134 Nev., Advance Opinion 22
IN THE SUPREME COURT OF THE STATE OF NEVADA
MICHAEL KIRSCH; AND SIU YIP, No. 70854
Appellants,
vs.
PETER G. TRABER; JAMES C. CZIRR;
FILE
JACK W. CALLICUTT; GILBERT F. APR 0 5 2018
AMELIO;•KEVIN D. FREEMAN; A. BROWN
Alci—SOU
ARTHUR R. GREENBERG; ROD D.
MARTIN; JOHN F. MAULDIN; STEVEN CUE
PRELACK; HERMAN PAUL
PRESSLER, III; DR. MARC RUBIN;
AND GALECTIN THERAPEUTICS,
INC., A NEVADA CORPORATION,
Respondents.
Appeal from a district court order granting a motion to dismiss
in a derivative shareholder action. Eighth Judicial District Court, Clark
County; Elizabeth Goff Gonzalez, Judge.
Affirmed.
Lee, Hernandez, Landrum & Garofalo, A.P.C., and David S. Lee, Natasha
A. Landrum, and Dirk W. Gaspar, Las Vegas; Lifshitz & Miller and Edward
W. Miller and Joshua M. Lifshitz, Garden City, New York,
for Appellant Michael Kirsch.
Aldrich Law Firm, Ltd., and John P. Aldrich, Las Vegas; The Weiser Law
Firm, P.C., and Robert B. Weiser, Brett D. Stecker, and James Ficaro,
Berwyn, Pennsylvania; The Weiser Law Firm, P.C., and Kathleen A.
Herkenhoff, San Diego, California,
for Appellant Siu Yip.
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Kaempfer Crowell and Ryan W. Daniels and Lyssa S. Anderson, Las Vegas;
King & Spalding LLP and Michael R. Smith and B. Warren Pope, Atlanta,
Georgia,
for Respondents.
BEFORE CHERRY, PARRAGUIRRE and STIGLICH, JJ.
OPINION
By the Court, STIGLICH, J.:
Under the doctrine of issue preclusion, a Nevada court defers to
a foreign court's final judgment resolving an issue between litigants if those
same litigants previously litigated the same issue before the foreign court.
However, the Nevada court does not defer to the foreign court's final
judgment if it contravenes a final judgment previously entered by a Nevada
court.
The question to be resolved in this appeal is whether a Nevada
district court's order denying a motion to dismiss constituted a final
judgment on the issue of demand futility. To the extent that we have not
previously defined "final judgment" within this context, we take this
opportunity to clarify that Nevada applies the definition set forth within
section 13 of the Restatement (Second) of Judgments. Applying that
definition to the facts of this case, we agree with the district court that its
denial of a motion to dismiss was not a final judgment on the issue of
demand futility. Therefore, it was proper for the district court to accord
preclusive effect to a subsequent final judgment from a foreign court.
Accordingly, we affirm
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FACTS AND PROCEDURAL HISTORY
Galectin Therapeutics, Inc. (Galectin) is a pharmaceutical
company incorporated in Nevada and headquartered in Georgia. Beginning
in October 2013, the directors of Galectin commenced a "stock promotion
scheme" in which they published glowing reviews of Galectin in third-party
publications. In July 2014, shortly after news of that promotion scheme
became public, Galectin's share price dropped approximately 50 percent.
In August 2014, several Galectin shareholders filed shareholder
derivative actions against Galectin's officers and directors in the United
States District Court for the District of Nevada, Appellant Siu Yip was a
named plaintiff in one of those federal cases, which were consolidated and
transferred to the Northern District of Georgia.
Shortly after the federal cases were filed, appellant Michael
Kirsch filed the instant derivative shareholder suit in Clark County district
court against Galectin's officers and directors (here, respondents). In his
complaint, Kirsch conceded that he did not make a demand on Galectin's
board of directors prior to filing suit. He alleged that such a demand would
have been futile. Siu Yip later intervened in Kirsch's suit.
Respondents moved to dismiss Kirsch's complaint pursuant to
NRCP 23.1, which requires a plaintiff in a shareholder derivative action
either to make a demand upon the corporation's directors prior to filing suit
or to plead particularized facts demonstrating that such a pre-suit demand
would have been futile. At a hearing on the motion, the district court noted
that Kirsch's complaint contained "conclusory allegations" that a pre-suit
demand would have been futile. Nonetheless, the district court denied the
motion to dismiss, commenting: "The allegations related to the conflicted
directors who may face personal liability are not the best I've ever seen, but
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they are not enough to merit dismissal at this point." The district court
granted Kirsch leave to amend his complaint to add additional plaintiffs,
advising him "to beef up [the] factual allegations" in the amended
complaint. Finally, the district court sua sponte stayed the case pending a
decision in the parallel shareholder derivative action filed in federal court.
