get it right the first time: the case for opposing or

June, 2000

When asked about thestandard for obtaining leave to amend,

most practitioners are quicklyable to recall the phrase “. . .leave shall be freely given whenjustice so requires . . . “ The re-sult of such a cursory reviewdoes not consider the significantimpact related to untimelychanges in litigation, such as in-creased costs, delays and in-creasing the level of thelitigation’s complexity. After all,if Courts are supposed to followthe liberal policy to “freelygrant“ leave to amend, then whymust permission be requestedand obtained?

In litigation today, both courtsand counsel seem to pay little at-tention to NRCP 15(a). As a re-sult of general unfamiliaritywith the actual requirements toamend a pleading, an importantlegal protection and litigation

GET IT RIGHT THE FIRST TIME:The Case for Opposing orDenying Motions to AmendBy Edward L. Kainen, Esq.

tool is often simply forfeited, tothe detriment of our clients.Most practitioners are surprisedto discover that the Rule, and thecase law regarding the same, arenot nearly as permissive as theymight appear.

Motions to amend pleadingsare governed by NRCP 15(a),which states, in pertinent part, asfollows:

(a) Amendments. A partymay amend his pleading onceas a matter of course at any timebefore a responsive pleading isserved or, if the pleading is oneto which no responsive plead-ing is permitted and the actionhas not been placed upon thetrial calendar, he may so amendit at any time within 20 daysafter it is served. Otherwise a

GET IT RIGHT THE FIRST TIME: THE CASE FOROPPOSING OR DENYING MOTIONS TO AMEND.......................... 1

HOW TO BE AN EXPERT WITNESS................................................ 6

THE SCHEME OF EXEMPT PROPERTY FORNEVADANS, OR, YOU GET A COMBO PIZZANO MATTER WHAT YOU ORDERED ............................................... 8

THE MILITARY DISABILITY WAIVER ................................................ 11

IN THIS ISSUE

VOLUME 15, NUMBER 2 JUNE, 2000

cont. page 2

N RFL Nevada Family Law Report

June, 2000

party may amend his pleadingonly by leave of court or bywritten consent of the adverseparty; and leave shall be freelygiven when justice so requires .. .

In actuality there is a substan-tial body of case law regardingsuch requests to amend plead-ings. Perhaps the simplest wayto explain the law, as it relates toa request to amend a pleadingunder NRCP 15(a), is as follows:

...leave to amend shall befreely given when justice so re-quires. This does not, however,mean that a trial judge may not,in a proper case, deny a motionto amend. If that were the in-tent, leave of court would notbe required. A motion for leaveto amend is addressed to thesound discretion of the trialcourt, and its action in denyingthe motion should not be heldto be error unless that discretionhas been abused.

Stephens v. So. Nevada MusicCo., 89 Nev. 104, at 105, 507 P.2d138 (1973); Leggett v. MontgomeryWard & Co., 178 F.2d 436, 439 (10Cir. 1949); Nelson v. Sierra Con-struction Corp., 77 Nev. 334, 343,364 P.2d 402, 406 (1961); Cf: Ne-vada Bank of Commerce v.Edgewater, Inc., 84 Nev. 651, 653,446 P.2d 990, 991 (1968).

Reasons which could, orshould, cause a Motion toAmend to be properly denied in-clude, but are not limited to, (1)undue delay; (2) bad faith; (3)dilatory motive; (4) repeated fail-ure to cure deficiencies byamendments previously al-lowed; (5) undue prejudice to theopposing party by virtue of al-lowance of the amendment; or(6) the futility of the amendment.The above is a nonexclusive list

of reasons for proper denial ofleave to amend which originatedfrom the U.S. Supreme Courtcase of Foman v. Davis, 371 US178, 9 L Ed 2d 222, 83 S Ct 227(1962). For purposes of this ar-ticle, the list will hereinafter bereferred to as the “Foman fac-tors.”

The Court in Foman concludedthat the granting or denial of anamendment is “within the dis-cretion of the court.” The caseconcluded that an abuse of dis-cretion only occurs when leaveto amend is denied “without anyjustifying reason appearing forthe denial.” In other words, solong as there is a basis or justifi-cation for the denial, then thequestion of granting or denyinga Motion to Amend is within thesound discretion of the TrialCourt.

THE NEVADASUPREME COURT

HAS FULLY ADOPTEDFOMAN

In considering the Foman fac-tors, and the comments of U.S.Supreme Court Justice ArthurGoldberg regarding those fac-tors, the Nevada Supreme Courtstated, “[w]e subscribe com-pletely to this interpretation ofthe intent and purpose of NRCP15(a).” Adamson v. Bowker, supra,85 Nev. 115, 121, 450 P.2d 796,801-2 (1969).

In Adamson, an analysis ofFoman was undertaken and theNevada Supreme Court quoteddirectly from Justice Goldberg’sOpinion in Foman, as follows:

If the underlying facts or cir-cumstances relied upon by aPlaintiff may be a proper sub-ject of relief, he ought to be af-forded an opportunity to testhis claim on its merits. In the

First Time cont.

NEVADA FAMILY LAW REPORT is aquarterly publication of the Family LawSection of the State Bar of Nevada.

Subscription price for non-sectionmembers is $35 payable in advance an-nually from January 1 to December 31.There are no prorations.

