MINUTES OF THE meeting

of the

ASSEMBLY Committee on Judiciary

 

Seventy-Second Session

May 8, 2003

 

 

The Committee on Judiciarywas called to order at 7:39 a.m., on Thursday, May 8, 2003.  Chairman Bernie Anderson presided in Rooms 3138 and 4100 of the Legislative Building, Carson City, Nevada, and, via simultaneous videoconference, in Room 4401 of the Grant Sawyer State Office Building, Las Vegas, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

Note:  These minutes are compiled in the modified verbatim style.  Bracketed material indicates language used to clarify and further describe testimony.  Actions of the Committee are presented in the traditional legislative style.

 

COMMITTEE MEMBERS PRESENT:

 

Mr. Bernie Anderson, Chairman

Mr. John Oceguera, Vice Chairman

Mrs. Sharron Angle

Mr. David Brown

Ms. Barbara Buckley

Mr. John C. Carpenter

Mr. Jerry D. Claborn

Mr. Marcus Conklin

Mr. Jason Geddes

Mr. Don Gustavson

Mr. William Horne

Mr. Garn Mabey

Mr. Harry Mortenson

Ms. Genie Ohrenschall

Mr. Rod Sherer

 

GUEST LEGISLATORS PRESENT:

 

Senator Michael Schneider, District No. 11, Clark County

STAFF MEMBERS PRESENT:

 

Allison Combs, Committee Policy Analyst

Risa B. Lang, Committee Counsel

Carrie Lee, Committee Secretary

Sabina Bye, Committee Secretary

Deborah Rengler, Lead Committee Secretary

 

OTHERS PRESENT:

 

Steve Holloway, Executive Vice President, Associated General Contractors, Las Vegas, Nevada

Renny Ashleman, representing the Southern Nevada Homebuilders Association

Michael Brimley, Attorney at Law, Henderson, Nevada

Jack Jeffery, representing the Southern Nevada Builders and Construction Trade Council

Steve Hill, Chairman, Coalition for Fairness in Construction

Jim Wadams, representing the Coalition for Fairness in Construction

Dave Duritsa, President, Safe Homes Nevada

Anthony Booth, Citizen

Scott Canepa, representing the Nevada Trial Lawyers Association

Ronald Lynn, Building Official, Building Division, Clark County Department of Development Services; and representing the Nevada Organization of Building Officials

Mark Fiorentino, representing the American Council of Engineering Companies of Nevada

Thelma Bartlett, Citizen

Karen Dennison, representing the Lake at Las Vegas Joint Venture

Bill Balsi, President, Valley Concrete Company

Robert Maddox, representing the Nevada Trial Lawyers Association

Betty Evanson, Citizen

Bruce King, representing the Coalition for Fairness in Construction

Frank Beers, Citizen

Corie Craig, Senior Deputy Director, Fannie Mae

Deanna Forbush, Citizen

George Toto, Citizen

Randy Harris, H&S Construction

Chris Napolitano, Gateway Educational and Consulting Resources

Jim Nadeau, representing the Washoe County Sheriff’s Office

Kristin Erickson, representing the Nevada District Attorneys Association

Chairman Anderson:

[The Chair reminded the Committee members and those present in the audience of the Standing Rules and appropriate meeting etiquette.  Roll called.  A quorum was present.]

 

Please note the sign on the table concerning the legality of misrepresenting facts before this Legislature.  Although I have the prerogative of swearing in people who give testimony, I generally don’t do that.  It is a misdemeanor to misrepresent a fact to a legislator either in committee or out of committee on a piece of pending legislation.  Please keep that in mind when speaking to us.

 

We’ll move with S.B. 206.

 

Senate Bill 206 (1st Reprint):  Makes various changes to provisions relating to mechanics’ and materialmen’s liens. (BDR 9-755)

 

Steve Holloway, Executive Vice President, Associated General Contractors:

I’m here on behalf of the construction industry to speak to Senate Bill 206, a consensus bill.  It has had input from just about every group and organization that has anything to do with the construction industry, it has the support of nearly every group that I know of in the industry, and it has the support of labor and management.

 

Senate Bill 206 prohibits the prospective waiver of a lien claimant’s rights.  Doing so is good public policy.  There are 36 states that have already done so by either statute or case law.

 

Secondly, S.B. 206 clarifies and thereby expedites the procedures for filing and adjudicating a lien.  Unfortunately, S.B. 206, which unanimously passed the Senate is too late for many contractors and subcontractors throughout Nevada.  These contractors and subcontractors have built the Venetian, Aladdin, Regency, and numerous smaller projects throughout the state at their own expense.  Because of the many inequities in Nevada’s current mechanics’ lien law, many of these contractors have been forced to settle their claims for 30 cents on the dollar.  Many have been forced into bankruptcy; the rest are still litigating their lien claims.

 

After six years, those who built the Venetian, as a case in point, are still litigating their lien claims.  It will be another 6 to 10 years before the Venetian is forced to pay those claims that have already been awarded by the district court.

 

Nearly every contractor in the state is prepared to tell you why S.B. 206 is needed.  In order not to belabor the point only a few are scheduled to testify here today.  Nevada deservedly has a reputation in the construction industry as being the worst state in the western United States in which to do business.  Passage of S.B. 206 will do much to negate that reputation.  It’s definitely worth your support.

 

Mr. Chairman, we have provided you with a summary of S.B. 206 (Exhibit C) and would be happy to go through that with you.

 

Chairman Anderson:

I think it would be helpful to spend a few minutes on it.

 

Steve Holloway:

As I previously said, the changes to S.B. 206 are intended to prohibit the perspective waiver of lien claimants’ rights and to conform and clarify and, thereby, expedite the procedures required for a waiver and release upon payment.  It will expedite the procedures for recording a notice of lien and surety bond to release a lien, and the proceedings to adjudicate a lien.

 

Sections 2 through 24, pages 1 through 5, simply consolidate, clarify, and add important definitions and terms.  Many of the definitions have simply been moved from the text of the current lien law section definitions; others are new.

 

Section 2, pages 5 through 6, voids conditions, stipulations, and provisions of a contract that requires a lien claimant to waive lien rights, except as provided in statute; makes the contract subject to the laws of another state; requires litigation or arbitration to occur in another state; or requires a lien claimant to waive delay damages that were not contemplated.  Please note that 36 states prohibit the prospective waiver of lien rights either by statute or case law.

 

Section 26, pages 6 to 11, allows the waiver and release of lien rights upon payment and provides standard waiver and release forms to be used to receive progress and final payments.  Currently, we do not have such standards forms in the state.

 

Section 27, page 11, deletes definitions that are now included in Sections 2 through 24.

 

Section 28, pages 11 to 13, confirms that any work, material, or equipment furnished at the request of the owner or his agent, whether in writing or verbally, is lienable.  Please note that whether the request was made will be a matter of proof, of course.  It also deletes language that is now incorporated into the definitions set forth in Sections 2 through 24 of NRS 108.225.

 

Section 29, pages 12 to 13, specifies the priority of liens and deletes language that is now incorporated into the definitions.

 

Section 30, pages 13 to 16, makes certain that the time for recording liens does not begin to run until 90 days after the work of improvement is complete, or until 40 days after a notice of completion is timely recorded and served.  It also establishes a standard form to be used to record a lien.  It allows liens to be served by certified mail and deletes language that is now incorporated into the definitions set forth in the statute.  Finally, it requires that the lien claimant provide the owner with a 15-day notice of intent to lien if the work of improvement is a multiple- or single-family residence or residences.

 

Section 31, pages 17 to 18, allows liens to be served by certified mail.

 

Section 32, pages 18 to 19, clarifies the requirements for a hearing on a frivolous or excessive lien.

 

Section 33, pages 19 to 20, clarifies the content and delivery requirements for a notice of completion and invalidates a notice of completion for failure to deliver.

 

Section 34, pages 20 to 21, confirms that lien claimants may amend their liens at any time prior to trial and requires the lien claimant to serve the owner with any amended lien. 

 

Section 35, pages 21 to 22 clarifies how a lien against two or more pieces of property will be apportioned.

 

Section 36, page 22, confirms that a notice of lien must be recorded in the county in which the property subject to the lien is located.

 

Section 37, pages 22 to 23, confirms that a lien may not bind the subject property longer than six months unless an extension is granted by the court.  That extension may not be granted for more than one year.

 

Section 38, pages 23 to 25, establishes the content to be included in a notice of non-responsibility and further defines a “disinterested owner.”

 

Section 39, pages 25 to 26, clarifies the lienable amount that may be recovered by a prime contractor and the prime contractor’s obligation to only defend the owner after receipt of payment.

 

Section 40, page 26, clarifies the rank of lien claimants and the distribution of proceeds from a judgment.

 

Section 41, page 26, confirms that a prevailing lien claimant shall be awarded attorney’s fees, court costs, and interest, and that any prevailing owner or owner’s agent may be awarded court costs and reasonable attorney’s fees.

 

Section 42, pages 27 to 28, confirms that filing a notice of lien does not preclude a lien claimant from pursuing other remedies.

 

Section 43, pages 28 to 30, establishes the time period for filing a statement of facts in an ongoing foreclosure action and establishes the procedures to be followed in a complex foreclosure action involving numerous lien claimants.

 

Section 44, page 30, clarifies by conforming language allowing for the release of a lien upon the posting of a surety bond.

 

Section 45, pages 30 to 32, requires a debtor to a lien claimant to record a surety bond in the office of the county recorder in which the notice of lien was recorded.  It also requires the debtor to mail a copy of the surety bond to the lien claimant.

 

Section 46, pages 32 to 34, extends the time period for the court to conduct preferential trials and establishes the procedures for such trials.

 

Section 47, page 34, subjects the principal and surety to the jurisdiction of the court in which any action or suit is pending on a notice of lien on the property described in the surety bond.

 

Section 48, pages 34 to 35, addresses the sufficiency of a surety bond.

 

Section 49, page 35 to 36, conforms language on the assignment of liens.

 

Section 50, page 36, conforms language on the discharge of liens.

 

Section 51, pages 36 to 37, also conforms language on the discharge of liens.

 

Section 52, page 37, clarifies by conforming language regarding the time limit for filing a foreclosure action.

 

Section 53, pages 38 to 39, clarifies by conforming language regarding the Notice of Right to Lien.  It also allows the Notice of Right to Lien to be filed at any time after the commencement of work.

 

Section 54, pages 39 to 40, is also conforming language addressing the prime contractor’s notice to owner and subcontractors regarding the Notice of Right to Lien.

 

Sections 55, 56, and 57 are simply conforming the language that address sections NRS Chapters 116 and 624.

 

Section 58 repeals certain sections in NRS Chapter 108 that have been incorporated into the definitions.

 

Section 59 provides that this act will apply only to agreements entered into on or after October 1, 2003.

 

It is, as you can see, a very extensive bill; it has been almost six years in the making and has required input from a wide range of people throughout the industry.

 

Chairman Anderson:

Thank you, Mr. Holloway.  I’m still trying to sort through all of the people who want to speak on the bill.  [The Chair noted the number of people wishing to speak and commented that he would have to time the speakers.]

 

Mr. Ashleman, is your presentation relative to the formal presentation of the bill?

 

Renny Ashleman, representing the Southern Nevada Homebuilders Association:

It is relative to the formal presentation of the bill.  There is a short list of amendments required, and I was going to present those to the Committee.  You have copies of them in Mr. Holloway’s package (Exhibit C).

 

Chairman Anderson:

We do.  I noticed Mr. Brown has a question but let us get the amendments in front of us.  I’m still trying to figure out [from the guest list (Exhibit B)] if there is anyone speaking in opposition to the bill; let’s hear the amendments.

 

Renny Ashleman:

In Section 18, page 4, line 8, we need to add the words “or an owner with a general contractors license functioning as the prime contractor” after the word “property” and before the word “to” on line 8.  The purpose is that certain professionals, particularly engineers, often contract directly with the owner.  Some owners function as their own contractors holding general contractors licenses.  Our definition wouldn’t cover that situation and would remove their existing lien rights if we don’t put this amendment in.

 

The second amendment is to Section 26, page 7, lines 29 and 33, and also lines 30 and 34.  It has the same purpose in both places.  It more carefully defines the definition of what the releases cover and the amount of them, the changed language allowing the release of the items which are the subject of the invoice or payment application, but only to the extent of the payment amount and so on.  Otherwise, there’s an ambiguity in the section.

 

Section 28, pages 11, lines 30 to 45 and page 12, lines 1 to 9, amend subsection 1.  We’ve added equipment and clarified the language.  We’ve set up two situations, one where the parties have agreed upon a specific price or method for determining a specific price and one where they had not.  We discussed the consequences of that in the establishment of the lien.

 

The next amendment is for Section 31, page 17, line 14.  We are replacing the word “resident” with the word “residents” following the word “of” and before the word “or” on line 14.

 

Section 38, page 25, lines 16 to 21, is of particular importance.  In the Senate, there were concerns about people who were lessors being liened for something a lessee did of which they had no knowledge or control.  A dramatic example was given where a person got stuck with a very large lien for a defaulting tenant for improvements that were of no use to him and in which he had no participation.  The amendment went too far and made it impossible to lien a landlord and/or lessor who actually participated in the improvements, such as putting up the improvement money or having it specifically designed, and who otherwise had reasons to be the person one would file a lien against.  So we are amending it to allow for the former situation and avoid the problems caused by the latter situation.

 

The next amendment allows the prevailing lien claimant on a claim against a surety bond, pursuant to a preferential trial under subsection 3, to be entitled to an immediately enforceable judgment and allows an appeal from a judgment by either party, even though all claims asserted or consolidated lawsuits brought in the underlying lawsuit may not be finally resolved by the judgment.  It is very common for a lawsuit to have a lot more involved than just the lien and the resolution of the lien.  That’s one of the reasons for the extremely long delays taking place.  This will help in those instances to try to cut down some of those delays.

 

The next amendment is to Section 48, page 35, line 1 and line 3.  We’ve added the words “or petition” because just a “motion” doesn’t cover all of the legal contingencies that might be involved.  Those are the proposed amendments.

 

Assemblyman Brown:

First, by way of disclosure, my law practice represents some contractors; however, those I represent would not be affected by this legislation.  Looking at the amendments, does this exhibit contain all of the amendments?

 

Renny Ashleman:

The two-page sheet you have there is the complete set of amendments.

 

Assemblyman Brown:

I just wish to discuss one word.  That’s on the amendment, number 4, for Section 28.  The little word, and sometimes insignificant word “or” in between (a) and (b).  In a perfect world we agree to everything.  It’s always especially nice to have a paper trial and have everything reduced in writing and contracts, et cetera.  There’s a situation where the parties agreed upon a specific price; this is one alternative.  The other is if they did not agree on a specific price then were looking at the fair market value.  Would it be problematic to change that “or” to “and”?  I say that because many times directives are given and are not always nailed down as to price, and sometimes the work goes on; I’m not sure if we’re excluding that type of situation. 

 

If there is a contract as to a specific scope of work, however, as the construction proceeds, there may be an owner directive or some type of situation where there is an agreement that additional work will be pursued but it’s not always nailed down as to price.  I’ve seen that in litigation; things get worked out down the road.  Do you see a problem with changing that “or” in that instance?  I don’t want to exclude the situation where there is additional work agreed to but maybe there wasn’t an agreed-upon price right up front.  I certainly don ‘t want to do violence to the bill as a whole, I’m just looking for your opinion on that.

 

Renny Ashleman:

I fear that changing to “and” will cause confusion in the courts on the issue of whether, after there’s a specific agreed-upon price, the parties can get into the issue of fair market value.  I do not see the language we have drawn as excluding change orders.  In fact, part (b) was expressly addressed to that issue.  I’m more than willing to consider any other way to take up your concern, but I think that we might do a little mischief by changing the “or.”  I don’t know if my colleague agrees with that.

 

Steve Holloway:

Actually, I’m going to defer to one of our other attorneys who practices lien law, Michael Brimley, to come up and address that.

Michael Brimley, Attorney at Law:

We were instrumental in drafting this bill and also the amendments.  In connection with this particular amendment that Assemblyman Brown has questioned, we believe the word “and” would be an acceptable substitute for the word “or.”  In our perception, having been involved in litigation extensively concerning these issues would actually be a benefit to the construction industry. 

 

The thought process behind it is that subpart (a) specifically pertains to circumstances where the price was agreed upon.  That would include, for example, the contract price and approved changes because approved changes would have an agreed-upon price.  When you have a situation in a contract where there is a change directive and the price is to be agreed upon later, yet at the end of the project the price is not yet been agreed upon, it needs to be very clear that the additional change directive would be included in the mechanics’ lien even though a price had not been agreed upon.

 

By inserting the word “and” into the location of the word “or” it would afford the courts the opportunity to make it clear that we are to include in a mechanics’ lien not only those items that were previously agreed upon, but also something that was properly directed and on which work was done, even if a price was not agreed upon; the court could insert a reasonable value.  It is not the intention of the coalition to obtain a change.  For example, if an approved change order did have an agreed-upon price, we’re not proposing, and this wasn’t intended, by using the word “and,” to substitute the agreed-upon price for a reasonable value.  The purpose is to have an agreed-upon price stand as the lien amount.  If no agreed-upon price is arrived at, then the price would be a reasonable value including reasonable overhead and profit.  Once again, I think the word “and” is an appropriate replacement for the word “or.”

 

Chairman Anderson:

That was well put.  Mr. Brown, does that satisfy your concern?

 

Assemblyman Brown:

I was thinking along those lines.  In both sections it has the language “some or all of the work,” so I think it’s implicit that some or all of the work may have an agreed-upon price.  Some or all of the work may not.  I think it recognizes what actually happens on a construction site in many instances.  So I would prefer the word “and” in there.

 

Chairman Anderson:

Remember that Legal does our bill drafting for us.

Assemblywoman Buckley:

I have a question on the amendment, paragraph 7, which has the sub-number 6 under it.  It indicates that a prevailing lien claimant shall be entitled to an immediately enforceable judgment and an appeal may be taken even though all claims asserted may not be finally resolved.  This seems to set the law, as I know it, on its head.  Usually there’s a final resolution before it’s appealed.  Writs are an exception, but everything should be resolved in case someone is owed money on a counterclaim.  Maybe lien law is different; I don’t do that kind of law.  Could you comment on this paragraph for me, please?

 

Michael Brimley:

This is quite a large issue because the mechanics’ lien statute has a specific section in it.  Even the current law has a specific section that allows a lien claimant, where a bond is substituted in place of the mechanics’ lien, to obtain an expedited hearing.  It would seem somewhat futile to have an expedited hearing on the bond claim only to have to wait until the end of the main litigation that may involve every issue that was involved on the construction project in order to enforce that bond claim.  What I believe to be the obvious purpose of the bond statute was to provide an expedited bond remedy.

 

The current law allows for a person to obtain 54B certification, which means that portion of the case is certified as final.  But in order to avoid having to go through the process of 54B certification, the obvious intention is to try to get the lien claimant paid because the contractor has advanced his own funds to push the project forward.  If the court has determined that the money is owed, there’s no just reason to wait until the end of a protracted litigation that could go on for another four or five or even ten years.  So the concept is to make sure that once a lien claimant has had his day in court, he is entitled to immediate enforcement.

 

Assemblywoman Buckley:

I think that makes sense.  I can certainly understand it for the Venetian project.  I’m just trying to think of the run-of-the-mill small case and whether this could create mischief when there really are legitimate issues on both sides.

 

Michael Brimley:

The concept is that a person can assert defenses to a mechanics’ lien claim.  If amounts are not legitimate because there was a back charge or an offset or some other type of credit, those are litigated as part of the expedited trial.  Essentially, when the judge comes down with a ruling on the bond claim, it includes most everything that could possibly be litigated with respect to that lien claim.  There really is no injustice in allowing the lien claimant to collect at that point in time if, ultimately, there is some unrelated issue that comes down the pike and it’s litigated four or five years later.  Then at that time the court can order a different award against the lien claimant and justice can be done in that fashion.  The real issue is, who holds the money during that process?  It’s only fair that if the lien claimant is able to prove that money is owed, that lien claimant should be entitled to hold that money so it can be used for further construction in Nevada.

 

Renny Ashleman:

With the explanation on the record as to the intent on item 4 with the infamous “or” versus “and” controversy, I’m more than content to have it resolved either way by the Legislative Counsel Bureau (LCB) staff.  I think that we’re clear enough that my objection is not really a problem at this point.

 

Chairman Anderson:

Mr. Brown is of the opinion that it should be an “and.”  Ms. Buckley doesn’t seem to be upset about whether it’s an “and” or an “or.” 

 

[The Chair indicated that several people had signed up to speak on the bill.  He noted that no one had signed up to speak in opposition.]

 

Jack Jeffrey, representing the Southern Nevada Building and Construction Trades Council:

I’ll give you the short version; we’re in favor of the bill.

 

Chairman Anderson:

Does anybody else wish to get on the record on S.B. 206 with the amendment?  Is there anybody speaking in opposition to S.B. 206 with the amendment.  Let’s close the hearing on S.B. 206.

 

Assemblywoman Buckley moved to Amend AND Do Pass S.B. 206 with the amendments being those submitted by Mr. Ashleman and the change from “or” to “and.”

 

Assemblywoman Ohrenschall seconded the motion.

 

The motion carried unanimously.

 

Let me assign the bill to Mr. Claborn.  Mr. Claborn, would you like to take the bill to the Floor, please?  [Mr. Claborn indicated he would.]

 

Let’s turn to S.B. 241.

 

Senate Bill 241 (1st Reprint):  Makes various changes to provisions governing certain claims for constructional defects. (BDR 3-156)

 

Steve Hill, Chairman, Coalition for Fairness in Construction:

[Introduced himself and submitted Exhibit D.] The Coalition was formed about a year and a half ago.  The Coalition is made up of homeowners, affordable housing advocates, virtually everyone in the construction industry, and many companies associated with the construction industry.  We’ve passed out a binder (Exhibit D) with a great deal of information.  You will see a partial list of members.  Our membership at this point numbers nearly 2,000.

 

Also in that binder is some research done by Jeremy Aguero.  He produced some information that deals with several issues (Exhibit E).  There has been a tremendous proliferation of lawsuits over the past five years.  In 1998, there were fewer than 10 in southern Nevada.  At the end of 2002, there were over 200.  The result has been multifaceted.  Insurance costs have gone up at times as much as 1600 percent for subcontractors.  The average insurance cost increase is around 500 percent and we are looking at an increasing unavailability of insurance in the very near future.

 

The result of this has been that companies have gone out of business.  Thousands of employees have lost jobs and the average price of housing is nearing $200,000 while the rate of homeownership is 5 to 6 percent less than the national average and just 5 percent above the homeownership rate in California.

