MINUTES OF THE SENATE COMMITTEE ON JUDICIARY Sixty-eighth Session May 18, 1995 The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 3:35 p.m., on Thursday, May 18, 1995, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Senator Mark A. James, Chairman Senator Jon C. Porter, Vice Chairman Senator Maurice Washington Senator Mike McGinness Senator Ernest E. Adler Senator Dina Titus Senator O.C. Lee STAFF MEMBERS PRESENT: Allison Combs, Senior Research Analyst Marilyn Hofmann, Committee Secretary OTHERS PRESENT: J. T. Watson, Jr., Officer in Charge, Reno Office, United States Department of Justice, Immigration and Naturalization Service Richard E. Wyett, Chief, Division of Parole and Probation Rick Eaton, Supervisory Special Agent, United States Department of Justice, Immigration and Naturalization Service Paula Berkley, Lobbyist representing Alliance for Latinas in Action and Solidarity (ALAS) Harvey Whittemore, Attorney at Law, Lobbyist representing the Nevada Resort Association Bill Bradley, Attorney at Law, Lobbyist representing the Nevada Trial Lawyers Association (NTLA) Joseph Cronin, Attorney at Law Bob Perry, Attorney at Law, Lobbyist representing the Nevada Trial Lawyers Association (NTLA) Senator James opened the hearing on Senate Bill (S.B.) 475. SENATE BILL 475: Provides for release of presentencing reports to Immigration and Naturalization Service of United States Department of Justice. The first persons to appear were J. T. Watson, Jr., Officer in Charge, Reno Office, United States Department of Justice, Immigration and Naturalization Service (INS), Richard E. Wyett, Chief, Division of Parole and Probation, and Rick Eaton, Supervisory Special Agent, (INS). Mr. Wyett presented a videotape concerning criminals who are illegal aliens. Following the presentation, he presented an issue brief, which is attached hereto as Exhibit C. Mr. Wyett stated the Division of Parole and Probation felt the bill was a "first step" to solving problems of communication between the INS and the division. He said many times the two agencies were "looking for the same individuals, but going in two different directions." Mr. Eaton stated the new unit involving the two agencies was activated only recently, and in one 9-day period, 71 fugitives were arrested, a large percentage of whom were violent criminals. He said the sharing of information led to the arrests. He said S.B. 475 would allow information to be placed before immigration judges "...to support an order of deportation." Mr. Watson added the success of the program would show what could be done when information is shared between state and federal agencies. The next to appear was Paula Berkley, Lobbyist representing Alliance for Latinas in Action and Solidarity (ALAS). She stated ALAS was in support of the measure. Ms. Berkley said the organization has been very active in the Reno area in attempts to legalize immigrants. Senator Washington asked where the organization was located and how long it had been in existence. Ms. Berkley responded said ALAS has been active for "a couple of years," and the Coalition for Legal Immigration was organized after the law regarding services to immigrants (Proposition 187) was passed in California in anticipation of similar laws in Nevada. She said there was no official office location and added the organization is composed of "some very involved ladies." There was no further testimony on S.B. 475. The chairman called for a motion to pass the legislation. SENATOR ADLER MOVED TO DO PASS S.B. 475. SENATOR WASHINGTON SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR TITUS WAS ABSENT FOR THE VOTE.) * * * * * Senator James referenced S. B. 474 and S.B. 482. SENATE BILL 474: Revises provisions governing civil liability for wrongful acts and revises provisions relating to punitive damages. SENATE BILL 482: Provides that attorney who unreasonably and vexatiously extends court proceeding may be required to pay additional costs, expenses and fees reasonably incurred because of such conduct. The chairman stated he had requested the two pieces of legislation after numerous discussions with various persons "on all sides of the tort reform issue." He said he has worked on the policy behind the measures and the language of the bills, in order to try to develop "responsible measures that address the issues which are under so much discussion nationally and in our state...reform of the legal system." Senator James said the two bills "...try to reform the way in which we look at lawsuits and the damages that are available under them...the standards that are applicable in a court and presented to a jury...." He said he believed the two bills evidenced very responsible steps to develop a better legal system, while at the same time preserving one of the most important rights persons have in the country and state, i.e, "right to a trial by jury...the right to assert your constitutional rights...and have the court stand up for you if you are in the right...no matter how powerful or influential the force on the other side of the issue might be...." Senator James stated the two bills "do no violence to that very important right," while recognizing that abuses can occur in the system. He added the Legislature must try to assure those abuses are not "...so we have the best and most fair legal system possible." Senator James stated in working through the bills, he had been requested by representatives of the Nevada Resort Association (NRA) to include some language in the two pieces of legislation, and he had accommodated those requests. He stated his law firm had from time to time represented hotels, and persons who have sued hotels. The chairman said he had discussed the matter with his partners, and they did not indicate there was any pending litigation which would be impacted by passage of either S.B. 474 or S.B. 482. He stated, however: I will defer an actual vote on this bill today...look at all the parameters surrounding this, and insure there is no ethical problem with me voting either for or against S.B. 474...1 don't anticipate any such problem. But it has been raised...l have been asked whether I would be able to do that, and in that caution, I will make sure that doesn't create any problems, and I don't anticipate that it will. The first person to testify on S.B. 474 was Harvey Whittemore, Attorney at Law, Lobbyist representing the Nevada Resort Association (NRA). Mr. Whittemore thanked the chairman and the members of the committee for the "cooperative nature of