The United States District Court for the Northern District of
Georgia dismissed the federal action in an order. See In re Galectin
Therapeutics, Inc. Derivative Litig., No. 1:15-CV-208-SCJ, 2015 WL
12806566 (N.D. Ga. Dec. 30, 2015). That order held that the Nevada district
court's denial of defendants' motion to dismiss was not "a final ruling on the
merits with respect to the issue of demand futility." Id. at *4. Turning to
the merits of the demand futility issue, the federal court "conclude [d] that
Plaintiffs have not set forth particularized allegations that a majority of the
board of directors face a substantial likelihood of liability." Id. at *5.
Armed with the federal court's order of dismissal in the federal
action, respondents moved again to dismiss Kirsch's suit, this time on the
grounds of issue preclusion. In ruling on that motion, the Nevada district
court concluded that "the parties are identical" between the Nevada and
'federal cases, "the issue of demand futility is identical," and the federal
court's dismissal constituted a final order as to the issue of demand futility.
Therefore, the district court granted respondents' motion to dismiss. Kirsch
and Siu Yip appeal from the order of dismissal.
DISCUSSION
This case turns on whether the Nevada district court's order
was a final judgment on the issue of demand futility.' If it was, then the
'Appellants concede that the federal court's order has preclusive
effect if the district court's prior order was not a final judgment.
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district court erred in according issue preclusive effect to the federal court's
subsequent decision. While a district court is free to revisit and reverse its
own rulings upon request of a party, see EDCR 2.24, it may not reverse its
own final judgment simply because a subsequent foreign judgment resolved
the issue differently. Reversing on that ground alone would be giving the
foreign judgment "greater credit and respect than the prior decree of our
own state lawfully entered." Colby v. Colby, 78 Nev. 150, 157,
369 P.2d
1019, 1023 (1962). We review de novo the district court's legal conclusion
that its order of denial was not a "final judgment" within the context of issue
preclusion. See Alcantara v. Wal-Mart Stores, Inc., 130 Nev. 252, 256,
321
P.3d 912, 914 (2014) ("We review a district court's conclusions of law,
including whether claim or issue preclusion applies, de novo.").
Nevada defines "final judgment" as set forth in section 13 of the Restatement
(Second) of Judgments
Before turning to the merits of this case, we must first
determine what it means for a judgment to be "final" such that it is immune
from the potential preclusive effects of a subsequent foreign judgment. In
defining that term, we will keep in mind the purpose of the issue preclusion
doctrine: "to prevent multiple litigation causing vexation and expense to the
parties and wasted judicial resources by precluding parties from relitigating
issues." Univ. of Nev. v. Tarkanian, 110 Nev. 581, 598,
879 P.2d 1180, 1191
(1994) (describing the purpose of res judicata generally, of which issue
preclusion is one of two "species"), holding modified on other grounds by
Exec. Mgmt., Ltd. v. Ticor Title Ins. Co., 114 Nev. 823,
963 P.2d 465 (1998).
Respondents urge us to apply the definition of "final judgment"
used to determine whether an order is appealable—that is, a judgment "that
disposes of all the issues presented in the case, and leaves nothing for the
future consideration of the court, except for post-judgment issues such as
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attorney's fees and costs." Lee v. GNLV Corp., 116 Nev. 424, 426,
996 P.2d
416, 417 (2000). Appellants criticize that definition as overly narrow and
point instead to the Restatement (Second) of Judgments section 13 (Am.
Law Inst 1982), which provides: 'final judgment' includes any prior
adjudication of an issue in another action that is determined to be
sufficiently firm to be accorded conclusive effect."
This court has touched upon this definitional issue on only one
occasion. 2 In Tarkanian, the finality of a judgment was not at issue, but
this court nonetheless offered dicta as to what constitutes a "final judgment"
within the context of issue preclusion. 110 Nev. at 599,
879 P.2d at 1191.
We quoted Restatement (Second) of Judgments section 13 (Am. Law Inst.
1982) for the proposition that "[for purposes of issue preclusion. . . , 'final
judgment' includes any prior adjudication of an issue in another action that
is determined to be sufficiently firm to be accorded conclusive effect." In
citing approvingly to the Restatement's definition, Tarkanian affirmed this
court's "long-standing reliance on the Restatement (Second) of Judgments
in the issue and claim preclusion context." Alcantara, 130 Nev. at 261 &
n.3, 321 P.3d at 917 & n.3 (listing Nevada cases that have relied on the
Restatement (Second) of Judgments in the issue and claim preclusion
context).
2Appellants cite to Garcia v. Prudential Insurance Co. of America as
another case wherein this court addressed this definitional issue. 129 Nev.
15, 22 n.7,
293 P.3d 869, 874 n.7 (2013) ("It is widely recognized that the
finality requirement is less stringent for issue preclusion than for claim
preclusion." (internal quotation marks omitted)). In Garcia, however, this
court was applying New Jersey issue preclusion law, id. at 22,
293 P.3d at
873, so it has little relevance to this case, wherein Nevada law controls.