 

Entry-level housing is down by 36 percent.  It’s virtually impossible for subcontractors and most builders to obtain insurance in order to build town homes and condominiums.  The construction industry, in looking at these problems, realizes that the method and the way to get those problems solved is an indirect method.  The direct method is to get homes fixed.  That is what our legislation focuses on.  We cannot fix the rest of the problems for homeowners, our industry, and the state’s economy without getting homes fixed.

 

The goal of our industry is to solve problems in homes before lawsuits take place.  We want to keep subcontractors who should not be involved in these cases, out of these cases.  There’s been some discussion about an “easy out” as it applies to subcontractors that should not be in these cases.  Our philosophy is, “never in.”  Let’s give them an opportunity to have a homeowner point at a problem get that subcontractor and the builder in there to fix that problem.  If there is a difference of opinion, have a mediator be able to help mediate that problem so that people who don’t belong in lawsuits can get problems resolved before lawsuits; give them an opportunity to do that before a lawsuit is filed.

 

The industry needs real reform.  A step in the right direction is an additional step toward the edge of the cliff.  We need real reform this session.  We feel that S.B. 241 is that reform and we urge your support. 

 

Jim Wadhams, representing the Coalition for Fairness in Construction:

[Introduced himself.]  I will try to be brief.  In my experience with this Committee, you generally read these bills in advance, so I’m not going to walk you through word by word.  I merely will identify those sections that I think require your particular attention.  Obviously, you will have questions from wherever they may come.

 

To set the stage, this bill does not suggest that contractors don’t make mistakes, and we’re not here to suggest that homeowners do not have defects; we know they do, we’ve seen pictures, and we’ve seen reality.  We’re not here to suggest that there should be no lawsuits.  We’re here because homeowners want their houses either completed or repaired.  We’re here because homeowners don’t want to be in litigation if it can be avoided.  We’re here because homeowners still want the right to sue the builder who won’t fix it or won’t fix it right.  We’re here because making a demand before litigation is common sense and the standard in American practice.  Contractors have found themselves in lawsuits before they knew there was a problem and before they had a right to stand behind their work.

 

I need to make a drafting comment.  We had requested a series of amendments to the existing law.  The LCB determined that a complete re-write of the old law would be a better drafting approach then trying to patch our amendments onto the existing law.  What you see in front of you in S.B. 241 was really an exercise of discretion of the LCB to re-codify our amendments and the existing law, and it was re-written.  We think the LCB did a very good job of that.  In that process, however, you will hear some suggestions of things that were deleted in the translation process and some other amendments I hope to identify along the way from other parties, that we would certainly consider friendly.

 

It’s important to note that this bill has approximately 22 sections that are definitional; most of those definitions existed before this bill.  There are 13 sections that are largely, if not totally, existing law.  Of the 59 sections, the majority of the text is in the old NRS 40.600.  I don’t know that it’s important; it’s old law versus new law.  We have heard some criticism of some sections that were placed into the old law in previous legislative sessions by this very Committee.  So if questions come up in that regard, I will try to identify whether it is existing law or new law.  But this is a complete re-write done by LCB.

 

What we’re trying to accomplish is to finalize and articulate what the Legislature believes it created in 1995, and that is an opportunity to resolve these issues prior to litigation.

 

[Jim Wadhams continued.]  The Chairman of this Committee has said several times that a homeowner has to notify the contractor of a defect; you will find that in Section 27.  The contractor has to notify the subcontractors; you’ll find that in Section 29.  As Mr. Hill mentioned an “easy out” or “never in,” that “never in” is provided for in Sections 29 and 34.  An opportunity to give the homeowner access to independent non-binding expertise is addressed in Section 31 [concerning] the State Contractors’ Board, which I will discuss again.  Preserving the homeowner’s right to sue occurs in various sections including, most particularly, Section 29.  Section 30 allows an adequate but limited time for repairs to be done; the repairs must be accomplished within 150 days.

 

Obviously, there are minor repairs that could be done much quicker than that.  The notion here is to try to accommodate the range of repairs that might be presented, including those that would be substantial.  Those 150 days represent a fuse that is lit by formal letter to the contractor, which is Section 27.  Before I jump into the bill itself, the bill does allow for the homeowner to recover the cost of repairs or the diminution of value as damages.  We think that’s an important piece; that’s Section 49.  Allowing prevailing parties to recover reasonable attorney fees is in Section 50.

 

While trials may be necessary, and oftentimes they are, they delay repairs.  We have heard testimony on prior bills in this Committee that those trials can run four or five years.  Being a lawyer myself, I can tell you the only people who are ever happy with a trial are those of us who make a living managing trials.  Parties are rarely happy with the outcome; money spent is significant.

 

We have met over a dozen times with lawyers who represent homeowners.  We have met with lawyers who represent subcontractors, lawyers who represent engineers, lawyers who represent insurers, and lawyers who represent master developers.  We have had some very constructive discussion with all of them and I believe that there will be some positive amendments.  We will be glad to work with the Committee on them.

 

As I take you through the bill in a rough summary, let me remind you that what we’re trying to do with this is to reconnect the person who has a construction problem with a person who can do the construction.  If those problems can’t be dealt with by people who deal with construction, then we need to resort to the lawyers who can hold people accountable for honoring their contracts.

 

[Jim Wadhams continued.]  There are really two phases of this process.  I might mention, in general, Sections 1 through 38 of the bill deal with pre-litigation issues.  I will try to summarize those in just a moment.  Sections 39 through 51 deal with procedures and litigation.  Sections 52, 53, 55, and 56 deal with certain homeowner’s rights to information, many of which are in the existing law and some of which have been supplemented as proposed in this bill.  Finally, Sections 54, 58, and 59 are what we euphemistically call transition language or LCB editing language. 

 

Sections 1 through 22 are definitions.  I want to point out Section 10 contains a definition of construction defect; I don’t want you to think that it’s not there.  This definition is not the critical one; that occurs later in Section 24, which I will get to in a just a moment.  The Section 10 definition is existing law.  Section 24 is the more critical section dealing with definition.  What it says is, “The house must be built to code,” not less than code, “and be functioning as intended.”  There’s a provision in there that if damage is caused—and that damage is defined in Section 49—and as I alluded to my preliminary remarks, that damage is cost of repairs yet to be made or the diminution in value.  Damage is defined; you may hear some suggest that means the house has to fall down or somebody has to be hurt; Section 49 does not require that.  This doesn’t apply to personal injury situations, in any event.

 

We have had discussions on using a definition that was offered in the Governor’s Liability Insurance Task Force that met during the Interim.  We’re certainly happy to look at that.

 

Section 25 is existing language and simply indicates maintenance items that are normal or expected in our climate and environment are not covered.  That’s been in the law since 1995.

 

Section 27 is the notice requirement and it does require that the State Contractors’ Board develop a form that can be used for consumers to give those notices to the contractors.  There’s a section in there that requires homeowners’ associations to have a majority vote before they can place their homeowners’ association into litigation.

 

Section 28 requires the homeowner to give the opportunity and access to come in, inspect, and evaluate the repairs.

 

Section 29 is the right to repair.  As I mentioned in my preliminary comments, it requires that the general contractor notify the subcontractors who have an issue within that repair problem.  So there is an “easy out” or a “never in” provision.

 

[Jim Wadhams continued.]  Section 30 says that within 90 days the contractor must indicate in writing whether he is going to repair or not.  This would allow time to get the subcontractors involved and get out and inspect the property.  Simple repairs can be done in a shorter period of time.  We’re trying to have a period of time that will not leave people having to litigate because they just didn’t have enough time to do that preliminary inspection.

 

Section 31 identifies the State Contractors’ Board.  The intent here is to allow… not that they’d be a screening panel, not that they could make a decision on who’s right or who’s wrong, but that their expertise and their job in addition to issuing licenses is competency of contractors.  They should have the expertise to evaluate whether a proposed repair or a completed repair is a reasonable proper repair.  If the homeowner doesn’t like that advice, he is not bound to accept that.  The purpose of this section is not to create a binding decision on either the homeowner or on the contractor.  If there’s a licensing issue beyond that, that’s a separate proceeding.  This is to facilitate some independent expertise that the homeowner can access, basically for free, because it is a state agency.

 

I want to draw your attention to Section 32; we have proposed that the statute of limitations…

 

Assemblywoman Buckley:

You said that it’s not binding on anyone.  Page 11, lines 1 through 4, says that the decision of the State Contractors’ Board would not be subject to judicial review.  Doesn’t that mean what it says, that it is binding, and not subject to review?

 

Jim Wadhams:

That’s an excellent question.  I think, if carefully read, it corroborates the suggestion that because this is not a decision affecting the rights of any party, licensee or member of the public.  It is purely advisory and is not binding; there is no purpose for judicial review.  The license can’t be revoked based upon this advice and the homeowner is not obligated to accept it.  It is purely an advisory position.  In discussions with lawyers for the State Contractors’ Board, they obviously did not want—you may recall discussion from last session—to be in the position of arbitrator.  This is merely to use their expertise to offer a comment that could be relied upon.  So there’s no judicial review; it would not serve a purpose in this context.  If there’s a revocation later, then the full statute, NRS Chapter 233B, does apply.

 

I wanted to point out in Section 32, the statutes of limitations are tolled.  This means they can’t run against the person who has the problem until 60 days after the repairs are completed, which gives them time to evaluate the repairs.  The opportunity to go to court is protected since one can’t just wait until the last minute and say the right has been lost.  The statutes of limitations are tolled.

 

[Jim Wadhams continued.]  Section 34, again, is what I referred to as a form of an “early out” provision for subcontractors.

 

Section 35 basically is existing law.  I want to point out here that there is a difference in this debate about imminent threat.  That’s the kind of threat that is not one of a code violation, which is a life safety issue.  This is one of an imminent threat, for example, where there’s a separation and somebody is going to get hurt if this thing falls.  That needs to be reacted to quickly.  When there is an imminent threat, it’s got to be repaired.  This provision gives the contractor an opportunity to come out, evaluate it, and fix it.  If he doesn’t think it an imminent threat and the homeowner does, the homeowner gets it fixed and can sue the contractor for the cost.  It makes no sense to suggest going to court first if there’s an imminent threat.  Courts do not deal with imminent threats; it has to be fixed first.  If a house is going to fall down, it needs to be propped up right away.

 

Section 36 is old law.  This is the section that was placed into law by this Committee two sessions ago to try to expedite repairs on new houses.

 

Section 37 is existing law and has worked effectively in cases since 1995 on mediation.  It’s one last chance to bring parties together to communicate.

 

Section 38 requires the contractor to pay for the bulk of the mediation costs.  I think a maximum of $750 is set there and the homeowner has a $50 buy-in to do that.

 

Section 39 is an engineering section that in the translation by LCB a word was changed; they will have an amendment there.  It requires a professional affidavit before engineers can be brought into these lawsuits.

 

Section 40 is existing law on master developers.

 

Section 41, as you’ll note, was deleted at the suggestion of the Nevada Supreme Court.  That was for the appointment of a senior judge.

 

Section 42 deals with class actions.  It indicates that class actions are available and permissible to those parties who have indicated that they have a problem and they want it repaired.  To be part of a lawsuit they would have indicated there was a problem and given the notice under Section 27.

 

[Jim Wadhams continued.]  Section 43 requires that a homeowner who files a lawsuit has to notify others who have an interest in that house.  Unfortunately, I’m one of most people in this state whose primary interest in my house is owned by a lender.  If I have a problem, we think that all parties that who have an interest in that house should know about that so their interest could be monitored.

 

Section 45 is existing law dealing with exchange of information after a lawsuit is filed.

 

Section 46, again, is litigation procedure on early conferences.

 

Section 47 allows a judge to compel the contractor’s insurance company, if he has one, to be there.

 

Section 48 is existing law and allows the contractor to buy back the house to settle the claim.

 

Section 49 is one I referenced; it defines what damage is.  It relates back to that definition section where it requires “damage.”  In other words, there has to be either a cost of repair that’s necessary or a diminution in value.

 

Section 50 is one I also referenced; it deals with attorney’s fees.  We suspect and have discussed an amendment to that to eliminate the articulation of the judicial standards; courts do this independently.

 

Sections 51, 52, and 53 are existing law.

 

Section 54 is transitional language for the effective date of the act.  I remind you that LCB prepared a new chapter.  They had to deal with the transition from the old chapter to the new chapter.

 

Section 55 conforms the information for homeowners to include soils reports, status of what this law is, the rights and duties.

 

Section 56 gives the power to the State Contractors’ Board to do what we suggest they ought to do in this bill, that is, to send out inspectors who can give advice and develop the forms.

 

Finally, Section 57 is the effective date of the act. 

Assemblyman Geddes:

My questions are in regard to Sections 24 and 25 of the bill.  I’m not quite sure how the definition works.  In Section 24, subsection 1(a) it mentions that it “is functioning as intended and was completed in compliance,” that’s when the house was done, complete.  Is there a time line after that where a defect could show up?  What is the time line to say that it was complete to specification at that time?

 

Jim Wadhams:

Let me answer that question with a little more information.  There are really three aspects to this answer.  First, a certificate of occupancy will be issued by a local building inspector saying the house is completed.  That doesn’t necessarily mean that a defect won’t show up, so this body, the Legislature, has adopted two sets of statutes that deal with that.  One is called the statute of limitations, which means there is a certain period of time after the discovery of the defect that a person has an obligation to bring that forward or lose the right to bring it forward.  In this area, there is also a variation of that called a statute of repose.  For those of you who recall your debates on medical malpractice, there is a statute of repose there on children.  That is a period of time that the Legislature sets after which a claim cannot be brought.  In other words, if I have a defect, whether I know about it nor not, after a certain period of time—we’ll refer to that here as 10 years, and there are subsets of that—after 10 years, basically, the house is the owner’s problem.  That’s existing law.

 

Assemblyman Geddes:

The second question is going into Section 25, subsections 1(a) and 1(b).  I’m thinking of the development where I live; part of the development has a problem.  It’s Highland Pines in the Reno area.  The normal shrinkage, swelling, expansion, or settlement—I’m wondering just how you would sign off on that based on the clay or moisture percentages, that sort of thing.  We had a particular instance where some of the development was draining properly and some of it wasn’t, so there was standing water.  What worked on one street did not work on another because of the amount of water and the expansive clay.  I’m wondering how the definition of “normal shrinkage” would apply in that case.

 

Jim Wadhams:

We have some people here who have actually litigated cases in that area that could give you a far better description than I.  But let me say this, this particular language has been in the law since 1995 and, despite it being in law, there are still many cases that have been litigated basically over soils.  That is probably one of the major problems at both ends of the state where the soils have not been adequately prepared to sustain construction.  I don’t think that the existing language has deterred anybody from pursuing either a repair or a lawsuit based upon bad soil.  That’s why two sessions ago we required disclosure of the soils report to new purchasers.

 

Assemblyman Carpenter:

On page 11, line 8, it says the contractors and all of the other people can pursue any remedy otherwise available from the State Contractors’ Board.  What does that mean?

 

Jim Wadhams:

This follows along the lines of Assemblywoman Buckley’s question.  The purpose of the engagement of the State Contractors’ Board—if the bill drafter has expressed our intent—will have nothing to do with the licensing status of that contractor.  The section you have identified on page 11, subsection 4, does not preclude the State Contractors’ Board from going after that contractor’s license or the claimant filing a complaint with the State Contractors’ Board under all other existing procedures.  What we have attempted to do is create a non-binding, purely advisory opportunity for an inspector to come out and say whether something looks right or wrong.

 

Assemblyman Carpenter:

It seems to me that if a contractor or subcontractor got pulled into this deal and the State Contractors’ Board sent somebody out, it might give the State Contractors’ Board the right to pursue the contractor to take his license away.

 

Jim Wadhams:

I think the answer to that is they can do that today.  This Committee, I know, has heard several bills dealing with the State Contractors’ Board, and irrespective of any other matter, they can pursue a contractor for a licensing problem.  Judicial review is available to that licensee if he thinks he’s been abused.  We have tried to ask the LCB to prepare it in a way that licensing issues are done separately from this.

 

The homeowner or a contractor can ask to have somebody sent out to explain whether the State Contractors’ Board thinks that this is proper repair.  There are two separate processes.  What we’re trying to do in the section you’re looking at, Mr. Carpenter, does not interfere with the normal or existing function of the State Contractors’ Board and does not confuse it with this.

 

Assemblyman Carpenter:

I worry about that.  I don’t know if you can put anything else in here to alleviate my fears, but I think if a contractor is called up on this situation it may give the State Contractors’ Board a greater opportunity to call him and take his license or whatever.

 

Another thing I want to ask is about your definitions of construction defects.  You just mentioned that a lot of these problems are from soils and those kinds of situations.  I don’t see anything in the specific language that mentions soils.  It seems to me that it would be a defect that should be mentioned specifically because it is such a great problem.

 

Jim Wadhams:

I suppose we could create a list of common defects.  The people in the state of California, in their attempts to address this issue, did that; they identified certain defects and certain performance guidelines that had to be followed.  I think that appeared in this Committee in a bill earlier this session.  I suppose that could be reviewed.

 

What we’re attempting to do with the definition was to say two things.  The house had to be built to code, and it had to function as intended.  Just to reflect back on Mr. Geddes’ question, if the foundation is heaving because the soils are not right or the house is flooding because the drainage is not right, then it’s not functioning as intended.  So we’ve left the broader definition.  We could talk about more specific definitions but I think some of my opponents might have issues with that.

 

Assemblyman Carpenter:

I found the language referring to contractors [in Section 52, subsection 4] on page 28; it says, “A contractor who violates any provision of this section shall be deemed to have violated the provisions of Chapter 624 of NRS.”  I may be reading this wrong, but it seems like that gives them another situation where they can call somebody in.

 

Jim Wadhams:

If that’s a question, I appreciate the concerns about over-reaching regulators.  We have attempted to deal with the repair opportunity before litigation.  We think this Committee has jurisdiction to deal with issues involving whether the State Contractors’ Board operates properly.  We do recognize that there are some contractors who probably should have their licenses dealt with punitively.  We’re trying not to complicate this.  We wanted to keep this dealing with the repair side of the issue, preserving the opportunity to sue, if they don’t repair timely or correctly, and leaving this Committee to deal, in separate bills, with the activities of the State Contractors’ Board as licensing regulators.

Assemblyman Carpenter:

I don’t want to belabor this.  Like you said, this is a 10,000-word bill.  It took me a few hours to read it.  On page 23, [line 3], it says, “The deadline for the claimant to issue to the other parties a statement of the method and cost of repair.”  I may be reading this wrong, but I thought the claimants were the people who the owned the home.  Why would they have to be the ones that issue the statement of the method and cost of repair?

 

Jim Wadhams:

Section 46, and the page you’re referring to, is an importation into this bill of existing language that deals with the litigation process.  If you go back to the beginning of Section 46, you can see it deals with after the date of service of an answer.  So the complaint, the lawsuit, has been filed and now there is an answer filed.  In a lawsuit real people don’t do anything any more; lawyers do it.  So these deadlines are really the courts’ guide for performance by the attorneys representing the parties.

 

Assemblyman Carpenter:

Why should the claimant do this rather than the contractor who is supposed to have the expertise?

 

Jim Wadhams:

The contractor will have an obligation to prepare a list of the repairs.  I think this section attempts to do so.  Its modification appears in existing practice that the repairs that are being sought by the claimants, the homeowners, evolved; the defendant is trying to respond to a moving target.  What we’re trying to establish here is to come to a definitive conclusion so that we can resolve the repairs that are being desired.  Basically, once in court, this is a provision that seeks to bring these issues to a head rather than constantly have them amended and further delay the ultimate resolution.

 

Assemblyman Mortenson:

One hundred and fifty days seems like on awful long time.  Somebody is sitting in a brand-new house and being inconvenienced by some sort of defect.  Why does it take 150 days before the contractor has to take action or answer?

 

Jim Wadhams:

Let me answer that two ways.  First, specifically as to the question, if a homeowner is sitting in a brand-new house, this Committee in this house added a section that appears in this bill as Section 36 two sessions ago.  It requires that in a house that is less than a year old, the repairs have to be done within 45 days.  So a brand-new homeowner is not going to be in that situation.  Again, the presumption that this Committee had at the time was that issues in a brand-new house are going to be virtually the punch list or completion issues and should be able to be effectuated fairly quickly.

 

The other answer to the question is, we have a range of defects, some of which we will probably see pictures, that are not susceptible to being fixed immediately; they are going to take some time.  So by setting the time frames of 90 days for inspection and another 60, a total of 150 days, for repair, that was not set to go in and fix the leaky faucet.  That was set to be broad enough to encompass the range of defects that would typically and could possibly be identified (Exhibit M).  I suppose somebody could say an abusive contractor is going to wait 149 days just to be a jerk.  We don’t support that, but yet we wanted a time frame that would be adequate to cover most of the circumstances that can occur.  You will see, in prior testimony and again today, some of these defects are going to take more time to fix.

 

Assemblyman Mortenson:

The other thing I was worried about is the mediation.  At $750 a day, how long is a typical mediation take and who pays what percentage of the cost?

 

Jim Wadhams:

The mediation section has been in existing law.  The maximum set here is $750.  Mediation, depending on how complex, can take, after it’s scheduled, from anywhere from 30 days to 60 days.  It depends on the mediator, the parties, and the problem.  The purpose of the mediation is not to make a final decision that binds either party, but the mediator is attempting to bring the parties back to a resolution short of going to litigation.  Up until 1999, mediation was effective in individual cases.  In 1999, we changed from the old system of requiring a prior notice.  From 1995 until October of 1999, there had to be prior notice and a mediation before litigation.  In 1999, we agreed to start complex cases involving five or more houses with a lawsuit.  In other words, you start the dispute today under NRS 40.682 with a filing of a lawsuit…

 

Assemblyman Mortenson:

You are getting away from the question.  I was wondering how much the mediation costs.  You just said 30 days.  At $750 a day, we are talking about $22,000.

 

Jim Wadhams:

The mediation would not take that long.  I thought your question was how long might it take for a mediation to set up and conclude.

 

Assemblyman Mortenson:

I’m talking about the cost of mediation.  How many active days at $750?

 

Jim Wadhams:

I wouldn’t think more than a day or two.

 

Assemblyman Mortenson:

Who pays that?

 

Jim Wadhams:

The statute, the proposal, requires that, “The claimant shall deposit $50 with the mediation service.”  I’m looking at page 15, line 41.  On line 43 it says, “The other party shall deposit with the mediation service the remaining amount estimated by the mediation service as necessary to pay the fees…”

 

Assemblyman Mortenson:

Is that for one day or each day?

 

Jim Wadhams:

That’s for the estimate of the mediator.

