March 27 Nevada Supreme Court rulings
The Nevada Supreme Court issued four rulings today, all in civil matters:
Trust fund babies may find reason to rejoice in the Court’s decision in, In re Orpheus Trust although the heirs of those trust fund babies may be less pleased. NRS 164.795 allows a special trustee to adjust amounts of trust income and principal distributed to a trust income beneficiary. The question the Court had to decide is whether the special trustee can may such adjustments with respect to principal and income accrued before the special trustee’s appointment. The Court concluded that, at a minimum, a special trustee may adjust between principal and income accrued in the year immediately preceding the special trustee’s appointment. The Court reasoned that the adjustment power granted by the statute is corrective, and so long as “so long as the trustees are bound by the standards of the Uniform Prudent Investor Act, the terms of the trust require distribution of income to an income beneficiary, and a special trustee determines that an adjustment is necessary, the special trustee may adjust between principal and income accrued in the preceding year.”
The Orpheus Trust is a successor to John Paul Getty Family Trust. The plaintiff in the action was contingent beneficiary (one of four) who objected to an increased distribution to the current beneficiary – his own dad. The trust had earned 14.77 % on its assets for the year, but dad’s distribution had been only 2.59 %. The adjustment gave him another 1.20%. It’s probably more than it sounds.
Casinos and other entities who offer free meals to patrons and employees won a victory over the taxman in Sparks Nugget v. State, Dep't of Taxation. The Court held that such entities need not pay sales tax on food purchased in bulk, and then prepared by the entity and served for free. Food that is purchased, but is not “prepared food intended for immediate consumption,” is exempt from sales tax. The Court rejected the Tax Dept.’s argument that by preparing the food to serve, Sparks Nugget transformed it into “prepared food intended for immediate consumption,” making it subject to a use tax. The Court reasoned that use tax is intended to collect taxes on goods that had evaded the sales tax, but unprepared food is exempt from sales tax, the use of the food was not a taxable event.
In International Game Tech. v. Dist. Ct., the Court resolves in ambiguity in NRS 357.250, which allows an employee who discloses fraudulent activity of his employer to recover if the employer retaliates against the employee for such disclosure. As written, NRS 357.250(s) suggests that an employee may recover for retaliation only if the employee was pressured into and did participate in the activity. The Court held that such a reading would allow employees to retaliate against nonparticipating whistleblowers with impunity. Accordingly, the court held that only employees who participated in the fraudulent activity must show that they were pressured to do so, in order to recover for retaliation. An employee who participated in the activity, but was not pressured to do so, may not recover under the statute.
In Andersen Family Assocs. v. State Engineer, the court held that an entity does not lose its vested rights, acquired prior to adoption of the statutory water law scheme, when a permit modifying those rights is canceled and later reinstated pursuant to NRS 533.395. The Court reiterated, however, that vested water rights are subject to state regulation. Holders of rights must comply with permit requirements when seeking to modification of use.
