Document 3k7ybyqxbg2oDxD366pKyJjO

RAYMOND C. SANDLER CHARLES L. BIRKE STEVEN E. LEVY WILLIAM F. TISCH CRA1C C. B1RKER MARCI J. FOX MINC-CHU C . KEEFE KAREN L. SKLAR VJRC1NIA A. JO H N SO N RICHARD V. SANDLER OF COUNSEL NELSON ROSEN (1910-1985) SANDLER AND ROSEN COU NSELLORS AT LAW SUITE 510 GATEWAY WEST CENTURY CITY 1801 AVENUE OF THE STARS LOS ANGELES. CALIFORNIA 9 0 0 6 7 TELEPHONE (213) 277-4411 OR (213) 879-9161 CABLE ADDRESS ' RAYNELS* TELECOPIER (213) 2 7 7 -5 9 5 4 April 20, 1992 OUR FILE NUMBER: 2P-3.1659 Harold Morse, Esq. Morse & Mowbray 300 South Fourth Street Valley Bank Plaza, Suite 1400 Las Vegas, Nevada 89101-6026 J. Randall Jones, Esq. Jones, Jones, Close & Brown 300 South Fourth Street Valley Bank Plaza, Seventh Floor Las Vegas, Nevada 89101-6026 Dear Randall and Mr. Morse: Enclosed is a copy of a recent decision of the Ninth Circuit Court of Appeals in Nevada Power Co. v. Monsanto Company 92 Los Angeles Daily Journal D.A.R. 5010. This case discusses Nevada law re statutes of limitations and equitable indemnity. Charles L. Birke CLB:dr Enc. cc: David Lyman, Esq. (w/enc.) RECEIVED JJC r e f e 5010 r x - -1 viiQl Daily Appellate Report ^ Wednesday April 15, 1992 decision' has been made (o act on .e development.' Id. (quoting Sierra Club v. Hathaway, 579 F.2d 1162, 1168 (9lh Cir. 1978)). Similarly, in Conner v Burford, 848 F.2d 1441 (9th Cir. 1988), cert, denied, 489 U.S. 1012 (1989) held that an EIS for the sale of "no surface occupancy" leaseswas not required because the government retained the authority to decide whether any activity would ultimately occur and could examine the effects of any proposed activity at a later stage. Id. at 1447. K*. '.) In the instant matter, the Park Service has not autho rized or recommended approval of any mining operations. No "critical decision" has been made to approve any miping operation application for any site in the three parks*.As,djscussed above, Alternative D requires the Park Service to, deny a future application for a permit to conduct a mining operation in the paries if it would harm the environment in violation, of existing state and federal regulatory requirements. Thus, the detailed analysis of mitigation measures and cumulative and synergistic effects demanded by the Sierra Club is unwar ranted at this stage. See California v. Block. 690 F.2d at 761. exercise mining rights in the park. Accordingly, the district court did not abuse its discretion in dissolving the injunction! V'ih.'rW' *' AFFIRMED. ibi].*" -JjV AMENDED OPINION CIVIL: PROCEDURE *>J *lii;.:: ' ... Limitations (Period(Doesn't (Begin f 'fEyen if fraud Couid(Be (Discovered . ,,, V . . Cite as 92DailyJournal DAR. 5010 [5] The alleged failure of the EISs to consider mitigation measures as well as certain potential cumulative and synergis tic effects does not foreclose, later analysis of these factors. Indeed, each EIS expressly provides that (he Park Service will, consistent with NEPA, make an environmenml assess ment regarding any future application for a permit that ijiay be submitted for approval. In its records of decision, in? its briefs filed in this court, and at oral argument, (he ParkService has represented that it will fully comply'with the stric tures of NEPA in evaluating future applications for mining operations. Having persuaded the district court that it under stands its duty to follow NEPA in reviewing future applica tions for permits to conduct mining operations, judicial estoppel precludes the Park Service from later arguing that it has no further duty to consider mitigation measures or the . cumulative impact of mining in the three parks. See Russetl v. Rolfs, 893 F.2d 1033, 1037 (9th Cir. 1990), cert, denied, -- U.S.-- , 111 S. Cu 2915 (1991) (judicial estoppel bars party from making legal assertion which directly contradicts a posi tion taken in the same proceeding or a prior one); Stevens Technical Services, Inc. v. SS Brooklyn, 885 F.2d 584, 588 (9th Cir.