 

Assemblyman Mortenson:

There are also provisions for trying to select a mediator.  Is it difficult; is there a situation where the claimant and the contractor will dance around over mediators?  Are there certain mediators that are biased toward homeowners and others toward contractors?  I’m just wondering what this section is all about.

 

Jim Wadhams:

This section is about trying to find that middle ground so that each party has a say in who is selected.  If I’m the contractor and I’ve selected my brother-in-law, you can reject that.  We could end up trying to get to somebody who is going to be perceived by both parties to be a fair person to try to bring us together.  The mediator does not make the final decision.  He merely tries to bring parties together.

 

Assemblywoman Angle:

I have three areas that I’m interested in.  First is the inspectors.  I don’t see anything in this that says that the inspector has a responsibility for making a good inspection of the job.  It seems like there is something going on here; we have land settling and things like this.  Inspectors should be signing off on this and if they are, then that should say that it’s done and there is no defect.  I’m not seeing anything that holds the inspector accountable or responsible for his inspection.  That’s not contained here, is it?

Jim Wadhams:

You’re absolutely correct.  It’s not contained here by intent and design.  This Committee and others in this house have discussed the issue of what role building inspectors should play for local governments.  In fact, in prior sessions there were discussions that there should be a sign-off and that should be the end of the discussion.  We don’t think that is the issue for this bill.  Our issue is not what building inspectors should do, but what we should have the opportunity to do before we get sued, irrespective of whether a building inspector did the job he was supposed to.  We really consider that similar to the question that was previously asked.  There are other issues that have a bearing about other people’s responsibility and roles.  We are only trying to identify that responsible contractors should have an opportunity to stand behind their contracts before they are sued.

 

Assemblywoman Angle:

My second concern is about the State Contractors’ Board.  When does this become criminal enough to say this fellow, this contractor, has done this to too many people now and should not be allowed to have a license any longer?  I think you were going into that with Mr. Carpenter.  So I’ll go on to my third question, which is in Section 53.

 

When a person sells his home, disclosures have to be made to the prospective buyer.  Is this existing law or is this something that we’ve added?  It just seems so onerous; people would have to keep all of this documentation about the repairs that have been done even if the defect has been adequately repaired; everybody’s happy.  It seems this would have a real chilling effect on the sale of a home, having to disclose all this.

 

Jim Wadhams:

That’s a fair question.  This has been in the existing law.  The idea the Legislature supports is that people who buy houses have a right to know what they are buying and if the house has been involved in litigation.  There are other issues in the real estate disclosure law besides this.  But if the house has been involved in litigation, the purchaser should have that information and make the decision on whether it was repaired or whether it’s still a problem.

 

Secondly, we think it is only fair that the subsequent purchaser knows that the contractor has already dealt with the prior owner on this issue and cannot be forced to deal with it again.  It is information disclosure to a prospective purchaser.

Assemblywoman Angle:

When a person discloses this, when he’s involved in a class action suit, where there are a lot of people involved, but his home didn’t have a defect, and yet he is named in the lawsuit, that clouds what is going on.  How does he prove that he didn’t have any damage and that this doesn’t really apply?  Does he still have to disclose the damage that might have been done on every other place?  Does he have to prove that there was no damage?

 

Jim Wadhams:

That is even a more pertinent question to the problem that we are trying to address in this bill.  It should be the individual homeowners’ choice as to whether they have a defect that they want repaired and it should be their choice whether they’re involved in litigation.  People have choices to make.  If they want to be involved in litigation, fine; many people don’t.  Many people might not even think there’s a defect even though somebody might tell them that there is.

 

Section 42 provides that the only people that could be brought into a class action are those that say they have a defect, want it repaired, and it wasn’t repaired or wasn’t repaired right.  That way they don’t fall into the trap of finding themselves suddenly in a lawsuit they didn’t want to be in or know they were in until it’s too late.

 

Assemblyman Horne:

In Section 27, where the obligations are listed and where a claimant has to file this standard form to provide notice of a construction defect, you have them listing the contractor, subcontractor, supplier, and design professional.  One of the criticisms of the bill is that of providing additional hoops for the homeowner to jump through.  I would like to see it more streamlined so the homeowner can contact the contractor.  The contractor should already have all this information on who worked on this property.  Why are we putting the burden on the homeowner to find all of these people?

 

Jim Wadhams:

That’s an appropriate question.  It does not require them to go find out who the subcontractors were before they send the notice.  It simply says to list them if they know who they are.

 

We also have a requirement in this bill that people be informed of who the subcontractors are.  The problem that this language has been attempting to deal with is an evolution from 1995 when it required the homeowner to give the builder a written notice, return receipt requested, of the defect, the problem, and the location.  We had to come back and have that specified.  They have to tell where the defect is so a reasonable person can walk on the property and find it.

 

We had a circumstance where the defect was identified by cracked tiles in a 156-unit condominium project, and the time would run before we could find where the crack was because it wasn’t specified as to where the defect could be located, so this has evolved over the course of some time.  What should be a simple process, unfortunately, becomes more burdensome.  We should have some reasonable opportunity to find and identify the problem.

 

I don’t believe this language obligates the homeowner not to send a notice until he finds out who the subcontractors are.  I do think it’s important for the homeowner to give the notice to the builder and the subcontractors if they are known.  The builder may have gone out of business and the homeowner may want to go after the subcontractors directly.

 

Assemblyman Horne:

The way it reads, “To provide such notice, the claimant must use the standard form…list on the standard form each contractor, subcontractor, supplier, and design professional who may be liable for the constructional defect and whose identity is known by the claimant.”  Is that what you’re talking about?

 

Jim Wadhams:

Yes, on line 32, are the words you just read, Mr. Horne, “whose identity is known by the claimant.”  If I don’t know who the subcontractors are, and quite frankly on my house, although it’s more than 10 years old, I would have no way of knowing; so if I don’t know, that’s fine.  If I do know who the subcontractor is, that can help expedite this process.  This is not designed to create a burden on the homeowner, but to light a fuse so that the builder has a specific time frame in which he must respond.  What we do now is file the lawsuit.

 

Assemblyman Horne:

The standards of burden for the homeowner from filing a suit, of being able to file an action, and the standard for a contractor to file a similar action against a subcontractor are different.

 

Jim Wadhams:

That would probably be in Section 29.  It identifies specific time frames for the contractor to notify the subcontractors.  On page 8, lines 9 and 10, it says, “A contractor shall provide a copy of the written notice to each subcontractor,” and that’s not later than 30 days after he receives the original notice.

Assemblyman Horne:

I will peruse it and get back to you.  Could you comment on the recertification of class actions and how we are going to do that?  Mr. Hill and I spoke about that.  I have concerns with changing the standard to where, unless a homeowner in a condominium complex, for example, fails to respond to that notice, he may be included in a class action suit; we should take that as a “no.”  I have concerns that if I live in a townhouse or in a condominium and I share a common roof or wall and because my neighbor may not have responded, they shouldn’t be included.  I think that could harm my participation or my remedies if we do that.

 

Jim Wadhams:

We really have to keep in mind that there are two discrete interests involved here.  One is the individual property owner.  The other is in a condominium complex.  They would own the interior of the structure.  In condominiums, the common walls, roofs, and exterior walls are owned by the association.  In those cases, the association has the right to bring forward litigation over anything it owns, which is separate from what a person, as an owner of a unit inside of that, might.

 

In a subdivision of freestanding houses, the association’s ownership of common areas will typically be swimming pools, [recreation centers], and grassy areas.  What we’re dealing with here is precisely the question I think was raised earlier, that the individual who has the house, has the right to make the choice as to what he wants to do.  If he wants it repaired, he can light the fuse.  If it is not repaired, he has the right to go to court.  If it is not repaired correctly or the repair fails, he can go to court.

 

What we are trying to prevent is a notion that the judges are struggling with right now—and I think our district court judges have done an admirable job of trying to organize this very issue—that is, should people who are in a common subdivision or a condominium complex be in lawsuits and have to exercise what [Nevada Rules of Civil Procedure] Rule 23 provides as an opt-out, as opposed to a consideration of the characteristics of what makes up that class in the first place?  We’re suggesting in Section 42 of the bill that class actions should be based upon people who are typical and common of each other.  That is, they have a problem that is typical in common and they want the repair as opposed to those persons who may not either believe it’s a defect or want that defect repaired.  Maybe they just simply don’t want to be in litigation and want to have the opportunity to deal with that themselves.  Section 42 does not prevent class actions, it just requires that those people who are going to be joined in the class are those who believe they have a problem and want it repaired.

Assemblyman Horne:

But it still stems on your numbers.  With the numbers, if the majority of those owners in that common tract or condominium complex have to agree to be included in that and if they don’t respond, then you don’t get that majority.  That doesn’t mean that they don’t have a defect, it just means they didn’t respond.  If that’s the case, we are going by just sheer numbers.  Because they didn’t respond, the ones who remain are left without the remedy they seek, which may be a lawsuit, because they are not getting remedied by the contractor coming in and making the repairs.

 

Jim Wadhams:

I didn’t correctly perceive the question you were asking until you rephrased it.  Homeowners associations, and that’s found in Section 27, where it requires that if a homeowners association for whatever its interest is—that is the common area owned by it, which does not include personal living units in a condominium or a stand-alone house in a subdivision—has to have a 51 percent vote of the owners to commit—not of the individual owners but of its owners.  The association is a separate animal from the individuals who have units of whatever kind in that property.  You would not typically see a homeowners association in a class action; they are a separate interest.  Where you see the class actions of individual owners being brought into a class action, that’s where Section 42, which is separate from the 51 percent rule, simply says the judge has to consider the interest of the individual.

 

Assemblyman Carpenter:

On page 13, under Section 35, it says that if a contractor goes out and finds a “defect that creates an imminent threat to the health or safety of the inhabitants,” he is required to repair the constructional defect and then it says, “as soon as reasonably practicable.”  It seems to me that if I, as a contractor, go out and see something wrong with that home and I say it’s an imminent danger to the health or safety of the people living in it, that I should correct it right away.  I should not wait for what’s “reasonably practicable.”

 

Jim Wadhams:

I couldn’t agree with you more.  Unfortunately, for us lawyers, in trying to devise ways in describing time frames, the alternative is the one where I answered Mr. Mortenson’s questions:  is 150 days the appropriate time frame, or is it as soon as possible or as soon as reasonably practicable?  We get into an issue question of what time frame should it be?  When lawyers put in phases like this, “reasonably practicable,” where there is an imminent threat, not just a code violation that’s not causing any immediate harm, but an imminent threat, “reasonably practicable” means—and I think any court would interpret it this way—it’s got to be fixed right away.  I don’t think that is an issue.  What we try to accommodate is a range of issues, so for the general defect that is not an imminent threat, we put a longer specific time frame so that lawyers don’t have to argue.  An imminent threat is a pretty clear case of something that is going to cause harm right away.

 

Assemblyman Carpenter:

It seems to me if it is an imminent threat, you ought to repair it immediately, not when it’s “reasonably practicable.”  I think there is other language you guys can come up with to mean what you said.

 

Assemblyman Mortenson:

Would you elaborate on the statute of limitations?  You said something about 60 days or something like that after a repair.  Did I understand that right?

 

Jim Wadhams:

Yes, sir.  If you look at Section 32 on page 11, line 35…  Statutes of limitations and statutes of repose operate as a matter of law to cut off rights to sue.  What we have provided in Section 32 is that those statutes cannot run during the period of time you are going through this process.  It extends that period of time.  It doesn’t count the repair time, plus we’ve added 60 days at the end of that to evaluate it.

 

Assemblyman Mortenson:

This is a roof repair, for example.  We don’t have rain sometimes for months and if a contractor supposedly repairs a roof and there is no rain for six months, and suddenly it rains, then the person is out of luck.  Is that correct?

 

Jim Wadhams:

No, sir.  The existing law, which does not change by this, is in effect; that repair starts a brand-new statute of limitations and statute of repose.

 

Steve Hill:

Mr. Chairman, we have several people who took time off today to be here.  We have witnesses in Las Vegas and a couple in Carson City whom we feel are representative of a broad group of people who have come today.  We’ll leave that up to you, but if they have the opportunity to speak, I think that what they have to say is important.  We also have their testimony in writing available.

 

[The following exhibits were submitted and distributed to the Committee without testimony:

 

• Exhibit F was submitted by Richard Plaster.

 

• Exhibit G was submitted by the Coalition for Fairness in Construction.

 

• Exhibit I was submitted by Norman Dianda.

 

• Exhibit L was submitted by Lois Ostraat.

 

• Exhibit N was submitted by Anne Kohl.]

 

Chairman Anderson:

We’ll try to accommodate what we can.  We’re going to hear those in opposition who have found some fault with this particular piece of legislation, and then we’ll move back to those in favor.  We’ll take a 5-minute break while they set up.

 

Dave Duritsa, President, Safe Homes Nevada:

[Introduced himself.]  Since we have this severe time constraint, I’m going to introduce some letters [Exhibits P, Q, R, and S].  These are from homeowners associations in opposition to S.B. 241.  They represent a total of 12,181 homes.  We’re having those distributed to you.

 

[The following exhibits were submitted and distributed to the Committee without testimony:

 

• Exhibit P was submitted by Ross Lageunesse.

 

• Exhibit Q was submitted by Marie Traub.

 

• Exhibit R was submitted by Glen Hayward.

 

• Exhibit S was submitted by Robert Nard.]

 

I also have a letter from a Nye County Commissioner, Patricia Cox (Exhibit T), that’s also being given to you.  I would appreciate it if you would take the time to read that.

 

With me today on the panel is Dennis Green, Secretary-Treasurer of Safe Homes Nevada, and Frank La Conte, Vice President of Safe Homes Nevada.  We represent a group of homeowners who are in opposition to S.B. 241.  For the record, we will say why we are opposed to this.  We just want everybody to know that before you sit three homeowners who feel that they have a right to speak.  We felt we had to speak all along because of our efforts—the individuals at this table have been sued by this industry.  You are all familiar with that action.  We feel that action was clearly intended to make us not be here today.  It clearly failed; we are here today.  We do have the right to speak and we wish to do so.

 

Before we go on, we have a gentleman, Anthony Booth, in southern Nevada, who has a brief film for you to see (Exhibit U).  He is not a member of Safe Homes; he is not represented by counsel.  May we have him come forward?

 

Chairman Anderson:

Is this part of your presentation?  [Mr. Duritsa indicated yes]  Secure the tape for Mr. Booth, please.

 

[A 90-second videotape (Exhibit U) was played.]

 

Dave Duritsa:

Mr. Booth is in southern Nevada, if you have any questions for him.

 

Chairman Anderson:

Are there questions for Mr. Booth from the Committee?  I see none, sir.  Is there any additional information you need to give the Committee?

 

Anthony Booth, Citizen:

I would first like to thank the Committee for letting me speak and Safe Homes for reviewing the issues with my house.  We purchased this house and wanted it to be the best.  We had cracks at the end of the first year and the builder’s response was to patch them.  He patched them up; the year ended and the builder said because the year was ended nothing more could be done for us.  He said we would have to file a claim with the insurance.

 

Two years into it, the house kept cracking; the cracks kept getting bigger and bigger.  The 4-foot crack that was initially fixed turned into a 20-foot crack that went all the way across the wall.  I submitted information to the State Contractors’ Board; home inspectors came out.  They took a look, reviewed it, and just said that there was a problem with the house.  They said we would have to get back with the builder.

 

At the same time, another homeowner from the same complex was getting the same results.  They approached a lawyer, and at that point the builder started to take us seriously when they got wind that there possibly could be a class action lawsuit.

 

The builder changed management in their company to respond to this particular investigation.  I filed complaints with the State Contractors’ Board.  It’s been several months; I believe I filed the first complaint back in August [2002] and the contractor has filed for extensions and has delayed the process.

 

This new legislation has some good points, but it is severely one-sided and takes away an enormous amount of consumer rights.  I believe that this would severely inhibit any new home purchases.  It’s ridiculous to go through this arbitration for months.  This bill is elaborate and could possibly extend…I think its whole purpose is to delay it and eventually hit the statute of limitations.

 

The current law has some issues, but nothing to the extent of what the builder can do right now.  If this passes, we should have some fear because rights are going to be taken away.  More time will be spent in investigating and trying to arbitrate what’s wrong with a person’s house.  It should be built correctly the first time.  I believe that this isn’t the answer.  The answer is getting more inspectors and making sure the job is done right the first time.

 

Even the Desert Research Institute did a study that said the contractor should take off the first 5 feet of dirt or the house would be basically floating.  Geotechnical engineers have changed that since the time of the initial studies in the 1960s compared to now.  The [soil conditions] aren’t even looked at anymore.  These inspectors need to take a look at the actual demographics and geographic nature of this unique environment that we have—this lakebed down in Las Vegas—and take appropriate action to fix it.

 

Assemblyman Mortenson:

Did you sign a contract with the builder that said one year after you moved into the house he would be absolved of the defects and you would have them corrected by the insurance company?

 

Anthony Booth:

Yes, it wasn’t a written statement; it was a verbal conversation where they said they would take care of all of our issues up to the first part of the year, after that, there was a 10-year home warranty on the house and we would have to go through the insurance company to have it resolved.

 

Assemblyman Mortenson:

But when you went to the insurance company they told you to go back to the contractor?

 

Anthony Booth:

That’s correct.

 

Dave Duritsa:

We need to put this into proper perspective; we need to take a look at why we are really here.

 

Right now in southern Nevada alone, there are about 100 lawsuits pending.  We’ve asked so many times for somebody to come forward from the construction industry and just bring us one of those lawsuits that’s been found to be frivolous, just one.  They haven’t been able to do it.  That tells me, to whatever extent, that there’s merit.

 

The overall picture of this is that there are serious problems with construction defects.  We’re not here for the trial lawyers, we’re not here for the construction industry, we’re here as consumers.  We want our homes built correctly.  If the builders are not going to do that, fix them.  If there are fixes to be made, do them correctly.  If builders are not willing to do that, we’re going to take whatever action we need to have it done.  That’s a lawsuit.  It comes right down to that.

 

All of these other things are just various ways to stop us from getting to that fact.  That’s what I’m seeing here.  I’m not going to belabor every section of S.B. 241.  We’ve talked about it individually and the others have mentioned it.  But Section 24, subsection 1(a), says that the contractor, subcontractor, et cetera, are not liable as long as the property is functioning as intended.  What does that mean?  I’m a homeowner who has to live with this.  I don’t know what that means, and I don’t want language like that.  I feel the current definition of a construction defect is good enough; it stands right there. 

 

If a [contractor] is a good builder, and by the way, there are good builders.  There are good people and good subcontractors in this room today that will stand behind their work.  That’s how they all should be.  What we want are the ones that will not stand behind their work.  We want them out; we want them gone.  We will sue them out if we have to.

 

In this bill I can point to so many places where we have this vague and ambiguous language that can be taken off and taken to other avenues.  Just take it away.  Let’s go back and start from the basic premise that if builders don’t do the job right they’re going to have to be accountable, stand up, and pay the price; we’re going to get rid of them for it.  That’s where we come from.

 

We want to send a message to the building industry today:  “We are your clients, we are your constituents, and we are your best method of advertising.  When you do the job right, we sell your products for you.  When you do the job wrong, we are your worst detractors.  We’re going out there and telling people of the bad job that you do.  So if you would simply be responsive to us…”

 

Why do we have to give the builders a letter, a certified letter, and give them a right to repair?  We’re asking them to repair our homes.  We give these pink slips in duplicate; we keep a copy and give the builder a copy over and over again saying, “Please come out and fix my problem.”  Yet, now they are asking for a right to repair.  “Okay, you can have it; please do it, and do it correctly.”  How hard is that?  That’s what we’re really talking about.

 

There are those here today that are willing to do that, fine.  Stand up with Safe Homes Nevada.  The ones that will not, we’re going to drive them out one way or another, or they will simply do it themselves as an industry with poor, shoddy construction and workmanship.  It will happen one way or the other. 

 

Whether you legislate it out or whether it self-implodes because they are allowed to get away with stuff such as, “I’m not fixing your house; it’s functioning as intended.  So it’s a cracked wall; the wall is still standing.”  No, that doesn’t cut it.

 

That’s what we want.  Now I’m going to turn this over to the Nevada Trial Lawyers Association who has a more in‑depth presentation for you.

 

Scott Canepa, representing the Nevada Trial Lawyers Association:

It occurred to me after the last hearings on A.B. 446 and A.B. 449, that some of the Committee members may not know my background.  [Introduced himself.]  I’m a fourth-generation Nevadan; I graduated from a Nevada high school and the University of Nevada, Reno.  I’ve practiced my entire career in the construction field in southern Nevada having represented subcontractors, real estate developers, and homeowners in trials to verdict with respect to all three branches.

 

On the hearings on A.B. 446 and A.B. 449 we took the Chairman’s statement to heart, which was that this Committee was not interested in processing any legislation that didn’t meet three objectives:

 

·        A reasonable right to repair for contractors and subcontractors

 

·        Legislation that would help homeowners like Mr. Booth who were confronted with adverse construction problems

 

·        Legislation that helps subcontractors from being dragged into lawsuits in which they do not belong

 

[Scott Canepa continued.]  Regrettably, S.B. 241 fails with respect to each of those three elements.  If you look at S.B. 241, Mr. Wadhams correctly points out that it is mainly a recapitulation of existing statutes; we will get to that in a minute.  Senate Bill 241 doesn’t require a contractor to do anything that isn’t presently required by existing law.  I’m here to tell you that the laws, right now, are failing homeowners in our state.  The State Contractors’ Board is not in a position to perform functions that will cause homes to be better constructed in the first instance.  The building inspectors are overwhelmed with inspections and as a result many thousands of homes are being approved that have serious construction defects.

 

I want to quickly take you through this presentation (Exhibit V).  Before we get to the specifics of the bill, I want to point out that from our perspective the market conditions do not presently justify S.B. 241.  This is a quote from Dennis Smith of Homebuilders Research.  Just recently he said, “The valley remains one of the nation’s hottest housing markets, even as land prices creep to $200,000 an acre and new home prices jump 8 percent a year.”  CBS Market Watch observed recently that the most important fact for the housing industry is not the immediate outlook but that it can look forward to at least 20 more years at what historically qualifies as genuine boom times.

 

This industry is thriving and we don’t begrudge them that one bit.  But we are disappointed that they present legislation that doesn’t offer an alternative for homeowners confronted with the fallout of an industry that is thriving so much in southern Nevada.

