Ferris v. Wynn Resorts Ltd.

• Decision Date: 27 May 2020
• Docket Number: Case No.: 2:18-cv-00479-GMN-DJA
• Citation: 462 F.Supp.3d 1101
• Parties: John V. FERRIS, et al., Plaintiffs, v. WYNN RESORTS LIMITED, et al., Defendants.
• Court: U.S. District Court — District of Nevada

462 F.Supp.3d 1101

John V. FERRIS, et al., Plaintiffs,

v.WYNN RESORTS LIMITED, et al., Defendants.

Case No.: 2:18-cv-00479-GMN-DJA

United States District Court, D. Nevada.

Signed May 27, 2020

Eric Gottlieb, Pro Hac Vice, Joseph Alexander Hood, II, Pro Hac Vice, Aatif Iqbal, Pro Hac Vice, Murielle J. Steven, Pro Hac Vice, Jeremy Alan Lieberman, Pomerantz LLP, New York, NY, Andrew R. Muehlbauer, Muehlbauer Law Office, Ltd., Las Vegas, NV, for Plaintiffs.

Alex Fugazzi, Patrick Gerard Byrne, V. R. Bohman, Snell & Wilmer L.L.P., Las Vegas, NV, Mark Holscher, Pro Hac Vice, Michael John Shipley, Kirkland & Ellis, Los Angeles, CA, Matthew Solum, Pro Hac Vice, Kirkland & Ellis LLP, New York, NY, for Defendant Wynn Resorts Limited.

Colleen C. Smith, Pro Hac Vice, Latham & Watkins LLP, San Diego, CA, J. Colby Williams, Campbell & Williams, Las Vegas, NV, Michele D. Johnson, Pro Hac Vice, Latham & Watkins, Costa Mesa, CA, for Defendant Stephen A. Wynn.

Alex Fugazzi, Patrick Gerard Byrne, Snell & Wilmer, Las Vegas, NV, Mark Holscher, Pro Hac Vice, Michael John Shipley, Kirkland & Ellis, Los Angeles, CA, Matthew Solum, Pro Hac Vice, Kirkland & Ellis LLP, New York, NY, for Defendants Craig Scott Billings, Matthew O. Maddox.

Alex Fugazzi, Snell & Wilmer, Daniel R. McNutt, McNutt Law Firm, P.C., Las Vegas, NV, Michael John Shipley, Kirkland & Ellis, Los Angeles, CA, for Defendant Stephen Cootey.

Mark Holscher, Kirkland & Ellis, Los Angeles, CA, for Defendants Alvin V. Shoemaker, Clark T. Randt, Jr., Daniel B. Wayson, J. Edward Virtue, Jay L. Johnson, John J. Hagenbuch, Patricia Mulroy, Ray R. Irani, Robert J. Miller.

Christine Elizabeth Hanley, Orrick, Herrington & Sutcliffe LLP, Seattle, WA, Dylan T. Ciciliano, Erika Pike Turner, Garman Turner Gordon LLP, Las Vegas, NV, James Neil Kramer, Pro Hac Vice, M. Todd Scott, Orrick Herrington & Sutcliffe LLP, San Francisco, CA, for Defendant Kimmarie Sinatra.

ORDER

Gloria M. Navarro, District Judge Pending before the Court is the Motion to Dismiss the Amended Class Action Complaint, (ECF No. 67), filed by Defendant Kimmarie Sinatra.¹ Plaintiffs John V. Ferris, JoAnn M. Ferris, and Jeffrey Larsen (collectively, "Plaintiffs") filed a Response, (ECF No. 96),² and Sinatra filed a Reply, (ECF No. 98).