the process which has been imposed on developing S.B. 474." He said the NRA, and that association's president, Richard Bunker, recommend passage of the bill. Mr. Whittemore then read from a prepared statement, which is attached hereto as Exhibit D. Mr. Whittemore added comments regarding section 4 of the bill: However it is drafted, section 4 of the bill has several major defects which require the amendments we propose today, making clear that the amendments we propose are simply errors in bill drafting...while they are substantive, it is the intent of the language as we proposed it with Chairman James and the other participants in this process. As drafted now, section 4 only applies to Nevada corporations. Mr. Whittemore referenced lines 34 and 35 (section 4), and indicated the language states, "...if the employer is a corporation which is organized under the laws of this state." He said that language should be bracketed, to delete "organized under the laws of this state," since it would create different punitive damage liability standards for Nevada corporations than foreign corporations doing business in Nevada. Mr. Whittemore said the result would be "bad law," since it would create serious constitutional questions under the Equal Protection, Interstate Commerce and other clauses of the United States Constitution. He stated it was also bad policy, given the large number of foreign corporations which are vitally important to Nevada's economy and the welfare of its citizens. Mr. Whittemore added a comparable California statute makes no such distinction. He said section 4 of the bill should be further amended as follows: "Under subsection 1, line 27, the employer had advance [notice or]..., and on line 28, bracket [incompetent or]...." Mr. Whittemore said advance notice might make constructive knowledge sufficient, whereas the entire thrust of the bill is to require deliberate, i.e., knowing conduct. Similarly, he added, knowledge the employee was incompetent goes to inadvertent care, i.e., negligent wrongdoing, whereas the object of punitive damages is deliberately wrongful conduct. Mr. Whittemore stated, "Knowledge the employee is 'unfit' is sufficiently broad to accomplish liability where it is consistent with the objectives of punitive damages." He said the foregoing changes were necessary to again make the paragraph substantially similar to the California statute. Finally, Mr. Whittemore said, under section 4(3), before the word "guilty" on line 32, they have asked for addition of the word "personally," which was omitted from the draft. He added, "Again, the purpose of the bill is to eliminate vicarious liability for punitive damages." He stated if traditional principles of the employer-employee liability are applied to this paragraph as written, it could restore vicarious liability for punitive damages, thereby fully defeating the objectives. Mr. Whittemore continued with his prepared statement (Exhibit D). He pointed out sections 6 through 8 of the bill are the portions being proposed by the NRA, and would clarify the liability of hotels, motels and other innkeepers when third parties cause personal injury to guests or other patrons. With reference to section 8 of the bill, Mr. Whittemore said they would propose certain clarifying amendments to the bill, including amending the definition of "premises" on line 34. He said they also propose amending section 8 to make it clear that where the issue is liability for injuries caused by third parties, as opposed to injuries caused by innkeepers themselves, an innkeeper is not liable unless there is an absence of care for the safety of patrons and others on the premises by employees acting within the scope of their employment. Mr. Whittemore said at the end of line 41, section 8, the NRA would recommend the addition of the phrase, "...for the safety of patrons and other persons on the premises," and bracketing the word "or" on line 39 and the word "ordinary" in line 41. He said with those changes, the bill would make innkeepers responsible for the acts of off-duty employees, and depending upon judicial interpretation of the words "control" and "supervision," perhaps independent contractors as well. He said inclusion of the word "ordinary" is inconsistent with the thrust of the bill, which is to reduce the scope of innkeepers' liability where injuries are caused by third parties, rather than their own conduct. Mr. Whittemore pointed out to the committee that there is significant disagreement between the NRA and the trial lawyers with respect to the standard which is expressed on line 40 of section 8, regarding the amount of evidence necessary to prove the case in section 8(1). He said he would like to bring the committee's attention to the phrase, "clear and convincing evidence." He said a representative of the Nevada Trial Lawyers Association (NTLA) would offer testimony with respect to that language. Mr. Whittemore said the NRA hoped the committee would agree, with respect to innkeepers, that this standard is appropriate in terms of the type of protection they were trying to provide to the industry. He said that is the only policy issue which he believes is substantive in terms of actual language. Mr. Whittemore continued with a discussion of section 9 of the bill, as set forth on Exhibit D, page 6. Mr. Whittemore called the committee's attention to section 10, lines 32 through 34, which allows, but does not mandate, an insurance company's coverage on punitive damages, except where the defendant intends to injure the plaintiff. He said this exception "...honors the frequently recognized public policy...that the trend will be to allow insurance with respect to punitive damages." He said states which have already enacted this policy include Arizona, Idaho, Montana, New Mexico, Oregon, Texas and Wyoming. Mr. Whittemore stressed all those states have allowed punitive damages to be insurable for non-willful wrongs. Mr. Whittemore returned to his prepared statement, Exhibit D, page 7. Mr. Whittemore pointed out sections 11 and 12 of the bill make the bill "effective on passage and approval and further make the bill applicable to pending cases." However, he added, the bill as drafted lacks a severability provision, which they had requested. He suggested the following language: Should any provision or portion of a provision of this act or the application thereof to any person, thing or circumstance, be held unconstitutional or otherwise invalid in full or in part, that invalidity shall not