` 1989) ("Judicial estoppel precludes a party from asserting a position in a current legal proceeding which is contrary to the position that party previously asserted in another."). UNITED STATES COURT OF APPEALS f o r t h e n in t h c ir c u it .. NgVi Power Co., a Nevada corporation, -'j.Ii ;i:*. Plaintiff-Appellant, ' v. Monsanto Company, a foreign corporation; General Electric Corporation, a foreign corporation; Westinghouse Electric.Corporation, a foreign corporation; and Does I through X X y , inclusive, . i , Defendants-Appeltees. No. 90-16179 D.C. No. CV-89-0Q555-LDG ORDER AMENDING OPINION, DENYING * ' PETITION FOR REHEARING, AND REJECTING SUGGESTION FOR REHEARING EN BANC 1 ' ^.Appeal from the United States District Court for the District of Nevada Lloyd D. George, District Judge, Presiding If the Park Service determines that the cumulative impact of a proposed mining operation is not significant, the Park Service has committed itself to issue an EA and a find ing of no significant impact as required by NEPA. 40 C.F.R. g 1508.13. If the impact on the environment is significant, the Pork Service will be required to prepare an EIS. 42 U.S.C. 4332(2)(C); 40 C.F.R. 1508.11. Whether an EA or an EIS is issued, the Sierra Club will have an opportunity to com ment and seek judicial review if NEPA has been violated. The Sierra Club argues that because future Es and EISs will be "tiered" to the present EISs, they will inevitably incorporate the EISs' alleged methodological errors. The EISs, however, expressly state that mitigation measures and the cumulative effects of specific mining operations will be considered in further detail when a specific application for a permit to conduct mining operations is submitted for approval. "W e cannot assume that government agencies will not comply with their NEPA obligations in later stages of development" Conner, 848 F.2d at 1448, Under the rule of reason, we conclude that the EISs demon strate that the Park Service has complied with NEPA "to the fullest extent possible" in dealing with hypothetical actions that may or may not be taken in managing future attempts to f -i.i .. Argued and Submitted . .,,,,.'October 10, 1991--San Francisco, California Filed February 5, 1992 ` Amended April 14, 1992 :1' = Before: Otto R. Skopil, Jr., Hany Pregen on, and : Diarmuid F. O 'Scannlain, Circuit Judges, /s Opinion by Judge O 'Scannlain; Concurrence by Judge Skopil COUNSEL iPaul Menell and Charles H. McCrea, Bloomington, Indiumi, for the plaintiff-appellant. ! Bruce. A. .Featherstone, Kirkland & Ellis, Denver, Colorado, for Monsanto; Jeffrey Klein, Weil, Gotsha! & Manges, New * York, New York, for Westinghouse; John ThomdalrThom- ' dal, Backiis, Maupin & Armstrong, Las Vegas, Nevada, for Monsanto and Westinghouse. ,' ; ORDER Wednesday, April 15, 1992 Daily Appellate Report k 5011 . The majority opinion in this matter, filed February 5,1992, is amended as follows: < '* ' 1 ' .`-i - The caption is revised to reflect the addition of Westinghouse Electric Corporation. The petition for rehearing is DENIED and the suggestion :for rehearing en banc is REJECTED. .Appellees' motion to file a transcript of oral argument is ' DENIED. slip op. at 1181, first paragraph, first line, after "fraud" insert the following: and failure to warn ' OPINION claslimips.o"pw. iatht 1181, first paragraph, third line, the following: the fraud claim. replace "such O 'SCANNLAIN, Circuit Judge; slip op. at 1181, before paragraph beginning "Nevada _ Power filed s u it. . . " insert the following: j f ; Nevada Power seeks to recover the costs of replacing elec- 1 bica! generating equipment that contained polychlorinated / The parties also agree that section 11.220 p f the ; Nevada Revised Statutes applies to the failure to ' warn claim. The Supreme Court of Nevada has expressly held that "the term 'accrued,' as used in 'biphenyls ("PCB's"). We must determine whether Nevada \ Power's claims for fraud and failure to warn against its ven- J dor, are time-barred, and whether Nevada Power has stated a c dini for implied equitable indemnification. NRS 11.220, incorporates the same `diligent discov ery' rule that is present in NRS 11.190(3}." Oak Grove Investors v. Bell & Gossett Co., 668 P.2d 1075, 1079 (Nev. 1983); accord Tahoe Village t ^ Homeowners Ass'n v. Douglas Cry., 799 P.2d 556, `558 (Nev. 1990). Thus, as with the fraud claim; the * , failure to warn action accrues V(w]hen the plaintiff , knew or in the exercise of proper diligence should I ''.During the 1960's and 1970*s Nevada Power purchased electrical equipment from General Electric and Westinghouse. Much