1

2 UNITED STATES DISTRICT COURT

3 DISTRICT OF NEVADA

4 THE STATE OF NEVADA, Case No. 3:23-cv-00442-ART-CLB 5 DEPARTMENT OF EMPLOYMENT TRAINING AND REHABILITATION, ORDER ON DEFENDANT’S MOTION 6 ex. rel. Chagolla, FOR RECONSIDERATION OR ALTERNATIVELY FOR 7 Plaintiff, CERTIFICATION v. (ECF Nos. 55, 56) 8 Lyft, Inc., 9 Defendant. 10 11 Before the Court is Defendant Lyft, Inc.’s motion asking this Court to 12 reconsider its order denying Lyft’s motion to dismiss, or, in the alternative, to 13 certify questions to the Nevada Supreme Court. (ECF Nos. 55, 56.) For the 14 reasons stated below, the Court grants in part Lyft’s motion for reconsideration, 15 clarifies its prior ruling, and grants in part Lyft’s motion for certification of 16 questions to the Nevada Supreme Court. 17 I. Background 18 This is a qui tam action brought by Plaintiff Christina Chagolla (“Relator”), 19 a former driver for Lyft, alleging that Lyft violated the Nevada False Claims Act 20 (“NFCA”), NRS 357.040(1)(g), which authorizes a reverse false claim where a 21 person “[k]nowingly conceals or knowingly and improperly avoids or decreases 22 an obligation to pay or transmit money or property to the State or a political 23 subdivision.” Relator alleges that Lyft knowingly misclassifies its drivers as 24 independent contractors, thereby avoiding its obligation to pay unemployment 25 taxes to the state of Nevada pursuant to NRS 612.085. Relator alleges that Lyft 26 drivers cannot meet the requirements for the independent contractor exemption 27 as outlined in NRS 612.085, and that Lyft did not seek an independent contractor 28 exemption from Nevada’s Department of Employment Training and Rehabilitation 1 (“DETR”). Specifically, Relator alleges that Lyft cannot satisfy NRS 612.085(1) 2 because “Relator and all other [Lyft] drivers in Nevada were not free from the 3 control and direction of Lyft in connection with the performance of the work,” and 4 that Lyft cannot satisfy NRS 612.085(2) because Lyft is a transportation 5 company, and Relator is a driver for Lyft, without which “[Lyft] would not have a 6 business.” (ECF No. 19 at 7, 8.) Because Lyft knowingly misclassifies its drivers, 7 Relator alleges, Lyft has “defrauded the state of Nevada by failing to pay monies 8 to the state of Nevada’s unemployment compensation system,” giving rise to a 9 reverse false claim under the NFCA, NRS 357.040(1)(g). (ECF No. 28 at 2.) 10 This case was originally filed in the Second Judicial District of Washoe 11 County, Nevada. (ECF No. 1-1.) Lyft then removed this case to federal court. (ECF 12 No. 1.) Lyft later filed a motion to dismiss Relator’s first amended complaint. (ECF 13 No. 22.) Lyft made several arguments in support of its motion: (1) Relator’s claim 14 is barred by the Nevada Supreme Court’s holding in International Game 15 Technology, Inc. v. Second Judicial District Court of Nevada,

(Nev. 16 2006) (hereinafter “IGT”); (2) NRS 612.085 does not require businesses to seek a 17 prior exemption before engaging independent contractors; (3) the Court lacks 18 jurisdiction over Relator’s claim under the NFCA’s public disclosure bar; and (4) 19 Relator’s claim does not meet the pleading requirements of Federal Rule of Civil 20 Procedure 9(b) because the complaint fails to allege a false statement. (ECF No. 21 22.) The Court ruled against Lyft as to each argument and denied its motion to 22 dismiss. (ECF No. 36.) Lyft now brings the instant motion to reconsider the 23 Court’s order, and in the alternative to certify questions to the Nevada Supreme 24 Court. 25 II. Lyft’s Motion for Reconsideration 26 A. Legal Standard 27 A district court may reconsider an interlocutory order for cause, so long as 28 it retains jurisdiction. LR 59-1(a). Reconsideration may be appropriate if the 1 district court “(1) is presented with newly discovered evidence, (2) committed clear 2 error or the initial decision was manifestly unjust, or (3) if there is an intervening 3 change in controlling law.” Smith v. Clark Cnty. Sch. Dist.,