affect the remaining provisions. Mr. Whittemore stated, "This has been a very time-consuming and deliberative process that we have engaged in with members of this committee with respect to addressing the issue of punitive damages and liability...with respect to patrons injured by third parties." Senator Adler asked a question pertaining to section 9, paragraph 3 of S.B. 474. He indicated liability would be limited for items deposited in safes and vaults. He said some hotels have signs up saying they are not responsible "unless items are placed into the safe or vault." Mr. Whittemore said the language with respect to limit of liability was already in the law, and all they were doing with respect to the changes in the section, "...is applying the protection which this Legislature already afforded to patrons...to the premises itself." Senator Adler said there should be a presumption that when items are placed in a safe or vault, they would not be taken. Mr. Whittemore agreed, and said they have never had a problem with respect to limitation as set forth in the section. He added, "You are asking to revisit a policy issue which has previously been decided." Mr. Whittemore said that provision has "always been limited to a $750 limitation," and there are signs posted in that regard, which are required by statute. He added, "If not, you turn the hotel into a guarantor for acts committed by a third party." Senator Adler responded, "Harvey, if I put something in a hotel vault, and it is stolen, I don't think it was stolen by a third party." Mr. Whittemore stressed there was no change in the bill with regard to this provision, and was a policy decision which had previously been addressed. Senator Titus referenced section 11 of the bill and the language, "...filed before the effective date of this act in which final judgment as defined in Nevada Revised Statutes (NRS) 37.009 has not been entered." She said in examining the definition of "final judgment" in NRS 37.009 "...means a judgment which cannot be directly attacked by appeal, motion for a new trial or motion to vacate the judgment." Senator Titus asked if the reference to an effect on "pending cases" meant cases which are in progress and awaiting appeals which have been filed. Mr. Whittemore answered the language "was designed to impact all cases which are pending...but the question of whether it is going to have an impact on those is going to be decided by a court." He added there were cases which were awaiting final decision by the Nevada Supreme Court, those which have gone to judgment and have yet to be appealed, and those which have been filed or in trial at this time. Senator Titus stated she was thinking of those cases where appeals are pending, and added, "That seems like you are changing the rules in the middle of the game." She then asked, "How would this affect Tail hook, for example?" Mr. answered, "Section 11 potentially would have impact on a case such as Tailhook...whether or not it would, would depend upon whether the punitive damage award in that case was viewed as a procedural or substantive right." He continued, "The question of whether this bill would affect that, would be a matter for the court to decide as to the appropriateness of whether a substantive, i.e., a contract right, was impacted." Senator Titus responded, "Now, that is a lot of legal jargon...go back and tell me what you mean in regular language." Mr. Whittemore said section 11 is drafted as "broadly as possible" to impact all cases which are pending in any sense of the word. He added: I have tried to explain very clearly that this is as broadly written as possible. The policy issue which we are strongly recommending to this committee is that in clarifying and bringing predictability and certainty to this issue, it is an important enough policy decision that the courts be allowed to decide whether or not those matters which may be impacted by this bill are 'of a procedural or substantive right.' Senator Titus asked for an explanation of the difference between a "procedural" and a "substantive" right. Mr. Whittemore explained: If we look to a contract right...a right which you and I enter into as a matter of contract...this states no party...can enter and require on an ex post facto basis that we change the contractual rights and obligations under that, so long as that contract is not void. That is a 'substantive right.' A 'procedural right' is one which the state allows a process to take place and a result to derive from that process, which may or may not occur. Punitive damages are a creation of statute...especially in this state, a creation of statute as modified by judicial decision. Mr. Whittemore cited two Nevada Supreme Court opinions, as set forth on page 2 of Exhibit D, i.e., Craigo v. Circus-Circus Enterprises, Inc., 106 Nev. 1, 786 P.2d 22 (1990), and Granite Const. Co. v. Rhyne, 107 Nev. 651, 817 P.2d 711 (1991). He said the Craigo decision, which was the subject of deep division at the court, and the Rhyne case, which legal commentators have suggested modified the Craigo decision, show, from a legal perspective, "...a deep misunderstanding as to where punitive damages are appropriately affixed." Mr. Whittemore stated S.B. 474 " . . . clears that matter up and does so in a way which we would strongly recommend." Senator Titus asked if the right to punitive damages was a "procedural" or "substantive" right. Mr. Whittemore answered, "That is the question I suggested to this committee should be addressed by a court." He went on to say he did not believe it was appropriate to "attempt to say it was a procedural right and therefore subject to the effect of this law. Senator Titus asked if that varied from case to case and continued: "Once we decide if it is one or the other, will that always apply?" Mr. Whittemore responded, "Once you have a final decision under Nevada law that says, 'We are interpreting this statute',...that would probably answer that question once and for all." Senator Titus then asked how Mr. Whittemore believed that would affect the pending Tailhook suit. Mr. Whittemore answered, "I would imagine that the attorneys who are representing both parties are going to argue that case in front of a judge who will determine whether or not this law is applicable to that matter." He continued to say he thought there were motions pending in that case for a new trial, and the question would then become, "Do they get the old law or do they get the new law. That is a matter which the courts will