                         IN THE SUPREME COURT OF THE STATE OF NEVADA


                  LORI A. SERIGHT POMPEI, AN                             No. 66459
                  INDIVIDUAL,
                  Appellant,
                  vs.
                  BARRY E. CLARKSON, AN
                  INDIVIDUAL; CLARKSON DRAPER &                                 FILED
                  BECKSTROM, LLC, A UTAH LIMITED
                  LIABILITY COMPANY; AND RICHARD                                JUN 2 3 2016
                  HAWES, INDIVIDUALLY AND AS A                             CLER
                                                                                TRACE K. LINDEMAN
                                                                                    F UPREME COURT
                  TRUSTEE OF PREMIER PROPERTIES                           EIY
                                                                                  DEPUTY CLERK
                  OF MESQUITE, INC.,
                  Respondents.

                                          ORDER OF AFFIRMANCE

                              This is an appeal from a district court order granting and
                  denying summary judgment in a corporations and tort action. Eighth
                  Judicial District Court, Clark County; Kathy A. Hardcastle, Judge.
                              Appellant Lori Seright Pompei is a real estate agent who
                  worked for Premier Properties of Mesquite, Inc. (hereinafter, PPM).
                  Respondent Richard Hawes was a director, officer, and part-owner of
                  PPM. Respondent Barry Clarkson is an attorney and partner in
                  respondent Clarkson Draper & Beckstrom, LLC (hereinafter, CDB).
                              In 2007, Pompei filed a complaint against PPM for breach of
                  contract and related claims. CDB represented PPM in the matter.
                  Pompei was awarded more than $225,000, including attorney fees and
                  costs. However, Pompei was unable to collect on this judgment because
                  PPM subsequently entered into an asset transfer agreement with CDB, in
                  which PPM transferred all of its assets to a new business entity in order to

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                 pay off its legal fees. Clarkson created, manages, and has an indirect
                 ownership interest in, the new entity.
                              Pompei then initiated this action against Hawes, Clarkson,
                 and CDB, alleging: (1) breach of fiduciary duties; (2) constructive fraud; (3)
                 civil conspiracy to breach fiduciary duties and commit constructive fraud;
                 (4) aiding and abetting breaches of fiduciary duties and constructive fraud;
                 and (5) negligence, among others. Pompei also asserted a derivative legal
                 malpractice claim against Clarkson and CDB on PPM's behalf.
                              Respondents moved for summary judgment on all of Pompei's
                 claims. The district court granted the motion with respect to the
                 aforementioned claims, concluding that respondents did not owe Pompei
                 any duty, so her claims for breach of fiduciary duties, constructive fraud,
                 civil conspiracy, aiding and abetting, and negligence failed as a matter of
                 law. The district court further concluded that Pompei lacked standing to
                 bring a derivative claim on PPM's behalf because she was a creditor, not a
                 shareholder. Pompei now appeals, arguing that (1) a creditor has
                 standing to assert a derivative claim on behalf of an insolvent corporation,
                 (2) a corporation's directors and attorneys owe the corporation's creditors
                 fiduciary duties, and (3) several of the district court's findings of fact were
                 erroneous.
                              We hold that the district court correctly concluded that
                 Pompei does not have standing to assert a derivative claim on behalf of
                 PPM, and that the respondents did not owe any fiduciary duties to
                 Pompei. Therefore, we affirm the district court's order.




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                  Whether a creditor has standing to assert a derivative claim on behalf of an
                  insolvent corporation
                              Pompei argues that a creditor of an insolvent corporation has
                  standing to assert a derivative claim on behalf of the corporation. This
                  court has never held that creditors may assert such actions in equity, and
                  the Legislature has not empowered creditors to bring such actions by law.'
                  The parties dispute whether NRCP 23.1 prohibits a creditor from
                  asserting a derivative claim. 2 We note that, although we have never
                  addressed the issue, federal courts interpreting FRCP 23.1 have largely
                  held that creditors do not have standing to assert a derivative claim. 3
                  Exec. Mgmt., Ltd. v. Ticor Title Ins. Co., 118 Nev. 46, 53, 38 P.3d 872, 876



                        'Cf. NRS 41.520 (recognizing a shareholder's right to assert a
                  derivative claim on behalf of a corporation); NRS 86.483, 86.485
                  (recognizing a member's right to assert a derivative claim on behalf of a
                  limited-liability company); NRS 87A.665, 87A.670, NRS 88.610, 88.615
                  (recognizing a partner's right to assert a derivative claim on behalf of a
                  limited partnership).