The NEVADA FAMILY LAW REPORTis intended to provide family law relatedmaterial and information to the bench andbar with the understanding that neitherthe State Bar of Nevada, Family Law Sec-tion editorial staff nor the authors intendthat its content constitutes legal advice.Services of a lawyer should be obtainedif assistance is required. Opinions ex-pressed are not necessarily those of theState Bar of Nevada or the editorial staff.

This publication may be cited as Nev.Fam. L. Rep, Vol. 15, No.2, 2000 at ____.

Nevada Family Law Report is supportedby the Family Law Section of the State Barof Nevada and NFLR subscriptions.

Co-EditorsRandy A. Drake

Gregory G. Gordon

Family Law SectionExecutive Council

Kathryn Stryker Wirth, ChairAnn Price McCarthy, Vice-Chair

Rebecca A. Miller, SecretaryTodd L. Torvinen, Financial

OfficerShawn B. Meador, ex-officio

member, RenoPeter J. Bellon, Las Vegas

Rebecca L. Burton, Las VegasRandy A. Drake, Reno

Denise Gentile, Las VegasEdward L. Kainen, Las Vegas

Muriel R. Skelly, RenoE.A. "Bo" Pollard, Incline VillageHon. Deborah L. Schumacher,

RenoHon. Cynthia Dianne Steel, Las

VegasRoger A. Wirth, Las Vegas

June, 2000

absence of an apparent or de-clared reason—such as unduedelay, bad faith, or dilatorymotive on the part of the mo-vant, repeated failure to curedeficiencies by amendmentspreviously allowed, undueprejudice to the opposing partyby virtue of allowance of theamendment, futility of amend-ment, etc.—the leave soughtshould, as the rules require, be‘freely given’. Of course, thegrant or denial of an opportu-nity to amend is within the dis-cretion of the District Court, butoutright refusal to grant theleave without any justifyingreason appearing for the denialis not an exercise of discretion;it is merely abuse of that discre-tion and inconsistent with thespirit of the Federal Rules.

Adamson, at 121.The significance of such lan-

guage is that amendmentsshould be freely allowed “in theabsence of an apparent or de-clared reason” for the denial ofleave to amend. Foman, at 9 L.Ed. 2d 222, 226.

THE NEVADASUPREME COURT

HAS CONSISTENTLYUPHELD DENIALS OF

MOTIONS TOAMEND WHERE

REASON FOR DENIALEXISTS

In contrast to those situationswhere leave to amend is granted,leave to amend is properly de-nied when there is an appropri-ate reason for the denial. In fact,the vast majority of Nevada caselaw on this point involves casesin which the District Court’s de-nial of leave to amend was up-held. Ennes v. Mori, 80 Nev. 237,391 P.2d 737 (1964), Stephens v. So.

Nevada Music Co., 89 Nev. 104, at105, 507 P.2d 138 (1973); Connellv. Carl’s Air Conditioning, 97 Nev.436, 634 P.2d 673 (1981). Asstated, if it was improper forleave to amend to be denied bythe Court, permission to amendwould not be required.

In Ennes v. Mori, 80 Nev. 237,391 P.2d 737 (1964), there was alawsuit between business part-ners, and the appellant soughtleave to amend his Answer so asto plead “fraud and fraudulentrepresentations as an affirmativedefense.” The District Court de-nied a request for leave toamend, and established certainfacts as part of the record. Theprimary element, which sup-ported the denial, appeared to bethat the party seeking theamendment had nearly sixmonths in which to pursue theamendment and did not seeksuch an amendment during thattime. The Nevada SupremeCourt approved the decision ofthe District Court which deniedleave to amend.

In Stephens v. So. Nevada MusicCo., 89 Nev. 104, 507 P.2d 138(1973), injuries were sustainedfrom a slip-and-fall accident.The Plaintiff alleged she fellwhen she slipped on a cigarettebutt. During jury selection of thecase, a mistrial was declared.Immediately thereafter, thePlaintiff moved to amend herComplaint to assert she did notfall based on the cigarette butt,but fell because of an accumula-tion of floor wax. The Court de-nied the Motion to Amend, andthe denial was upheld by theNevada Supreme Court. TheNevada Supreme Court specifi-cally found that the conduct ofPlaintiff’s counsel in waitinguntil trial to make the request forleave to amend constituted a

dilatory action. On that basis,the denial of the Motion toAmend was affirmed by the Ne-vada Supreme Court. This casefocused heavily on the broadexceptions to the language that“leave to amend shall be freelygiven.”

In Connell v. Carl’s Air Condi-tioning, 97 Nev. 436, 634 P.2d 673(1981), a lawsuit resulted froman automobile collision. On theeve of trial, Plaintiff sought toamend her Complaint to includea theory of negligent entrust-ment. The Trial Court denied herrequest to amend based on thelate date of the requestedamendment. The Nevada Su-preme Court upheld the denialof the amendment, and pointedout that,

A motion for leave to amendpursuant to NRCP 15(a) is ad-dressed to the sound discretionof the trial court, and its actionin denying such a motion willnot be held to be error in theabsence of a showing of abuseof discretion.