decide...we're not recommending to you that you impose any particular standard with respect to that particular matter." Mr. Whittemore stated: But, this isn't a bill about the Tailhook case. This is a bill about three very substantive changes in our punitive damage law: ( 1 ) To make it clear that punitive damages arise in wrongful death; (2) To say in punitive damages that we have a standard that you say is appropriate, since it is a creation of statute and since we have such deep division on the court with respect to what is appropriate or not; and with respect to punitive damages, making it clear that employers don't have vicarious liability; and (3) With respect to innkeepers, that we are not responsible for the misconduct of third parties. Finally, from a policy decision, that you are making this effective upon passage and approval and saying that any cause or application which is constitutional, you want it to apply to constitutionally, not ex post facto...doesn't diminish a vested right...does not create a problem that is inappropriate. That is what this bill does. Senator Washington asked Mr. Whittemore to explain the intent of section 8 of the bill. Mr. Whittemore answered under Nevada law, prior to a decision in Doud v. Las Vegas Hilton Corp., 109 Nev. 1096, 1101, 864 P.2d 796, 799 (1993), the question of whether "...I owed a duty to you, as a patron," was a matter to be determined by the judge..."Do I have a legal duty to you to do something...or not to do something?" He stressed this was not a contract situation, but rather a duty of care, "...what every person in our society owes to another person...." Senator James indicated to Mr. Whittemore that he had "expanded the concept of duty way beyond what was intended." Mr. Whittemore responded, "The chairman appropriately corrects me." He added, "The duty we are talking about is that responsibility which one citizen has to another." Mr. Whittemore said with respect to section 8 of the bill, what they were attempting to do was to "codify what was the old law with respect to that issue." Senator James reiterated the sections of the bill requested by the NRA related to opposing court cases, one which says there must be deliberate harm, and one which says if "you know something bad might happen" in a situation, a plaintiff could receive punitive damages. He said since there were two competing interpretations, "...we are essentially adopting one of them in the bill." The chairman added in the applications section of the legislation, it is set forth that "...we will allow the courts to go ahead and utilize that standard statutorily adopted, if they think that does not abridge somebody's vested right." He added "All we are saying with the saving clause, is that if they decide it would be an unconstitutional application to apply a standard to a case in the pipeline, that the whole bill doesn't fail because of that." Mr. Whittemore agreed with Senator James' statement. In response to a question posed by Senator Titus, Mr. Whittemore stated the severability provision of the bill is absolutely essential "...so you don't have one unconstitutional application causing a problem with respect to the entire act." Senator Titus asked: Is it the "retroactivity provision" which is "making you worried that it might be unconstitutional...[which is] why the severability clause was [included]. Mr. Whittemore answered, "Absolutely not." Senator Titus stated, "That is what it sounded like the chairman just said." Mr. Whittemore answered the chairman only used that as an example. He added there were "other provisions which may cause problems with respect to unconstitutionality." Mr. Whittemore stated: Some good lawyer is going to argue that by defining certain conduct by statute in section 3, or the fact that certain employers do not have the same protection as others...the distinction between a corporate employer and a regular employer...that somehow through 'in artful drafting' there is some sort of unconstitutional or equal protection argument. We don't anticipate that, but being good lawyers, we are saying we don't want to risk that...we have spent way too much time to get this resolved. Senator Porter asked for a clarification regarding the addition of the word "personal" in section 4(3) of the bill. Mr. Whittemore answered they wished to "make clear that the employer does not have vicarious liability...but has to be personally responsible of oppression, fraud or malice express or implied...unless it is ratified by the corporate employer." Senator Porter, with respect to section 8 of the bill, asked if the term "the court" specified a judge, and not a jury. Mr. Whittemore answered that was correct. The next person to testify was Bill Bradley, Attorney at Law, Lobbyist representing the NTLA. Mr. Bradley indicated the NTLA has "done a lot of work trying to arrive at some compromises on this bill." He stated they were "extremely concerned to see the Nevada Supreme Court 2 years ago intimate that it wanted to indicate a policy in this state that punitive damages were not available in wrongful death cases." Mr. Bradley added, "What that really means is that it is cheaper to kill people that it is to maim them." He said that opinion "sent shock waves through the members of our organization, because it sets a very bad public policy." Mr. Bradley said as a consequence, they wish to do everything they can to make sure punitive damages are available in wrongful death cases. He said their major concern with S.B. 474 is with section 8 at line 40, having to do with burdens of proof in civil cases. Mr. Bradley said that language attempts to "increase the burden of proof in cases involving innkeepers from a "preponderance of the evidence" to "clear and convincing evidence." He stated the association was "strongly opposed to doing that kind of increase in the burden of proof." Mr. Bradley said in every type of civil case in the State of Nevada where there is an allegation that someone was negligent, the burden of proof is to find "by a preponderance of the evidence." He said it is absolutely necessary to maintain consistency in the state in civil cases where negligence is a factor, such as the negligence of an innkeeper. Mr. Bradley stated there was "...absolutely no reason to increase the burden of proof against innkeepers to "clear and convincing evidence" when the rest of Nevada's grocery store owners and drug store owners, for example, are subject to a lower standard of care. Consequently, he said, the