 8:01845.

173 Id.

174 AA 7:01445-01448.

175 AA 7:01568-01570.

176 AA 7:01570.

177 Id.

178 Id.

179 Id.

180 AA 7:01449-01450.

181 Adamson v. Bowker, 85 Nev. 115, 121, 450 P.2d 796, 800 (1969).

182 AA 7:01457-01459.

183 Las Palmas Assoc. v. Las Palmas Center Assoc., 235 Cal.App.3d 1220, 1249 (1991) (citations omitted) (emphasis in original); For

nearly 55 years, Nevada has adopted and followed California's alter ego principles. Frank McCleary Cattle Company v. Sewell, 73

Nev. 279, 317 P.2d 957 (1957); see also Rehab Choice Inc. v. CLC Healthcare, Inc., 2007 WL 1944344 (N.D. Tex. 2007).

184 Las Palmas Assoc., 325 Cal.App.3d at 1249.








185 AA 7:01570 (Ironically, Nevada had never adopted the federal pleading standard, but it was used against Ethel and Marilyn.).

186 See Frank McCleary Cattle Comany v. Sewell, Supra at 147.

187 Id. at 959.

188 Id.

189 Las Palmas Assoc., 325 Cal.App.3d at 1249 (citations omitted) (emphasis in original).

190 AA 7:01457-01459.

191 See id.

192 Id.

193 Id.

194 Id.

195 Id.

196 FGA, Inc. v. Giglio, 278 P.3d 490, 501 n. 9 (Nev. 2012).

197 AA 4:00739.

198 AA 4:00742.

199 AA 6:01401-01402

200 AA 6:01380-01383.

201 AA 4:00720.

202 AA 9:01893-01906; AA 10:02090-02091.

203 AA 9:01878. On March 21, 2011, the compressed discovery dates were brought to the district court's attention. The district court

acknowledged the extended discovery deadlines but did not want to continue the trial date. Due to the compressed schedules, the

district court stated “we can work with the deadlines and keep the trial date.” AA 7:01617. However, two months later when Ethel

and Marilyn filed a motion for summary judgment one month before the dispositive motion deadline, the district court refused to

hear the motion. AA 14:03090. The district court indicated it did not hear the motion because Ethel and Marilyn “spent all [their]

time going to the Nevada Supreme Court and that's your business.” AA 14:03090.

204 AA 9:01877.

205 Id. at 01883.

206 AA 9:01970-01971.

207 AA 10: 02094.

208 AA 9:01893-01906; AA 10:02090-02091.

209 Id.

210 AA 10:02090-02091 (Lundvall objected to any questions inquiring whether other investors are “family,” the judge sustained the

objection); AA 10:02256 (Lundvall asks whether other investors are family members despite her objection to the question being

previously sustained).

211 Preamble to Nevada Code of Judicial Conduct (2010).

212 Nevada Code of Judicial Conduct at Cannons 1.1, 1.2, 2.1, 2.2, 2.3, 2.6 and 2.11.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.