 

Mr. Hill said today that one aim of the bill was to reduce insurance premiums for contractors.  There is nothing in S.B. 241 that does anything to cause homes to be built better—not one provision in the bill.  One of the issues raised at the Liability Insurance Task Force was, why are contractor insurance rates rising?  One of the insurance companies that was asked for input on that subject observed that “while the high cost of litigation is one reason for claims severity,” they believe “the most critical cost-driver from a claims perspective is the substandard construction practices and poor workmanship by contractors.”  That’s not the Nevada Trial Lawyers Association telling you; that’s the insurance industry telling you why they are increasing the insurance rates to their insureds.

 

I had to defer to Mr. Wadhams, a former insurance commissioner of our state, who testified on S.B. 241 on the Senate side that the bill is not going to do anything for insurance rates.  He said this bill would not bring relief to insurance rates.  Demand for housing would be unabated regardless of insurance rates.  Yet the premise for the bill as advanced to you in testimony this morning is that it is going to do something for insurance rates.

 

[Scott Canepa continued.]  There is a section in S.B. 241 that, by the very testimony of the insurance representatives who testified at the Liability Insurance Task Force, is going to drive those insurance companies away.  If you look at Section 33 of the bill, it says that an insurance company shall treat a notice of defects from a homeowner, a pre-litigation notice of defects, as if that notice was a formal lawsuit, to trigger their obligations to defend and indemnify the contractor before a lawsuit is on file. 

 

Mr. Gorman, a representative of an insurance company, said during the course of the Liability Insurance Task Force hearings that if such a provision passed in any state, the underwriters would say they would be on the hook early, would have high defense costs, and maybe they should reconsider writing in this state. 

 

We will support a pre-litigation right to repair; we believe that exists under present law.  Any premise that includes insurance companies in the repair phase when the onus should be on these contractors to make those repairs, not on the insurance company, that it is going to help insurance rates, is defeated by the testimony of the insurance industry itself.

 

Now we get to the important part.  This goes, in part, to some of the questions Mr. Mortenson asked.  That is, Mr. Wadhams said that the majority of the bill is a recapitulation of existing laws.  We compared S.B. 241 to NRS Chapter 40, existing law.  You cannot understand the true insidious nature of this bill and the havoc it wreaks on homeowners’ rights until you compare S.B. 241 and existing law side by side.  When you do that you are going to see that Senate Bill 241 leaves out NRS 40.650 of existing law.  That section penalizes contractors that refuse to make an offer of settlement, make a good-faith response to the claim asserting no liability, complete repairs in a good and workmanlike manner, agree to a mediator, or accept the appointment of a mediator.  Senate Bill 241 makes that provision of law go away.  That is the current law as it stands today.  If the contractor refuses to participate in mediation, the insulation under the statute punitive damages goes away.  Under S.B. 241, they get total insulation from punitive damages, even if it’s established that they built the homes defectively, on purpose, and they refused to do any one of those things.

 

Nevada Revised Statutes 40.667 will also go away.  It invalidates waiver and release agreements if repairs are done improperly.  Mr. Mortenson asked Mr. Wadhams about statutes of limitation and repose.  Mr. Wadhams said if you do a repair, the statutes of repose and limitation start all over again.  That’s correct, but when they don’t, that is when the repair is conditioned upon a release of claims.  That’s where the contractor says to the homeowner, “We’re not doing these repairs unless you sign this document giving up your rights to ever complain about that repair again.”  Present law protects the homeowners in those instances by saying that if the repairs fail and an expert says the repairs failed, that waiver and release agreement can be set aside.  Senate Bill 241 throws it out the window.

 

[Scott Canepa continued.]  Nevada Revised Statutes 40.689 regards preferential trial settings.  Senate Bill 241 requires homeowners to go through a lengthy pre-trial right to repair process.  The chart that they put up for you in the corner of the room suggests to you—and I think it is misleading—there is no deadline where the State Contractors’ Board must perform its functions under S.B. 241.  There is no deadline by which the mediation must be performed.  Homeowners could find themselves involved in the litigation process for years.

 

Preferential trial settings were established as part of the original NRS Chapter 40 program, giving recognition to the fact that homeowners couldn’t get their place in line for trial until a lawsuit was filed.  So we said that if a homeowner is going to be dragged out in a pre-litigation process, he should get the benefit of going to, not necessarily the front of the line, but he should not be penalized in terms of the amount of time it took from the filing of the complaint until the trial date.  Senate Bill 241 takes away those preferential trial settings for homeowners who are confronted with serious construction defects.

 

Nevada Revised Statutes 40.692 is probably one of the most important provisions taken away by S.B. 241.  It permits the court to join parties to facilitate judicial economy.  Under present law, if a homeowner has a leaking roof but doesn’t know of any other problems with his home, he ends up in litigation about the roof.  During the course of investigation, he discovers that he also has a missing firewall; he does not have to start the process all over again.  Under S.B. 241 he does.  Under S.B. 241, not only would the lawsuit with respect to the roof claim stop in its tracks, but also he would have to start the process all over again with respect to the missing firewall.  We think that’s unfair.

 

Liability Insurance Task Force findings do not support S.B. 241, as was pointed out by Mr. Duritsa.  There was no evidence of frivolous cases, there was no evidence that repairs were refused by homeowners in complex cases, and there was no decline in contractor’s licenses issued.  Mr. Hill testified today that contractors are going out of business and thousands of people are losing their jobs; there is no evidence of that.  There was no evidence of that presented to the Liability Insurance Task Force and no correlation between insurance availability and housing starts.  Probably the most important finding they made is that contractors are still starting new homes.  There are as many new home starts with the increase in liability insurance premiums as there were before that happened.  Anybody who lives in southern Nevada knows just how hot that market is. 

 

[Scott Canepa continued.]  Liability Insurance Task Force recommendations were excluded from S.B. 241.  One of the things the Task Force unanimously recommended was to increase the quality of new homes with contractor competency and continuing education requirements; that is left out of S.B. 241.  For the subcontractor who does not want to be involved in the suit to begin with, the Task Force recommended that developer lawyers file a Certificate of Merit certifying that they have consulted with somebody in the trade of the subcontractor who they purport to sue before that lawsuit gets filed.  That is not in S.B. 241. 

 

The definition of defect includes the following:

 

A homeowner has a right to recourse

 

·        If his home has a code violation

 

·        Or if his home has suffered property damage

 

·        Or if his home has life safety defects

 

·        Or if the contractor has engaged or committed a violation of the standard of care. 

 

That is not in S.B. 241.  If you look at Section 24, the definition of defect is set forth as an “either/or”; it is the “or” part that we have a problem with.  It says a contractor is not liable for a construction defect if the home is functioning as intended and was built in compliance with the code “or” there has been no proximate cause of injury or damage.  That means that the home could have a code violation that has not proximately resulted in damage or injury, and the homeowner has no recourse under Section 24.

 

Mr. Wadhams’ capitulation aside about entertaining amendments, this provision has been attempted by the industry in past sessions.  The explanation that has been given on these very same words in past sessions was that it was a codification of the economic loss rule, which stands for the proposition that I just advanced to you—that homeowners should be foreclosed the right for recourse unless the defect results in damage or injury.  We think that is morally repugnant; it is not the rule of law in any state in this union and should not be the law in the state of Nevada.  It will cause homeowners insurance rates to rise.  You can imagine what would happen if homeowners with construction defects, code violations that haven’t resulted in injury or damage, have to disclose that to their homeowners insurance carrier.  Their rates are going to go up because the casualty carriers are going to conclude that if we have a home that has construction defects, there is a greater likelihood of a risk of loss in that home than a home that doesn’t have construction defects.  This makes sense; it stands to reason. 

 

[Scott Canepa continued.]  Senate Bill 241 misleads jurors with respect to building inspection.  Section 24 says that the passing of inspections shall be prima facie evidence, or on-face-value proof, that the home was built in compliance with the code.  Yet, what we know from practical experience in litigating these cases in southern Nevada is that inspectors only do spot inspections.  Inspectors have testified in depositions that they cannot control what happens after they do the inspection.  In fact, they testified that things have been changed to be in violation of the code after they have left.  Inspections do not guarantee the absence of defects.  Inspectors and local governments have legal immunity from suit even if they admit that they negligently failed to inspect the home or they negligently inspected and approved it even though it was defective.

 

The next one is an excerpt from a deposition of an official with the Clark County Building Department that supports the position I just advanced wherein he said that the fact that a building has passed an inspection is not a guarantee in any respect that the building does not have serious life, safety, and health defects. 

 

The mandatory right to repair in S.B. 241 is unfair; this is Sections 27 through 31.  The mandatory right to repair says that under S.B. 241, the contractor has the right to make the repair under all circumstances, to enter the property.  The homeowner has no right to say no unless they forfeit their claim and there is no exception for violent contractors.  The State Contractors’ Board records are replete with evidence of contractors who have assaulted homeowners, who have put pipe bombs under homeowner’s cars, and who have done other acts of violence against homeowners.  This law would require those homeowners to allow that contractor back in their house unless they want to forfeit their claim.  I hear chuckling in the back.  We are going to provide proof to you of the statements that I just made in the form of a separate document that will identify the places on the Web site from the State Contractors’ Board, where you can see for yourself the allegations made by the homeowners and the criminal cases that have trailed thereafter.

 

[Scott Canepa continued.]  There is no exception for homeowners who are already in litigation with contractors.  The slap statute that was amended in 1997 to prevent homeowners who speak out against their bad construction practices, we think is against public policy.  It forces a homeowner to allow a contractor who has sued them in a court of law back into their home; there should be an exception for that.  There is no exception for failed, flimsy, or fraudulent repairs and no exception for contractors who have already refused to repair the problem.  Why are we forcing homeowners under S.B. 241 to once again go through all of these steps when they have already been refused by the contractor?  There should be an exception for that. 

 

Regarding the State Contractors’ Board involvement (Exhibit W), this goes to Assemblyman Carpenter’s concerns.  First of all, the State Contractors’ Board lacks the necessary expertise in complex cases.  One of the handouts that we have given you is a document that was prepared by the Contractors’ Board at the behest of Senator Townsend in connection with hearings on bills on the Senate side.  What you will see in many cases is when the State Contractors’ Board is given an issue that is too complex for them, they capitulate and merely tell the homeowner they need to proceed to court.  The State Contractors’ Board lacks necessary resources.  There is no judicial review of the Board’s decision on this subject.  Senate Bill 241, Section 29, is internally inconsistent.  It says on the one hand that the Board has to follow the procedures under NRS Chapter 624, which requires due process of law, and on the other hand says that there is no judicial review of their decision.

 

Finally, Mr. Wadhams told you a few moments ago that this does not affect homeowner’s rights, yet under S.B. 241 the findings of the State Contractors’ Board are admissible in court against the homeowner, even though the homeowner has no right to challenge that finding and there is no judicial review of that finding.  This Committee processed Assembly Bill 220, which is conceptually inconsistent with this process because under A.B. 220, the findings of the investigators on claims that do not make it to a hearing are not discoverable, you can’t discover all of the papers, the documents, and their comments.  Conceptually that is inconsistent.

 

Finally, the State Contractors’ Board lacks jurisdictions over non-licensees.  This section is a bust for this reason alone.  Most real estate developers are not licensees; they are not licensed contractors.

 

Section 50 unreasonably restricts contingent fee contracts.  Section 32 unreasonably limits the tolling of the time bar statutes.  Section 36 arbitrarily limits remedies in new homes.  Section 43 seeks to prevent legitimate claims through intimidation by requiring that they notify their lenders.  Section 42 effectively eliminates class actions and does so inappropriately. 

 

[Scott Canepa continued.]  Section 49 codifies what is called the “diminished market value” rule.  Mr. Wadhams did not give the full description.  What it says under S.B. 241 is the homeowner gets the diminished market value of their home that is defectively constructed or the cost to repair, whichever is less.  This leads to repugnant results.  If you have a life safety defect in your house that costs $5,000 to fix and the real estate developer’s appraiser says that the house is only diminished by $1,000 in the market, you don’t get the $5,000 to fix your house.  What if you don’t want to move?  What if there is no market for your house?  What if you are in one of the cow counties in our state and there is no market for your house?  You are stuck; you pay for the defect on your own.  There is no exception where the homeowner wants to stay.

 

I want to give you an example of this and then I will close.  This is a case that my law firm litigated on behalf of 76 homeowners of the Rancho Sierra Homeowners Association.  During the course of the litigation, the defendants offered a cost to repair that community, their admitted defects, how much it would cost to fix, of $948,839.52.  They had a real estate appraiser rate the diminished market value at $190,000, and that is all the homeowners should get.  We settled that lawsuit after four years of litigation and the homeowners had spent to date $1,260,556.77 repairing their community.  That rule is repugnant; it makes no sense.  In many states where it was originally brought up by the courts, it has been rejected legislatively. 

 

Chairman Anderson:

There are serious problems in construction that have to be taken care of in some meaningful, legitimate methodology that will make the homeowner whole, or as close to whole as possible.  I think that we are all really trying to get to the point where the homeowner has his problems taken care of.  When I don’t see that, I am not happy. 

 

Assemblyman Geddes:

On the third or fourth slide, you had a quote from company number 8 from the testimony to the Liability Insurance Task Force with the high cost being due to construction practices and poor workmanship.  How many insurance companies provided testimony and how many of them made that same statement?  I noticed you quoted number 8; did 1 through 7 not comment? 

 

Scott Canepa:

My recollection is that those were anonymous solicited statements made by the Insurance Commissioner for a hearing that took place in July of 2002, and I believe there were a total of 12 insurance carriers that were asked to respond anonymously.  I didn’t check to see if everyone of them concurred with that or not.  That one was the most succinct for the purposes of this presentation.

 

Assemblyman Geddes:

Your statement right after that slide was that the insurance industry believed this.  I was wondering if it was this company or if it was the industry as a whole that stated that?

 

Scott Canepa:

One of the problems that permeates legislation in all areas is that we can never get the insurance industry to the table to ask them those questions directly.  We know that this particular insurance company was asked to provide this response because they specifically wrote insurance for contractors and subcontractors.  I can’t tell you if they speak for the entire insurance industry.

 

Assemblyman Horne:

You stated there was no correlation that increased insurance premiums were related to construction defect litigation, is that correct?

 

Scott Canepa:

No, I think what I said was the Nevada Trial Lawyers Association asked the Liability Insurance Task Force to inquire whether the increase in insurance premiums has in any way diminished the number of housing starts.  It was found by the Task Force that there was no evidence presented that there was a correlation between the increase in insurance costs and a diminished number of housing starts.

 

Assemblyman Horne:

At that time there wasn’t, but if the current trend continues, isn’t that a possibility?  I know I have heard countless stories particularly from small subcontractors that they are on borrowed time.  Even if we pass legislation, it may not save some of them because their insurance premiums are not going to come down in time.  Isn’t it a possibility that if the trend continues it eventually will slow the building market?

 

Scott Canepa:

Based on what I have read from homebuilders research as published in the local newspapers, the outlook for housing starts, at least in southern Nevada, is pretty strong over the next decade.  I suppose if we get to a point where insurance is no longer available that could impact the number of housing starts.  We don’t disagree that insurance rates have gone up; we disagree about the solution.

 

Assemblyman Horne:

Getting those defendants out of the suit who don’t belong has been a problem in part of the protracted litigation where you have individuals in a suit that probably don’t need to be there.  It seems to be taking too long and I don’t see why we can’t have something like, for example…  I am Joe Landscaper.  The defect we are talking about is cracked tiles or floor tiles, but I have been included in this suit.  Why can’t we expedite it in some procedure where we say, “Your honor, I don’t belong in this suit because I laid sod.”  The judge can say, “You’re right, I am going to release you without prejudice and will bring you back if it turns out you did more than lay sod.  You did the soil, it is bad, and it settled; but for now you are gone.”  Why can’t we do that?  The other way seems to take too long.

 

Scott Canepa:

We could not agree with you more.  That is not covered in existing law.  We attempted in A.B. 446 to put provisions in the law that would help get those subcontractors out of those cases.  There is a culture of insurance companies controlling the defense of developers who sue any subcontractor that comes anywhere near a site.  There is no question that the vast majority of the lawsuits filed against subcontractors come from the real estate developers.  One of the things we advanced in A.B. 446 was the idea that subcontractors should be able to get out of that claim early by settling their portion of the claim directly with the homeowner, getting themselves out, and having a motion for good-faith settlement cut off any other claims, including contractual indemnity claims.  In S.B. 241, Section 51 is illusory.  On the one hand, it says that the subcontractor can settle directly with the homeowner, but under Section 34, subsection 2, it takes it away because it says that any remaining claims that the contractor may have for defense cost, et cetera, remain intact.  This bill does nothing for the problem you described; we think the solutions were in A.B. 446 and we would favor amendments to this bill or any other bill that would help get those subcontractors out who were wrongfully brought into these cases.

 

Assemblyman Claborn:

Obviously NRS Chapter 40 is not working; the folks here want their homes repaired and it is not getting done.  I was hoping we could go down a different avenue and come up with some kind of an agreement.  We have had NRS Chapter 40 on the books for quite a while and here we are again today.  Are we going to get something out of this or do you have any ideas?

 

Scott Canepa:

Nevada Revised Statutes Chapter 40 is a law that has two principal components.  One is a pre-litigation right for people to try to resolve their disputes without going to litigation; the other is to set forth the damages that the aggrieved homeowner is entitled to.  We don’t think the second part of that statute has failed in any material respect.  Homeowners who are being forced through the litigation system by builders who are refusing to repair homes are being made whole under the system.  The first part of NRS Chapter 40, the alternative dispute resolution component, has not worked in all cases and the reason it has not worked is because homebuilders are not offering to repair defective homes.  We provided a list of over 100 complex cases, with a full list of defects, in which the developers were given the opportunity to make an offer to repair the homes, and no offers were made.

 

Assemblyman Claborn:

I have not heard anybody ask me if they wanted to keep this NRS Chapter 40, all they wanted was their homes fixed.  I am still having a hard time getting hold of this thing because if we don’t do something, we are going to be here two years from now doing the same thing.  It does not make any sense to me.  Why can’t we all get together, go down a different road, help these people out, and help the contractors as well?  That is why we are here. 

 

Assemblyman Brown:

On the repeal portion, NRS 40.650, I am not really familiar with that particular section, but it penalizes the contractors who fail to make an offer of judgment and a number of other things.  Did you use the term “punitive damages” or what is the penalty there?

 

Scott Canepa:

The current system under NRS Chapter 40 is the contractor must respond to the notice of defects and they must respond to each defect in writing.  They must state affirmatively whether they are going to disclaim liability, make a monetary offer to settle it, or make an offer to repair.  The homeowners, when they send the notice, are going to receive a written response back from the contractor.  Senate Bill 241 abandons that process for a process that says that a homeowner sends the notice of defect and the contractor then unilaterally decides whether the homeowner is going to sue them or not.  We don’t think that is fair.  

 

Nevada Revised Statutes 40.650 is probably the heart and soul of NRS Chapter 40 because it puts the teeth in NRS Chapter 40 that forces those contractors to respond to the homeowner in writing as to each defect so the owner has a response.  If there is evidence in the case that would support a punitive damages award, the contractor can avoid the specter of punitive damages by merely playing by the rules and making the response to the homeowner that comports with the statutory scheme.  If, however, the contractor sends no response, then the limitations on damages, i.e., punitive damages take effect, or other damages if the homeowner has proof to establish those causes of action, and the homeowner gets to put those claims for relief as well.

 

Assemblyman Brown:

So, the penalty under NRS 40.650 is punitive?

 

Scott Canepa:

No, the penalty under NRS 40.650 is that if you don’t play by the rules, you don’t insulate yourselves from a potential claim for punitive damages to the extent such a claim exists and can be substantiated by clear and convincing evidence as is the standard under Nevada law.

 

Assemblyman Brown:

Representing litigants, those folks are not liable so I would not recommend to them to offer any kind of settlement.  I find it hard to see why we would penalize someone for failing to make an offer of settlement, and if they don’t feel the liability is there, they don’t think mediation is an alternative, and they choose not to mediate, would there not be any penalty for that?

 

Scott Canepa:

In the second part of NRS 40.650 it says they are entitled to make a good-faith response to the claim asserting the liability.  Under current law your client is protected and believes he doesn’t have any liability.  Mediation under the current statute can be waived in writing by both parties.  I have been involved in cases where there have been contractors that have felt like your clients and we have agreed to waive the mediation process.  But as a matter of public policy, even when people feel strongly one direction or the other, sometimes it is beneficial to bring them together in the form of mediation and that took the form of the policy that became NRS Chapter 40 in 1995.

 

Assemblyman Brown:

On the complete repairs in a good workman-like manner then, is that where in their response they have said, “Okay, we agree to liability,” but then they don’t proceed to repair?  I don’t know the details of NRS 40.650, but if they deny liability, they shouldn’t be required to make the repairs.

 

Scott Canepa:

That portion says that if they agree in writing, they say, “Your roof is defective and we are going to fix it,” but then they don’t actually effectuate the repairs in a good workman-like manner, then they are no longer protected by the limitations on damages under the statutes.

 

Assemblyman Brown:

On the following it talks about “additional consumer protection laws.”  Dealing with joinder of claims and parties, perhaps I don’t understand the pleadings sufficiently.  Most of the time in legal pleadings you plead so broadly that you can pull in any defect.  I think you made reference to a leaky roof; let’s say you get well into the litigation or just prior to trial and you notice something else.  Don’t you plead in such a broad fashion that through the course of discovery you can divulge that information?

 

Scott Canepa:

The pleader requirements are liberal but the notice requirements under NRS Chapter 40 are not.  You must give specific notice of the specific defect and its location.  The way the statute works now is if you are litigating a roof defect and you are in litigation, the court will only allow you to join the additional missing firewall claim that I used in my hypothetical example if the court determines that a good-faith reason exists.  In other words, you are not sandbagging and trying to bring in a defect; you have to present proof that you did not know about the other defect at the time you initiated the suit.  Otherwise, under NRS Chapter 40, you would have been required to give specific notice and opportunity to respond to the contractor.

 

Assemblyman Mortenson:

The proponents of this bill had what seemed a reasonable complaint that a class action suit can suck in some homeowners into that suit when the homeowner actually feels that he does not have a construction defect and he is stuck in the suit.  Can you comment on that?

 

Scott Canepa:

That is overstated.  Under Rule 23 of the Nevada Rules of Civil Procedure, which are modeled after the Federal Rules of Civil Procedure and pertain to class actions, the court is required by law to give notice of the pendancy of the class action to everybody that it affects and the notice must state within it that the homeowner can sign the document and opt out of the class action if they so desire.  Any statements to the effect that class actions are forcing people to be litigants who don’t otherwise want to be is a misstatement of law and a misstatement of fact.

 

Assemblyman Horne:

I was going to ask Mr. Canepa to comment on my question on class action.  He kind of touched on it a little bit.  It seems they are reclassifying how we are going to classify a class action suit.