association would encourage the committee to strike the language "clear and convincing evidence," and replace it with "a preponderance of the evidence." Mr. Bradley continued: For the committee's information, 'clear and convincing' is the standard we have to convince the judge of to even allow a jury to consider punitive damages. It is a very high standard...a very strict standard...and a very difficult standard to achieve. Consequently, 'clear and convincing' is an appropriate standard for punitive damages. It is an entirely inappropriate standard for defining negligent conduct. Mr. Bradley said another concern related to page 4 of the bill, line 1, where the language, "...not foreseeable unless prior instances of similar wrongful acts." He said the association wants to make sure that the phrase "similar wrongful acts" is never interpreted as "identical" or "nearly identical" wrongful acts. He said the common notion is if a patron was assaulted on the premises, and 2 weeks later, another patron is raped on the premises, "...is the prior assault a sufficient, similar wrongful act, or does it take something more than an assault...what are the standards?" Mr. Bradley added what punitive damage consideration would be when there have been numerous criminal acts or sufficient criminal activity that any reasonable person should realize that they have a problem on their property, and they have to increase security. He indicated he wanted to insure that "similar wrongful acts" is not construed too narrowly. Mr. Bradley also stated he and Mr. Whittemore have attempted to work out the language, but still have differences as to the meaning of "similar." Senator Washington asked if a person goes to a hotel or motel in a part of town that has a crime rate, the person knows of the area's reputation, and is a victim of a crime, is the victim or the innkeeper at fault? Mr. Bradley answered theoretically it would put both at fault. He added the law already provides that if a person "voluntarily assumes a known risk" the case can be thrown out of court. Mr. Bradley also said if a person knows the area is a bad one, but does not have knowledge of a "known risk," he may fail under the "doctrine of comparative negligence." That doctrine, he explained, evaluates the person's acts and compares them with the acts of the innkeeper, and so long as the person's acts are not greater than 50 percent responsible for the problem, he or she is entitled to recovery. Mr. Whittemore pointed out that the provisions of section 8 of the bill"...were only talking about those deaths or injuries caused by another person." He said the reason that standard was important was to indicate "...we should not be responsible for the third party conduct...unless it becomes our own." Mr. Whittemore stated the discussion between Mr. Bradley and Senator Washington "...really goes to whether I had a duty as the innkeeper directly to a patron and may not have an intervening criminal act." Senator James suggested this is why hotels are safe, with the use of doors which shut automatically, with double locks, and why keys are changed all the time. He said liability would be imposed if the innkeepers fall below such safety standards. Appearing in opposition to S.B. 474 was Joseph Cronin, Attorney at Law, Minden, Nevada. Mr. Cronin indicated he was involved in a number of cases mentioned in Mr. Whittemore's testimony, and stated he was one member of a team of lawyers who represented Paula Caughlin, plaintiff in the Tailhook case. He said he was also the lawyer representing Mr. Doud, in a case currently pending against the Las Vegas Hilton Corporation. (Doud, supra.) Mr. Cronin stated he wished to "dispel some of the things you have previously heard." First, he said, the United States District Court for the District of Nevada has denied all of the Hilton's motions in the Tailhook case, and the case is now before the Ninth Circuit Court of Appeals. Secondly, he stated: The effect of the retroactivity section of the proposed legislation, if it were to be found constitutional, would have the effect of nullifying that judgment, because the jury in that case was instructed that the burden of the plaintiff was by a preponderance of the evidence, and the plaintiff met that burden by a preponderance of the evidence. Mr. Cronin referenced an article contained in the April 1995 issue of The Hotel- Motel Security and Safety Management magazine. He said this magazine serves the hotel and motel industry, particularly safety and security concerns. Mr. Cronin said the article was directed to the Las Vegas Hilton, regarding the Tailhook matter, and was entitled, "What the Hotel Did Wrong." He quoted: They failed to provide adequate numbers of security personnel; there was a failure to adequately and properly train the security staff; a thorough analysis of this case has been conducted by...a security professional and an attorney who specializes in the areas of meetings, conventions and trade shows...he cites specific acts of negligence or omissions by the hotel, which were asserted by the plaintiff...it serves as an excellent point of reference for high-risk meeting preparation...failure to adequately and properly train the security staff or other hotel personnel to respond to the activities occurring on the third floor of the hotel...failure to summon the Las Vegas Metropolitan Police to stop the criminal activity...and to investigate and arrest those individuals committing criminal acts...permitting drunk and/or violent or dangerous convention attendees to loiter in the public hallway of the hotel's third floor, and allowing them to form the gauntlet...continuing to serve alcohol to Tailhook conventioneers, despite knowledge that members were causing damage and injury to hotel property and guests.... Senator Washington cited an example: I'm going to this party...knowing that there are festivities going on... is it the hotel's responsibility to provide adequate security and trained personnel above and beyond the call of duty...something is missing. Why is it the hotel's responsibility...why is it not the fault or the conduct the liability of those people at the party who are performing these acts? Mr. Cronin answered he did not come to the hearing to discuss Tailhook, but would respond to the question. Senator James interjected: "I don't want to try that case here...this isn't a bill dealing with specifically that...l appreciate your perspective, but I would not like to try the facts of the case here." Senator