Connell, at 439.The Nevada Supreme Court

concluded that, “[i]n light ofappellant’s dilatory conduct inwaiting until the eve of trial toseek an amendment, we find nosuch abuse.” supra. Clearly, theNevada Supreme Court hasheld, on more than one occasion,that waiting until the eve of trialconstitutes “dilatory conduct.”

It is clear that, when appropri-ate reasons for denial exist,Courts properly deny Motionsfor leave to amend regularly.Such motions may be properlydenied based upon the presenceof any of the following reasons:

(1) Lack of diligence of theparty seeking to amend; Ennes v.Mori, 80 Nev. 237, 391 P.2d 737(1964), Stephens v. So. Nevada

June, 2000

Music Co., 89 Nev. 104, at 105, 507P.2d 138 (1973); Connell v. Carl’sAir Conditioning, 97 Nev. 436, 634P.2d 673 (1981).

(2) Neglect; Stephens v. So. Ne-vada Music Co., 89 Nev. 104, at105, 507 P.2d 138 (1973); Connellv. Carl’s Air Conditioning, 97 Nev.436, 634 P.2d 673 (1981).

(3) Prior approval of thepleaded issues in a Pretrial Con-ference; Schick v. Finch, (D.C.,S.D.N.Y.), 8 F.R.D. 639 (1944);Ennes v. Mori, 80 Nev. 237, 391P.2d 737 (1964).

(4) Making such requests onthe eve of trial; Stephens v. So.Nevada Music Co., 89 Nev. 104, at105, 507 P.2d 138 (1973); Connellv. Carl’s Air Conditioning, 97 Nev.436, 634 P.2d 673 (1981).

(5) Making requests withoutadequate cause for modification:Schick v. Finch,(D.C., S.D.N.Y.), 8F.R.D. 639 (1944).

(6) Futility of the requestedmodification; Foman,371 US 178,9 L Ed 2d 222, 83 S Ct 227 (1962).

(7) Attempts to amend mattersthat are related to the merits ofthe controversy which have al-ready been admitted; Cf: Good v.District Court, 71 Nev. 38, 279P.2d 407 (1955); Tehansky v. Wil-son, 83 Nev. 263, 428 P.2d 375(1967); Weiler v. Ross, 80 Nev. 380,395 P.2d 323 (1964); and,

(8) As discussed in detailabove, the Foman factors, whichinclude:(a) Undue delay; (b) Badfaith; (c)Dilatory motive;(d)Repeated failure to cure defi-ciencies by amendments previ-ously allowed; (e) Undue preju-dice to the opposing party; and(f)Futility of the amendment.

The Burden of ProofThe case of Ennes v. Mori, 80

Nev. 237, 391 P.2d 737 (1964),

also created a distinct change inthe analysis of lower court deni-als of requests to amend withrespect to the burden of proof.Historically, there was a sugges-tion that, since “leave to amendshould be freely granted,” it wasincumbent upon the party seek-ing to prevent the amendment toshow prejudice. The Nevada Su-preme Court rejected such aninterpretation. In fact, the Su-preme Court cited the case ofSchick v. Finch, (D.C., S.D.N.Y.),8 F.R.D. 639 (1944), as being onpoint. In interpreting Schick, theNevada Supreme Court stated,

The court goes on to say thatthe liberal policy provided inRule 15(a) ‘does not mean theabsence of all restraint. Werethat the intention, leave ofcourt would not be required.The requirement of judicialapproval suggests that thereare instances where leaveshould not be granted. The in-stant case, I believe, falls intosuch a category. It is made onthe very eve of trial. It proposesto change allegations which goto the heart of the issue with-out assigning an adequatecause for the modification. It isconcerned with matters, which,if true, must have been withinthe defendant’s knowledgewhen the controversy arose.’The Honorable Simon H.Rifkind, District Judge, deniedthe motion for leave to amend.

[Emphasis added]. Ennes, at243.

The Nevada Supreme Courtchose to reject the concept thatthe party seeking to defeat theamendment should be requiredto show prejudice in order tosuccessfully defeat the amend-ment. Relying upon Schick v.Finch, (D.C., S.D.N.Y.), 8 F.R.D.639 (1944) and Anderson v. Na-tional Produce Co., 253 F.2d 834

(1958), the Nevada SupremeCourt concluded,

We prefer to follow the rea-soning of these two cases. Oth-erwise, we should be approvinga rule under which, despite anentire lack of diligence on thepart of the defendant, in spiteof long-lasting neglect withoutexcuse, in spite of a defendant’sapproval of the pleaded issuesin a pre-trial conference, he isentitled to an amendment andmay throw the entire burden ofshowing resulting prejudiceupon the opposing party.

We prefer to follow the logicof Judge Rifkind’s opinion asapproved by the Court of Ap-peals for the Second Circuit,and to hold that there was noabuse of discretion in the trialcourt’s denial of appellant’smotion for leave to amend hisanswer.Ennes, at 243, 244.In this regard, it is not the bur-

den of the party opposing theamendment to demonstrate thatprejudice will result from allow-ing the amendment. Rather,such prejudice is a “factor” (justlike the other Foman factors)which the Court may rely uponas a basis for denying a Motionto Amend.