(9th 4 Cir. 2013) (citing Sch. Dist. No. 1J v. ACandS, Inc.,

, 1263 (9th Cir. 5 1993)); see also LR 59-1(a). 6 B. Analysis 7 Lyft requests reconsideration as to three of the arguments in its motion to 8 dismiss. Lyft argues that the Court committed clear error when it (1) failed to 9 decide whether IGT bars Relator’s NFCA reverse false claim, and failed to “predict” 10 how the Nevada Supreme Court would decide this question; (2) failed to decide 11 whether there is an affirmative duty under NRS 612.085 to seek an independent 12 contractor exemption from DETR; and (3) found that Relator plead a violation of 13 the NFCA. 14 1. Whether IGT Bars Relator’s Claim 15 The Court will grant in part Lyft’s motion to reconsider whether IGT bars 16 Relator’s claim. While the Court’s order did decide that IGT does not bar Relator’s 17 claim, the Court did not “predict,” as it does now, how the Nevada Supreme Court 18 would decide this question. Because this question meets the standard for 19 certification to the Nevada Supreme Court, the Court also grants Lyfts’s 20 alternative motion to certify this question. See infra section III. 21 When federal courts confront a state law issue without binding precedent, 22 they must “predict how the state’s highest court would decide” the question. See 23 Giles v. Gen. Motors Acceptance Corp.,

(9th Cir. 2007). While 24 the Court’s order held that IGT did not preclude the instant action, it now 25 acknowledges that this is an open question because the Nevada Supreme Court 26 has not directly spoken to this issue. The Court predicts that the Nevada Supreme 27 Court would answer this question the same for three reasons: IGT and NRS 28 357.040(1)(g) permit reverse false claims based on tax liability; this case does not 1 involve, as IGT did, a request by the Nevada Attorney General to dismiss the NFCA 2 action for good cause; and the question of whether Lyft owed unemployment taxes 3 is one guided by Nevada statute and routinely decided by courts. 4 First, the Nevada Supreme Court in IGT explicitly stated that tax liability 5 matters as a whole are not excluded from the scope of the NFCA. IGT,

at 1103–05 (citing inter alia NRS 357.040(1)(g)). The court in IGT held that the 7 text of the NFCA contemplates that private relators may pursue reverse false 8 claims based on tax liabilities: 9 Nevada’s FCA, in stark contrast to the federal legislation after which it was modeled, includes language allowing reverse false claims but 10 omits any provision barring persons from bringing false claims actions based on tax liabilities.[] Thus, facially and otherwise, the 11 inclusion of “obligations” within the FCA's scope, coupled with the 12 omission of an express tax bar, conclusively demonstrates the Legislature’s intent to include tax liability matters within the realm 13 of possible false claims. 14 Id. at 1104 (omitting footnote citing to California’s reverse false claims statute, 15 which, like the federal statute, excludes tax liability claims). Though the NFCA 16 has since been amended, the current version also does not bar reverse false 17 claims based on tax liabilities.1 18 Second, IGT focused on a specific procedural context, namely the Nevada 19 Attorney General’s request to dismiss the NFCA claim for “good cause.” There, 20

21 1 In IGT, the Nevada Supreme Court construed the prior version of NRS 357.040(1)(g), which was amended in 2013. Prior to the amendment, NRS 22 357.040(1)(g) required proof that the person knowingly made or used “a false 23 record or statement.” IGT,