Washington stated the question did not necessarily have to pertain to Tailhook, and said he was "trying to put the whole concept together." Mr. Cronin said the Tailhook case was an "inadequate security case." He said to make law dealing with homicide cases based upon what is seen on television with regard to the O. J. Simpson case, would be just as inappropriate as making law for inadequate security litigation based upon the Tailhook case. Mr. Cronin indicated with respect to the Tailhook case, "...there was a 20-year history of violence in the common areas of the hotel." He said windows had been broken and "people had been held out windows by their ankles, eight stories above the payment...and people thought that was funny...and they continued to invite those people back." Mr. Cronin pointed out the acts complained of happened in the hallway, where 108 other people besides his client were assaulted. Mr. Cronin indicated the reason the law should not be changed, is because "hotels are magnets for crime." Senator Porter asked if Mr. Cronin did not believe any of the law should be changed, as in S.B. 474. Mr. Cronin said he only was referencing "inadequate security litigation," such as set forth in sections 6 though 8, and section 11, the retroactivity provision. He indicated he would not speak with respect to punitive damages. Mr. Cronin stated the present law was good because the same standards apply to inadequate security litigation that apply to railroads, schools, hospitals, drivers, and airlines. He said hotel owners, "...just because they are in Nevada, shouldn't be treated differently...because people will be hurt and people will die." He added in response to a question from Senator Porter, "This bill effectively insulates hotels from inadequate security litigation." He said it places many barriers in the path of crime victims. Mr. Cronin stated, "Clear and convincing evidence is not the standard of care for torts...here or anyplace else. By making clear and convincing evidence the standard just to insulate the hotel industry is to put so many barriers before the crime victims, so as to make it impossible for a crime victim to recover." Senator Porter asked Mr. Cronin if he believed the standard should remain a "preponderance of the evidence." Mr. Cronin responded he believed the phrase should not even be included in the bill, because it is the same as any other tort action. He said there should also be an "affirmative judicial finding of duty." Mr. Cronin said this meant there would be an automatic judicial motion for summary judgment under Civil Rule 56, in every case. He said the plaintiff would be "...met with the burden of a judicial finding of duty before he can go anyplace else." Mr. Cronin said that exists in no other area of tort jurisprudence, including medical malpractice. Mr. Cronin asked, "Are you committee members going to recommend to the full Senate and then to the entire Assembly that the hotel industry of this state has no duty to provide a safe and secure premises to its patrons." Senator James responded, "No, that is not what the bill does." Mr. Cronin said the language of the bill states a case cannot go forward until and unless a judge makes an affirmative determination by clear and convincing evidence that the hotel had a duty to the patron. He said in all other areas of litigation and tort jurisprudence, it requires an affirmative showing by the defense that there was no duty. Senator James responded, "We would have to be a lot more specific than that to impose a duty for a judge to act sua sponte [of his or its own will or motion.]" Mr. Cronin reiterated he read the language to mean the judge must make the determination. Senator James responded he read it "the other way." Mr. Cronin said the language was ambiguous and Senator James responded if that was the case, "...they would look to legislative history...and there is no question in my mind that they would have to make a motion." Mr. Cronin asked if it was the chairman's position there would have to be a Rule 56 motion before that issue could be addressed. Senator James responded, "Yes." Mr. Cronin said the third thing the legislation would do is require that prior similar crimes have occurred. He indicated in inadequate security jurisprudence this has been discredited in every jurisdiction which has taken it up. Senator Adler indicated the language does not indicate "crimes," but rather "prior incidents of wrongful acts." Mr. Cronin pointed out the bill "...calls for prior similar conduct (which is plural)...that means that the first person who has been attacked, brutalized, assaulted, stabbed, slashed or otherwise violated, will not have a cause of action, nor will the second, because it requires two or more prior similar acts." He said a clear line of cases, referencing Isaacs v. Huntington Memorial Hospital, 695 P.2d 653 (Ca. 1985), which was cited in Doud, supra, indicate that to say a second or third victim has a cause of action when the first one doesn't, is flawed. Finally, Mr. Cronin said, he interprets the section as "...saying the hotel must have actual knowledge of the prior similar bad conduct." He stated "actual knowledge of the prior similar bad conduct simply means that all they have to do is deny they ever knew it happened." Mr. Cronin said the law as it stands at this time states "if there were prior similar acts and that [they] knew or should have known that those acts occurred." Senator Adler stated he believed "notice" was different than "knowledge." He said "knowledge" indicates "personal knowledge" while "notice" is something lesser. Mr. Cronin asked why the language did not say "know or should have known, which is the present standard." He added, "If they don't want to change the standard to actual knowledge, then why doesn't it say, know or should have known?" Senator Adler agreed the language was not "should have known," but stated "notice" denoted a lesser standard such as "third-hand reports." Mr. Cronin stated, "I don't know what the problem is that this issue is being brought to remedy. If you are telling me there are frivolous lawsuits being filed on behalf of victims of crime...l don't know of any." He added, "Who wins? The hotel industry wins. Who loses? Victims of crime lose...because they have no civil remedy." Mr. Cronin stated when "preponderance of evidence" as a standard is taken away and "clear and convincing evidence" is added, "...you have raised the hurdles so high that people like me are not going to take