of that equipment contained PCB's as a cooling agent Monsanto was die supplier of PCB's to General Electric and ' Westinghfclse during this period. have known o f the facts constituting the elements of! ~ his cause of action." Oak Grove, 668 P.2d at 1079. ' . slip op. at 1182, replace paragraph starting "The Manufac t u r e r s do not dispute . . . " with the following: 1 ` The Manufacturers argue that Nevada Power's 4 action accrued no later than 1979, when it conced*j ; edly knew of the dangers of PCB's. The falsity of a ' representation is only one of the facts that make up a fraud or failure to warn claim, however. One of the facts constituting a fraud or failure to warn claim is ` the defendant's state of mind. Only if the defen dant's misrepresentation is intentional has the defen- dant acted fraudulently. See Lubbe v. Barba, 540 , ' P.2d .115, 117 (Nev. 1975). Similarly, liability for failure to warn cannot arise where.lhe defendant did not reasonably know of the hazard. See'Oak Grove, 1 668 P.2d at 1080. slip op. at 1182, second full paragraph, fourth line, follow ing "constitute a fraud" insert the following: or failure to warn slip op. at 1184, immediately before the sentence beginning " `Because our precedent. . as pan of the same paragraph, insert the following: . W ' In the early 1970's, Congress began to investigate the dan gers to humans of exposure to PCB's. In 1976, Congress passed the Toxic Substances Control A ct which, inter alia, outlawed the manufacture, sale or distribution of PCB's unless used in a "totally enclosed" setting. See 15 U.S.C. 2605(e)(2). The Environmental Protection Agency ("EPA") promulgated regulations pursuant to this a c t which permitted the use of PCB's in most electrical equipment because such use was found by the EPA to be "totally enclosed," but the District of Columbia Circuit struck down these regulations as unsupported by substantia] evidence. See Environmental Defense Fund, Inc. v. EPA, 636 F.2d 1267, 1286 (D.C. Cir. 1980). In 1982, the EPA issued new regulations allowing . electrical.equipment containing PCB's to be used only in -restricted access areas, and in 1985, the EPA ordered more restrictions on such equipment See 40 C.F.R. 761.30 (1990). As early as the early 1970*s, the then-chairman of Nevada Power became aware of the dangers of PCB's. In 1976, Nevada Power's safety director sent a memorandum to all . company personnel discussing the hazards of PCB exposure, and in 1979 he began giving lectures on this subject Also in that year, Nevada Power Issued a company manual on the ' dangers of PCB's. During 1978 and 1979, Nevada Power also began a program o f removing equipment using PCB's from < Very recently, this court has reaffirmed that under " ; service before its useful life had been completed. federal law, "when the plaintiff discovered or could have discovered the fraud with the exercise of rea sonable diligence . . . is usually a question for the ' trier of fact." General Bedding Corp. v. Echevarria, 947 F.2d 1395, 1397 n.2 (9lh Cir. 1991). Nevada Power filed suit in Nevada state court on July 7, i 1989. Nevada Power alleged, inter alia, that General Electric, Monsanto,' and Westinghouse (the "Manufacturers") had knowledge of the dangers of PCB's in the 1960's and 1970's .when they sold Nevada Power equipment with PCB's, but - The dissent opinion is amended as follows: j represented to Nevada Power that such equipment was safe. * ia, Nevada Power sought damages from the Manufacturers under * slip op. at 1188, second paragraph, line one and line seven: , theories of fraud and misrepresentation, failure to warn (col- replace'"statute with "statutes" lo, , ' . , lectively the "fraud claims"), and implied equitable indemnity.1 iw The panel has voted to deny the petition for rehearing. . .Nevada Power alleged that although it was aware of the dan- ' 1 m- Judges Pregerson and O'Scunnlain have voted to reject (he ' gers of PCB's by 1979, it only learned in 1988 that the Manu- for . suggestion for rehearing en banc and Judge Skopil has'.so rec-. . facturis had willfully misrepresented their knowledge about . ommended. PCB's .when.they sold equipment to Nevada Power in the I960's and 1970's. That is, Nevada Power contends that The full court has been advised of the en banc