Scott Canepa:

It obliterates the class action rule.  The chief problem with it is that class actions often, and I included some United States Supreme Court quotes in the slide, are designed to protect people who don’t know they have the problem.  If you have a neighborhood and three homeowners come to the builder and say, “My firewalls are missing in the attic,” and the builder says, “Wow, those three really are missing,” they go and repair them.  We believe it is incumbent on the builder to reconnect with all their other clients in that neighborhood and approach them.  Under this rule, those people who don’t know they have a problem are required to come to the builder; class actions are designed to avoid that absurd result.  That is why that portion should be rejected.

 

Assemblyman Horne:

I was just going over the scenario that Mr. Canepa painted.  Would a design defect be different from what you described?  If we have a design defect, we start to make the assumption that it was in the design, so therefore that defect is going to occur throughout the construction.  They would have to go to the contractor; it would almost be automatic.

 

Scott Canepa:

Design defects fit the paradigm better, but we also have had cases in southern Nevada where there have been workmanship defects that have been widespread, in fact, 100 percent.  We had a project where sheer walls were not installed according to the structural engineer’s plans on a widespread basis.  But, again we are not saying that the contractor shouldn’t be afforded the opportunity to repair.  If three homeowners go to Ford Motor Company and say, “There is something wrong with my car,” Ford Motor Company, if they believe it is a common problem and class actions only apply to common problems, sends out a recall notice.  We think the prudent builder should do the same thing.  We don’t think that consumers who have similar problems should have to continually give notice to the builder of the very same problem when the builder themselves know that the problem is widespread.  I think that is fundamentally where we stand.

 

Assemblyman Brown:

One of the things I hear out there is that maybe some of these suits are filed on perhaps a shorter fuse than they are supposed to be.  Are you aware of some counsel sending out letters immediately that say, “Contractor, you have some problems on this project, don’t step foot on it, don’t contact any of the homeowners,” and then days later a complaint is filed and served?  I have heard of some of those instances.  Are you aware of any of those issues amongst some of your professional colleagues where that may be getting skipped?

 

Scott Canepa:

I am aware of cease-and-desist letters that have been sent to contractors because I have written some myself.  But those cease-and-desist letters in every case, at least as far as my firm is concerned and I don’t speak on behalf of all of my colleagues, are followed up with a notice and opportunity to fix all the defects in the community.  The best example I can give you is we have a project called Echo Bay where there were serious drainage problems.  The contractor was making a halfhearted attempt at fixing them, which we established through the use of a civil engineer, and we said cease and desist until we get our hands around it.  Then we sent out another list of defects and gave the contractor an opportunity to fix it correctly.  That case ultimately made its way to litigation because there was no offer to repair.  That is the scenario.  As for people shortening the fuse, you would have to give me a better example of what you are talking about, but that is where I am coming from in my practice.

 

Assemblyman Brown:

Is this cease and desist per statute?  Is that part of NRS Chapter 40?

 

Scott Canepa:

It is not.  It is probably a part of the statutory scheme that you practice in, I don’t know, but it was not necessarily meant to be a term of art.  It is to stop making bad repairs until we can figure out what is wrong with the place through the use of our own experts.  That case was a pretty acute example of a Band-Aid repair.  That does not happen very often.

 

Assemblyman Brown:

That gives me a little concern.  If it were abused in any manner, I think it would be most inappropriate. 

 

Scott Canepa:

I understand and agree with you.

 

Chairman Anderson:

There are people I want to try to get up here who have some potential amendments to the bill that either were in part agreed to or came out of the Senate and I want to make sure that their points are made. 

 

Ronald Lynn, Building Official, Building Division, Clark County Department of Development Services; and the Nevada Organization of Building Officials:

[Introduced himself.]  You have the amendments that Clark County proposed (Exhibit X).  It was discussed in the Senate to remove “certify.”  Building departments do not have the ability to certify, warranty, or guarantee anything.  In two areas it has the word “certify.”  In Section 5 under the definition and also in Section 35, page 14, line 15, “A building inspector will not certify that the constructional defect creates an eminent hazard…”  “Assess” or “determine” is the proper language for it, not “certify.” 

 

As an aside comment, if a jurisdictional inspector determines it is an eminent hazard, we are going to take our separate action as empowered by law.

 

Chairman Anderson:

I presume the City of Henderson had the same concerns?

 

Ronald Lynn:

Yes, sir, they did.

 

Mark Fiorentino, representing the American Council of Engineering Companies of Nevada:

[Introduced himself and presented (Exhibit Y).]  The American Council of Engineering Companies of Nevada is an association of engineers who practice in the state.  I want to thank you sincerely and for just a minute or two to make a very brief presentation to you and the Committee this morning. 

 

It probably deserves a little bit of background.  Last session you may recall this Committee and the Legislature passed a bill that deals with engineers.  To make a very long story short, it requires a certificate of merit to be filed before you can bring an engineer into a construction defect lawsuit.  It is a very important piece of legislation to the engineers; it is working very well.  As all of you on the Committee know, engineers almost always get pulled into these lawsuits once they are filed regardless of what the alleged or potential defect is.  The legislation you passed last session is working very well to screen unmeritorious claims.  It is also working in a way that we had hoped it would work when we testified to you last session, which is that it allows engineers to assess very early in a case whether they really did do something wrong and spend their money on fixing it, as opposed to spend their money on litigating it or going through discovery. 

 

We generally support S.B. 241 and the right to repair but we have concern because of what has been presented to us as a drafting error in the bill.  It is an error that substantially changes the protection that you adopted last session.  Under the current law, regardless of who brings the engineer into the lawsuit, whether it be the homeowner, a contractor, or homebuilder, everyone has to go through the certificate of merit process.  Under the bill that is before you today, unless you make some changes to it, the only person who would be responsible for that certificate of merit would be the homeowner.  The developers and contractors would no longer be required to go through that and it was because a word was deleted, the word being “complainant.”  We have presented to you some proposed amendments that would add that word back in where it was deleted and redefine it.  All of the language that is before you is existing law, so we ask you, regardless of what you do on S.B. 241, to make these changes so that you maintain the existing law.

 

Mr. Chairman, before I leave the table I would be remiss in indicating that we have spoken to both the proponents and the opponents of this bill and it is my understanding that neither of them would have a concern with making these amendments if you process the bill.

 

Chairman Anderson:

If we choose to process the bill, it will be with several amendments.

 

Mark Fiorentino:

I am just hoping mine will be one of the ones you consider.

 

Thelma Bartlett, Citizen:

[Introduced herself and presented (Exhibit O).]  I have been a Henderson resident since 1954.  I appear before you in support of S.B. 241.  I am a homeowner in Sun City McDonald Ranch for 7 years, have followed the construction defect legislation issue, have been in the banking industry for 58 years, and know the financial impact litigation makes on residents of our state.  I want to share with you a situation that is currently taking place in our community and that has divided the homeowners and the board of directors of our association. 

 

Last November, the homeowners association board hired a construction defect law firm.  No development is ever perfect; they found some problems.  The issue with the homeowners is not the defects found, but the board and its attorneys who have refused to let Dell Webb repair the problems.  Dell Webb has offered to make repairs; they even offered to pay all of the board’s legal fees to solve the problem without litigation.  Some of the homeowners are extremely angry with the board for dragging us into the lawsuit when the problems could have been repaired from the beginning.  I have signed petitions in my hand of hundreds of homeowners demanding that the board work directly with Dell Webb to get homes fixed properly without litigation.  My husband and I experienced a problem in our home a year ago.  I called Dell Webb; they came out immediately.  They completely repaired the problem at absolutely no cost to us and moved us into a hotel while the problem was being resolved.  They have responded to our neighbors’ problems in the same manner. 

 

I support S.B. 241 in every way.  It is a common-sense bill that puts homeowners back in touch with their builders.  My experience has been that builders, good builders, are more willing to make repairs when notified.  The repairs are generally performed in a relatively quick manner, unlike the incredible delays experienced with litigation.  For those builders that are uncooperative and don’t make repairs according to the strict timeline, S.B. 241 protects that homeowner’s right to sue.  I leave you with one last thought.  Other businesses are given the opportunity to correct mistakes; the construction industry should have that same opportunity.  S.B. 241 provides for that for all Nevadans. 

 

Vice Chairman Oceguera:

I was just wondering, how long have you been working with the builder on your specific problem and have any repairs been started?

 

Thelma Bartlett:

Once we notified the builder a year ago of our problem, they immediately took care of it, put us in a hotel as they had the others, and repaired it.  It happened to be plumbing problems.

 

Vice Chairman Oceguera:

It was a year ago, so that repair has been taken care of or is it still on going?

 

Thelma Bartlett:

It was taken care of immediately.  We are very pleased.

 

Chairman Anderson:

Ms. Dennison, you have proposed amendments to this bill?

 

Karen Dennison, representing the Lake at Las Vegas Joint Venture:

[Introduced herself and provided (Exhibit Z).]  We support the bill but we have what we consider to be a friendly amendment, a drafting oversight perhaps, in not including master developers and subdividers among the list of persons having a right to repair.  Often master developers and subdividers are named in lawsuits as sellers of custom lots and also as sellers of homes where they participate or joint venture with a contractor.  All we are asking with our amendment is the insertion of the words “master developer and subdivider” in those sections involving the right to repair.

 

Bill Balsi, President, Valley Concrete Company:

[Introduced himself and submitted Exhibit J.]  I am a fourth generation Nevadan and been here all my life.  I have been in business in Reno since 1964 and employ 90 people year-round; we all live in the Reno area and own homes there.  We are a union company and pay good wages and benefits.  My main issue is insurance.  It is impossible for us to get insurance quotes anymore and we just need you to know that these problems are not just a southern Nevada issue, because I don’t know if we have been caught up in the tidal wave or whatever but last year we received one written quote for liability insurance.  We have always had Class A insurance companies; we have been in business 39 years.  These companies have all left; they will not cover us in Nevada.  I received a quote at 5:00 p.m. on New Year’s Eve, which is not my favorite thing to do on New Year’s Eve, but January 2^nd I could not have gone to work, I would not have had any insurance.  The rates are going up tremendously; they went up 117 percent last year.  Since 2000, they have gone up 427 percent and we are prohibited from doing condos or townhouses, and I don’t know of anyone whose insurance will let them do that anymore.

 

We have never really been in any litigations or anything, yet we have been named in four class action suits, which did not involve our trade but our insurance companies did have to put out pretty large settlements.  We do lots of housing; we probably do 1,500 homes a year.  I think the problems around here are not the same as in the south that I can see.  If there are problems, they get fixed and let the homeowners go about their business.  I think we need to do something so that if you do not have people like us getting insurance, you are still going to be building homes, but I don’t know who is going to be doing the work and I think you will have some real problems. 

 

We have been around here all these years, support a lot of people, have a good business, and I think everyone does a good job, but if we can’t get insurance, we sure are not going to go out there and take care of this stuff ourselves.  I don’t know what you folks can do about it either, because I don’t understand all the problems of politics and litigations or whatever.  That is my message to you.  Thank you very much.

 

Chairman Anderson:

Thank you very much for coming and spending your time today.  I am not sure we can fix the insurance company problems; it remains a great mystery to me how we could.  I do think that there seems to be a preponderance of differences in what happens in the larger populated area of the state compared to up here, or in what are considered to be the more rural areas of the state.  It isn’t that we don’t have our problems, and it is really kind of strange to me that, just as an observation, it is not a matter of the cost of the house either.  We have a major development going in next to a major golf course in a very high-priced area, and the developer walks away leaving homeowners with half-constructed houses.  I am a little perplexed by what takes place.  I know that your company has a good solid reputation in our community.

 

Robert Maddox, representing the Nevada Trial Lawyers Association:

I had actually intended to indicate that I was to speak on S.B. 273.  I put both bills in the same box there; Mr. Canepa has more than adequately presented our position on S.B. 241.  If I may, though, a single comment in response to Mr. Claborn’s comment earlier.  Nevada Revised Statutes Chapter 40, of which I played a considerable role in getting it enacted in 1995, is working very well.  Ninety-five percent of the cases that are brought are resolved by negotiated settlement.  The problem is there continue to be construction defects.  In A.B. 449, we proposed some ideas for trying to address problems at the front end, raising standards to help prevent them from happening.  Mr. Ron Lynn and I, two years ago in the Senate Committee on Commerce and Labor, spent many hours trying to work on provisions that would help prevent construction defects.  I firmly believe that is where this Legislature should be headed:  trying to address standards to prevent a defect from occurring, particularly those related to soils issues.  Thank you, Mr. Chairman, for allowing me that.

 

Assemblyman Claborn:

With all due respect Mr. Maddox, I disagree with you.

 

Betty Evanson, Citizen:

[Introduced herself.]  I am here in support of S.B. 241.  My husband and I own a condominium unit in a development in Las Vegas that almost went into litigation.  Our homeowners association board actually filed a lawsuit without consent from the homeowners and there were several questionable practices used by attorneys and defect testing experts along the way.  We need S.B. 241 to create a fair repair process that holds all parties accountable.  Lawyers told our board it was an emergency to file a lawsuit immediately, as the statute of limitations was about to run out when, in fact, one or more years were left depending on the time the units were completed and sold.  A defect team of experts, at a special meeting called to show the homeowners why the lawsuit filing was necessary, showed slides taken, but the homeowners pointed out that some of these pictures were not of our community.  Their answer was, “Well, this is what could happen.” 

 

A defect team was sent out to do testing again unknown by the homeowners.  The board had given them permission to go on to common areas of exclusive use such as balconies and covered patios without the homeowner’s consent.  While testing the ceiling of my patio, one tester noted that he found nothing wrong; another said, “The wood was soaking wet.”  So I decided I would test it myself.  I climbed on the ladder and found dampness to the tar paper, but found no wood that was soaking wet.  Did I mention their timing to do this destructive testing came after several days of heavy rains?  The homeowners voted 156 to 16 not to proceed with the lawsuit.  Even after this vote, the board brought in a second “construction defect” law firm and the homeowners had enough at this point.  We petitioned for a special meeting and threw out the entire board.

 

The current board is working with the builder and their insurance companies.  A tolling agreement was signed and has been extended several times over the last year and a half.  Repairs have been made while negotiating a final settlement agreement, which will be signed within the month.  Please note, I said one and a half years and not the three or four years that it usually takes for lawsuits.  This is my home, my investment, and therefore it is important that I and all homeowners be given the opportunity to speak before being thrown into a lawsuit.  That is why I support S.B. 241.  By giving homeowners this bill, the emphasis will be on fixing our homes.  What a great opportunity for all of us to get problems solved more quickly and amicably rather than having to go through a lawsuit.  Why do I consider my statement as being relevant to your Committee’s decision-making process?  Because I can personally testify that this bill, even though it has not been passed, does work.  Our homeowners association is living proof of this proposed bill.  Please support Senate Bill 241.

 

Bruce King, representing the Coalition for Fairness in Construction:

[Introduced himself.]  I reside in Clark County; I am a paint drywall subcontractor, third generation contractor.  My grandfather started this company in 1947.  I am happy to be here.  I want you to know that as a subcontractor I am also here not just representing myself but I am here representing the subcontractors throughout the state of Nevada.  Many of us have joined the Nevada Subcontractors Association, which went on to become the founding member of the Coalition for Fairness in Construction, which represents subcontractors throughout the state of Nevada.

 

I really want to point out to this Committee something that is often lost in this argument:  that subcontractors are probably the group that will be hurt the most if we fail to get some serious changes in NRS Chapter 40, if we fail to change it entirely.  The large home builders, the national home builders, the billion-dollar companies, as some like to call it, would not be dramatically affected.  On the other hand, this endemic [problem] is laying waste to subcontractors throughout Clark County, many of whom would have loved to have made it in business this far, but unfortunately were unable to get insurance in the past year, so they are not here with us. 

 

As subcontractors, we live here, we work here, our children go to school here, we pay taxes in the state of Nevada, and we employ the tens of thousands of people throughout the state who build these homes.  We are the people who provide the good jobs.  If we are fortunate enough to make a profit, even our profits stay here; they are not shipped to another state, they stay here in Nevada.  This is where we run and maintain our businesses.  We are being sorely affected by what has happened.  My grandfather started this business in 1947.  The other day, I did a little math and I figured that we have certainly done in excess of 100,000 homes in that period of time here and in Phoenix, Arizona.  But we have never had a construction defect lawsuit until 1997— not a single one.

 

When all of this started in 1997, I thought surely this was about defects and getting homes fixed.  I don’t believe that anymore.  This has degenerated into an issue about money.  When you can get an award of $25 million for a fairly new project that the new cost of that project was $8 million, the part about getting things fixed gets all fuzzy when it comes to the money.  Nevada Revised Statutes Chapter 40, I would have to differ with Mr. Maddox, has become a black hole from which none of us emerge whole—not the homeowners who need their homes fixed, not the subcontractors who want to fix them, or the contractors who want to fix them. 

 

With S.B. 241, we are simply asking that we are called first.  Why should any homeowner be stuck or trapped in a four-year lawsuit and then call me?  Because you will call me; we are the contractors who will fix that home.  You can call us first and we will do it for free if it is a warranty or a defect in construction.  Or you can take us through a four-year lawsuit, then call us, and you will pay us to fix that same defect.  We are asking that we are called first.  We are also asking for a real chance to make a repair, not half a chance.  We cannot leave here this time and come up with a halfway solution.  Anything at all in any bill, proposal, or procedure that comes between a good contractor or a good subcontractor who wants to make a necessary repair is bad policy.  We are asking you to consider S.B. 241.  Amendments may be made, but we must as contractors throughout the state of Nevada leave here this session with real change—meaningful change.  I appreciate your time and I appreciate the difficulty of the task before you.

 

Assemblyman Mabey:

Why do you think it is that all those years from 1947 to 1997, you had zero lawsuits and now over the past years you have?  What is the difference?

 

Bruce King:

Will this be just between you and me?

 

Assemblyman Mabey:

Yes.

Bruce King:

I want to be careful here and not get myself into trouble.  Without question, there are some builders who have some issues and some homeowners who have problems, and that is why in S.B. 241 we do not want to prevent a homeowner from being able to get a problem resolved and if necessary apply to the courts.  But, as I said, this is not about making repairs anymore.  No one can tell me that this is about making repairs; this is about money.  Unfortunately, the way NRS Chapter 40 is designed, and I know for a fact that no one in this building or on this Committee ever thought that NRS Chapter 40 would get to where it is, but we are here; as Mr. Claborn pointed out, it is broken.  It is not working and to answer your question again, I believe it has come to the point where this is about money and not fixing homes.

 

Frank Beers, Citizen:

[Introduced himself.]  I am both a recipient of the help of Dell Webb in coming in and repairing our home and a plaintiff in a class action suit, which is kind of a unique position.  With that being said, I want to support what I have heard here today in S.B. 241.  I think you need to pass it; I think NRS Chapter 40 is broken as Mr. King just said.  Thank you.

 

Corie Craig, Senior Deputy Director, Fannie Mae:

[Introduced herself and submitted Exhibit H.]  I am here this morning because we are concerned that the issue that is being discussed may have an effect on the affordability of housing and home ownership here in Nevada.  Fannie Mae’s mission is to increase affordable housing and home ownership.  We do have a fairly substantial commitment to housing here in the state of Nevada.  Our current investments exceed $19 billion within the state.  Just to give you an example, the Housing Division [of the Nevada Department of Business and Industry] has a current investment of about $916 million, so we do have quite an interest in what happens here with housing.

 

Fannie Mae works with a number of affordable housing partners throughout Nevada.  Some of these partners who have the ability to develop for sale affordable housing can only develop affordable rental housing at this point due to the lack of available insurance.  Local governments have been asking these developers to build for sale properties because they believe that home ownership creates more stable communities, as do we.  But, unfortunately, these affordable housing developers have been unable to do that because of the insurance issue. 

 

I did ask the Myers Group to take a look at what was happening with the average sale prices throughout the state, particularly the housing prices as a whole as they compare to condominiums because traditionally condominiums, town homes, and attached properties have been the most affordable way of getting into home ownership for first-time home buyers, but they have also seemed to be the most affected by the difficulty in getting insurance.

 

The information that I received showed the market as a whole over the past year or so for southern Nevada had increased about 5.6 percent and the condominium market increased by 23 percent, excluding Turnbury and Park Place because those were extremely expensive properties and really skewed the numbers.  We saw more dramatic changes to the average sale prices here in northern Nevada.  The average market price increased by 8 percent; the condominium market increased by 66.3 percent.  We are concerned about the number of first-time home buyers who are being priced out of the market because of that.  We feel that any dramatic increase to the cost of construction obviously will be passed along to the home buyer and will affect the home ownership rates in the state.

 

[Chairman Anderson accepted into the record the following exhibits without testimony.

 

• Exhibit AA, submitted by Roy H. Adcock, Architect.

 

• Exhibit O, a letter from Dell Webb Corporation, submitted by Thelma Bartlett.]

 

Deanna Forbush, Citizen:

[Introduced herself. (Exhibit K)]  I am an attorney here in Las Vegas and am appearing as a private citizen today in support of Senate Bill 241.  About a year and a half ago, a construction defect attorney solicited my former neighbors and me for legal work and asked that we complete a survey identifying defects in our homes.  The solicitation was sent in the form of a letter addressed to the homeowners association and was printed on the letterhead of a firm based in California.  The letter had also listed this firm’s website as <www.constructiondefects.com>.  The letter also mentioned the association of a local firm; however, the partner of the Newport Beach firm signed the letter and there was no mention of the local firm on the California firm’s website.  Since this was the second time they had solicited me, I responded with a letter stating that in my opinion their survey was nothing more than a thinly felt solicitation for professional employment sent in violation of a Nevada law and for that reason I also sent a copy of my letter to the Nevada Bar Association. 

 

It seems clear that a few of these out-of-state lawyers are simply trolling homeowners associations to generate legal business for their out-of-town firms while leaving the practice of law in general in disrepute.  These are not the actions of neighbors looking out for neighbors but carpetbaggers looking to win the litigation lottery while leaving Nevada homeowners with homes that cannot sell and, in some cases, cannot even refinance while the litigation drags on. 

 

It has been my personal experience that Nevada homebuilders are eager to satisfy their customers, to maintain their company’s integrity, and to generate positive word-of-mouth advertising.  Unlike these construction defect litigation attorneys, most Nevada homebuilders have been doing business here for years and have a vested interest in the prosperity of our communities. 

