On February 6, 2013, the Nevada Supreme Court issued an order reversing a major portion of an arbitration award and vacating an award of $1,040,000 due to the fact there was no substantial evidence presented at arbitration to support the award.  The arbitration award in favor of Respondents, Old Blue, LLC., Warren Certain and Ebony Biddle totaled approximately $1,293,000.  The arbitrator had awarded $1,040,000 of that amount for the “loss of value” to the Respondents’ property caused by intentional interference with contract or intentional interference with prospective economic advantage.  The Eighth Judicial District Court in Clark County affirmed the arbitrator’s award.  Appellant, Sunridge Builders, Inc., appealed the orders affirming the arbitrator’s award.

The Respondents’ had argued that the Appellant had interfered with a residential construction loan agreement between Respondents’ and the Bank of America, which was loaning them monies to build a residence.  The residential construction loan agreement was for a total of $4,000,000.  The Nevada Supreme Court found that there was no evidence that Appellant interfered with a valid and existing contract between the Bank of America and Respondents.  The Court found that the residential construction loan agreement was for $4,000,000, however, the arbitrator’s award seemed to base damages on a potential loan increase of $1,040,000 rather than an existing contract.  The Court noted that purportedly, Appellant’s interference prevented this increase.  The Court stated that the increase was not part of an existing contract between the Respondents and the bank, since that amount was only for $4,000,000.

Further, the Court found there was no evidence of harm.  The Court held that, “As appellant correctly argues, there was no substantial evidence supporting the $1,040,000 award because respondents did not suffer $1,040,000 in damages.”  The Court stated that if the Respondents had received the loan as anticipated, they would have had the opportunity to borrow $1,040,000 that they would have been obligated to repay to the bank.  The Court added that even assuming that the Respondents’ valued this opportunity, they cannot claim more than nominal damages for money that, if procured, would have been a debt rather than an asset.

In addition, the Court found that damages based on “loss of value” to the Respondents’ property were unfounded.  As Appellant argued, the Court held that the Respondents’ property did not lose value because the bank did not issue a loan.  Rather, the Court held that the property did not gain the value Respondents had anticipated.  The Court added that, although Respondents could have used the loan to fund improvements that could have increased their property’s value, evidence of those anticipated improvements was too speculative to support damages.

The Court concluded that since there was no substantial evidence to support the $1,040,000 damage award, the Court was compelled to conclude that the award was arbitrary and capricious in part and that the portion of the damage award for $1,040,000 was remand to the District Court with instructions to vacate that portion of the arbitration award.

The appeal on behalf of Sunridge Builders, Inc., was a collaborative effort by the firm’s Appellate Law Group between Anne E. Padgett of the Las Vegas, Nevada office of McCormick Barstow, LLP and Todd W. Baxter of the Fresno Office of McCormick Barstow, LLP.  Mr. Baxter, a Certified Appellate Law Specialist certified by the Board of Legal Specialization of the California State Bar, appeared in the case Pro Hac Vice with the permission of the Nevada Supreme Court.

Sunridge Builders, Inc. v. Old Blue, LLC, et al., Nevada Supreme Court Case Nos. 56335 and 57316