suggestion, although it realized by 1979 that the Manufacturers' represen- " and no judge of the court has requested a vote on it. tations in the I960*s and early 1970's about the safety of rn i^riin i fffriiy itfr^ ^ 5012 Daily Appellate Report i & Wednesday, April 15, 1992 PCB's had been false, it was only in 1988 that Nevada Power discovered that such false statements had been made intentionally by the Manufacturers, and not out of ignorance. The Manufacturers removed the case to federal court based on diversity of citizenship, and filed a motion for summary judgment, contending that Nevada Power's claims were barred by the applicable statutes of limitations. The district court granted the Manufacturers' motion, concluding that all of Nevada Power's claims were time-barred, and further that Nevada Power had failed to state a claim for equitable indem nity. Nevada Power timely filed notice of appeal. II t This matter was before the district court under its diversity I jurisdiction, and hence.stale substantive law applies. See Erie I Railroad v. Tompkins, 304 U.S. 64 (1938). Specifically, fed/ eral courts exercising diversity jurisdiction are to use state statutes of limitation. West v. Conrail. 481 U.S. 35, 39 n.4 (1987). The Nevada Supreme Court is controlling authority on questions of Nevada law. See Commissioner v. Bosch, 387 U.S. 456,465 (1967). As in questions of federal law, a district court's interpreta tion of state law is reviewed de novo. See In re McLinn, 739 F.2d 1395, 1397 (9th Cir. 1984) (en banc) (abandoning prior rule of "a deferential standard of review to a district judge's construction of the law of the state in which he or she sits"). A grant of summary judgment presents an issue of law reviewed de novo. Kruso v. International Tel. &. Tel., 872 F.2d 1416,1421 (9th Cir. 1989), cert, denied, 110 S. Cl 3217 (1990). In determining whether any genuine issue of material fact exists, this court must view the evidence in the light most favorable to the nonmoving party, here Nevada Power. Tzung v. State Farm Fire & Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989). Ill have known of the facts constituting the elements of his cause of action." Oak Grove, 668 P.2d at 1079. Nevada Power filed suit on July 7, 1989. Hence if its cause of action accrued before July 7, 1986, its action is barred. The uncontested facts are that Nevada Power knew of the dangers of PCB's no later than 1979, but that it only discovered in 1988 that the Manufacturers' misrepresentations to tt were intentional. Between 1979 and 1988, Nevada Power appar ently did not investigate the possibility of fraud by the Manu facturers. Nevada Power contends that between 1979 and 1988, although it knew that the Manufacturers' representations had been false, it had no reason to believe that such misrepresen tations were anything other than innocent mistakes caused bv the general lack of scientific understanding during the 1960's and early 1970's of the effects on humans of PCB exposure. In 1988, Nevada Power discovered internal documents of the Manufacturers which Nevada Power contends show that the Manufacturers' understanding of the dangers of PCB's in the 1960*s and early 1970's was much more advanced than the general state of knowledge in the scientific community. Hence, Nevada Power argues that only in 1988 did it discover the fact of the Manufacturers' willful state of mind in making ^ > misrepresentations about the safety of PCB's. The Manufacturers argue that Nevada Power's action accrued no later than 1979, when it concedetlly knew of the dangers of PCB's. The falsity of a representation is only one of the facts that make up a fraud or failure to warn claim, however. One of the facts constituting a fraud or failure to warn claim is the defendant's state of mind. Only if the defen dant's misrepresentation is intentional has the defendant acted fraudulently. See Lubbe v. Barba, 540 P.2d 115, 117 (Nev. 1975). Similarly, liability for failure to warn cannot arise where the defendant did not reasonably know of the hazard. See Oak Grove, 668 P 2d at 1080. A Nevada Power contends that its fraud and failure to warn claims are not barred by (he statute of limitations.