 

Las Vegas has always been a town where even a housekeeper or porter could own a new home because home prices have always been affordable.  Construction defect litigation has made affordable housing in California extinct, but defect attorneys are alive and well doing their business here in Nevada.  If these type of attorneys are allowed to continue running roughshod over Nevada homeowners and builders, the dream of owning a first home will soon be lost to many Nevada families, while these California attorneys continue to buy million-dollar mansions by the sea.  Please support S.B. 241 for all Nevadans.

 

Assemblywoman Buckley:

My question is as a fellow attorney who does no construction defect litigation.  I hate hearing stories about out-of-state lawyers engaging in what sounds like unethical behavior.  Did you follow up with the bar and did they do anything?

 

Deanna Forbush:

I didn’t actually file a formal complaint with the bar.  I sent a copy of the letter just for interest.  They did not follow up with me.

 

Assemblywoman Buckley:

One of the things that I suggested last session when we had a hearing related to a similar concern is that every single time one of them did that, a complaint should be filed with the bar and have a representative of the builder, like Mr. Wadhams, another fellow attorney, follow up with the bar because if you can get a few of the bad apples in every industry whether it is home builders, lawyers, or whatever, it serves all of us.  I think people should be doing that every single time that happens.

 

Deanna Forbush:

I think that is good advice, Assemblywoman Buckley.

Jack Jeffrey, representing the Southern Nevada Building and Construction Trades Council:

[Introduced himself.]  I would also like to say that I have been in communication with Danny Thompson, Executive Secretary of the American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), and Richard Houts with the Nevada Building & Construction Trades Council of Northern Nevada, and all three entities oppose S.B. 241.  I believe you have a letter (Exhibit S) from Bob Nard, Secretary-Treasurer, Southern Nevada Building & Construction Trades Council, that was distributed.

 

Our concern with this thing has been previously stated.  There is nothing in this bill that is going to improve the workmanship in home building and I know from personal experiences, as past secretary-treasurer of the Southern Nevada Building & Construction Trades Council, there are a large number of workers in the home building field who are undertrained or untrained and not qualified.  Many of these issues relate to workmanship and it seems like the bigger the industry gets, the harder time we have with workmanship.  That is the reason we oppose this bill.  We would like to see the training brought up to standard and have qualified people in the field doing the work.  I would also like to state that, in case the Committee is not aware, I also represent the Nevada Trial Lawyers Association primarily in the area of worker’s compensation.  I don’t want anybody to misunderstand that, but that has nothing to do with the position of the three entities that I mentioned.  [If you have] any questions, I would be happy to answer them.

 

George Toto, Citizen:

[Introduced himself.]  I am a Reno resident and homeowner.  I am the President of Citizens for an Informed Community; we are a government watchdog organization in business for 10 years.  I am also on the board of directors of Field Creek Estates.  I have been listening to everybody speak for and against S.B. 241.  I came in prepared to discuss some of the issues but most of them have been covered.  I am one of the individuals that have gone through hell as far as my dealings with the State Contractors’ Board and the contractors.  We have had major problems in my particular new house, our dream home, an over half-million dollar custom home.  The contractors basically left us hanging for over two and three-quarter years. 

 

We finally got to a point where they said, “Well, go sue us,” so I went to the State Contractors’ Board.  We went through three different notices to repair, verbal notices to repair, all ignored.  Finally in April 2003, and we started in June 2002 with the complaint, we had not seen the contractor or any of the subcontractors until we went to the hearing.  At the hearing, basically the bottom line was, “You shouldn’t have any representation for you,” but the contractor had legal representation, the board chairman had legal representation, and the state had legal representation.  I was a witness and that is all I could do was speak when spoken to on my own behalf on my complaint.  I am not satisfied with the way the State Contractors’ Board handled any of this.  The final verdict was “Yes, we upheld almost all of your complaints because you had hired a lawyer, but we are not going to award you any damages.”   

 

Finally, after four or five tries and 300 phone calls of rejection by the contractor, we said, “Enough is enough, we don’t want these guys back out here anymore.”  The chairman said, “I am sorry, I can’t help you, but we will fine these guys a token amount,” which was nothing.  The state recovered their costs.  My attorney’s fees were not covered, none of my damages were covered, my repairs are still obnoxious, and I am living with them.  I would like to, at some point, show all of you what really happens, like the gentleman earlier had shown you on TV.

 

Now we are forced to go through NRS Chapter 40 and I don’t believe that people are addressing the right issues here.  The complaints I keep hearing are things are not getting fixed.  Well, we have been trying to get them fixed for almost 3 years now and we have a contractor that played games.  The minute the state took over, [the state] used that time, 9 months, and bent over backwards for this contractor and at the end, I was told, “Do you want this person to come back into your home and do the work?”  I said, “No,” and because I said ”no,” and I was warned of this beforehand by the staff, that the State Contractors’ Board would just wash their hands of it, and they did just what was expected of them—they wrote it off.  Now I have to go through civil procedures to claim anything.  My house is still the way it was.  The State Contractors’ Board had the option of fining the contractor, suspending his license, or revoking his license; they did none of the above.  This is a consistent problem. 

 

One other issue, I don’t know who is involved with issuing state licenses, but when an individual can have a license as a general contractor and basically rent his license out to anybody who wants to pay him who is not a licensed contractor to build homes in exclusive areas, I think there is a problem and someone needs to address it.  Thank you.

 

Randy Harris, H&S Construction:

[Introduced himself.]  I started H & S Construction 10 years ago based in Minden, Nevada.  Today, my liability insurance is $31,806 plus $1,100 per home built.  Last year, we built 29 homes; that is over $60,000 in liability insurance alone.  This excludes fire, theft, auto, and health insurance.  I cannot get insurance for multifamily projects.  I have had one lawsuit in 19 years of building homes.  After agreeing to remedy a faulty tile situation, the homeowners decided they did not like their home anymore and filed a construction defect suit.  The judge recommended that I purchase the home back, plus pay all the plaintiff’s legal fees.  I did so and my insurance company has refused to reimburse me.  I was able to resell the house, but I am still out $70,000 in legal fees.  We need S.B. 241 in order to get affordable insurance, fix the problem at hand, and continue our business of building homes in the state of Nevada.

 

Chairman Anderson:

Let me close the hearing on S.B. 241 and bring it back to Committee.  We have until May 16, 2003, which is next Friday, to have the bill out of this Committee.  This bill does not fit; I wish I could tell you that it did, but it does not.  It still has some major flaws in it; it would be easy to turn it over to a subcommittee and have additional hearings, but there just isn’t time under this 120-day time frame to go through all that.  I am going to ask a couple of you to find some middle ground so we can bring it back to the Committee by next week.  If we could have it by Thursday of next week, that would give us Thursday and Friday to try to make sure that we get it taken care of by May 15 or 16.  If not, we will be left without.

 

I don’t believe that is what this Committee wants; I don’t believe that is what any of you want.  Hopefully you can work out whatever differences you have with the bill.  Let me say that if I don’t see or believe that any progress is being made, the Speaker has given me a bill to start on my own and if need be I will start it here this coming week on Tuesday or Wednesday.  You all have to understand that there is going to have to be some middle ground found.

 

Let’s turn our attention then to the last bill of the day, S.B. 273.

 

Senate Bill 273 (1st Reprint):  Enacts provisions relating to inspections and claims for constructional defects. (BDR 3-252)

 

Chairman Anderson:

Let me open the hearing on Senate Bill 273.  This is a piece of legislation introduced by Senator Schneider.

 

Senator Michael Schneider, District No. 11, Clark County:

[Introduced himself and submitted Exhibit BB.]  What I have found over the past few years is that oftentimes in these construction defect cases, inspections of properties are done, buildings are opened up, and roof tiles removed without a third set of eyes to watch.  Often attorneys hire an inspector to go out with a home inspection company; they are actually construction companies that go out and open houses to find defects.  The way it is done really gets between the builder and his client, the homeowner.  If you are going to go in and do that, if our goal is to get houses fixed, then I think it is imperative that we get the builder involved as soon as possible and not play a game of “gotcha”—do an inspection and say, “Here are those alleged defects; we are going to court.”  The builder has had no opportunity to see the defects, let alone remedy any of the problems, then, when the builder wants to see the defects, he is locked off the property and refused access to the property.  That is what has been going on in this state and I think it is in the best interest of the consumer to make sure the builder has an opportunity to be there when any inspections are done on the property he built.  The secretary has passed out a letter to you (Exhibit BB).

 

Chairman Anderson:

Is this the Carlson letter (Exhibit BB)?

 

Senator Schneider:

Yes, it is.  This is a very good example of how a construction defect starts and this happened right here in Carson City.  A local attorney has placed himself between the builder and the builder’s clients; they did an inspection, called a meeting of the homeowners, and the quote is, “You will be shocked and amazed to see what we found.”  The builder has been working with these half dozen homeowners in this particular area because there was a reported drainage problem.   Now that the attorney has placed himself in there and done an inspection of the houses, it is “You will be shocked and amazed at what we found,” and the lawsuit will follow. This is how they start; there is no opportunity for the builder to go in and make reasonable repairs.  This one I don’t believe is in litigation yet, but we have several others that I have here.  This is just how these operate. 

 

What I and the Senate would like to see is that the builder be right there from the beginning.  Look at everything and give him an opportunity to address the problems instead of a situation where you do the inspection where there may or may not be defects.  Oftentimes these buildings are opened up during rainstorms and not resealed by the person doing the inspections; they are putting homeowners at risk.  I do have a slide show but I didn’t want to delay you any more, but anyone is welcome to come to my office. 

 

Chairman Anderson:

I am always distressed when you talk about houses being opened during inclement weather because as you know if we had to wait for clearing weather up here, we would never have a house built. 

Assemblyman Horne:

As I read this, if a homeowner does hire somebody to inspect their defect without giving this notice, would you have them completely barred from remedy?  As a contractor would their defense be, “Sorry, I was not allowed to be there during the inspection, so therefore I don’t have to repair your home”?

 

Senator Schneider:

They should be given an opportunity, at least three working days…

 

Assemblyman Horne:

Let’s say that I see a crack in my floor and I call in an inspector and the inspector looks at it and says, “Yes, the ground is settling; it was done wrong and this is why you have this crack,” but I didn’t go through this notice that is in here, I didn’t give this three-day notice to the contractor.  What happens next?

 

Senator Schneider:

If this is an inspection that leads to litigation, you have to give the contractor three working days’ notice, not if all you do is call out some low guy and say, “Why is my floor cracking?”  If you are calling out someone to specifically look at this and probably you are looking at litigation, then yes, you have to give the three-day notice.  But you know, for a lot of cracks in the floor, maybe you would just want to replace the tile.  If you are just going to replace the tile, you don’t have to give the notice on that.  This is only under the ten years also.

 

Assemblyman Horne:

I guess I am not being clear.  If we pass this and then I, as a homeowner, even if I am thinking in my mind, “Hey, this looks like a construction defect,” I am going to bring out an inspector and I know a potential lawsuit could happen and I don’t follow these provisions…

 

Senator Schneider:

You are asking what is the penalty? 

 

Assemblyman Horne:

Exactly.

 

Senator Schneider:

I don’t think we put a penalty in there.  I think the judge would probably step in and ask this.   You may want to refer to the Chairman.

Chairman Anderson:

Let me think about this for a second.  For example, I get a new heating/air conditioning unit retrofitted into my home and I have done other simultaneous substantial remodeling.  Everything is fine with the remodeling but the heating/air conditioning unit seems to be having problems.  I call the air conditioning guy out and he does whatever to fix this and six months later there is a problem.  Again I call him back and he comes in and he says, “Well, I don’t know, I don’t think that is covered by warranty anymore, it is going to be a service call.”  I know somebody who is a home inspector and I am concerned about this.  I have paid for the repair and I asked that guy to come over to take a look at the air conditioning unit to see if there is a problem with it.  Am I now not able to pursue to a lawsuit because I called this home inspector to come in after the repair was done?

 

Senator Schneider:

I would say you had better call your general contractor who did the work back again, tell him you are going to have this inspected, give him the three days’ notice, and have him come out.  I would have the inspector return again if it looks like you are going to go to a lawsuit.  Mr. Chairman, you are getting into one house, one individual house, and what we are looking at is more related to these big lawsuits, but I think we can address that in some fashion.

 

Chairman Anderson:

I can appreciate the contractor or the subcontractor being concerned about their large exposure, but the individual homeowner is concerned about his house.  While he is concerned about everybody in the group, he is concerned about how he is going to be treated in protecting his investment.  How do I go about making sure that I am not being taken advantage of?   I think this is Mr. Horne’s issue.  I am not a contractor and I am not an air conditioning specialist, but I know my heater/air conditioner is not working and I want to know what the story is. 

 

Senator Schneider:

What you did was a remodel job here and the home is probably over 10 years old if you have to do a remodel job.  That would be covered under the Recovery Fund anyhow if the builder has gone bad. 

 

Assemblyman Horne:

I would have problem with this even if they didn’t follow this procedure.   If in fact we do have a defect, I wouldn’t want contractors to be relieved of liability because they didn’t get their three-day notice to come and look at this.  I think they should still be able to petition and say, “Okay, I will come now and I will look at it.  Yes, it is my fault and I will fix it.”  I don’t want that to be an absolute bar just because they didn’t notify me.

 

Senator Schneider:

The intent here is not to relieve the contractor of any liability; the intent is to get the contractor back on the property so he can observe what is happening. Now he is on notice and he will have an opportunity to make any corrections he needs to do.  I am not trying to set something up so if a homeowner misses a three-day notice then the deal is off.  This is more of a requirement for the homebuilder to be there and he has to repair.  We are giving him every incentive to get in there and repair, to get with his customer again.

 

Assemblyman Horne:

I think if there were some language that said something like “if a homeowner failed to do this and filed a suit, a contractor would have X number of days to come onto the property and make such inspection,” or something like that.

 

Senator Schneider:

If you can draft such language that would make sense, Mr. Horne, and I would be amenable to that.  This is to help the homeowner too; this is not to go around anything.

 

Assemblyman Claborn:

We are talking about NRS Chapter 40, correct?  In NRS Chapter 40, you would like to add “right to repair,” correct?

 

Senator Schneider:

That would be nice, wouldn’t it?  I support a requirement to repair, rather than a right to repair.

 

Assemblyman Claborn:

Are we talking about a single home or are we talking about more homes?  Because if we are talking about more than five homes, then we are getting into a class action suit, which starts the process in NRS Chapter 40.  You would have to remove that as well, wouldn’t you?

 

Senator Schneider:

Have to remove it?  NRS Chapter 40?

 

Assemblyman Claborn:

No, the provision in NRS Chapter 40 that starts the process for class action suits.  Single home, no.  Five homes or more, then the process starts with a class action suit.  Then you go to get the contractor and have him come out there; that would have to be deleted from that.

 

Senator Schneider:

Yes, but that whole scenario doesn’t happen, Mr. Claborn.  Once they start it, the contractor is locked off the property and not given an opportunity to repair.

 

Assemblyman Claborn:

Yes, repair what?  Just the one house or…the whole process in NRS Chapter 40 with five homes or more, the process is actually you file a class action suit first before you can do anything.  That is automatic.

 

Senator Schneider:

But what I am saying is when a presentation is made to a homeowner association in these class action suits, an inspection has already been done of the property, and I think the builder should be there when that inspection is done.   That is what we are getting at here; that inspection is already done when the presentation is made to the homeowners association and that is what we are trying to do, get the bill reengaged.  The story that we hear is oftentimes the builders have no clue that there was even a problem.

 

Assemblyman Claborn:

My problem with the whole thing in NRS Chapter 40 is with that provision we have there.  I would like, just like it was my home or whatever, to get everybody together and get your contractors to do that, like you are talking about with the association, before the lawsuit starts the process.  Is this what this bill will do?

 

Senator Schneider:

Hopefully, that is what this will do.  The builder will look at it and see what defects are there or if there are defects there.  Then he is reengaged with his customer.

 

Chairman Anderson:

As you envision this, Senator, if I have a problem, I am going to call up the contractor and say, “I’m going to have an inspection done by the Anderson inspectors.”  They are going to do an inspection on whatever this problem is that you have contracted for.   The inspector is going to show up when the inspector shows up and the contractor is going to stand around and wait for him? 

Senator Schneider:

These guys will schedule it for a day and time to come in.  For example, if I have a problem with my builder and he has not been performing with me, I am going to call Anderson Contracting and Anderson says, “I will be there Tuesday morning to start the inspection.”  Now I am going to call my contractor, Mortenson Contracting, and I am going to say, “Mr. Mortenson, I am having an inspector come out to do defect testing on my house on Tuesday morning.”  Now, you have your three working days’ notice.  Mr. Mortenson then can choose to come and hopefully he will, or he can choose not to come.

 

Chairman Anderson:

The contractor shows up and then Mortenson decides that he wants to fix the problem.  What happens then?

 

Senator Schneider:

That is what we want to happen, isn’t it?  We want them to reengage and take care of the customer.

 

Chairman Anderson:

If I have talked to him about coming out before and he didn’t come…

 

Senator Schneider:

Well, maybe this is the impetus that will make him pay attention.  That is the goal here, to get everyone reengaged.  Like I said when I started out, then there is none of this “gotcha.”  “Yes, we never notified you but the heck with you.”

 

Chris Napolitano, Gateway Educational and Consulting Resources:

[Introduced himself.]  I have been involved in a lot of these litigations in the past. I am familiar with most of the attorneys that are involved in the construction defects and understand what their procedures are.  Many of the inspectors that these companies send out for construction defect litigation cases are not individuals who are qualified to determine or spot a construction defect, much less a latent defect, or a defect that could happen in the future; only a person who is trained can understand those types of defects.  They are really not trained to see those defects, so first of all you may not be getting an accurate representation of what really is or is not a defect because the person actually making inspection may not be a state inspector. 

 

Construction companies hire people under the auspices of “You are going to be part of our inspection crew, do you know how to inspect a house?”  And the guy will say, “Sure, I can inspect a house.”  “Do you know anything about inspections, are you licensed?”  “No.”   But they really don’t ask them that question.   They say, “OK, this what you need to do.  Go through this checklist, see if this is okay and that is okay”—if they even get that.  Then they take some photographs, fill out a report, and bring it in. 

 

The attorneys base a lot of their conclusions on these reports by inspectors who are really not inspectors.  So we have some fundamental problems there.  We need to get started on the right foot and educate some of these inspectors or make sure these inspectors become certified or licensed before they go out and do some kind of a construction defect lawsuit representing a large attorneys’ group or an association.

 

There is an interpretation situation here.  I will just throw in one other thing.  I have seen the finality of a lot of these large class action suits and a lot of these customers end up getting $25,000, $50,000, $75,000, or $100,000 apiece.  They go off to buy Winnebagos and have no intention of fixing their houses, because it was done on a strategy of numbers as part of a class action suit. They say, “Well 30 percent of them are messed up but we are going to include all 100 percent because the chances are the rest of them are going to go bad too.”  These people are counting on that money, so they become part of the class action suit and they look at it as a bank account.  This money is distributed to them and they buy a new car or go on a trip; you never see those houses get repaired. 

 

Chairman Anderson:

Sir, are you in support of S.B. 273 or are you in opposition? 

 

Chris Napolitano:

Yes, I am in support.  The contractor should have the opportunity to go in there and take a look at that house and be part of this whole situation instead of being screened out right away without having the opportunity to make repairs.

 

Robert Maddox:

I think it is pretty important that we take a look at the language to see what this bill really proposes to do.  It is fairly short and all the key language is on the first page and carries on to the second page, all the bolded language, but in particular on the page 1, line 6.  Any time a “homeowner or homeowner association has hired, contracted with, or paid any person to inspect the residence or appurtenance to obtain information related to any condition or damage which has the potential to result in a claim for a constructional defect…”  Then it continues with “may not conduct the inspection unless you have given the contractor three days’ notice and an opportunity to be present during that inspection.”  This language is so broad that it includes a number of situations that are very different from what has been discussed so far.  I have put together a little handout (Exhibit CC).  I call S.B. 273  “more harassment for mistreated homeowners.”

 

I want to run through a few scenarios.  Typically within the first year, if you have a problem, you are going to call the contractor.  That is what happens, that is human nature and is what people do.  The contractor, or the builder, typically tells the homebuyer, “You only have one year for us to take care of things and after that you are on your own,” so all of my scenarios relate to after that first-year period.

 

In the first one, a homeowner has a plumbing leak in the middle of the night and it is an emergency and he decides to deal with it; he calls one of these 24-hour plumbing services. The homeowner didn’t give that builder a three-day notice and an opportunity to participate in an inspection.  An inspection certainly takes place when the plumber comes out to determine what the problem is.   Perhaps that is a situation where the plumber gives advice to that homeowner that there is a construction defect and that you really have to address that with your builder.

 

Another scenario is very similar to what Mr. Booth testified to this morning in opposition to S.B. 241.   In his situation, he had cracks in the walls of his home within the first year and reported that to the builder.  The builder did some patching of cracks. After the first year the builder told him he was on his own.  The builder has already refused to come in and patch any cracks.  Let’s assume…and I won’t use Mr. Booth’s name any longer, we’ll call him Smith.  Mr. Smith just wants to know what is going on.  His builder has already told him, “You are on your own; we wash our hands of you and your problem.” So Mr. Smith really wants some confidential information and he contacts an engineer to come out.  This bill would say that Mr. Smith couldn’t do that; he would have to let the builder know and the builder would have to be present during that inspection.

 

Let’s consider also the scenarios that Mr. Canepa addressed in opposition to S.B. 241 with regard to right to repair.   This bill has nothing to do with right to repair, but we are talking about being required to let a contractor into your home perhaps after you have already had an extremely unpleasant contact with that contractor and that contractor has decided to play rough with you.  Now, if you want to get any advice on what the problem is with your home, you have to let that contractor into the home.  

 

Senate Bill 273, as you have heard by the proponent of the bill, is based on the premise that somehow homeowners or attorneys or experts working for homeowners are playing this “gotcha” game.  The suggestion was made that somebody comes in, does an inspection, but instead of really doing an inspection, they are committing a fraudulent act and are actually trying to create a situation that looks like a construction defect.  That is what this is supposed to be dealing with.  Do you really think a bill like this that tells somebody you have to have the builder present with you to conduct an inspection is really going to stop somebody who might have this fraudulent intent?  I suggest to you that there is no way that would happen; if someone is really out to commit fraud, they are going to do it and this bill will have no benefit in preventing that.  We are adamantly opposed to any such conduct, will have nothing to do with it, and I am firmly convinced, certainly in my practice, it does not happen at all, nothing close to it.