those cases...and that is exactly what the hotel industry wants." Mr. Cronin referenced an unpublished case titled King v. Trans Sterling/Stardust Hotel. He said in 1982, he received a call from an attorney in Chicago who represented a black woman who was raped at the Stardust Hotel in Las Vegas. Mr. Cronin said the lawyer told him, "Because she was black, it wasn't worth very much." He indicated he took over representation of the woman and received a favorable result. Mr. Cronin said during the investigation of the case, he found out that the Stardust Hotel was losing keys at the rate of 500 each week, and no doors in the hotel had ever been re-keyed in 27 years of operation. As a result, he stated, "there were over 700,000 keys unaccounted for." Mr. Cronin said the person who raped, assaulted and brutally sodomized his client, entered her room with a key. He said it was also discovered that in the hotel, "...in order to give people a false sense of security, they installed what appeared to be video cameras...we found there were never any video cameras in those boxes." Mr. Cronin indicated they were "dummy" cameras, and that "the entire criminal element knew about it." He said in the 3-year span between the rape and the verdict, "...nothing happened in Las Vegas...to change key control policies." However, he indicated, in the 6 months following the verdict, 20,000 hotel rooms in Las Vegas were re-keyed with state-of-the-art electronic locks on their doors. Mr. Cronin read a portion of a memorandum, dated May 20, 1986, from the parent corporation of Hilton Hotels' security director to management of the Flamingo Hilton: Also in the survey of 1982, it had been recommended that a security officer be posted, preferably at a podium near the bank of elevators, simply to observe those individuals gaining access to the guestroom floors. This procedure would be similar to the post at each elevator bank at the Las Vegas Hilton. He pointed out that hotel had been advised to enact such security measures in 1982, and it was necessary to do it again in 1986. Mr. Cronin concluded, "The last time I checked, that podium still isn't there...and my client was assaulted. He stated: Unless this Legislature is passing tough acts regulating security in casinos and in hotels, and enforcing those with an appropriate enforcement mechanism, I think it is appropriate that you leave the trial lawyers of this state to representing people who have been injured and damaged severely in cases where the hotel industry has failed miserably in their duty to protect them...l don't want you to take away the rights of victims to recover where it is appropriate. There was no further testimony on S.B. 474, and the chairman closed the hearing on the bill. He then opened the hearing on S.B. 482. SENATE BILL 482: Provides that attorney who unreasonably and vexatiously extends court proceeding may be required to pay additional costs, expenses and fees reasonably incurred because of such conduct. Senator James indicated the bill would simply state that in addition to the ethical and other standards which already exist under the Nevada Rules of Civil Procedure (NRCP) and otherwise, for the filing of frivolous claims, would be added that an attorney could be held personally liable to pay additional costs and expenses reasonably incurred because of such conduct. The chairman indicated the NTLA strongly supports the legislation, and would offer an amendment, attached as Exhibit E. The first person to testify on S.B. 482 was Bob Perry, Attorney at Law, representing Nevada Trial Lawyers Association (NTLA). Mr. Perry stated he believed all the members of their organization were "decent, honorable people," but there were some "unscrupulous lawyers." He said the main reason for needing tort reform, was "too many frivolous suits." Mr. Perry added: "Yet, no proposal we have heard to date has anything to do with effecting frivolous cases." He said a lawyer who files a "frivolous slip and fall case," will continue to file such cases, "day in and day out, because lawyers like that don't get the serious cases." Mr. Perry stated there will be "...hundreds of millions of dollars netted by the insurance companies as a windfall, if you abolish the collateral source rule...and those people who are truly responsible will not have to pay for those...." He added: "The measures that we have heard we believe are examples of opportunistic conduct by the insurance companies to play on the fears that folks have about frivolous lawsuits, and to use frivolous lawsuits as an excuse to try to impinge on the rights of people with serious and legitimate claims." Mr. Perry said the "lawyer accountability act" would say "...the onus of filing frivolous lawsuits falls on the person who is most responsible, the lawyer who advises the client to go ahead...." Mr. Perry stated if S.B. 482 passes, "...the first time a judge imposes the costs of a frivolous lawsuit on a lawyer...the word will spread like wildfire among the lawyers who file these kinds of cases...." He stated he believed this was the "solution to frivolous lawsuits and tort reform." Senator Porter stated he took exception to Mr. Perry's comments regarding the insurance industry and added: "It is very easy to attack an industry that is nameless...." Mr. Perry agreed and said it was easy to make general statements which were not always true. He said his comment was directed towards some members of the insurance industry who would capitalize on the fact there were frivolous lawsuits, "...in order to reap a windfall...." Senator Porter indicated he wished his concern to be placed on the record. Senator James indicated a good attorney would "vigorously and within the ethical rules zealously represent [his or her] client." He said to do that an attorney takes advantage of all the substantive and procedural mechanisms offered by the law. Senator James stated he wished to make it clear that "...when we talk about unreasonably and vexatiously extending proceedings we are not talking about that kind of zealous representation of a client...in order to advance your case." He said he wished to be certain the bill would not "become a club the other way," to try to prevent people from bringing meritorious claims and from utilizing all avenues available to them...." Mr. Perry agreed with the Chairman's statement. Senator Adler asked if S.B. 482 was modeled after the federal statute. Mr. Perry responded the federal statute did not contain the language with regard to "file, maintain or defend." He said the statute "...dealt with the unreasonable and vexation extension of an action or proceeding." Mr. Perry said he believed the federal statute was designed to deal with persons who "take 40 depositions, when you only need to take 1." He said the did not think it adequately dealt with the lawyers who file such lawsuits. Mr. Perry added the bill was a combination of the federal statute and Nevada Rules of Civil Procedure (NRCP) 11. There was no further testimony offered on the bill, and Senator James called for a motion. SENATOR ADLER MOVED TO AMEND AND DO PASS S.B. 482. SENATOR TITUS SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * Senator James opened the work session on S.B. 474. Senator James indicated decisions would have to be made regarding certain amendments to the legislation, which had been discussed by both proponents and opponents. Senator Porter referenced the discussions regarding the "clear and convincing evidence" and "preponderance of the evidence" issue. SENATOR PORTER MOVED TO AMEND AND DO PASS S.B. 474, WITH THE INCLUSION OF THE LANGUAGE, "CLEAR AND CONVINCING EVIDENCE." SENATOR WASHINGTON SECONDED THE MOTION. Senator James asked for discussion on the motion. Senator Adler stated: "I can't buy keeping 'clear and convincing evidence' on the innkeeper in this bill, distinguishing it from others." He continued, "If it is a small club...it is by a 'preponderance of the evidence,' but if I have a small club attached to a motel, it would be 'clear and convincing."' Senator Adler reiterated he believed the same standard should apply as in any other negligence statute. Senator Lee stated he would like to "see everything remain the same for everybody." He said he had a problem with singling out one business versus another. Senator Titus asked for an explanation of the difference between the two definitions. Mr. Bradley stated "clear and convincing evidence" is a much higher standard of evidence than "preponderance." He said it requires a much higher degree of proof, and more culpable conduct. Mr. Bradley indicated "clear and convincing evidence" was an "appropriate standard" when considering punitive damages. He added it was a "substantially higher burden to prove and a difficult standard to achieve. Mr. Whittemore stated he would like to point out why the "clear and convincing" standard is set forth in the bill. He testified: In chapter 651 of NRS, the standard of neglect in the entire statute, except for this area, is gross neglect. If you will look at the rest of chapter 651 [of NRS], you have to find gross neglect on the part of the innkeeper before you attach liability. In determining the appropriate standard, i.e., exercise care, there were discussions as to the preponderance of evidence. While there was no agreement, the individuals involved in that discussion, i.e., those of us who represent the resorts, said '...fine, we will go away from a gross neglect standard to a more traditional...little bit higher negligence standard, which is the absence of care'. While it is important to us, we can understand there is a difficult policy issue here. I would hope that this committee could support keeping 'clear and convincing' in while the bill makes it way through the rest of the process. It is going to be a difficult process as it is. Again, I think there are strong policy reasons why, since we have already taken out the 'gross neglect' standard, we should be entitled to a 'clear and convincing' standard. Senator James indicated it appeared there were three votes for "clear and convincing" and three votes for "preponderance." Senator Adler cited an example: The Carson City Nugget owns a motel. So, if I walk out of the Nugget Motel and into the parking lot and something happens, it is 'clear and convincing'...the Horseshoe Club doesn't have a motel. So I walk out of there...it is a 'preponderance,' with the same event. How do I explain to the owner of the Horseshoe Club.... Mr. Whittemore answered, "We are only talking about why the reason this is narrowly drafted, was specifically to do that...because we are talking about innkeepers." He said the idea was they could agree that the standard, because there is an innkeepers' "bill or rights" in all other areas, "...was to craft additional rights and responsibilities under this act." Mr. Whittemore continued: "Yes, you create distinctions...that is the process we are engaged in." Senator Lee stated: In light of what we just did...in relationship to the crime bill...in light of what we have done in all of those areas...that hopefully we are showing some concern for victims...l hear very, very little comment about victims in this legislation. I believe there is a reason why this language is here, and it is nothing more...no pun intended...it is to save money to the owners of properties. And when you save money for owners of properties, who does not get that money? It is the victims. That is why I am concerned about leaving it equal as it is. I can support the bill if we will take that out. Senator James called for a vote on Senator Porter's motion to include the language, "clear and convincing." He stated he had been advised to abstain from the vote since his law firm had represented both hotels and persons suing hotels. THE MOTION FAILED. (SENATOR JAMES ABSTAINED FROM THE VOTE; SENATORS ADLER, LEE AND TITUS VOTED "NO.") * * * * * SENATOR LEE MOVED TO AMEND AND DO PASS S.B. 474, WITH THE REMOVAL OF THE LANGUAGE, 'CLEAR AND CONVINCING'.... SENATOR ADLER SECONDED THE MOTION. THE MOTION CARRIED. (SENATOR JAMES AND SENATOR WASHINGTON ABSTAINED FROM THE VOTE.) * * * * * Senator James referred to an earlier vote to amend and do pass Assembly Bill (A.B.) 1 33. ASSEMBLY BILL 133: Makes various changes to provisions governing regulation of gaming. The chairman indicated the amendment involved the definition of "debt security" to be applied throughout the NRS chapter, which was an error, and the language should only appear in one section of the statute. SENATOR ADLER MOVED TO RESCIND PRIOR ACTION TO AMEND AND DO PASS A.B. 133. SENATOR LEE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * SENATOR ADLER MOVED TO DO PASS A.B. 133. SENATOR LEE SECONDED THE MOTION. THE MOTION CARRIED UNANIMOUSLY. * * * * * There was no further business to come before the committee and the meeting was adjourned. RESPECTFULLY SUBMITTED: Marilyn Hofmann, Committee Secretary APPROVED BY: Senator Mark A. James, Chairman DATE: Senate Committee on Judiciary May 18, 1995 Page