WHEN LEAVE TOAMEND SHOULD BE

FREELY GRANTED

It is true that leave of courtshould be freely given when noprejudice would result to eitherparty and none of the reasonslisted in Foman are present. Forexample, in Doud v. Las VegasHilton Corp., 109 Nev. 1096, 864P.2d 796 (1993), summary judg-ment was granted in the casemidway through discovery. Ac-cordingly, the case was dis-missed and an appeal ensued.

June, 2000

The Supreme Court reinstatedthe case, and also allowed theamended pleading to be filed.The Supreme Court reasonedthat, based on the reinstatementof the case and the reset trialdate, “. . . any perceived preju-dice . . . is de minimis.” Doud, at1107.

The Nevada Supreme Courthas also overruled the DistrictCourt’s denial of a Motion toAmend, and permitted anamendment, when:

(1) a corporate plaintiff wasbeing substituted for a namedindividual plaintiff. Good v. Dis-trict Court, 71 Nev. 38, 279 P.2d407 (1955);

(2) correcting a failure to ac-knowledge a prior pleading.Tehansky v. Wilson, 83 Nev. 263,428 P.2d 375 (1967);

(3) amending the complaintwhich designated a “special ad-ministrator” of the estate when,in fact, the proper title was “gen-eral administrator.” Weiler v.Ross, 80 Nev. 380, 395 P.2d 323(1964).

In such cases, it is certainlyappropriate for the Court to per-mit the amendment. In fact, thedenial of such minor amend-ments would constitute an abuseof discretion. In characterizingthe sort of minor amendment towhich they were referring, theNevada Supreme Court, inWeiler v. Ross, 80 Nev. 380, 395P.2d 323 (1964), noted that thefailure to properly identify the“special administrator” as a“general administrator,”

. . . was an inadvertence to-tally unrelated to the merits ofthe controversy . . . and with-out prejudice to the rights of ei-ther.

Weiler, at 382.Simply put, these are minor

changes, oversights and inad-vertent errors, for which leave ofcourt to amend should be freelygiven. In such cases the amend-ments do not relate to the meritsof the pending case. Further,these are situations where theFoman factors are not present. InTehansky v. Wilson, 83 Nev. 263,428 P.2d 375 (1967), the Courtadopted the same rationale as inWeiler. In that regard, amend-ments should be freely allowedwhen there is “. . . an inadvert-ence totally unrelated to the mer-

its of the controversy . . .”Tehansky, at 264.

CONCLUSION

The bottom line is that amend-ing a pleading is not an actionwhich one should rely upon asbeing easily accomplished. Thecareful practitioner should takethe time to get it right the firsttime. Further, if you find your-self defending a case where anopponent is belatedly attempt-ing to drastically change the liti-gation by amending a pleading,your efforts may be able to saveyour client significant increasesin litigation time and costs. Inthis regard, knowledge is themost meaningful litigation tool.

June, 2000

As many know, my law prac-tice involves divorce litigation. Iam also fortunate enough tohave been engaged as an expertwitness several times. I havebeen deposed, and I have givencourtroom testimony.

GENERAL ADVICE

I bring this up because I be-lieve that I have gained a uniqueperspective. I have worn bothhats. I have worn the advocatehat, and I have worn the experthat.

The role as an expert requiresan entirely different thought pro-cess then that of an advocate. Inorder to be an effective expert,the expert must not be an advo-cate for a party. The expert canand should be an advocate forhis position and opinion. To bean effective expert and advocatefor an opinion, the expert, in gen-eral, should be conservative, andnot take positions that are “farout” of the mainstream. In ad-dition, an expert can and shouldalways admit weaknesses in hisopinion. Such admissions onlyadd to credibility.

Because of my experience, Isuggest the following to the di-vorce bar when considering theengagement and testimony of anexpert witness (usually a CPA).

UNDERSTANDINGTHE CASE

Most Common Cases. It isimportant for the expert CPA to

understand the nature of thecase. Typically, in a divorce case,most common issues involvebusiness valuation, professionalpractice valuation, preparationof a marital balance sheet, andincome normalization calcula-tions for purposes of alimonyand child support.

Understanding the Case. It isimportant to read the relevantcourt pleadings and discoverywhich would include: the com-plaint, answer, affidavits of fi-nancial condition, and any inter-rogatories and production ofdocuments. However theexpert’s primary source of infor-mation for understanding thecase is the attorney. The attor-ney should spend a block of timewith the CPA at the beginning ofthe case, and explain his or herview of the most important as-pects of the case and the issueslikely to be litigated. The CPAshould also spend a block of timewith a party for whom he or sheis engaged as an expert.

Understanding the Attorney.The attorney should never indi-cate to the expert that he expectsa certain outcome. If the attor-ney does this, perhaps the CPAshould consider declining theengagement. Such expectationcould compromise the CPA’sability to be an advocate for hisor her opinion.

Attorney UnderstandingCPA’s Opinions. The CPAshould spend sufficient time sothat the attorney understandsthe CPA’s opinions and the un-

HOW TO BE ANEXPERT WITNESSBy Todd L. Torvinen, Esq.

derlying facts supporting them.The CPA should also inform theattorney of any weaknesses inhis or her opinions. The lastthing an attorney wants at trialis to be surprised by his own ex-pert. Many times attorneys donot understand the financial is-sues upon which the CPA relies.If the attorney understands theCPA’s opinions, then he or shewill be better able to present anddirect CPA testimony. The attor-ney will also be better able tocross-examine his or heradversary’s expert.

