Capital v. Archon Corp..

• Decision Date: 22 December 2010
• Docket Number: No. 2:08–CV–00007–PMP–LRL.,2:08–CV–00007–PMP–LRL.
• Citation: 759 F.Supp.2d 1249
• Parties: LEEWARD CAPITAL, L.P., Plaintiff,v.ARCHON CORP., Defendant.
• Court: U.S. District Court — District of Nevada

759 F.Supp.2d 1249

LEEWARD CAPITAL, L.P., Plaintiff,

v.ARCHON CORP., Defendant.

No. 2:08–CV–00007–PMP–LRL.

United States District Court, D. Nevada.

Dec. 22, 2010.Order on Reconsideration Feb. 4, 2011.

Joanna S. Kishner, DLA Piper LLP, Las Vegas, NV, Robert W. Brownlie, DLA Piper U.S. LLP, San Diego, CA, for Plaintiff.Erin E. Dart, John Desmond, Justin J. Bustos, Jones Vargas, Reno, NV, for Defendant.

ORDER

PHILIP M. PRO, District Judge.

Presently before the Court is Plaintiff's Motion for Summary Judgment (Doc. # 39), filed on August 19, 2010. Defendant filed a Response (Doc. # 44) on September 9, 2010. Plaintiff filed a Reply (Doc. # 46) on September 27, 2010. Also before the Court is Plaintiffs's Motion to Strike Affirmative Defenses (Doc. # 40), filed on August 19, 2010. Defendant filed a Response (Doc. # 42) on September 7, 2010. Plaintiff filed a Reply (Doc. # 45) on September 17, 2010. Defendant filed a counter Motion for Summary Judgment (Doc. # 43) on September 9, 2010. Plaintiff filed a Response (Doc. # 47) on September 27, 2010. Defendant filed a Reply (Doc. # 48) on October 14, 2010.

This case involves similar facts regarding the alleged breach of the Certificate of Designation of the Exchangeable Redeemable Preferred Stock of Sahara Gaming Corporation (“Certificate”) as two other pending cases, D.E. Shaw Laminar Portfolios, LLC, et al. v. Archon Corp, Case No. 2:07–cv–1146–PMP–LRL (“ Shaw ”), and David Rainero, on behalf of himself and on behalf of others similarly situated v. Archon Corp., Case No. 2:07–cv–01533–RCJ–PAL. In Shaw, this Court granted Plaintiffs partial summary judgment, holding that the Certificate was unambiguous and that Plaintiffs' interpretation of dividend calculations which results in compounding is correct.

I. BACKGROUND

In 1993, Defendant Archon Corp. (“Archon”),¹ a Nevada corporation, issued a class of equity securities designated as Exchangeable Redeemable Preferred Stock (“Exchangeable Preferred Stock” or “EPS”). (Decl. of P. Lowden (Doc. # 43), Ex. 1.) Plaintiff is a California limited partnership which holds EPS shares. (Compl. (Doc. # 1), ¶ 7.) From the period of January 1, 2007 to December 31, 2007, Plaintiff purchased 60,000 EPS shares. (Mot. for Summ. J. (Doc. # 39), Ex. 1.)

The Certificate is the contract between Archon and the EPS holders, and details the rights of EPS holders. ( Id., Ex. 4.) The Certificate provides, in relevant part:

1. Designation and Rank ... Shares of the Exchangeable Preferred Stock shall have a liquidation preference of $2.14 per share plus accrued and unpaid dividends, thereon, subject to Section 7(a).

...

2. Cumulative Dividends Priority.

(a) Payment of Dividends. The holders of record of shares of Exchangeable Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefore, cumulative case dividends at a rate per annum per share (the “Dividend Rate”) initially set at 8% of (i) $2.14 plus (ii) accrued but unpaid dividends as to which a Dividend Payment Date (as defined below) has occurred. Dividends shall accrue from the date of issuance and be payable semi-annually in arrears on the 31st day of March and the 30th day of September in each year ... commencing on March 31, 1994 (each of such dates a “Dividend Payment Date”); provided, however, that on any or all of the first six Dividend Payment Dates the Company may, at its option, pay dividends on the Exchangeable Preferred Stock, in the form of additional shares of Exchangeable Preferred Stock at the rate per annum of 0.08 shares of additional Exchangeable Preferred Stock for every share of Exchangeable Preferred Stock entitled to received [sic] a dividend. If all Exchangeable Preferred Stock has not been redeemed prior to the tenth Dividend Payment Date, the Dividend Rate will increase on the tenth Dividend Payment Date to the rate per annum per share of 11% and will thereafter increase by an additional 0.50% per annum per share on each Dividend Payment Date until either the Dividend Rate reaches a rate per annum per share of 16% or the Exchangeable Preferred Stock is redeemed or exchanged by the Company as set forth herein. In no circumstances will the Dividend Rate exceed 16% per annum per share.... Dividends on the Exchangeable Preferred Stock shall be fully cumulative and shall accrue (whether or not declared), on a daily basis, from the first day of each Dividend Period; provided, however, that the initial semi-annual dividend payable on March 31, 1994 and the amount of any dividend payable for any other Dividend Period shorter than a full Dividend Period shall be computed on the basis of a 360–day year composed of twelve 30–day months and the actual number of days elapsed in the relevant Dividend Period.