Also pending before the Court is the Motion to Dismiss, (ECF No. 71), filed by Defendants Wynn Resorts Limited ("Wynn Resorts" or the "Company"); John J. Hagenbuch, Robert J. Miller, Patricia Mulroy, Clark T. Randt Jr., Alvin Shoemaker, Daniel B. Wayson, Jay L. Johnson, Ray R. Irani, and J. Edward Virtue, Matthew O. Maddox, and Craig Scott Billings (collectively, "Wynn Resorts Defendants").³ Defendants Stephen Cootey and Stephen A. Wynn filed Joinders, (ECF Nos. 73, 75).⁴ Plaintiffs filed a Response, (ECF No. 96), to the Motion to Dismiss. Wynn Resorts Defendants filed a Reply, (ECF No. 99).⁵ Defendants Cootey and Wynn filed individual Replies, (ECF Nos. 102, 103).

Also pending before the Court is Wynn Resorts Defendants' Motion for Leave to Submit Supplemental Authority, (ECF No. 105), in Support of the Motion to Dismiss, (ECF No. 71). Sinatra filed a Joinder, (ECF No. 106).

Also pending before the Court is Wynn Resorts Defendants' Motion for Leave to Submit Supplemental Authority, (ECF No. 107), in Support of the Motion to Dismiss, (ECF No. 71). Plaintiffs filed a Response, (ECF No. 108).

Also pending before the Court is Wynn Resorts Defendants' Motion for Leave to Submit Supplemental Authority, (ECF No. 111), in Support of the Motion to Dismiss, (ECF No. 71). Plaintiffs filed a Response, (ECF No. 112), and Wynn Resorts Defendants filed a Reply, (ECF No. 113).

Also pending before the Court is Wynn Resorts Defendants' Motion for Leave to Submit Supplemental Authority, (ECF No. 116), in Support of the Motion to Dismiss, (ECF No. 71). Defendant Wynn filed a Joinder, (ECF No. 117). Plaintiffs filed a Response, (ECF No. 118).⁶

I. BACKGROUND

Plaintiffs bring this putative securities class action against Wynn Resorts and certain of its directors and executive officers, on behalf of all persons who purchased or otherwise acquired Wynn Resorts' securities between February 28, 2014, and February 12, 2018 (the "Class Period").⁷ (First Am. Compl. ("FAC") ¶ 1, ECF No. 52). Plaintiffs claim that during the Class Period, Defendants made several misleading statements and omissions, thereby concealing the alleged sexual misconduct of then Chief Executive Officer, Defendant Stephen Wynn. (See id. ¶¶ 1, 3). As a result, Wynn Resorts' securities traded at an inflated price during the Class Period. (See, e.g., id. ¶¶ 238, 249, 253). Plaintiffs allege that news of Defendant Wynn's alleged sexual misconduct caused Wynn Resorts' share prices to decline, resulting in a financial loss to class members. (Id. ¶¶ 10, 239).

A. The Parties

Plaintiffs are persons who purchased the Company's securities at allegedly inflated prices during the Class Period. (Id. ¶¶ 15, 16).

Wynn Resorts is a developer, owner, and operator of casino resorts that integrate hotel accommodations and a wide range of amenities. (Id. ¶ 2). It owns and operates Wynn Las Vegas and Encore in Las Vegas, Nevada, and Wynn Macau and Wynn Palace in Macau, China. (Id. ). Wynn Resorts is currently constructing a new $2.4 billion property in Massachusetts. (Id. ). Its securities trade on NASDAQ under the ticker symbol "WYNN." (Id. ¶ 17).

Defendant Stephen Wynn is the founder of Wynn Resorts and served as its CEO and Chairman from 2002 to 2018. (Id. ¶ 18). Defendant Matthew Maddox joined Wynn Resorts in 2002, served as its President since November 2013, and served as its CEO since February 2018. (Id. ¶ 19). Defendant Kimmarie Sinatra served as Executive Vice President, General Counsel, and Secretary of Wynn Resorts from February 2006 until her resignation in July 2018. (Id. ¶ 22). Defendant Stephen Cootey served as the Company's CFO and Senior Vice President from 2014 to 2017. (Id. ¶ 18). Defendant Craig Billings has served as Wynn Resorts' CFO since March 2017. (Id. ¶ 25).

Defendants John Hagenbuch, Dr. Ray Irani, Jay Johnson, Robert Miller, Patricia Mulroy, Clark Randt, Alvin Shoemaker, Edward Virtue, and Boone Wayson are former and current directors of Wynn Resorts. (Id. ¶¶ 29–41).