PREPARATION OFWRITTEN OPINIONS

AND REPORTS

Easy to Understand Report. Inmost cases, the CPA is calledupon to prepare a written report.The report should be easy for thejudge, the attorneys, and the par-ties to understand. If there is agreat deal of information in thereport, perhaps consider prepar-ing a summary page of the re-port which “boils down” the in-formation and the opinions ofthe expert. Such a summary willalso provide a good point for thebeginning or the end of directtestimony. For example, if acomplex professional practicevaluation report is prepared,consider summarizing the opin-ion as to value, and the mainimportant underlying factorscontributing to value on onepage. The judge is human, andwill be more likely to adopt anexpert’s opinion which is easilyunderstood.

Triple Check the Report. Itdoes not happen often, butsometimes I have reviewed re-ports from CPA’s which containerrors. The errors include: (1)picking up the wrong facts, (2)

June, 2000

carrying incorrect numberswhich are necessary for later cal-culation, and sometimes adopt-ing methodologies which justplain do not fit the case. Checkand recheck the report.

Discuss the Report with theAttorney and the Party. TheCPA should discuss any reportand its opinions with the attor-ney and the party. Both the at-torney and the party should un-derstand the report to the fullestextent possible. That way, anysurprises are avoided, and nofalse expectations are created.

EFFECTIVELYDELIVERING EXPERT

WITNESS TESTIMONY

Clear and Concise Communi-cation. The bottom line is thatyou communicate your opinionand its underlying supportclearly and concisely. Judgesusually love pictures with colorgraphs and charts. They are eas-ily understood.

Communicating and Testify-ing at Various Stages.

The expert may testify at adeposition, and at trial. Usually,deposition testimony is given tothe opposing party’s lawyer.Trial testimony is usually givento the attorney who engaged theexpert. Trial testimony also usu-ally includes cross-examinationby the opposing party’s attorney.

Attire. The expert should al-ways dress appropriately. Fordeposition and for trial the ap-propriate professional attirewould include a suit. The dressof the expert contributes to ordetracts from credibility.

Direct Testimony. As statedabove, the direct testimonyshould be clear and concise.Avoid using words that onlyCPA’s know. Avoid rambling

answers. Speak in short, under-standable sentences. You shouldlet the attorney ask questionswhich will allow information tobe presented in digestible blocks.

Knowing the Courtroom. Ev-ery courtroom is different.Courtrooms have differentacoustics. The CPA, if unfamil-iar with the courtroom, shouldvisit first. Usually, court staff ishelpful with access. The attor-ney may also be helpful in thisregard. The CPA should test thecourtroom to ensure that his orher testimony can be clearlyheard and understood by thejudge, the parties, and the attor-neys. In addition, if the CPAplans on preparing a PowerPointpresentation, the CPA shoulddetermine the best place for thescreen so that the attorneys andthe judge can easily see the in-formation presented.

Credible Testimony. All youhave is your reputation. There-fore, never, ever, lie. 9 times outof 10, the opposing attorney willexpose it. As a result, your cred-ibility with the court in that par-ticular case will be destroyed.Probably, your credibility withthat judge will also be foreverdestroyed. It is not worth it. Ifyou do not know the answer,admit it. Do not guess. If youguess, and your guess is exposedfor what it is, your credibilitywill be damaged. If your opin-ion testimony has a weakness, itshould be brought out on directexamination. This adds to yourcredibility. If it is not brought outon direct testimony, it will prob-ably be brought out on cross-ex-amination. Immediately admitany weaknesses in the opiniontestimony.

Do Not Memorize. Do notmemorize. You should knowyour opinion and its underlying

facts and assumptions cold. Ifyou try to memorize, it comesout mechanically and is not per-suasive. Further, memorizationis a trap. The opposing counselon cross-examination will honein on rigid memorized answersto try to throw you off your tes-timony.

Practice. Practice deliveringyour testimony. The attorneyshould prepare you for testi-mony by asking you to presentyour opinion, and also by ask-ing the most likely cross-exami-nation questions.

Active Listening. The CPAshould closely listen to any ques-tions asked. If you do not un-derstand the question, ask thatit be repeated. If the question isunclear, ask the attorney or op-posing counsel “what do youmean?”. Let the attorney finishasking the question before youanswer. Do not banter with theattorney. 9 times out of 10, if anopposing attorney tries to ban-ter with you, he or she is simplytrying to get you to “take youreyes off the ball” and make amistake. Do not fall for this oldtrick.

Behavior on the WitnessStand. Do not roll your eyes atopposing counsel. Do not makeinappropriate gestures such asshrugging your shoulders, orpointing at opposing counsel.

CONCLUSION

Be yourself. If you deliverstraightforward, clear, and con-cise testimony that is easily un-derstandable, you will enjoyyourself, and provide valuableinformation to the court.

June, 2000

Lawyers and litigants of-ten give thought to pro-tecting assets from

creditors claims. The bookstoresare full of books on how to hideassets, whether it be by takingthe assets offshore, burying themin the backyard or squirrelingthem away in the family trust.