(quoting prior version of NRS 357.040(1)(g) (1999) (providing that a reverse false claim arises when a person 24 “[k]nowingly makes or uses, or causes to be made or used, a false record or statement to conceal, avoid, or decrease an obligation to pay or transmit money 25 or property to the State or a political subdivision”)). After the 2013 amendments, 26 NRS 357.040(1)(g) now provides that a reverse false claim arises if a person “[k]nowingly conceals or knowingly and improperly avoids or decreases an 27 obligation to pay or transmit money or property to the State or a political subdivision.” 28 1 the Attorney General intervened in the case and moved to dismiss the action, 2 which the lower court denied.

at 1095–96. On appeal, the Nevada Supreme 3 Court’s analysis focused on the “good cause” standard for dismissal, which 4 requires an Attorney General to show that “the dismissal is rationally related to 5 a legitimate government purpose.”

at 1100–01. The Nevada Supreme Court 6 held that there was good cause for dismissal based on the Attorney General’s 7 “showing that the resolution of a false claims action requires a factual evaluation 8 of, or legal interpretation of, the revenue statutes.”

. Here, the Attorney 9 General was notified of the action filed in state court and did not intervene, so 10 there is no request by the Attorney General to dismiss for good cause. Rather, the 11 request for dismissal comes from the defendant under the Rule 12(b)(6) failure to 12 state a claim standard. Though Lyft argues that IGT requires dismissal under 13 12(b)(6), the Court is not aware of any case law applying IGT in this way. Allowing 14 a defendant to dismiss an NFCA tax liability claim under IGT would therefore 15 extend, not simply follow, the holding in IGT. 16 Third, nothing in IGT or NRS 612.085 precludes the Court from deciding 17 whether Lyft meets the independent contractor exemption under NRS 612.085. 18 While Lyft argues that this question must be decided in the first instance by 19 DETR, NRS 612.085 provides the requisite legal test. The default rule under NRS 20 612.085 is an employment relationship. NRS 612.085 (“Services performed by a 21 person for wages shall be deemed to be employment unless . . .”) (emphasis added). 22 The independent contractor exemption, a three-part test codified in NRS 612.085, 23 is modeled on the “ABC” test. See Robert Sprague, Using the ABC Test to Classify 24 Workers: End of the Platform-Based Business Model or Status Quo Ante?, 11 Wm. 25 & Mary Bus. L. Rev. 733, 748 n.63 (2020). This is a common test which state and 26 federal courts regularly apply. See People v. Uber Techs., Inc.,

290, 289 (2020), as modified on denial of reh’g (Nov. 20, 2020) (applying 28 California’s statutory ABC test); Salinas v. Cornwell Quality Tools Co.,

Supp. 3d 979, 990–92 (C.D. Cal. 2022) (same); Sportsman v. A Place for Rover, 2 Inc.,

, 1090–99 (N.D. Cal. 2021) (same); Portillo v. Nat’l 3 Freight, Inc.,

, 90–94 (D.N.J. 2022) (applying New Jersey’s 4 statutory ABC test). The Nevada Supreme Court has engaged in similar analysis 5 in analyzing independent contractor versus employment status in the context of 6 wage and hour laws. See Doe Dancer I v. La Fuente, Inc.,

, 868–70 7 (Nev. 2021) (applying “economic realities” test to determine if workers were 8 independent contractors); Terry v. Sapphire Gentlemen’s Club,