B. The Okada Litigation

Beginning in 2012 and throughout the Class Period, Wynn Resorts was party to a major lawsuit in Nevada state court. (Id. ¶ 96). The lawsuit, styled as Wynn Resorts, Limited v. Kazuo Okada, et al. , No. A-12-656710-B (the "Okada Litigation"), involved the Company and some of its largest shareholders, including Elaine Wynn,⁸ ex-wife of Defendant Stephen Wynn. (Id. ¶¶ 96, 156); (Elaine Wynn Counterclaim, Ex. 11 to Bohman Decl., ECF No. 77-1).

On March 28, 2016, Elaine Wynn filed the First Amended Answer of Elaine P. Wynn to Aruze and Universal's Fourth Amended Counterclaim; Fifth Amended Counterclaim and Crossclaim of Elaine P. Wynn (the "Elaine Wynn Counterclaim") in the Okada Litigation. (FAC ¶ 156); (Elaine Wynn Counterclaim, Ex. 11 to Bohman Decl.). The Elaine Wynn Counterclaim contained various allegations and described a "multi-million-dollar payment" by Defendant Stephen Wynn following allegations that he engaged in "serious misconduct" "on company property against an employee." (FAC ¶ 157). It also detailed a "pattern of reckless risk-taking" behavior by Defendant Wynn that "left the directors and the Company vulnerable to potential liability and regulatory exposure." (Id. ). As discussed further below, Wynn Resorts subsequently issued press releases denying Elaine Wynn's allegations.

C. Wall Street Journal Article and Regulatory Investigations

On January 26, 2018, the Wall Street Journal ("WSJ") published an article titled "Dozens of People Recount Pattern of Sexual Misconduct by Las Vegas Mogul Steve Wynn," alleging that in 2005, Defendant Wynn paid a Wynn Resorts employee $7.5 million after the employee accused Defendant Wynn of forcing her to have sex with him. (Id. ¶¶ 4, 196). The WSJ article detailed additional sexual misconduct allegations by Wynn Resorts employees. (Id. ).

The day the article was published, Wynn Resorts' share price fell $20.31, or 10.12 percent, to close at $180.29 on January 26, 2018. (Id. ¶ 197). The stock's high trading volume and price decline continued for several days, and the stock closed at $163.48 on January 29, 2018. (Id. ).

Defendant Wynn denied the WSJ article's allegations stating that the "idea that I ever assaulted any woman is preposterous. The instigation of these accusations is the continued work of my ex-wife, Elaine Wynn, with whom I am involved in a terrible and nasty lawsuit in which she is seeking a revised divorce settlement." (Id. ¶ 198). On February 6, 2018, the Company announced that Defendant Wynn had resigned as CEO and Chairman of the Board, effective immediately. (Id. ¶¶ 8, 208).

Moreover, shortly after the WSJ article's publication, both the Nevada Gaming Control Board and the Massachusetts Gaming Commission commenced investigations into the article's sexual misconduct allegations. (Id. ¶ 6).

Then, on February 12, 2018, the Las Vegas Metropolitan Police Department (LVMPD) revealed that two women had recently filed reports against Defendant Wynn alleging that he had sexually assaulted them in the 1970s. (Id. ¶¶ 63, 215). On this news, Wynn Resorts' share price closed at $162.92 on February 12, 2018. (Id. ¶ 216). Compared to the February 9, 2018 closing price ($166.22), this was a drop of $3.30, or 2 percent. (Id. ). Compared to its January 25, 2018 closing price ($200.60), this was a drop of $37.68, or 18.8 percent. (Id. ).

D. Nevada Gaming Control Board Complaint and Settlement

On January 25, 2019, the Nevada Gaming Control Board (the "NGCB") filed a disciplinary complaint (the "NGCB Complaint") and accompanying settlement against the Company and Wynn Las Vegas, LLC, relating to the NGCB's investigation of the response of certain Wynn Resorts employees to sexual misconduct allegations against Defendant Stephen Wynn....