Prudent planning, or the pro-verbial “prior planning preventspoor performance,” on the eveof an adverse jury verdict, di-vorce complaint, TPO excludinga party from the home, or evenbankruptcy might include con-verting non-exempt assets intoexempt assets. In the divorcescenario, perhaps it means tak-ing greater exempt assets, e.g.houses which can be home-steaded or protected pension as-sets, and not the assets whichcould be seized by creditors.

A variety of laws govern ex-emption of property from execu-tion, attachment or other legalprocess. It is the same conceptin keeping property out of thehands of the bankruptcy trustee.

Congress has acted to protectSocial Security benefits,longshoreman’s benefits andveterans benefits, as well as fed-

The Scheme of ExemptProperty forNevadans, or, You Get aCombo PizzaNo Matter What You Orderedby Bob Butler, Reno, Nevada

eral civil service retirements, etc.These are exempt from legal pro-cess. This is “nonbankruptcy”law because it is not a part of theU.S. Bankruptcy Code, found inTitle 11 of the United StatesCode.

There are additional federalbankruptcy exemptions apply-ing only in bankruptcy whichare found in the bankruptcycode at 11 U.S.C. § 522.

The Bankruptcy Reform Act of1978 brought us our currentbankruptcy code which permit-ted the states to opt either for thebankruptcy code exemptions orthe state law exemptions.

The four areas of law or ingre-dients which make up the total

picture are:1) federal non-bankruptcy law,

e.g., protecting Social Security,Veterans, etc.

2) federal bankruptcy law, inthe BK Code at 11 U.S.C. 522(d)

3) state law exemptions (con-tained in our execution statute,NRS Chapter 21)

4) state law exemptions notfound in the execution statute

Congress did not preclude thefifty states from using their lawsregarding property protectedfrom creditors or the trustee inbankruptcy. It created an optionto use the federal bankruptcyexemptions in 11 U.S.C. §522(d)or not. Specifically, the electionis between the bankruptcy list,

June, 2000

or... any property that is exempt

under Federal law, other thanSubsection (d) of this section, orstate or local law that is appli-cable on the date of the filing ofthe petition at the place inwhich the debtor’s domicile hasbeen located for the 180 daysimmediately preceding the dateof filing of the petition...

11 U.S.C. §522(b)(2)(A)In Re Richards, 57 B.R. 662

(Bankr. D. Nev. 1986), and NRS21.090(3) established that we arean opt-out state and thus thequoted rule above applies to us.The Nevada scheme covers anyproceeding in the state. It con-sists of federal nonbankruptcyexemptions and Nevada law.

The author’s motivation forthe article is the fact that noknown source has properly in-dexed the exemptions available.One twenty-year-old handbookaccompanying a CLE debt col-lection seminar found in somelibraries is both outdated andwrong.

Choice of law considerationsare being purposely ignored be-cause of a line of authority thatholds:

... exemption laws pertainmerely to the remedy and haveno extraterritorial effect andexemption laws of the forumapply (cites omitted), In Re Mar-riage of DeLotel, 140 Cal. Rptr.553, 100 ALR 3d 1231 (1977)

Judge Riegle, who sits in LasVegas, held in In re Weed 221 B.R.256 (Bankr. D Nev. 1998) thatexempt property is defined bythe state law that is applicable atthe time the bankruptcy petitionis filed. Weed is consistent withWatson where Judge Goldwaterwas presented with a debtorwho wanted Nevada law to gov-ern certain exempt property, but

a more favorable Utah Law tocover his pension plan:

Debtor claims his domicile isNevada and signed schedulesthat he had lived in Nevada for180 days. He thus falls squarelyunder the provision of§522(b)(2)(A). Debtor may onlyuse Nevada exemptions; hecannot use Nevada for somethings and Utah for his pensionplan.

In Re Watson, 192 B.R. 238, 244(Bankr. D Nev. 1996)

Nevada is quite friendly tojudgment debtors and bank-rupts because of a scheme of ex-emptions which has liberalizedconstantly in the last twentyyears by raising homesteads to$125,000, IRAs to $500,000 andcars to $4,500.

The protection available to thedowntrodden (but not necessar-ily the broke) is as benign as ithas ever been in our history.Let’s look at some of these ex-emptions:

These do apply in Nevada:Alimony (all), 21.090Annuities $350 per month, NRS

687B.290 (more if hardshipshown, NRS 687B.290(1)(c)

All property in Nevada wherejudgment creditor is a foreignstate whose judgment is for taxon pension NRS 21.090 (n)

Cemetery Trust, NRS 689.700Child Support all, NRS 21.090Civil Service disability and death

benefits (all), 5 U.S.C. §8130Civil Service Retirement (all), 5

U.S.C. §8346Courthouses, schools, public

property of cities and townsNRS 21.090

Dwelling if creditor has judg-ment for medical bill, NRS21.095

Earnings disposable (25% ormore by formula, with restric-tions inapplicable in case of

“...order for support...state orfederal tax...” 15 U.S.C. §1673

Escrow funds of escrow agents,NRS 645A.170

Family pictures and keepsakes,NRS 21.090

Farm truck, equipment $4,500,NRS 21.090

Federal judges, widows, chil-dren annuities, (Judicial Survi-vors Annuities Fund) 28 U.S.C.§376(n)

Fire engines, apparatus and fur-niture of fire departments,NRS 21.090

Foreign Service retirement anddisability system, 22 U.S.C.§4060(c)