 

Regarding this letter that I heard presented to you, I have not seen the letter (Exhibit BB), but I heard the discussion about a case in Carson City and I believe that the attorney being referenced is yours truly.  I think it is important for me to let you know that what took place in the meeting that was discussed was that I advised each and every one of those homeowners to contact the builder to get things fixed, proposals have been made, and hopefully those will be done.  What we are about is getting homes fixed.  There is presently a mandatory obligation to repair, but the provision dealing with defects that relate to imminent threats to life or health safety… in all my years of practicing I don’t know of a single instance where a builder has actually honored the obligation to do those repairs. 

 

This bill, S.B. 273, should be rejected because it will not solve any problem, the premise upon which it is based is extremely tenuous, and it creates unnecessary hassles for homeowners.

 

Dave Duritsa:

Again, I will make this brief.  All the testimony I have heard this morning for the other bills and this one, S.B. 273, are supposedly based upon consumer-friendly means to get your house fixed.  We need to take into consideration that there are very real problems in northern and southern Nevada and nothing in this bill promotes fixing them.   What we have here is something once again that puts up a roadblock for me getting my house fixed or you getting your house fixed, and let me tell you why.  If you want to have an inspector come in and look at your house for whatever reason, at whatever point, you have to make a determination, “Could this be a potential construction defect?” because that is what this says.  The other thing that I want to point out to each and every one of you is, as a homeowner, as a citizen of the United States of America, I have the absolute right to have whoever I want in my house at any time for my purposes that I decide, not somebody else for any purpose.  I have that right to do that.  I don’t believe this body realistically or in any circumstances has any way to take that away from me or any homeowner.  I urge you highly to reject this straight out.

 

Chairman Anderson:

That is it, we have been here long enough today, we are finished with those in favor; no more testifiers.

 

Assemblyman Claborn:

I am having such a hard time understanding what is going on here.  NRS Chapter 40 is the only thing these people have to fix their homes.  They haven’t fixed them; they are here.  Is there any other bill that is going to come before us?  Because if they don’t want S.B. 241, I don’t understand how they are going to get their homes fixed.  They are already up here because they can’t get their homes fixed.  What is the solution?  I haven’t seen anything that is positive, only a negative effect since 7:30 a.m. this morning. 

 

Chairman Anderson:

Let me close the hearing on S.B. 273.   Mr. Claborn, I was highly hopeful that S.B. 241 was going to come forward with a bill that had been worked out with some of the defects in it that might be similar in fashion to a bill that came out of this Committee last session, A.B. 133 of the Seventy-first Legislative Session in its second reprint.  Assembly Bill 133 of the Seventy-first Legislative Session was not a perfect bill either; I wish it had been.   I have been working on a bill in part that has some of the same elements of A.B. 133 of the Seventy-first Legislative Session in it that I believe is not going to make the trial lawyers happy in some places, it is not going to make contractors happy in some places, it probably will help some subcontractors, and it hopefully will make the road a little easier to identify for homeowners. 

 

The problem appears when you come to the large class action suits.  Class action suits are not controlled by legislatures but by the courts.  The courts determine what makes up a class and they have been determining that relatively broadly in the past.  If they would recognize that a group that falls into a class means class, not because they all happen to have the same contractor but rather because the nature of the defect is the same, we would be able to get individual homeowners taken care of.  That is what I really believe we are trying to do here.  In terms of solving the problem of insurance, I don’t think we can do that.  We can’t do that with medical malpractice and we can’t do it with this one either.

 

Senator Schneider:

You will be receiving a bill next week, S.B. 371, that hopefully will address Mr. Claborn’s questions.  It is an exempt bill.

 

Assemblyman Claborn:

My only comment would be that if we don’t see another bill in here, we will see the same people back here two years from now. 

 

Chairman Anderson:

We will recess.  We have an evening meeting and will be meeting at 7:00 p.m. here in this room.  We have a work session scheduled for 7:00 p.m. and hopefully we will get through it by 9:30 p.m.  It is my intention to adjourn by 9:00 p.m., but these things have a tendency to go on.  I am still trying to stay away from Friday.  I know a couple of you have already made arrangements for Friday that cannot be changed, nor would I expect it of you.  I want to remind you all that I have personal business on Monday, so I will not be here on that day.  We have a difficult week next week, so we really need to bear up this evening.  It is my hope to get out as early as I can on Friday afternoon, not later than 6:00 p.m. or 7:00 p.m. at the latest.

 

With that, we are in recess until 7:00 p.m.  

 

The Assembly Committee on Judiciary will please come back to order on Thursday, May 8, 2003, at 7:22 p.m.  The full Committee is here, a quorum is present.

 

[The Chair reminded the members and the audience of the Standing Rules and added that new testimony is not usually taken during a work session.]

 

We have the Work Session Document (Exhibit DD) in front of us.  If we finish this document this evening, we will not have a session tomorrow.

 

Let’s take a look at Senate Bill 317.

 

Senate Bill 317 (1st Reprint):  Makes various changes relating to incarcerated persons. (BDR 34-594)

 

Allison Combs, Committee Policy Analyst:

Senate Bill 317 was jointly referred to the Assembly Committee on Education (Exhibit DD).  The measure makes various changes relating to incarcerated persons including requiring the Department of Education to adopt regulations that coordinate a statewide program for educational services for those persons within the Department of Corrections.

 

There was one formal amendment, proposed by Jim Nadeau, representing the Washoe County Sheriff’s Office and the Second Judicial District.  At the request of the Chairman, Ms. Lang, Committee Counsel, worked with the individuals involved and has prepared an amendment that I will defer to her to explain. 

 

Risa Lang, Committee Counsel:

This amendment changes the existing statute for releasing prisoners from jail and provides a new subsection that applies when there is no city jail; there’s just one jail that houses county and city offenders.  In that circumstance, one has to still apply to the chief judge for the judicial district; that judge will consult with the justice of the peace and the municipal courts.  After the consultation, it is determined how to release prisoners to avoid the overcrowding situation.  The authority is only for 30 days.

 

Further down, there are some standards for release requested by the Committee.  Those are on page 2 of the proposed amendment.  The person must have served at least 75 percent of his sentence, he must not be serving for a crime that has a mandatory sentence set forth in statute, he cannot be serving a sentence for a crime that involved an act of violence, and the person must not pose a danger to the community in order to be eligible for early release.

 

Section 15, subsection 6, was added, which provides that a prisoner who is released can be required to remain on residential confinement for the remainder of his sentence, or he could be required to participate in some other alternative program of supervision.

 

Chairman Anderson:

The reason I swept this bill into our Committee was to place this amendment in it. We want to try to move it along to the Assembly Committee on Education.

 

Jim Nadeau, representing the Washoe County Sheriff’s Office:

[Introduced himself.]  We support the amendment; we are very pleased with it.

 

Chairman Anderson:

Have the judges had the opportunity to review it?

 

Jim Nadeau:

Yes, we have talked with the judges from the Second and Eighth Judicial Districts, we’ve talked with the District Attorney, and with a variety of people that would feel the impact of this; they have all indicated support.

 

Assemblyman Carpenter:

Is the seven-day deal out then?  It looks like it is.

 

Jim Nadeau:

Yes, the seven days is out.  It basically is opened-ended depending on the circumstances.

 

Chairman Anderson:

There is a secondary amendment for concerns that were raised about the bill.  Several of you were concerned.

 

Assemblywoman Buckley:

I had a concern with waiving tuition charges for prisoners.  I think it’s fine to encourage people to get their GEDs and support that part of it.  I think free college for prisoners, when we have so many people struggling to put their kids through college, is the wrong policy and the wrong message to send.

 

Assemblyman Mabey:

I agree with Assemblywoman Buckley.

 

Assemblyman Conklin:

I agree as well; I’m almost wondering if under Section 4, subsection 3, where it says “money in the fund must not be…” if we could add a paragraph (c) and put in some language that indicates that the money could not be used—I don’t have a problem if it subsidizes, but there is certain value when people have to work for something.  I don’t mind helping them if they’re doing the bulk of the work.  Perhaps we could just put something in there that says, “Funds may not be used to fully fund any class for any one individual.”  If the class costs $50, and they make dollar a day for a whole month and want to take a class, then we can help them with it.  But I agree; we shouldn’t be funding the education of these folks without getting something in return.  I think that’s a compromise I can live with.

 

Chairman Anderson:

We’re talking about removing it entirely from the Department of Corrections for college-level classes.  You want us to put a dollar in for what?

 

Assemblyman Conklin:

Maybe I’m misreading the bill.  My interpretation is that there are funds that the program can go outreach.  It’s not money coming in from the General Fund; it’s money from grants and other things.  I just want to make sure that money is not spent entirely on the class.  If it’s the wish of the Committee to cut it out entirely, I can live with that or I can compromise.  I just don’t want it to wholly fund the education; the inmates need to work for it.

Assemblyman Carpenter:

My feeling on this is unless we give inmates a chance to make something of themselves in prison, when they get out they’re going to be immediately doing what caused them to go to prison in the first place.  I know a few people who have gone through this program and I think that they’ve done pretty well.  If there’s a way to make them work and put that money into it, I don’t have any problem with that.  But I do not want to see inmates unable to get an education while they’re in there, because if there’s anything that might help them when they get out, it’s [an education].

 

Vice Chairman Oceguera:

I have the same feelings as the rest of the folks.  I had marked Section 8, subsection 4 on page 5, which talked about the fees.  I don’t have any problem if they can offer some college classes, correspondence, or whatever and the inmate can pay for it.  I don’t have a problem with that, but I don’t want to pay for college courses.  I would find it hard to go back to my constituents and tell them that.

 

Chairman Anderson:

I believe we also have to remove lines 44 and 45 on page 4, Sections 1 and 2, and all of Section 4.  The bill drafter would have to identify the sections to be removed.

 

Assemblyman Mortenson:

I agree with both Mr. Carpenter and Ms. Buckley, and I don’t know how to resolve it.  If we amend this bill to take it out, I think we need to make sure we don’t make it impossible.  If there is some way we could aid a prisoner to get college courses, I think that would be very good.  I agree with Mr. Carpenter:  if these prisoners can get a college education, I don’t think they will be back.  They will finally get some self-confidence and believe in themselves.  I don’t think they’re going to come back again and that will save an awful lot of taxpayer money.

 

Chairman Anderson:

Personally, I don’t disagree with that concept.  I think there is a real difficulty at this particular juncture, therefore, if we are going to move with the bill we should follow the suggestions by Ms. Buckley and eliminate that one section.  I appreciate Mr. Carpenter’s and your sentiments and I don’t believe that any of us disagree with the fact that prison is not supposed to be merely a place of punishment but rather a place of changing behavior.  That’s what a correctional institution is really about.

Assemblyman Horne:

I understand everyone’s concerns.  I’m thinking along the same lines as Mr. Conklin.  I don’t have a problem with putting some money towards it but not paying the entire thing.  Remembering the testimony from the young woman who had been incarcerated, I believe that is what this program is supposed to do.  If you think about the money that might have been spent on her education and what it’s done, I would venture to guess her victims would agree that it was money well spent.  So that’s where I stand.  I wouldn’t like it to be a complete bar that made it so difficult to where you’d be throwing out the baby with the bath water.

 

Chairman Anderson:

What we’re trying to do is set up this fund for the school districts to enhance their educational program offerings.  People who are getting a high school diploma, GED, or whatever while they are incarcerated is the second part of this, which is a different area.  It’s not the kind of policy issue that this Committee should be dealing with.

 

Assemblywoman Angle:

As I read Section 4, I don’t see money coming from any place but gifts and grants; it doesn’t look like it’s really coming out of the General Fund.  When I look at the fiscal note they say there is no cost to the Department of Education.  I’m thinking that these are grants they will be applying for; they are actually meant for this purpose, to educate incarcerated people.  I know that there is money specifically granted for that purpose in many of the federal funds, such as Department of Health and Human Services when we’ve been looking for funds; that’s where you can find these things.  I would say just leave it the way it is because they are going to go out looking for this money and when they find it they’re going to need to have someone who needs a college education in order to be able to apply for these funds.

 

Assemblyman Geddes:

In regard to the university system, I think we’re dealing solely with Section 8 of the bill and I agree with waiving the fee entirely, although at lines 44 and 45 in Section 8, when you are just talking about waiving the tuition charge, which is generally charged to out-of-state students, they still have to pay the registration and lab fees and any other associated fees.  I think it’s OK to leave that in as far as waiving the tuition charge, as long as they are still paying the fees.  I would suggest leaving that portion in when the bill drafters look at it.  It’s at the bottom of page 4, top of page 5, and I think paragraph (e) should stay because that only deals with the tuition charge and the prisoners would still pay the registration and other fees.

 

Chairman Anderson:

This happens because of the out-of-state students—out-of-state inmate.  If we have an in-state inmate, apparently we would take him.  If a person is an out-of-state inmate, it is quite possible that there are grant dollars available.  We may need to clarify that issue.

 

Assemblyman Claborn:

I think it was last session that we had a bill regarding something about charging the inmates because they all wanted to be junior lawyers.  There were so many frivolous lawsuits filed, it got to be where we had to come in and act on it.  Is this what we’re going to do?  Are we making a bunch of junior lawyers?  Are they going to get high school educations?  I don’t understand what we’re trying to do here.  We might run into the same problem we had before.

 

Chairman Anderson:

I believe we are trying to make sure that these inmates are going to avail themselves of the educational institutions through the Department of Education and the local school districts in the four counties where ongoing issues were indicated:  Clark, White Pine, Carson City, and Pershing.  So this would aid in that program first.  The next part of the program is the suggestion on how to take care of the out-of-state tuition.

 

Assemblyman Gustavson:

I’ve been reading through this bill and I see that we’re setting up a fund for this money and there may be money available out there.  I agree with Mrs. Angle.  I’d like to see these persons have the opportunity to get an education, high school diploma or GED and any other education that might be possible, as long as other funds are available and as long as it is not funded by the state.  I think it is something we need to look into.

 

Assemblywoman Buckley:

I was just going to comment on Section 4.  It allows for a fund to be created and to accept gifts and grants.  So if there is someone out there who wants to make a donation to help prisoners obtain college courses, it makes that available in that section.  Additionally, prisoners could pay for it themselves, like that impressive young woman who came forward to testify.

 

What Section 8 does, though, is waive the tuition charges for out-of-state incarcerated persons in lines 44 and 45 on page 4.  Then in addition, at line 8 on page 5, it waives the registration fees for everyone.  As I recall the testimony of the university officials, they were waiving those charges and providing the courses; that is a General Fund hit.  They indicated that they would be coming to us in a future biennium for funding to support that.  So that is the section that I have the concern with—spending General Fund money for these college courses.  They could also be for individuals who are in for life, who will never get out.

 

Again, I have no problem with grants, if someone wants to give it, or if they want to pay for it themselves, but I think it is wrong for us use taxpayer dollars to do it.  It would be Section 8 in its entirety, just the highlighted portions paragraphs (e) and subsection 4.

 

Chairman Anderson:

Does anybody else have observations to make on the bill?

 

Assemblyman Geddes:

If an inmate is here for more than a year does he qualify for residency, or is he still based in his home state?

 

Risa Lang:

This doesn’t seem to discriminate between whether prisoners are from this state or another state if they are incarcerated here.  It just says, “…incarcerated persons who take courses that lead to post-secondary degree offered pursuant to Section 3.”  So it would be any.

 

Assemblyman Geddes:

But the registration fee is regardless of whether a prisoner is from in the state or from out of the state.  If a person is an in-state resident or is incarcerated from one of the good neighbor counties, there is no tuition charge.  So it’s just the question of not having to pay the tuition charge if he has been in prison for six months.

 

Risa Lang:

This indicates that they would be eligible for that as long as they met the financial eligibility criteria.

 

Chairman Anderson:

The bill says, at lines 33 and 35, “All students whose families are bona fide residents of the state of Nevada,” and “All students whose families reside outside the state of Nevada providing such students have themselves been bona fide residents of the state of Nevada for at least 6 months…”  I believe that once a person becomes a bona fide resident of our facility, beautiful Lovelock, that does not make him a bona fide resident of the state of Nevada.

Assemblywoman Ohrenschall:

I was just going to add that a person cannot establish residency unless he voluntarily goes to a place.  Any place he goes to involuntarily does not establish residency, such as when being taken as a prisoner.

 

Chairman Anderson:

The Chair will entertain a motion of Amend and Do Pass S.B. 317 with the amendments or what other cleanup may be needed so that we’re taking care of that problem.

 

Assemblywoman Ohrenschall moved to Amend and Do Pass S.B. 317 with the amendments being those as presented in the Work Session Document and the suggestion to eliminate the new language in Section 8, pages 4 and 5, of the BILL.

 

Assemblywoman Buckley seconded the motion.

 

The motion carried unanimously.

 

Let’s turn our attention to S.B. 73.

 

Senate Bill 73 (1st Reprint):  Makes various changes to provisions governing juries. (BDR 1-934)

 

Allison Combs:

Senate Bill 73 makes various changes to the provisions governing juries.  The testimony noted that the changes were recommended by the Nevada Supreme Court’s Jury Improvement Commission (Exhibit DD).  The bill deletes the exemptions from jury service and makes changes regarding the payment for mileage and fees for jurors.

 

There were some concerns raised regarding the deletion of the exemptions and the potential for conflict between prosecutors and defense attorneys in selecting a jury.  However, there were no proposed formal amendments.

 

Chairman Anderson:

We are not taking additional testimony.  Mr. Carpenter, I haven’t taken a motion yet; you can ask your question.

 

Assemblyman Carpenter:

I was just going to say that the people in Wells are really going to beat me up with this 65 miles; I’d like to make it 50 if I could.

 

Chairman Anderson:

How far is Wells from Elko?

 

Assemblyman Carpenter:

It would be 51 miles when we change it to 50.

 

Chairman Anderson:

I think that 50 miles is very reasonable, 50, 75 and 100 would be the normal.  I wonder how the Nevada Supreme Court decided on the number.  Do you think they measured the distance just outside of Jackpot?

 

Assemblyman Carpenter:

Jackpot is about 120 miles.  Not too many jurors come from there or Wendover, but they get quite a few from Wells.

 

Chairman Anderson:

I think that may be the only community in the state that would fall at the edge of a 50-mile where 65 miles is a bit.  I hesitate to put another amendment in. 

 

Assemblyman Geddes:

I asked that question and they said they changed it to 65 miles to be consistent with other parts of the statute, and I don’t remember to what sections they were referring.  I had asked why they went from 60 to 65.  Gabbs, Nevada and Tonopah, Nevada are 110 miles [away from the court].

 

Chairman Anderson:

Mr. Carpenter, it appears that’s only a 5-mile change, so apparently we’re not going to change it for the folks that you are trying to help.  They would probably appreciate the additional mileage to go the other way, but apparently it’s not necessary.

 

Assemblyman Horne:

I wasn’t here for this presentation but I see that the opponents were James Jackson and Nevada Attorneys for Criminal Justice.  I was wondering what their opposition was.  Was it the exemptions?

 

Chairman Anderson:

Their concerns rest with the fact that the preemptory challenges would be taken up by the prosecution, thus eliminating police officers, other attorneys, and other potential people.  They were concerned that by broadening this to include previously excluded classes that they would lose that prerogative.  The observation from Justice Robert Rose [of the Nevada Supreme Court], at the time was that the burden would fall equally on both sides.

 

Assemblyman Gustavson:

I remember from the testimony that this would save approximately $309,000; that was in Clark County.  On the face of the bill it still shows, “Contains unfunded mandate.”  What about the other counties?  Is this going to put a burden on any of the smaller counties?

 

Assemblywoman Buckley:

As I recall the testimony, the Jury Improvement Commission went into that in great detail and worked out exactly what it would cost every county and provided that to every county; there wasn’t one county that opposed it.  In fact, they had letters of support from the district attorney, the jury commissioner, and a judge.

 

Chairman Anderson:

We have a motion ready to go.

 

Assemblywoman Buckley moved to Do Pass S.B. 73.

 

Assemblyman Geddes seconded the motion.

 

The motion carried unanimously.

 

I will assign this bill to you, Mr. Claborn.  The previous bill, S.B. 317, will go to the Committee on Education.

 

Let’s turn to S.B. 186.

 

Senate Bill 186:  Imposes fee upon obligor each time employer withholds income for payment of support for child. (BDR 3-446)

 

Allison Combs:

Senate Bill 186 is a bill that imposes a fee upon the obligor each time an employer withholds income for payment of support of a child.  The Committee considered this one earlier this week (Exhibit DD).  An amendment was proposed at that time by Assemblywoman Angle to specify that the $2 fee for the income withholding required by the bill may not be charged to the obligor more than two times each month, in other words, on the bi-weekly pay period

Chairman Anderson:

That will relieve part of our concern about the bill.  Some of you have lingering doubts about how this is going to come to be, but I wanted to try it one more time.  I believe that it is a solid piece of legislation and one much needed.  I think with Mrs. Angle’s proposed amendment that we would be able to at least, in part, help those people who are struggling to make ends meet, so they are only hit twice a month instead of, potentially, every time they get a paycheck.  It puts a limit out there.

 

Assemblyman Claborn:

I don’t like the bill at all.  I will be voting no.

 

Assemblyman Conklin:

I just wanted to clear up something from the last work session.  There was testimony about $1.74 being the cost from the Welfare Division [of the Department of Human Resources], to collect this money per pay period, whatever that pay period is.  There was concern on the Committee that there was money left over, that we were collecting too much.  My recollection of the testimony was that additional money, the money that was left over, went to the counties and I think that’s important to note because the counties are the ones doing the prosecuting to get that money in the first place.  I don’t know that it is coming out of the Welfare Division; usually it comes from District Attorney’s office.  My experience indicates that is the case.  I don’t know that there is a lot of waste in that $2 area.  I’ll go for it either way, but I would like to see the bill go out.

 

Assemblyman Gustavson:

I agree with Mr. Conklin on the $2; there would really not be any waste.  This $1.74 figure will fluctuate and will more than likely go up.  So I wouldn’t have a problem with that.  Also, I wanted to clarify that we discussed day laborers and them having to pay.  The more I thought about it, I realized this isn’t going to happen because the person who hires the day laborer is not going to know whether the laborer has any outstanding obligations anyway.  By the time it got reported, he would be gone.  So that wouldn’t be a problem.

 

Assemblyman Horne:

As noted before, my concern was not so much the merits of the bill, but the impact on those we are trying to protect in A.B. 117.

 

Chairman Anderson:

I have found some answers to A.B. 117.  It will be in the next Senate work session.  You might want to stop by and talk to the chairman of the Senate Committee on Judiciary so he could accomplish that.

 

The suggestion then is an Amend and Do Pass.  Mr. Sanford and Mr. Means, is there a problem for your agency?  [They indicated there was not.]

 

Assemblywoman Angle moved to Amend and Do Pass S.B. 186.

 

Assemblyman Mabey seconded the motion.

 

The motion carried with Assemblyman Claborn voting no.