-There is no disagreement that a three-year statute of limitations ~ applies to the fraud claims. See Nev. Rev. S lat 11.190.3(d) (1989) (actions for "fraud or mistake" must commence within )3 years). Such actions are "deemed to accrue upon the discov ery by the aggrieved party of the facts constituting the fraud or mistake." Id. .The Nevada Supreme Court, however, has ,,interpreted.this statute to mean not that an action in;fraud accrues only when the plaintiff has alt the facts needed .to I constitute a fraud claim, but rather that "the statute of limita- I lion commenced] to run from the date of the discovery of / facts which in the exercise of proper diligence would have ' enabled the plaintiff to leam of the fraud." Howard v. How ard, 239 P.2d 584, 589 (Nev. 1952). Accord Sierra Pacific (Power Co. v. Nye, 389 P.2d 387, 390 (Nev. 1964) ("mere ignorance of the existence o f . '. . the facts which constitute the cause will not postpone the operation of the statute of limita tions . . . if the facts may b e *ascertained by inquiry or diligence"). *, x The parties also agree that section 11220 of the Nevada f Revised Statutes applies to the failure to warn claim. The Supreme Court of Nevada has expressly held that "the term `accrued,' as used in NRS 11.220, incorporates the same `dili gent discovery' rule that is present in NRS 11.190(3)." Oak Grove Investors v. Belt & Gossett Co., 668 P.2d 1075, 1079 (Nev. 1983); accord Tahoe Village Homeowners Ass'n v. Douglas Cty., 799 P.2d 556, 558 (Nev. 1990). Thus, as with the fraud claim, the failure to warn action accrues "(w]hen the plaintiff knew or in the exercise of proper diligence should Thus whether Nevada Power's suit was timely turns on whether its knowledge of the dangers of PCB's in 1979 was sufficient that, with proper diligence, it could have uncovered the rest of the facts necessary to or tai lure to warn claim. Under federal law, this kind ot determination is generally inappropriate for resolution on summary judgment.1 In deter mining when an action has accrued under a discovery-based statute of limitations, "[t]he question of when [the alleged wrongdoing] was or should have been discovered is a ques tion of fact It may be decided as a matter of law only when unconcroverted evidence irrefutably demonstrates plaintiff discovered or should have discovered the fraudulent conducL" Mosesian v. Peat, Marwick, Mitchell < Co., 727 F.2d 873, 877 (9th Cir.), cert, dented, 469 U.S. 932 (1984) (internal citations and quotations omitted). "Where the cause of action was belatedly discovered, the issue whether the plaintiff exer cised reasonable diligence is a question of facL'* Timmel v. Moss, 803 F.2d 519, 521 (9th Cir. 1986). In a case quite similar to the one before us, the defendant installed an inadequate computer system in the plaintiffs office. See Sierra Diesel Injection Sent. v. Burroughs Corp. tSierra Diesel I), 648 F. Supp. 1148.1149 (D. Nev. 1986). As in the instant case, the plaintiff knew early on that the defen dant's representations about the equipment made at the time of sale had been inaccurate. Id. at 1151. The question faced by the court was whether, under the Nevada limitations rule, such knowledge was sufficient that, with proper diligence, the plaintiff should have discovered that such misrepresentations, were not innocent mistakes but willful fraud. The court stated that "the question of what constitutes sufficient knowledge to \ '* w twjj Wi i OUXJ place a party under an afnrmti'j^duty to discover the fraud or mistake is normally a jury q ` ""ion." Sierra Diesel injec tion Serv. v. Burroughs Corp. (Sierra Diesel 11), 651 F. Supp. 1371, 1373 (D. Nev. 1987) (denying motion to reconsider Sierra Diesel /). The nonmovant, here Nevada Power, is entitled to have inferences drawn from the evidence in the light most favor able to it on a motion for summary judgment. Tzung, 873 F.2d at 1339-40. One reasonable inference from the facts is that, although Nevada Power knew of the dangers of PCB's by 1979, it had no reason to think that the Manufacturers were any less in the dark about such dangers than the government and scientific community generally were in- the 1960's. Between the I960*s and late 1970's the level of knowledge of scientists and the government regarding'PCB's increased dra matically. Before its 1988 discoveries, Nevada Power may have plausibly