, 9 958–60 (Nev. 2014) (same). The legal test supplied by NRS 612.085 is one 10 routinely applied by courts and nothing in the statute appears to bar courts from 11 applying it in the first instance. 12 For these reasons, the Court predicts that the Nevada Supreme Court 13 would decide that neither IGT nor NRS 612.085 bars the present action. The 14 Court also finds this question appropriate for certification, as discussed below in 15 section III. 16 2. Whether There is an Affirmative Duty Under NRS 612.085 to Seek an Independent Contractor Exemption from DETR 17 18 Lyft argues that the Court’s order failed to determine whether there is an 19 affirmative duty to seek an independent contractor exemption from DETR under 20 NRS 612.085, and failed to predict how the Nevada Supreme Court would decide 21 this question. The Court declines to reconsider this issue because the Court did 22 not commit clear error. The Court’s order held that whether there is an affirmative 23 duty under NRS 612.085 to seek an independent contractor exemption was not 24 dispositive of Lyft’s motion. Rather, even if there is no affirmative duty to do so, 25 Relator still alleged that Lyft cannot meet the requirements for an independent 26 contractor exemption under NRS 612.085, giving rise to an obligation to pay 27 unemployment taxes, and that Lyft knowingly failed to do so, which is sufficient 28 to state a reverse false claim under the NFCA. The Court therefore did not commit 1 clear error in not deciding this question. 2 3. Whether Relator Plead a Violation of the NFCA 3 Finally, Lyft argues that the Court committed clear error when it found that 4 Relator plead a claim under the NFCA, even though Relator’s complaint did not 5 allege that Lyft fails all three prongs of the independent contractor exemption test 6 under NRS 612.085. This argument is based on a misconception of the test under 7 NRS 612.085. Under NRS 612.085, services are deemed to be employment unless 8 all three prongs of the test are met. See State Dep’t of Emp., Training & Rehab., 9 Emp. Sec. Div. v. Reliable Health Care Servs. of S. Nevada, Inc.,

, 417 10 (Nev. 1999). Put another way, if an employing unit fails just one prong of the test, 11 the services are deemed to be employment, subject to unemployment taxes. 12 Therefore, the allegations in Relator’s complaint that Lyft fails the first two prongs 13 of the test, NRS 612.085(1) and (2), are adequate to allege that Lyft cannot meet 14 the independent contractor exemption. 15 III. Lyft’s Alternative Motion for Certification 16 Under Nevada Rule of Appellate Procedure 5(a), the Nevada Supreme Court 17 may answer questions of law certified to it by a United States District Court 18 “which may be determinative of the cause then pending in the certifying court 19 and as to which it appears to the certifying court there is no controlling precedent 20 in the decisions of the Supreme Court or Court of Appeals of this state.” 21 Generally, “[i]f the state's highest appellate court has not decided the question 22 presented, [a federal court] must predict how the state’s highest court would 23 decide the question.” High Country Paving, Inc. v. United Fire & Cas. Co.,

976, 978 (9th Cir. 2021). “However, if state law permits, [a federal court] may 25 exercise [its] discretion to certify a question to the state's highest court.”

In 26 deciding whether to certify a question to a state’s highest court, a federal court 27 should consider: “(1) whether the question presents ‘important public policy 28 ramifications’ yet unresolved by the state court; (2) whether the issue is new, 1 substantial, and of broad application; (3) the state court’s caseload; and (4) ‘the 2 spirit of comity and federalism.’”

(quoting Kremen v. Cohen,

, 3 1037–38 (9th Cir. 2003)). 4 The Court finds that the question of whether the holding in IGT bars 5 Relator’s reverse false claim action—outside of the context of an Attorney 6 General’s request to dismiss for good cause—is an unsettled question of state law 7 which is entirely dispositive of this case. This question also presents important 8 and potentially broad public policy ramifications. Whether this type of action is 9 barred by IGT bears significantly on the issue of under what circumstances a 10 relator may bring a reverse false claim action under the NFCA for a failure to pay 11 unemployment taxes. 12 Rule 5 also provides that a certification order must specifically address the 13 following requirements: 14 1) The questions of law to be answered; 15 2) A statement of all facts relevant to the questions certified, identify any facts 16 that are in dispute; 17 3) The nature of the controversy in which the questions arose; 18 4) A designation of the party or parties who will be the appellant(s) and the 19 party or parties who will be the respondent(s) in the Supreme Court; 20 5) The names and addresses of counsel for the appellant and respondent; 21 6) A brief statement explaining how the certified question of law may be 22 determinative of the cause then pending in the certifying court; 23 7) A brief statement setting forth relevant decisions, if any, of the Supreme 24 Court and the Court of Appeals and the reasons why such decisions are 25 not controlling; and 26 8) Any other matters that the certifying court deems relevant to a 27 determination of the questions certified. 28 Nev. R. App. P. 5(c). The Court will address each of these requirements below. 1 First, the question of law to be answered is whether IGT bars the instant 2 action under the NFCA alleging Lyft knowingly failed to pay unemployment taxes, 3 specifically: 4 Relator sues Defendant Lyft alleging that it has an obligation to pay unemployment taxes under NRS 612.085 and knowingly failed to do 5 so. International Game Technology, Inc. v. Second Judicial District Court of Nevada (“IGT”) held that where an Attorney General requests 6 to dismiss an action under the NFCA, a showing that the resolution 7 of the action requires a factual evaluation under or legal interpretation of the revenue statutes constitutes “good cause” for 8 such dismissal.