                        2 NRCP   23.1 provides, in relevant part:
                              In a derivative action brought by one or more
                              shareholders or members to enforce a right of a
                              corporation. . . , the complaint shall be verified
                              and shall allege that the plaintiff was a
                              shareholder or member at the time of the
                              transaction of which the plaintiff complains . . . .

                        3 FRCP   23.1(a) provides, in relevant part:

                              This rule applies when one or more shareholders
                              or members of a corporation or an unincorporated
                              association bring a derivative action to enforce a
                              right that the corporation or association may
                              properly assert but has failed to enforce.

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                (2002) (stating that federal cases interpreting the Federal Rules of Civil
                Procedure are strong persuasive authority in interpreting the Nevada
                Rules of Civil Procedure); see Darrow v. Southdown, Inc., 574 F.2d 1333,
                1337 (5th Cir. 1978) (stating a contract creditor has "no ownership interest
                and therefore no derivative standing"); Kusner v. First Pa, Corp., 395 F.
                Supp. 276, 281-82, 287 (E.D. Pa. 1975), rev'd in part on other grounds, 531
                F.2d 1234, 1236-37 (3d Cir. 1976) (holding a creditor lacked standing
                because its interest, although financially substantial, was "clearly non-
                proprietary"); Dodge v. First Wis. Trust Co., 394 F. Supp. 1124, 1127 (E.D.
                Wis. 1975) (holding a creditor lacked standing to bring a derivative suit);
                Brooks v. Weiser, 57 F.R.D. 491, 493-95 (S.D.N.Y. 1972) (same); but see
                Bank of Am., N.A. v. Knight,   725 F.3d 815, 818 (7th Cir. 2013) (stating in
                dicta that "a creditor can't recover on behalf of a corporate borrower
                without using the form of a derivative suit").
                              However, we need not decide whether NRCP 23.1 prohibits a
                creditor from asserting a derivative claim, for even if it does not, we
                decline to grant creditors an unqualified right to assert derivative claims
                on behalf of insolvent corporations. Procedural safeguards typically
                accompany derivative actions to further ensure the party bringing the
                claim will adequately represent the corporation's interests. 4 The parties


                      4 For example, the "contemporaneous ownership" requirement
                generally requires the plaintiff to be a shareholder at the time of the
                transaction alleged in the complaint. See NRS 41.520(2); NRCP 23.1;
                Deborah A. Demott & David F. Cavers, Shareholder Derivative Actions:
                Law and Practice § 4:3 (2015). The "continuing ownership" requirement
                generally requires the plaintiff to maintain his or her proprietary interest
                throughout the pendency of the suit. See Keever v. Jewelry Mountain
                Mines, Inc., 100 Nev. 576, 577-78, 688 P.2d 317, 317 (1984); Demott &
                Cavers, supra, § 4:3. And the "demand" requirement generally requires
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                   have not discussed (1) to what extent these requirements (or modifications
                   thereof) would apply in the context of creditor derivative suits; (2) if
                   additional requirements may be necessary to ensure a corporation's
                   interests are adequately represented by a party with a non-proprietary
                   interest; and (3) whether granting creditors such a right in the corporate
                   context would have implications as to other business entities, and if so,
                   whether that would be desirable. 5
                               Therefore, we believe this is an issue that the Legislature
                   should address in the first instance.        See Renown Health, Inc. v.
                   Vanderford, 126 Nev. 221, 225, 235 P.3d 614, 616 (2010) ("This court may
                   refuse to decide an issue if it involves policy questions better left to the
                   Legislature."). As such, we decline to recognize a creditor's right to assert
                   a derivative claim at this time.
                   Whether an insolvent corporation's directors and attorneys owe fiduciary
                   duties to the corporation's creditors
                               Pompei argues that the directors of an insolvent corporation
                   owe fiduciary duties to the corporation's creditors. However, this court
                   has never held as much. Indeed, we have held that "the [fiduciary] duty of
                   loyalty requires . . . directors to maintain, in good faith, the corporation's


                   ...continued
                   the plaintiff to attempt to seek redress through the corporation's directors
                   or shareholders before bringing a derivative action unless such an attempt
                   would be futile. Shoen v. SAC Holding Corp., 122 Nev. 621, 633, 137 P.3d
                   1171, 1179 (2006); Demott & Cavers, supra, § 4:2.

                         5To the extent it is suggested that NRCP 23.1 permits a creditor to
                   bring a derivative suit without having to abide by any procedural
                   protections, we reject such an interpretation. See State v. Quinn, 117 Nev.
                   709, 713, 30 P.3d 1117, 1120 (2001) (stating statutes should be interpreted
                   so as to avoid absurd results).