believed that the Manufacturers' knowledge ' had similarly increased during th 1960's and 1970's, and that , their earlier representations, while clearly false given the knowledge base today, were innocent mistakes rather than part of the willful cover-up that Nevada Power now alleges. might apply wheg e party knows facts sufficient to make * out a negligence t ' .i. That is, the facts constituting the neg ligence claim might be enough that, with proper diligence, the facts showing willfulness, and hence a fraud claim, would come out In that situation, of course, the Nevada courts would apply their well settled rule that at the time the plaintiff "in the exercise of proper diligence should have known of the facts constituting the elements of his cause of action," the statute begins to run. See Oak Grove, 668 P.2d at 1079. I We see no indication that the Nevada Supreme Court would go further and, as the.Manufacturers urge, adopt a per se rule that whenever the facts of a negligence claim are present, the statute begins to run on fraud actions regardless of whether the facts of such fraud could be discovered through proper diligence. It may be that in most cases where the facts ) I I i 4 of a negligence claim are known, the "proper diligence" rule would start the limitations period running. But in those cases where, even with knowledge of the facts of a negligence claim, proper diligence could not uncover the facts regarding state of mind needed for a fraud claim, it would be unduly harsh and inequitable to hold that the fraud action always accrues at the time of the negligence action. We are not per Very recently, this court has reaffirmed that under fed- era! law, "when the plaintiff discovered or could have discov-1 suaded that the Nevada Supreme Court would adopt such a rule. ered the fraud with the exercise of reasonable diligence. . . is 1 usually a question for the trier of fact." General Bedding[ IV Corp. v. Echevarria. 947 F.2d 1395,1397 n.2 (9th Cir. 1991). "Because our precedent dictates that the question of notice of fraud is for the trier of fact, the party seeking summary dispo sition has an extremely difficult burden to show that there exists no issue of material fact regarding notice." SEC v. Sea board Corp.. 677 F.2d 1301, 1309-10 (9th Cir. 1982). We conclude that such burden has not been met here. The district court rejected Nevada Power's claim for implied equitable indemnity against the Manufacturers because under Nevada law, the indemnitee and the indemnitor must have "common liability." The court noted that the EPA regulations impose no liability on the Manufacturers for their acts of supplying equipment to Nevada Power twenty or more years ago. Only current use or manufacture of PCB equip B ment runs afoul of the EPA regulations, and hence no liability common to both Nevada Power and the Manufacturers exists In the alternative, the Manufacturers contend that even if here. the facts of a fraud claim could not have been uncovered through proper diligence by Nevada Power, a per se ru le') should apply barring fraud claims whenever a negligence / daini based on the same incident would be barred. Since I Nevada Power has conceded that its strict liability and negli- V gence claims connected with the sale of the PCB equipment 1 are barred by the statute of limitations, if the per se rule urged by the Manufacturers were adopted, Nevada Power's fraud claims would be barred as a matter of law, despite the exis tence of a genuine issue of material fact regarding the "proper The Nevada Supreme Court has spoken recently and clearly that under Nevada law, "[t]he right of indemnity rests upon a difference between the . . . liability of two persons, each o f whom is made responsible by the law to an injured party." Black &. Decker, Inc. v. Essex Group, 775 P.2d 698, 699 (Nev. 1989) (emphasis added). As Judge Learned Hand has stated, it is an essential prerequisite for the existence of indemnification liability that, regarding the indemnitor and (he indemnitee, "both parties are liable to the same person for diligence" rule. the joint wrong." Santisteven v. Daw Chemical Co., 506 F.2d 1216, 1219 n.I0 (9th Cir. 1974) (quoting Slattery v. Marra . The Manufacturers argue that "once a plaintiff has a Bros., 186 F.2d 134,139 (2d Cir.), cert, denied, 341 U.S. 915 suspicion of. some wrongdoing, the statute of limitations (1951)). begins to run' on all claims relating to that wrongdoing, including fraud -- regardless of whether the plaintiff has . Nevada Power, in an effort to support its position, cites .knowledge of the facts supporting a particular theory of to authority stating that the indemnitee and the indemnitor action." They provide no Nevada authority for this proposi need not be joint tortfeasors. See Hydro-Air Equip, v.