...

3. Optional Redemption.

(a) General

(i) ... [T]he shares of Exchangeable Preferred Stock may be redeemed, in whole or in part, at the election of the Company, upon notice as provided in Section 3(b), by resolution of the Board of Directors, ... at a redemption price equal to the Liquidation Preference.

...

7. Liquidation Rights; Priority

... [The Liquidation Preference is an amount] per share equal to the sum of (i) $2.14, plus (ii) an amount equal to all accrued but unpaid dividends for the then current Dividend Period, through the date of liquidation, dissolution, or winding up, plus all prior Dividend Periods, whether or not declared....

( Id.)

Archon elected to make payment in kind dividend payments in lieu of cash on the first six dividend payment dates. (Def.'s Mot. for Summ. J. (Doc. # 44), Ex. 1.) After the first six payments, Archon accrued cumulative dividends rather than pay cash. ( Id.) The Certificate provides that dividends accrue to the extent not declared. (Mot. for Summ. J., Ex. 4.) The EPS dividends were fully cumulative, meaning there is no time limit as to how long they can accrue. ( Id.) Dividends were to accrue on the EPS at an increasing dividend rate if not paid. ( Id.)

Shares of the EPS could be redeemed at any time, at Archon's election, upon notice and by resolution of Archon's Board of Directors and upon payment of a redemption price equal to the Liquidation Preference for such shares. (Mot. for Summ. J., Ex. 4.) On July 31, 2007, Archon issued a Notice of Redemption of Preferred Stock (“Notice”), indicating it would redeem each outstanding share of EPS for $5.241 per share, which Archon claimed included all accrued but unpaid dividends. (Mot. for Summ. J., Ex. 5.) Archon redeemed the EPS on August 31, 2007 for $5.241 per share. (Def.'s Mot. for Summ. J., Ex. 1.) Plaintiff brought suit in this Court on January 2, 2008, for breach of contract, alleging Archon did not properly calculate the EPS dividends and Liquidation Preference according to the Certificate's terms.

On August 6, 2008, this Court granted partial summary judgment to Plaintiffs in Shaw, holding that the Certificate was unambiguous and Plaintiffs' interpretation of the Certificate which results in compound dividends is correct. (Mot. for Summ. J., Ex. 3.) This Court also struck four of Defendant's five affirmative defenses, leaving only the defense of failure to mitigate which was not challenged by Plaintiffs' Motion. ( Id.)

In the present case, Plaintiff now moves for final summary judgment, entry of final judgment, and prejudgment interest. Plaintiff also moves to strike Defendant's affirmative defenses of equitable estoppel, lack of standing, unclean hands, failure to mitigate, and statute of limitations. Defendant contends that this Court's prior order interpreting the Certificate was in error, and that Archon paid the correct redemption price. Defendant counter moves for summary judgment.

II. LEGAL STANDARD

Summary judgment is appropriate if the pleadings, depositions, answers to interrogatories and admissions, and affidavits demonstrate “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). A fact is “material” if it “might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). An issue is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. Where a party fails to offer evidence sufficient to establish an element essential to its case, no genuine issue of material fact can exist, because “a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The party “seeking summary judgment bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of ‘the pleadings ...’ which it believes demonstrate the absence of a genuine issue of material fact.” Id. at 323, 106 S.Ct. 2548. The burden then shifts to the non-moving party to go beyond the pleadings and set forth specific facts demonstrating there is a genuine issue of material fact for trial. Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir.2000). The Court views all evidence in the light most favorable to the non-moving party. County of Tuolumne v. Sonora Cmty. Hosp., 236 F.3d 1148, 1154 (9th Cir.2001).

III. DISCUSSIONA. Affirmative Defenses

Plaintiff moves to strike Archon's affirmative defenses of equitable estoppel, Plaintiff's lack of standing, unclean hands, failure to mitigate, and statute of limitations. In its Opposition to Plaintiff's Motion to Strike, Defendant abandoned the affirmative defenses of lack of standing, unclean hands, and statute of limitations. The Court therefore will grant Plaintiff's Motion to Strike with respect to these defenses.

Federal Rule of Civil Procedure 12(f) provides that “the court may order stricken from any pleading any insufficient...