(Nev. 2006). Defendant Lyft argues that IGT requires dismissal of this action, although the 9 Attorney General has neither intervened nor moved to dismiss for 10 “good cause.” Does IGT require dismissal of this action?

11 While Lyft has moved for certification of several other questions, the Court finds 12 that those questions are not “determinative of the cause pending.” Nev. R. App.

(a). 14 Second, all relevant facts are set forth above, and no relevant facts are in 15 dispute because all allegations are to be taken as true at this stage of the 16 litigation. 17 Third, the nature of the controversy is set forth above. 18 Fourth, the moving Defendant is designated as the Appellant, and 19 Plaintiff/Relator is designated as the Respondent. 20 Fifth, the names and addresses of counsel are as follows: 21 Counsel for the moving Defendant: 22 Jeremy S. Schneider Jackson Lewis P.C. 23 11790 Sunrise Valley Drive Suite 400 24 Reston, VA 20191 25 Joshua A Sliker 26 Jackson Lewis P.C. 300 S. Fourth Street 27 Suite 900 28 Las Vegas, NV 89101 1 Kirsten Ann Milton 2 Jackson Lewis PC Bank of America Plaza 3 300 S. Fourth Street, Suite 900 Las Vegas, NV 89101 4 Matthew Eric Kreiser 5 Jackson Lewis P.C. 6 11790 Sunrise Valley Drive Ste 400 7 Reston, VA 20191

8 Counsel for the Plaintiff (Relator) 9 Joshua D Buck Thierman Buck LLP 10 325 W Liberty Street Reno, NV 89501 11

12 Leah Lin Jones Thierman Buck LLP 13 325 W Liberty Street Reno, NV 89501 14 Mark R. Thierman 15 Thierman Buck LLP 16 325 W Liberty Street Reno, NV 89501 17 Co-Counsel for the Plaintiff (Relator) 18 Joshua R. Hendrickson 19 Hendrickson Law Group, PLLC 325 W. Liberty St. 20 Reno, NV 89501 21 22 Sixth, whether the Supreme Court’s holding in IGT bars Relator’s claim 23 under NRS 357.040(1)(g) is dispositive of Relator’s claim. 24 Seventh, neither the parties nor this Court have identified any decisions 25 from the Nevada Supreme Court or the Nevada Court of Appeals that have 26 addressed the question of whether the holding in IGT applies in this context. 27 Eighth, all other elaboration upon the certified question is included in this 28 Order. IV. Conclusion 2 It is therefore ordered that Lyft’s motion for reconsideration (ECF No. 55) 3 || is GRANTED IN PART. 4 It is further ordered that Lyft’s motion for certification (ECF No. 56) is 5 || GRANTED IN PART. As described in this Order, the Court CERTIFIES a question 6 || of law to the Nevada Supreme Court pursuant to Rule 5 of the Nevada Rules of 7 || Appellate Procedure. 8 It is further ordered that the Clerk of the Court shall forward a copy of this 9 || Order to the Clerk of the Nevada Supreme Court under the official seal of the 10 || United States District Court for the District of Nevada. See Nev. R. App. P. 5(d). 11 Dated this 2"4 day of July 2025. 12 13 Ana plod iden 14 ANNE R. TRAUM 15 UNITED STATES DISTRICT JUDGE 16 17 18 19 20 21 22 23 24 25 26 27 28