- Hyatt tion, but cite an Iowa case that does apparently hold that the statute of limitations begins to run on a fraud claim as soon as a party has facts sufficient to make cut a strict liability or negligence claim regarding the same transaction. See Sparks v. Metalcraji. Inc., 408 N.W.2d 347, 352 (Iowa 1987). But that court added that "(ojne exception to this holding might be a fraudulent concealment by the defendant resulting in a claimant's failure to discover facts supporting a legal theory Corp., 852 F.2d 403,405 (9th G r. 1988) (interpreting Nevada law). But this misses the point. Nobody has_claimed that Nevada Power and the Manufacturers m j"" fnrtfoa. sots. Rather, the Nevada Supreme Court has stated thatfor an indemnity action to arise, there must be a "legal obligation owed by each of the wrongdoers to the injured person," Black & Decker, 775 P.2d at 699. '' of action." Id. at 352-53. Since Nevada Power indeed alleges just such concealment here, the persuasiveness of this case, even as noncontrolling authority, is weak. ` ' Even accepting, arguendo, Nevada Power's contention ' that the EPA is an "injured person," only Nevada Power has a legal obligation to the EPA with respect to the electrical . It would appear that Nevada case law has carved out an \ exception to the statutory limitations rule where, although the I party, does not know all the facts constituting his cause of ( action, he could discover such facts lhrough the exercise of 1 equipment the Manufacturers sold it. The Manufacturers have . no obligations or liabilities to the EPA connected with equip ment they sold in the 1960's and early I970's. No common liability exists here. proper diligence. See Howard, 239 P.2d at 589. Sych rule j 15, 1992 ;ummons.`> )n period dissolved ' husband i Howard ' when she vc actuala fraudu-> a duty to: ida couit-\ 1she dis- s In other fore us, began to ire of the 879 F.2d >90). The he plain-;' tncealing id of that plaintiffs >CBs... period in vhen the >ns were 10th Gr. e notion :ams that Ohio v. Iied, 454 on in ming if of :nt of ' will ethe is for - could not t whether /as put on es the law in of fact miff real s', e.g., 1293. 446. 611 ssue as to mentations judgmem .614F.2U xd on the knew the hrce years tat it knew been false, to inquire ward, 239 its. to decide luch of the k Wednesday, April 15, 1992 Daily Appellate Report 5015 T v T -----:------- ---------------------------------------3 ------------- - protection limitation rules are intended to provide. The-rules -- -- Dan Davis, the president and major shareholder of ITAC urc-grounded on twin policies of protecting defendants:from Corporation, appeals a jury verdict finding him liable for will defending stale claims and promoting repose..Jieya&y'StqtgT fully failing to pay withholding and social security taxes for Bank v. Jamison Fam. Part.,___Nev. 8 01'F.2d'1 j'7 7 /'' 1381 (1990); Ohio, G5I F.2d at 694. Both policies are'iYdtletf'j by a rule that necessarily makes the statute of limitation^ ' 1 jury question. See Ohio, 651 F.2d at 694. Unless the coup bifurcates the trial, both the defendant and the 'court' Wilf be burdened by the trial of a stale claim, even if the defridt^ is vindicated, id. Furthermore, any repose -front`th'slattile''! would be illusory if the defendant still faces "th cost aild^ vexation of protracted litigation and the uncertainty'ofcon tin t1 gent liability." Id. < t-i* diiup:?: r^AC's,employees for the last quarter of 1981 and the first two Quarters of 1982. Davis had argued that he was not a responsible officer and that his subsequent preference of other cretifjtors over (he Internal Revenue Service ("IRS") did not evince "willfulness." The district court refused to instruct the jury1on Davis's definition of willfulness. The jury subse- qqcntty found Davis liable for the employee taxes owed the government. The district court also denied Davis's motion to reduce the assessment for the last quarter of 1981. Davis appeals. We affirm. /A I would affirm the district court. . - >f b n . ( .