 

Please record no abstentions, 14 in favor, one in opposition.

 

That will be your bill [for the Floor], Mrs. Angle.

 

Let’s turn our attention to S.B. 315.

 

Senate Bill 315 (1st Reprint):  Provides that cigarette vending machines may be placed in public area only if persons who are under 21 years of age are prohibited from loitering in that area pursuant to certain statutes. (BDR 15-435)

 

Allison Combs:

Senate Bill 315 provides that cigarette vending machines may be placed in public areas only if the persons who are under 21 years of ages are prohibited from loitering in the area (Exhibit DD).  There was testimony from the Office of the Attorney General on this measure.  The testimony indicated the measure was requested to expressly ban cigarette vending machines except in gaming areas and bars where children under 21 are prohibited from loitering.  There were no formal amendments proposed at the hearing or since that time.

 

Chairman Anderson:

Mr. Carpenter, you raised some concerns about this particular piece of legislation.

 

Assemblyman Carpenter:

I think my concern was that even if the machines are in a bar or especially in a casino, unless they are [out in plain sight] and not back in a corner someplace, the kids are still going to be able to get to them.  But I guess it’s not worth worrying about; the kids are going to get cigarettes anyway.

Chairman Anderson:

There’s a new letter being distributed (Exhibit EE), Mr. Carpenter, which I think clarifies some of the concerns that you had relative to this piece of legislation; it’s from Mr. Albrecht.

 

Assemblyman Claborn:

I don’t like this bill either and I’ll tell you why.  Who is going to police it?  Nobody.  Why put a bill up here and pass it if nobody is going to police it?

 

Assemblywoman Buckley:

I believe that the Office of the Attorney General has not only the enforcement powers, but also an enforcement grant from the federal government under the Synar Amendment.  That’s how they have done these stings and that’s how, session after session, right or wrong, they are in this; I think they plan to do it pursuant to that program.

 

Chairman Anderson:

The problem is that some of these businesses don’t want their clerks to be distracted to sell cigarettes and, therefore, they allow these machines in laundries and convenience stores.  It doesn’t look like there are a lot of them out there, but I understand your concern.

 

Ms. Ohrenschall, you are abstaining from this for conflict of interest?

 

Assemblywoman Ohrenschall:

Yes, sir.  That is correct.

 

Chairman Anderson:

Ms. Ohrenschall will be abstaining from participation on S.B. 315, as she represents in whole, or in part, a company that deals in tobacco products.

 

The Chair will entertain a motion.

 

Assemblyman Mabey moved to Do Pass S.B. 315.

 

Assemblyman Brown seconded the motion.

 

The motion carried with Assemblywoman OHRENSCHALL abstaining and Mr. Claborn voting no.

 

Let me assign that to you, Dr. Mabey.

 

Let’s turn our attention to S.B. 383.

 

Senate Bill 383 (1st Reprint):  Revises provisions governing mandatory reporting of abuse or neglect of children. (BDR 38-194)

 

Allison Combs:

Senate Bill 383 is the next bill on page 3 of the Work Session Document (Exhibit DD).  It would require that adults employed by entities that provide organized activities for children to report child abuse.  There were no amendments proposed at the time of the hearing or since then.

 

Assemblyman Horne moved to Do Pass S.B. 383.

 

Assemblywoman Ohrenschall seconded the motion.

 

The motion carried unanimously.

 

Mr. Geddes, that will be your bill on the Floor.

 

Let’s turn our attention to S.B. 394.

 

Senate Bill 394:  Revises various provisions relating to certain criminal statutes. (BDR 15-1026)

 

Allison Combs:

Senate Bill 394 is a measure that makes various changes to the criminal statutes (Exhibit DD).  Representatives of the Nevada District Attorneys Association testified in favor of the bill.  The testimony indicated the measure was requested to address a couple of different decisions from the Nevada Supreme Court involving the crimes of manufacturing controlled substances, as well as the annoyance of a minor.  The measure also adds the luring of mentally ill persons to the existing crime of luring a child, through the use of a computer system or network, with the intent to engage in sexual conduct and replaces the term “obscene material” with the term “material harmful to minors.”

 

There were three amendments discussed during the hearing.  The first was proposed by the Nevada District Attorneys Association to expand the definition of a sexual offense for the purposes of registration as a sexual offender.  The definition would be expanded to include the following crimes:

 

·        Sexual conduct between employees of or volunteers at a school and a pupil

 

·        Sexual conduct between employees of colleges or universities and a student

 

·        Conspiracy to commit an offense listed under the definition of a sexual offense

 

The NRS sections are referenced.  On the green attachment you can see the full definition as it exists under NRS 179D.410 with those crimes added in.

 

The second amendment was proposed by Assemblyman Geddes.  He suggested, with regard to Section 29 of the bill, which addresses the manufacturing of controlled substances, and revises the list of chemicals, to delete the word “optical” as a modifier to “isomers” in order to broaden the chemicals referenced.

 

Finally, the third proposed amendment, also to Section 29 of the law, specifically adds prohibitions relating to the manufacture of the drug ecstasy.  Although the amendments were requested in writing from Ms. Tyson, we have not received anything from her.  The statute currently does not specify the manufacture of a particular drug.  It says “manufacture of a controlled substance.”

 

Those are the three amendments.

 

Chairman Anderson:

Mr. Geddes, what is the difference between “optical” and “isomer”?

 

Assemblyman Geddes:

Optical isomers—actually, optical is just a measurement tool to determine different isomers and how they appear under an optical device.  There can be racemic isomers, there can be stereo isomers, and there can be a variety of isomers.

 

Chairman Anderson:

An isomer is a measuring tool.

 

Assemblywoman Ohrenschall:

Will the Chair accept a motion at this time?  [The Chair indicated he wanted more discussion.]

 

Assemblyman Horne:

I was not here for this testimony and I just have one question.  My concern is on number 1(b) on the Work Session Document, “sexual conduct between certain employees of college or university and a student pursuant to NRS 201.”  What age are we talking about?

 

Vice Chairman Oceguera:

I had the same question, so I read the statute and it said the adult employee being over the age of 21 and the student being 16 or 17 years old or under.  I don’t know why it distinguished 16 or 17.

 

Assemblyman Geddes:

I think it’s important to add instructors, professors, administrators, and head or assistant coaches.

 

Chairman Anderson:

You don’t like the term “certain employees” and want to make it specific?

 

Assemblyman Geddes:

No, I was just expanding on that.

 

Assemblywoman Buckley:

I recall the statute; I voted in favor of it in 1997.  When we require a person to register as a sex offender his whole life, I think we always wanted to make sure that it was for a serious crime because that’s a serious penalty.  Let’s say you have a 17-year-old person who is going to college and a 21-year-old employee, are you going to make [that employee] register as a sex offender his whole life [if he gets involved the 17-year-old]?  The college thing—we went back to check—we thought it was college students and it’s not; it’s for 16- and 17‑year-olds going to college, which is a fairly rare case, but does happen.  I’m just wondering if that’s right.  Is that the right result?  I don’t mind the penalty; we voted for that.  But it’s the registration; it’s almost an additional penalty.  Is that the right thing to do?  I just raise it for consideration.

 

Chairman Anderson:

You are concerned about 1(b) in the definition?

 

Assemblywoman Buckley:

Is registration of sex offenders appropriate for consensual sex between a 17-year-old and a 21-year-old when the 17-year-old is enrolled in college and is a college student where someone might think he or she were 18 or older?  Should he have to register as a sex offender his whole life?

 

Assemblyman Mortenson:

I’m looking for “annoyance” in here.  I see it in the Work Session Document (Exhibit DD).  Is there a legal definition of “annoyance”?

 

Allison Combs:

If you look at Section 3 of the bill, on page 4, the bill addresses that issue as raised by the courts.  That was the statute that provided a penalty for annoying or molesting a minor.  What you see now in Section 3 would be the revision to that statute.

 

Assemblyman Mortenson:

Are you taking “annoyance” out?

 

Allison Combs:

It’s on line 29, on page 4, “a person who annoys or molests or attempts to annoy or molest a minor.”

 

Assemblyman Mortenson:

Okay, it’s coming out, then.

 

Chairman Anderson:

It is, “…maliciously engages in a course of conduct with a child who is under 16 years of age and who is at least 5 years younger than the person which would cause a reasonable child of like age to feel terrorized, frightened, intimidated, or harassed and which actually causes the child to feel terrorized, frightened, intimidated, or harassed…”

 

Assemblyman Mortenson:

Is “annoyance” anywhere else in here?  Is it going to stay in elsewhere in the bill?  If it is, what is the definition?

 

Chairman Anderson:

Ms. Lang, Mr. Mortenson’s concern relative to whether we have eliminated “annoyance” is a bill drafter question.

 

Risa Lang:

“Annoyance” is coming out and is being replaced by the language you see in here now.  That, in part, is due to the Nevada Supreme Court’s opinion that “annoyance” was too vague.  That term has been removed.

 

Chairman Anderson:

That’s the reason why the amendment to the statute was requested.

 

Assemblyman Carpenter:

I really don’t remember a discussion on this.  I thought we took care of it years ago with the Senator from Fallon and the situations that happened there.  It seems to me we’re getting into volunteers, like Ms. Buckley said.  Regarding the 17- and 21-year-olds, I don’t like the amendment without somebody giving us an example of why we need to do this.

 

Chairman Anderson:

At the time of the hearing we had that example based upon a Supreme Court case, in part, and that’s the reason why the Nevada District Attorneys Association supports the bill.

 

Kristin Erickson, representing the Nevada District Attorneys Association:

[Introduced herself and asked Mr. Carpenter to repeat the question.]

 

Assemblyman Carpenter:

I was wondering why we need the amendment that talks about the sexual conduct between employees or volunteers of colleges and universities and pupils, and the conspiracy situation.

 

Kristin Erickson:

With regard to 1(c) on page 4 of the Work Session Document, conspiracy to commit an offense, the offenses that are listed are primarily sex offenses.  The conspiracy charges are very important because oftentimes we’ll have what’s commonly referred to as a gang rape situation in which the persons involved may all plead guilty to conspiracy to commit sexual assault.  Under the law, if that’s what they plead guilty to, they do not have to register as sex offenders.  So that’s the primary reason for 1(c).

 

Part 1(a) deals primarily with the high school situation and, unfortunately, even middle school in some instances.  It’s important in that instance because teachers have a position of trust and confidence with the students and with young minds.

 

Part 1(b) is a difficult call; I certainly understand your concerns in dealing with university professors, sometimes young administrators or professors, and sometimes very intelligent, mature children.  I understand your concerns with this section, and we have no problems if you want to have that removed.

 

Assemblyman Carpenter:

What about volunteers?  Have you had any instances of that in your career?

 

Kristin Erickson:

The instances with volunteers that I can think of have primarily occurred in athletics.  Assistant coaches may be assisting, or volunteers may be assisting in various athletic venues.  Those are the only situations I have encountered.

 

Assemblywoman Buckley:

Right now, under NRS 179D.410, paragraph 17 defines sexual offense as an attempt to commit anything from items 1 through 16, which include sexual assaults, statutory sexual seduction, lewdness, and indecent exposure.  Can we get conspiracy from an attempt?  Are we finding two different scenarios?  Why wouldn’t we just plead them to something right as opposed to pleading them down to something that doesn’t fit?

 

Kristin Erickson:

That’s an excellent question.  Under the law, attempt and conspiracy are two separate and distinct statutes.  Again, an attempted sexual assault requires an overt act, where with a conspiracy there may not be any attempt at a sexual assault.  An offender may be assisting, for instance, holding a person down to facilitate the sexual assault of others to commit that crime.  So conspiracy is totally distinct and separate from an attempt.  That’s the situation where we found out that if a person conspires and is convicted of that, he doesn’t have to register.

 

Assemblywoman Buckley:

Can’t you get him under accomplice liability?  Isn’t he a party if he would participate to that extent?

 

Kristin Erickson:

Yes, we could charge him under an aiding and abetting theory.  Sometimes, depending on the facts, conspiracy is somewhat easier to prove than aiding and abetting.  Depending on the circumstances, for instance, if they get together ahead of time and agree to do this [crime] but the person doesn’t actually take an active role as the others, then conspiracy would work for us, whereas attempt or aiding and abetting would not.

 

Vice Chairman Oceguera:

I think Ms. Erickson brought up a good point.  In NRS 201.550, Section 1, paragraph (b), it talks about a position of authority; that’s the trust and authority we’re talking about, and I think it is one point for me that makes it work.  Another point—in Section 18, we list 19 things—these two offenses, to me, are equal to several of those.  Both of these offenses are Category C felonies; this means these people have already been convicted and are facing 1‑ to 5-year sentences—it’s a pretty serious offense.  I don’t have a problem with adding them in.

Assemblyman Brown:

On that same issue, I have a little problem with that.  I think of upperclassmen or grad assistants teaching courses at a university who may meet someone at the cafeteria.  There are plenty of 17-year-olds who look older and that grad assistant may not know or think to ask, but he is an employee of the university.  In that instance he may not have a position of trust and confidence, but certainly would fall within this.  It gives me a little stress to throw out such a broad dragnet.

 

Chairman Anderson:

I can appreciate that particular point of view.  Unfortunately, when a person takes a position in an institution of higher learning or at a high school, he takes on the responsibilities that come with that.  He must acknowledge who he is and be cognizant of his actions.  I have seen a lot of student teachers that are not much older than the seniors in high school—they are usually three or four years out of high school themselves—who sometimes look younger than the kids in the class.  But they have a responsibility; they are supposed to be aware of [their actions].  I think when they move into a position of authority they have to recognize on a continuing basis that they have a responsibility that comes with that whether they’re in the classroom or not.  That’s just my personal view.

 

Assemblyman Brown:

I sure hope we are giving them notice of their duties as they are hired.

 

Chairman Anderson:

We make new teachers very aware of the question—extremely aware of their obligations.  It is one of the major things we do during student teaching.  We have kids who are just two years out of high school who are in high school-level—college-level teaching.  I’m sure they have teaching assistants who are just a few years older than the students too.  It’s a legitimate problem.  I don’t think that we can let it down.

 

Assemblyman Horne:

I understand what you’re saying, but I agree with Ms. Buckley.  I would feel better with 1(b) gone, particularly if it is a level to such where we want to have them registering as sex offenders forever.  Regarding Mr. Brown’s scenario, should they be fired, disciplined?  Probably; but is their conduct such that they should be registering as sex offenders if they do something like that?  I don’t think so.  We’re talking about a college campus; I would feel better with that paragraph deleted.

Assemblyman Mortenson:

I don’t know how things have changed these days.  When I was in college I had situation where I was senior teaching certain classes to a range of students, including freshman.  There was an instance where a bunch of students needed a particular course in physics and I had an informal agreement with the administration to tutor these kids and allow them to take an exam at the end of the year to see how they did.  Also, when I was in graduate school I had a teaching assistantship and I taught freshman. 

 

Not a single time in any of those instances was I given any kind of cautions or told not to fraternize with anybody.  I just wonder if that situation happens today in those type instances.  I can understand what the Chairman is talking about—more controlled situations—but most of these were very informal situations.  Are these kids going to know that they are flirting with really big danger?

 

Chairman Anderson:

I can only tell you what I tell student teachers.  Anecdotally, when we have student teachers, among the things we tell them, “Don’t ever, no matter what, not now or in the near or distant future, find yourself alone in the classroom with a student because if you do, you open yourself up for potential charges.”  If they’re going to do that, they need to make sure that they will be in an area that has glass and other people can see them.  We have counseling rooms set up that way for that very purpose—to make sure that that kind of openness is present.  At the high school where I teach, and I can’t speak for every situation and for every teacher in the United States or the state of Nevada, but I can tell you that is what I counsel new teachers coming into the profession.  I tell them that is one of the areas they need to be extremely aware of.  If they’re not, they are only opening themselves up for problems.

 

Assemblywoman Buckley:

I believe this bill was brought because of the Supreme Court cases, the annoyance of the minor and the mentally ill, and the crimes of manufacturing methamphetamines; it’s already been to the Senate in that form.  No one has really had a chance to comment on these new amendments because it hasn’t been on the other side, and now it’s being added as a late amendment and there are some concerns about it.  It may be that if we wrestled with it longer and people had more notice we could come up with a good balance, but I was just going to suggest that we skip this topic.  It could have been in its own bill earlier in the session; I think it’s too late to work it out and we should go with the original intent of original bill, and move on that.

Vice Chairman Oceguera:

On a different subject, the Section 29 proposal, I wanted to ask the resident expert if we add the drug “ecstasy,” would we have to add all the chemicals that go with that?  How does that work?

 

Assemblyman Geddes:

I’m not an ecstasy expert.  I provided the technical name for ecstasy to the LCB staff.  I think we should include ecstasy itself, but I don’t know the compounds that go into making it and I’m not sure those need to be listed.

 

Chairman Anderson:

I don’t think we should get into the process of naming a long pharmaceutical list of potential drugs that fall into that.  I think we’ve done so in another statute with a bill we dealt with earlier.

 

Risa Lang:

As the statute is currently written, the substances that go into making methamphetamines are listed.  That was in response to the Supreme Court decision that seemed to indicate that we needed to list the precise substances, or a least some of the substances, or a manner of determining the substances that would go into manufacturing so that people would know what conduct is prohibited.  If we add ecstasy, I think it would be in the form of a list of substances.  That would indicate there is the concern that people are manufacturing ecstasy.  I would note that on page 29, in paragraph (b), subparagraph 2 on line 20, it does allow for expert testimony to prove the manufacturing or compounding a controlled substance, which would allow for someone to prove that the substances necessary to manufacture ecstasy or any other controlled substance were there.

 

Chairman Anderson:

On the Buckley motion to Do Pass, which means that we are not looking to changing “optical” to “isomers,” either we are going to leave ourselves in chemical…

 

Assemblywoman Buckley:

Mr. Chair, I was suggesting that we do paragraphs 2 and 3; we might as well take advantage our chemist.

 

Chairman Anderson:

Why don’t we just do 2; Amend and Do Pass with the recommendation number 2; that is changing “optical” to modify “isomers”?

Assemblywoman Buckley:

Adding “ecstasy” with the technical stuff to follow—just 2, that’s what I meant.

 

Chairman Anderson:

I think our chemist was in the process of saying he hadn’t identified all the isomers.

 

Jim Nadeau:

I was just thinking that the State Board of Pharmacy has the ability, as they have done with some of the date-rape drugs, to add those to the schedules.  So that might be as an interim solution until we get something more solid.

 

Chairman Anderson:

I understand what you’re saying, but I don’t think we can do it with this piece of legislation.

 

Jim Nadeau:

The State Board of Pharmacy can just do that on its own action.  That might be an interim action.

 

Chairman Anderson:

Sure, OK.

 

Assemblywoman Buckley moved to Amend and Do Pass S.B. 394 with the amendment suggested by assemblyman Geddes.

 

Assemblyman Oceguera seconded the motion.

 

The motion carried unanimously.

 

Let me give this to Mr. Geddes for the Floor in case there are questions of a chemical nature.

 

Senate Bill 434 is next.

 

Senate Bill 434 (1st Reprint):  Exempts from execution by creditors certain money held in trust forming part of qualified tuition program under certain circumstances. (BDR 2-303)

Allison Combs:

Senate Bill 434 exempts from execution, money held in a trust that forms a qualified tuition program under certain circumstances (Exhibit DD).  There were no amendments proposed for this bill.

 

Assemblywoman Buckley moved to Do Pass S.B. 434.

 

Assemblyman Conklin seconded the motion.

 

The motion carried unanimously.

 

Chairman Anderson:

Mr. Horne, this bill will be yours for the Floor.

 

We will now look at S.B. 105.

 

Senate Bill 105 (2nd Reprint):  Makes various changes to provisions pertaining to crime of placing graffiti on or otherwise defacing property. (BDR 15-375)

 

Allison Combs:

Senate Bill 105 is the bill relating to graffiti and otherwise defacing property (Exhibit DD).  The measure was brought up earlier in a work session.  There was some amendatory language proposed by Mr. Horne to clarify regarding the aggregation of the value of the property damaged.  Currently the bill reads that if one or more persons commits the offenses pursuant to a scheme or continuing course of conduct, the value of the property can then be aggregated.  Under those circumstances—it’s at the top of page 2, lines 6 and 7, there is a proposal to clarify that language to specify that an offender couldn’t be held responsible for another person’s graffiti or tagging.

 

Chairman Anderson:

We were also concerned about the time on line 27, 12 months; take it back to 6 months.  I’ve talked to representatives from the City of Reno; they’ve indicated that that would be acceptable.  Ms. Buckley, did you have another concern?

 

Assemblywoman Buckley:

No, I think with Assemblyman Horne’s clarification and taking out those 6 to 12 months, I would move to Amend and Do Pass.

 

Chairman Anderson:

Mr. Horne, are you okay with that?  [Mr. Horne concurred.]  I’m not sure personally, but I’m going to let this go.  Deep down I’m still concern about whether somebody is going to get charged here because some businessman wants his wall cleaned and he’s going to have to pick up full tab.

 

Assemblyman Horne:

During my Floor statement, Mr. Chair, I will state what our intent was with this bill.

 

Chairman Anderson:

I’m sure that the person who writes the Floor statement will make sure that it’s properly presented.

 

Assemblyman Claborn:

This is another one where we take a driver’s license away if [kids] put graffiti on the wall.  I have a problem with that, but we have to stop the graffiti some way.

 

Chairman Anderson:

The court may do that for six months under the current statute and with this bill, we are going to leave it at what they are currently doing in that area.  We are not changing that part of the law.  We’re only going to determine that additional tagging question.

 

Assemblyman Claborn:

I’ll support the bill, but I just hate to see everything that comes up here involving the Nevada Department of Motor Vehicles (DMV) to police everything.  I just don’t understand it.  The DMV has enough to do.

 

Assemblywoman Buckley moved to Amend and Do Pass S.B. 105.

 

Assemblyman Horne seconded the motion.

 

The motion carried unanimously.

 

Chairman Anderson:

This would be Mrs. Angle’s bill.  I’m sorry, Mr. Horne, let me reassign that bill to you.  Mrs. Angle, the next one will be yours.

Ms. Combs, I want to thank you very much for another great Work Session Document.  Is there anything else that needs to come before us?  Come see me if there’s a piece of legislation that we have heard and have not seen in this Work Session Document; recognize that there’s a very good chance that it’s going mellow on my board.  We’ll see you tomorrow morning at 7:30 a.m.

 

We are adjourned [at 8:52 p.m.].

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                                 

Deborah Rengler

Transcribing Committee Secretary

 

APPROVED BY:

 

 

 

                                                                                         

Assemblyman Bernie Anderson, Chairman

 

 

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