Fraternal benefit societiesmoney, whether before or af-ter payment by the society,NRS 695A.220

Funeral and burial service plantrust funds, NRS 689.700

Guns, one per debtor, NRS21.090

Homestead, state law equity upto $125,000, NRS 21.090; fed-eral lands or debts contractedbefore patent, 43 U.S.C. §175

Household goods (necessary),yard equipment, $3,000, NRS21.090, limited by CFR

Housing Authority property,NRS 315.992, real propertyNRS 315.310

Injury or death compensationpayments from war risk haz-ards, 42 U.S.C. 1717

Insurance (Health or Disabilitywhich are supplemental to lifeor annuity contracts, NRS687B.270

Insurance (Life), where pre-mium does not exceed $1,000per year, NRS 21.090

IRA, $500,000, NRS 21.090Libraries, private $1,500, profes-

sional $4,500, NRS 21.090Life Insurance, NRS 687B.280

(all) and NRS 21.090 (part)“Serviceman’s, or “Veteran’s”

June, 2000

“...exempt from claims ofcreditors, and shall not be li-able to attachment, levy, or sei-zure by or under any legal orequitable process whateverwhether before or after receiptby the beneficiary.” 38 U.S.C.§1970(g)

Longshoreman and harborworker ’s benefits (all), 33U.S.C. §916

Military Survivor benefit plan(all) 10 U.S.C. §1450

Mineral collections, art curiosi-ties and paleontological re-mains, NRS 21.090

Miner’s stuff, $4,500, NRS 21.090Money on deposit in US

Serviceman’s savings institu-tions while on permanent sta-tion abroad, 10 U.S.C. §1035(a)

Mortgage Company money inan impound trust account,NRS 645B.180

Motor vehicles, $4,500 perdebtor (but all of the speciallyequipped vehicle for disabled),NRS 21.090

Partnership property, NRS87.250 (2)(c)

Pension/Profit Sharing, ERISAqualified plans/IRA, $500,000,NRS 21.090

Pensions paid to winners of Con-gressional Medal of Honor, 38U.S.C. 3101

Pet Cemetery Trust Funds, NRS452.700

Public Employees Retirement,NRS 286.670

Prosthesis, NRS 21.090Public Assistance, NRS 422.291Railroad retirement, 45 U.S.C.

§231(m)Railroad Unemployment Insur-

ance, 45 U.S.C. § 288(e)Social Security (all), 42 U.S.C.

§407Spendthrift Trust, NRS 21.080Tools $4,500, NRS 21.090Unemployment Compensation,

NRS 612.710

Veteran’s Benefits, 38 U.S.C.§5301 and 38 U.S.C. §3101

Vehicle for disabled, NRS 21.090Vocational rehabilitative mainte-

nance (all), NRS 615.270Wages due seaman, fishermen,

masters and apprentices, 46U.S.C. §601

Workmen’s Compensation,“...before issuance and deliv-ery of the check...”

NRS 616C.205Before we end, it should be

clear that a careful reading of theexemption language could saveyou or your client thousands.For example, many pensionerscan have their benefits assignedfor awards of child support andsupport of a spouse. Railroadand veterans benefits have tierswhere some are exempted andsome are not under a familyCourt award. Federal Civil Ser-vice has an assignment excep-tion for sexual molestation andabuse victims. A letter to theeditor of the NTLA Advocate bya lawyer from southern Nevadasuggested about five years agothere was such an exception forrailroad benefits. There is not!

There is a consistent line ofthought that reoccurs all throughthe exemption statutes. Somepensioners can claim the exemp-tion even after the money or ben-efits are paid to them: Social Se-curity, servicemans and veteransinsurance, fraternal benefit soci-ety payments. Most of the liti-gation concerning the continu-ing nature of the exempt statushas concerned Social Security.

Bennett v. Arkansas, 485 US 395,108 S.Ct. 1204, 99 L.Ed.2d 455(1988) refused to allow the stateto seize its prisoner’s Social Se-curity benefits for the costs oftheir confinement. A certificateof deposit was protected inFayette County Hospital v. Reavis,

523 NE.2d 693 (Ill. App. 1988).Funds from Social Security heldin a bank account are supposedto be protected. They were inHousehold Finance Corp. v. ChaseManhattan Bank, NA, 397 NYS.2d564 (1977); Harris v. Bailey, 574F.Supp 966 (WDVa 1983); andBrosamer v. Mark, 540 N.E.2d 652(Ind. App. 1989).

One notable exception oc-curred in the Eleventh Circuit,where the recipient had $63,000in the bank and corporate con-trol over another 10 million.Citronelle Mobile Gathering, Inc. v.Watkins, 934 F.2d 1180 (C.A. 11th

Ala 1991).When there are other owners

of the account or where there isevidence of commingling, theburden of proof shifts to the re-cipient. Commingling itself isnot fatal to the exemption claimbut does shift the burden ofproof. NCNB Financial Servicesv. Shumate, 829 F.Supp 178(W.D.Va 1993).