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                  and its shareholders' best interests over anyone else's interests." Shoen, 122
                  Nev. at 632, 137 P.3d at 1178 (emphasis added). In addition, imposing
                  such a duty on directors would create an impermissible conflict of interest,
                  because the interests of shareholders and creditors often diverge.        See
                  Laura Lin, Shift of Fiduciary Duty Upon Corporate Insolvency: Proper
                  Scope of Directors' Duty to Creditors, 46 Vand. L. Rev. 1485, 1488 (1993).
                  For example, when a corporation is insolvent, shareholders may be more
                  inclined to pursue riskier business ventures than creditors, who may want
                  to avoid such risks to ensure the corporation's assets are not further
                  depleted.   Id. at 1489. Furthermore, this conflict of interest would
                  compromise a director's ability to fulfill his fiduciary duties to the
                  corporation itself by limiting his "freedom to engage in vigorous, good faith
                  negotiations with individual creditors for the benefit of the corporation."
                  N. Am. Catholic Educ. Programming Found., Inc: v. Gheewalla, 930 A.2d
                  92, 103 (Del. 2007). 6
                               Nor did PPM's attorneys owe Pompei direct fiduciary duties.
                  Pompei argues that Clarkson and CDB directly owed her fiduciary duties
                  because: (1) as a director of PPM, Hawes held PPM's assets in trust for its
                  creditors upon insolvency and dissolution; (2) as a creditor, Pompei was a
                  beneficiary of the trust; and (3) Clarkson and CDB represented Hawes in

                        6To  the extent Pompei argues that Nevada's dissolution statutes
                  imposed on Hawes a direct fiduciary duty to her, we reject this argument.
                  Even assuming Hawes was a director at the time of the asset transfer,
                  Hawes was not a "trustee" under NRS 78.590 at the time of the asset
                  transfer, because a director only becomes "trustee" "upon the dissolution"
                  of the corporation, which occurs "at the time of the filing of the certificate
                  of dissolution." NRS 78.580(5); NRS 78.590(1) (emphasis added); Quinn,
                  117 Nev. at 713, 30 P.3d at 1120 (stating an unambiguous statute must be
                  given its plain meaning).

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                    his capacity as trustee. Although Pompei contends that "an attorney
                    [who] represents a trustee in his or her capacity as trustee ... assumes a
                    duty of care and fiduciary duties toward the beneficiaries as a matter of
                    law," Charleson v. Hardesty, 108 Nev. 878, 882-83, 839 P.2d 1303, 1306-
                    07 (1992), in 2011, the Legislature enacted NRS 162.310, which states
                    that "[a]n attorney who represents a fiduciary does not, solely as a result
                    of such attorney-client relationship, assume a corresponding duty of care
                    or other fiduciary duty to a principal," and we have also held that directors
                    "are not trustees of a trust in terms of the law of trusts,"     Canarelli v.
                    Eighth Judicial Din. Court, 127 Nev. 808, 815, 265 P.3d 673, 678 (2011).
                    Furthermore, even if Hawes were a trustee in the sense Pompei argues,
                    Pompei has presented no evidence that Clarkson or CDB represented
                    Hawes as trustee. See Waid v. Eighth Judicial Dist. Court, 121 Nev. 605,
                    611, 119 P.3d 1219, 1223 (2005) (stating "a lawyer representing a
                    corporate entity represents only the entity, not its officers, directors, or
                    shareholders"). Therefore, the mere fact that Clarkson• and CDB
                    represented PPM did not impose on Clarkson or CDB direct fiduciary
                    duties to PPM's creditors.
                                Based on the foregoing, we conclude that Pompei did not have
                    standing to assert a derivative claim, and the respondents did not owe
                    Pompei any fiduciary duties. Having so held, Pompei's argument that
                    several of the district court's findings of fact were erroneous is rendered
                    moot, as Pompei's claims fail as a matter of law.     See Wood v. Safeway,
                    Inc., 121 Nev. 724, 729, 121 P.3d 1026, 1029 (2005) ("Summary judgment
                    is appropriate and shall be rendered forthwith when the pleadings and
                    other evidence on file demonstrate that no genuine issue as to any
                    material fact [remains] and that the moving party is entitled to a

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                   judgment as a matter of law.") (alteration in original) (internal quotation
                   marks omitted). Accordingly, we
                               ORDER the judgment of the district court AFFIRMED.




                                                        I ct.A A
                                                              -                   , C.J.
                                                      Parraguirre


                                                                                     J.




                   cc: Chief Judge, The Eighth Judicial District Court
                        Hon. Kathy A. Hardcastle, Senior Judge
                        Bingham Snow & Caldwell
                        Laxalt & Nomura, Ltd./Reno
                        Richard Hawes
                        Eighth District Court Clerk




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