Distinct Governmental Entities and Issue Preclusion: State vs. County in Nevada Qui Tam Actions

1. Introduction

This commentary examines the Supreme Court of Nevada’s April 1, 2025 decision in Orbitz Worldwide, LLC v. Eighth Judicial District Court. The petitioners—major online travel companies—sought writ relief to dismiss a qui tam action under the Nevada False Claims Act. Relators Mark Fierro and Sig Rogich alleged that petitioners under-remitted transient-lodging taxes by calculating tax on the contracted discounted rate rather than on the higher retail price charged to consumers.

The litigation overlapped with a separate Clark County suit challenging the same tax treatment. After Clark County’s suit was resolved in federal court in petitioners’ favor, petitioners argued that issue preclusion barred relators’ action. The district court rejected that argument, and the petitioners sought mandamus relief from the Nevada Supreme Court.

2. Summary of the Judgment

The Nevada Supreme Court denied the petition for a writ of mandamus. It held that issue preclusion cannot apply because the State of Nevada (for whose benefit the qui tam action was brought) and Clark County (the plaintiff in the parallel action) are distinct governmental entities not in privity. The court concluded that:

Clark County is neither a statutory trustee nor an agent of the State under NRS 244.3354 or related provisions.
Representation by the same law firm does not create privity.
Absent privity, relitigation of the lodging-tax issue by relators is not barred by issue preclusion.

3. Analysis

3.1 Precedents Cited

Five Star Capital Corp. v. Ruby (124 Nev. 1048): Defined issue preclusion and required party/privity nexus.
Alcantara ex rel. Alcantara v. Wal-Mart Stores, Inc. (130 Nev. 252): Adopted Restatement (Second) of Judgments § 41 on representation and privity for non-parties.
Mendenhall v. Tassinari (133 Nev. 614): Emphasized fact-specific nature of privity inquiries.
Golconda Fire Protection District v. County of Humboldt (112 Nev. 770): Recognized statutory trustee relationship where county holds funds on behalf of a fire district.
Bower v. Harrah’s Laughlin, Inc. (125 Nev. 470): Held that mere common counsel does not establish privity for preclusion.
Mitchell v. Forsyth (472 U.S. 511): Highlighted policy against duplicative litigation justifying early resolution of threshold defenses.

3.2 Legal Reasoning

The court’s reasoning proceeded as follows:

Writ Jurisdiction: Although writ relief is extraordinary, the court invoked its discretion to prevent needless duplication of litigation on a discrete issue—whether petitioners owed lodging taxes.
Standards for Issue Preclusion: Issue preclusion requires (1) a final judgment on the merits, (2) the same issue actually litigated, (3) essential to the prior judgment, and (4) party or privity in the prior action (Five Star).
Privity Analysis: Under Alcantara, a non-party may be bound if represented by a party in a fiduciary, agency, or class-representation capacity. The court examined NRS 244.3354 and related statutes to test three theories:

Constructive Trust/Trustee Theory: Unlike in Golconda, NRS 244.3354 does not require counties to hold or segregate lodging-tax revenues on behalf of the State, so no statutory trust arises.
Agency Theory: Collection and distribution of tax proceeds under NRS 244.3354 and NRS 364.127 is a ministerial act, not evidence that Clark County operated as the State’s agent with a right of control over the State’s interests.
Common Counsel Theory: Following Bower, shared legal representation does not suffice to create privity for preclusion purposes.

Conclusion: Relators and Clark County do not stand in privity. Without privity, issue preclusion does not bar relators’ qui tam action.

3.3 Impact

The decision clarifies two important principles:

In Nevada, subordinate political subdivisions are not automatically in privity with the State simply because they collect and remit revenues under a common statutory scheme.
Early resolution of preclusion defenses via writ remains available when it prevents unnecessary duplicative litigation of settled issues.

Future qui tam or tax-recovery suits can proceed in parallel at county and state levels unless the plaintiff entities demonstrate a recognized privity relationship. This decision may also inform other contexts where counties collect statutorily apportioned funds for state programs.

4. Complex Concepts Simplified

Qui Tam Action: A lawsuit brought by private individuals (relators) on behalf of the government under the Nevada False Claims Act to recover fraudulently obtained public funds.
Issue Preclusion (Collateral Estoppel): Bars relitigation of an issue already decided in a prior final judgment when the same parties or those in privity litigated the issue.
Privity: A flexible, fact-driven concept that binds a non-party to a prior judgment only if a sufficiently close legal relationship existed (e.g., trustee, agent, class representative).
Writ of Mandamus: An extraordinary remedy compelling a lower court to correct a clear legal error when no adequate appellate remedy exists.

5. Conclusion

The Supreme Court of Nevada’s decision in Orbitz Worldwide, LLC v. Eighth Judicial District Court establishes that for issue preclusion purposes, the State and its subordinate political subdivisions (here, Clark County) are not automatically in privity under NRS 244.3354. By requiring a concrete trustee or agency relationship—beyond mere statutory apportionment of tax proceeds or common counsel—the court preserves the right of private relators to pursue qui tam actions on the State’s behalf even after county-level litigation. This ruling strengthens procedural safeguards against premature dismissals of government-recovery suits and underscores the necessity of a true legal nexus before invoking issue preclusion between distinct public entities.