-ru !.o:j BACKGROUND ::t.\ , * 1 . . * *. , ii; , - * . ' i !'.>" 1 *' - /ul*"':! an" ; -.! itrjibfehui. rilriti aill j: ii iij i - .. '-'i ii* T A X A T IO N -' - r. nou. _ V - ;.> * . ? - . .viTii' : : ... . ... . . 1 *--fu . '{Presidentfs {Preference io {Pay&e&tor$ ';iv i Over Government Shops ; Statutory Framework The Internal Revenue Code requires employers such as ITAC Corporation ("ITAC*) to withhold federal social secur ity and individual income taxes from the wages of their employees. .26 U.S.C. 3102(a), 3402(a).* Although an employer collects this money each salary period, payment to the federal government takes place on a quarterly basis. In the interim, the employer holds the collected taxes in trust for the government.-26 U.S.C.- 7501(a). These taxes accordingly are kno.wh as "trust fund taxes." Siotlov v. United States. 436 U.S. 238,243 (1978). Other taxes, such as those directly owed by d& Business, are.referred to as "non-trust fund taxes." V).; . Citeas 92 DailyJournal D A R . 5015 -.n-!-,, - '* " a Vitiiisfa UNITED STATES COURT OF APPEALS1"'- FOR THE NINTH CIRCUIT , ; .' Dan O. Davis, Plaintiff-counter- *- , claim-defendant-Appel!an:, v. Untied States of America, Defendant-counter- - ; . claimant-Appellee. No. 90-16209 ' ' '- D.G N an CV-88-20759-RPA f y' *OP. *INIO.N 4 -.Once net wages are paid to an employee, the government credits that employee with the tax payments, regardless of whether the taxes are ultimately paid over by the employer. Id.-In order to protect against revenue losses,, the tax code offers the IRS a variety of means of recovering from employeis'who fail to pay over collected employee taxes. In addition to tax liens, 26 U.S.C. 6321, and criminal penalties, 26 U.S.C. 7202, 7215, the IRS may assess a civil penalty against responsible corporate officials equal to the amount of delinquent trust fund taxes (" 100% penalty"), 26 U.S.C. 6672. Section 6672 provides, in relevant part: . Any person required to collect, truthfully account for, and pay over any tax imposed by this title who - willfully fails to collect such tax,- or truthfully Appeal from the United States District Couit'''' for the Northern District of California .^ \ . , Robert P. Aguilar, District Judge, Presiding' ' , Argued and Submitted , \ - ..October 10, 1991--San Francisco, Gdjf o r m a . 'j r,\i r r . * .. -Filed April 14,' 1992: i-s1 ^'r & i : I ' .. - <--.t : : f Before:. Richard H. Chambers, Thomas Tang and. Stephen S. ,f . Trott, Grcuit Judges., . . . . , j. i A .r;ti v r> . '!-'/) Opinion by Judge Tang- ! \k COUNSEL pt V David M. Kirsch, San Jo.<re, Califomia, forU e app^IlnL ,, Bruce R. EUisen, Tax Division. UnitedStoles Department of Justice, Washington, D.C., for the appellee. . {j . . - , .. . / OPINION TANG, Grcuit Judge: 'i Vl **'*^ t ,,account for and pay over such' tax, or willfully attempts in any manner to evade, or defeat any such . . tax.or the payment thereof, shall, in addition to other . .'penalties'provided by law, be liable to a penalty 'equal to the total amount of the tax evaded, or not collected, or not accounted for and paid over. A "person," for purposes of section 6672, includes "an offi cer or employee of a corporation, or a member or employee ..of a `partnership, who as such officer, employee; or member is under a duly to perform the act in respect of which the vio lation occurs." 26 U.S.C. 6671(b).The recovery of a penalty . under section 6672 entails showing that the individual both Was a "responsible person" and acted willfully in failing to 'collect or, pay over the withheld taxes. Moggy v. United States, 560 F.2d 1372,1374 (9th Cir. (977), cert, denied, 439 U A 821 (1978). .\ . . B. Factual History v . -' Dan Davis helped to organize' ITAC in the mid-1970s. Dur' ing the time in'queslion, Davis was ITAC's president, a mem ber of its board of directors, and its major shareholder. ITAC failed to pay its employees' withheld social security ' and income taxes during the last quarter of 1981 and the first 'two quarters of 1982. Davis claims that he did.not leam of