Failing to assert the exemptionis a waiver. Matavich v. Budak,447 NE.2d 1311 (Ohio App 1982).Our state allows such a claim ofexemption to be made should acreditor go after exempt prop-erty. At execution, the noticeprescribed in NRS 21.075 ismailed to the debtor. Withineight days, the affidavit of ex-emption must be filed with theclerk of the Court issuing theexecution, and served on thecreditor and the sheriff. See NRS21.112.

Exempt property in our statehas authority in both state andfederal statutes, but not the§522(d) list in the bankruptcycode. When you serve up thelaw of exemption, it should looklike a combo pizza, or you arenot using the right recipe.

June, 2000

When a military pen-sion is maritalproperty to be di-

vided in a divorce the provisionsof the Uniformed ServicesFormer Spouses’ Protection Act(USFSPA) must be followed. Inorder to prevent double dippinga military retiree cannot receiveretirement benefits under theArmed Forces Retirement Sys-tem at the same time that disabil-ity benefits are received from theVeteran’s Administration pro-gram. It is more favorable for the

THE MILITARYDISABILITY WAIVERBy Marvin Snyder

person to receive veteran’s dis-ability benefits, if possible, be-cause they are tax free. It is tothe advantage of the military re-tiree to waive a portion of mili-tary retirement pay to receive alike amount of veteran’s disabil-ity pension.

This potential, or actual,waiver poses a problem in a de-sired distribution of the militarypension as marital property in adivorce. The USFSPA authorizesstate courts to treat military re-tirement benefits as marital

property and the Armed ForcesRetirement System honors validcourt orders (similar to a quali-fied domestic relations order(“QDRO”). The maximumamount of a military pensionthat is allowed to be awarded toa former spouse as property indivorce is fifty percent of dispos-able retired pay. The definitionof disposable retired pay specifi-cally excludes any amountwaived so the retiree may re-ceive a veteran’s disability pen-sion.

An otherwise carefully craftedand designed divorce propertysettlement can be thwarted ifand when such a waiver is ex-ecuted by a military retiree be-cause then the amount supposedto be received by the formerspouse could be diminished.

For example, if the formerspouse is awarded fifty percent

EXAMPLES*1.The marital coverture fraction community portion is 100%

Spouse % Award Marital Fraction Sp.Portion Monthly Benefit Amt. Waived Net Ben.Sp. Ben.Retiree Pays to Sp.50% 100% 50% 1,000 0 1,000 500 050% 100% 50% 1,000 250 750 375 12550% 100% 50% 1,000 500 500 250 25050% 100% 50% 1,000 750 250 125 37550% 100% 50% 1,000 1,000 0 0 500

2.The marital coverture fraction community portion is 75%.

Spouse % Award Marital Fraction Sp.Portion Monthly Benefit Amt. Waived Net Ben.Sp. Ben.Retiree Pays to Sp.50% 75% 37.5% 1,000 0 1,000 375 050% 75% 37.5% 1,000 250 750 281 9450% 75% 37.5% 1,000 500 500 188 18750% 75% 37.5% 1,000 750 250 94 28150% 75% 37.5% 1,000 1,000 0 0 375

3.The marital coverture fraction community portion is 50%.

Spouse % Award Marital Fraction Sp.Portion Monthly Benefit Amt. Waived Net Ben.Sp. Ben.Retiree Pays to Sp.

50% 50% 25% 1,000 0 1,000 250 050% 50% 25% 1,000 250 750 188 6250% 50% 25% 1,000 500 500 125 12550% 50% 25% 1,000 750 250 63 18750% 50% 25% 1,000 1,000 0 0 250

Note: Titles are Spouse, Award, Marital Fraction, Spouse Portion, MonthlyBenefit, Amount Waived, Net Benefit Spouse, Benefit Retiree Pays to Spouse.

June, 2000

of the military pension, and suchpension is $1,000 per month, theformer spouse expects to receive$500 per month. But, if the re-tiree is eligible for a partial dis-ability award of $250 per month,that much is waived so the re-tiree receives $750 from the mili-tary system and $250 from theVeteran’s Administration. Theformer spouse’s award of fiftypercent translates into dollars asonly $375 (50% of $750), not theexpected $500 per month. Astate court cannot change this.

However, a state court mayhave the power to order the mili-tary retiree to make up any defi-ciency in the award to the formerspouse by paying the required

portion of any waived amountsdirectly to the former spouse.The Supreme Court of SouthDakota ruled on this subject in1996 in the case of Marilyn Hisgenv. Richard M. Hisgen, 554 N.W.2d494 (S.D. 1996). The military re-tiree can be made responsible bythe state court for any amountsnot paid by the military retire-ment system which were con-templated to be paid to theformer spouse under the termsof the divorce action. It is advis-able for appropriate language tobe included in the divorce decreeor property settlement agree-ment to impose such a require-ment whenever there is a mili-tary pension involved.

Set forth below are sets of ex-amples to illustrate how the al-location of benefits could workwhen there may be a disabilitywaiver in a divorce of a militarymember.

It should be clear that in everycase where there is a militarypension, provision should bemade in advance for the possi-bility of a disability waiver.

Marvin Snyder, a pension actu-ary, is president of Marvin SnyderAssociates, Inc., P.O. Box 370370,Las Vegas, Nevada 89137, phone(702) 869-0303, specializing in thedrafting of QDRO’s and the valua-tion of pensions in divorce.

get it right the first time: the case for opposing or

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