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According to the Restatement's definition, a judgment is final if
it is "sufficiently firm." Restatement (Second) of Judgments § 13 (Am. Law
Inst. 1982). The Restatement's comments provide helpful guidance as to
what "sufficiently firm" means. "A judgment may be final in a res judicata
sense as to a part of an action although the litigation continues as to the
rest." Id. at cmt. e. "The test of finality. . . is whether the conclusion in
question is procedurally definite and not whether the court might have had
doubts in reaching the decision." Id. at cmt. g. "Finality will be lacking if
an issue of law or fact essential to the adjudication of the claim has been
reserved for future determination. . . ," id. at cmt. b, or "if the decision was
avowedly tentative," id. at cmt. g. Factors indicating finality include
(a) "that the parties were fully heard," (b) "that the court supported its
decision with a reasoned opinion," and (c) "that the decision was subject to
appeal." Id.
Of the competing definitions proposed by the parties, the
Restatement's definition best effectuates issue preclusion's purpose of
increasing judicial efficiency by preventing parties from relitigating issues
definitively decided by a court. See Tarkanian, 110 Nev. at 598,
879 P.2d
at 1191. The Restatement's definition achieves that purpose by according
finality to any judgment a court intended to definitively resolve an issue
fully litigated between parties. Under respondents' definition, by contrast,
an interlocutory order could never be considered a final judgment as to an
issue—even when the district court intended an interlocutory order to
definitively resolve an issue.
Therefore, to the extent that this court did not formally adopt
the Restatement's definition of "final judgment" in Tarkanian, 110 Nev. at
599,
879 P.2d at 1191, we do so now.
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The district court's order denying respondents' motion to dismiss was not a
final judgment
Applying the Restatement's definition to this case, we conclude
that the Nevada district court's order was not a "final judgment" on the
issue of demand futility.
Only one factor suggests that the order of denial could be
considered a "final judgment" as to the issue of demand futility: The parties
fully briefed the issue and argued it at length during a hearing on the
motion to dismiss. Thus, "the parties were fully heard." Restatement
(Second) of Judgments § 13 cmt. g (Am. Law Inst 1982).
Several factors militate against this order being a final
judgment on the demand futility issue. First, an order denying a motion to
dismiss is not "subject to appeal." Id.; see also NRAP 3A(b) ("Appealable
Determinations."). Second, the district court's decision was not
"supported. . . with a reasoned opinion." Restatement (Second) of
Judgments § 13 cmt. g (Am. Law Inst. 1982). Rather, the district court's
order dismissed the respondents' motion without explanation.
Moreover, the district court's statements during the hearing
strongly indicate that it did not intend to fully resolve the issue of demand
futility. 3 Restatement (Second) of Judgments § 13 cmt. b (Am. Law Inst.
3 We reject appellants' argument that this court is prohibited from
examining the statements made by the district court during the hearing
The cases cited to for that proposition merely establish that a written order
controls over conflicting statements made during a hearing. See Canterino
v. Mirage Casino-Hotel, 118 Nev. 191, 194,
42 P.3d 808, 810 (2002); cf.
Mortimer v. Pac. States Sat'. & Loan Co., 62 Nev. 142, 153,
145 P.2d 733,
735 (1944) (holding that a district court's formal written order controls over
a conflict in the minute order). "But a court may consult the record and
proceedings giving rise to another court's order, at least when the latter is
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1982). First, the district court suggested that the complaint's allegations
were lacking in particularity when it described those allegations as
"conclusory." Second, the district court revealed that its decision was
tentative when it stated, "[t]he allegations . . . are not the best I've ever
seen, but they are not enough to merit dismissal at this point." (Emphasis
added.) Third, the district court indicated that it intended to revisit the
demand futility issue when it advised Kirsch to "beef up [his] factual
allegations" if he decided to amend his complaint. Combined, these three
statements show that the district court did not intend to fully resolve the
demand futility issue, but instead "reserved [it] for future determination."
Id. at cmt. b.
In sum, the district court's order denying respondents' motion
to dismiss was not a final judgment on the issue of demand futility.
Therefore, because that issue had not been definitively resolved by a
Nevada court, the district court did not give "greater credit and respect" to
a foreign court's judgment than to "the prior decree of our own state" when
it accorded preclusive effect to the federal court's judgment. Colby, 78 Nev.
at 157,
369 P.2d at 1023.
CONCLUSION
A judgment is final within the context of issue preclusion if it is
"sufficiently firm" and "procedurally definite" in resolving an issue.
Restatement (Second) of Judgments § 13 & cmt. g (Am. Law Inst. 1982). In
this case, the district court's order denying the respondents' motion to
dismiss reserved for future determination the demand futility issue.
ambiguous." Holt v. Reg'l Tr. Servs. Corp., 127 Nev. 886, 895,
266 P.3d 602,
608 (2011).
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Therefore, the district court correctly held that its prior order did not
prohibit it from according preclusive effect to the federal court's order.
Accordingly, we affirm.
a_4_
c J.
Stiglich
We concur:
Neva el J.
CLAth J.
Parraguirre
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