In re Stratosphere Corp. Securities Litigation, CV-S-96-708-PMP(RLH).
| Decision Date | 04 October 1999 |
| Docket Number | No. CV-S-96-708-PMP(RLH).,CV-S-96-708-PMP(RLH). |
| Citation | 66 F.Supp.2d 1182 |
| Parties | In re STRATOSPHERE CORPORATION SECURITIES LITIGATION. This Document Relates to: All Actions. |
| Court | U.S. District Court — District of Nevada |
Kevin P. Roddy, Karen T. Rogers, Milberg Weiss Bershad Hynes & Lerach LLP, Los Angeles, CA, William S. Lerach, Spencer A. Burkholz, Michael L. Schrag, San Diego, CA, Jules Brody, Stull, Stull & Brody, New York City, for Co-Lead Counsel, plaintiff.
G. Mark Albright, Albright, Stoddard, Warnick & Albright, Las Vegas, NV, Eleissa C. Lavelle, Lavelle-Stubberud & Associates, Las Vegas, NV, for Liaison Counsel, plaintiff.
Kirk B. Lenhard, Jones Vargas, Las Vegas, NV, Martin C. Washton, Gareth T. Evans, James P. Maniscalco, Gibson, Dunn & Crutcher LLP, Los Angeles, CA, for defendants Grand Casinos, Inc., Lyle A. Berman, Stanley M. Taube, David R. Wirshing, Thomas A. Lettero, Andrew S. Blumen and Thomas G. Bell.
Dan R. Waite, Ike Lawrence Epstein, Beckley, Singleton, Jemison, Cobeaga & List, Las Vegas, NV, for defendants Bob Stupak and Bob Stupak Enterprises, Inc.
Presently before this Court is Defendants Grand Casinos, Inc.'s ("Grand Casino"), Lyle A Berman's ("Berman"), Stanley M. Taube's ("Taube"), David R. Wirshing's ("Wirshing"), Thomas A. Lettero's ("Lettero"), Andrew S. Blumen's ("Blumen"), and Thomas G. Bell's ("Bell") Motion for Summary Judgment or, in the Alternative, Summary Adjudication (# 182) filed on June 4, 1998. Defendants Robert E. Stupak ("Stupak") and Bob Stupak Enterprises ("Stupak Enterprises") filed two documents entitled Joinder in the Motion for Summary Judgment (# 189, # 194) on June 11, 1998 and June 23, 1998 respectively. Plaintiffs filed an Opposition (# 244) on April 2, 1999. Defendants filed a Reply (# 268) on June 16, 1999.
In conjunction with the Motion For Summary Judgment or, in the Alternative, Summary Adjudication (# 182), Defendants filed a Motion to Strike Expert Reports (# 259) filed on May 18, 1999. Plaintiffs filed an Opposition to Motion to Strike (# 263B) on June 9, 1999. Defendants filed a Reply in Support of Motion to Strike (# 270) on June 21, 1999.
Defendants also filed a Motion to Strike Plaintiffs' Separate Statement of Disputed Material Facts (# 263A) on June 9, 1999. Plaintiffs filed an Opposition to Defendants' Motion to Strike Plaintiffs' Separate Statement (# 271) on June 25, 1999.
The proceedings in this case were consolidated before this Court on January 15, 1997. (Order # 29). The Court previously dismissed Plaintiffs' First Amended and Consolidated Class Action Complaint, with prejudice, for failure to satisfy the pleading requirements for fraud under Federal Rule of Civil Procedure 9(b). See In re Stratosphere Corp. Sec. Litig., Fed.Sec. L.Rep. (CCH ¶ 99,473, 1997 WL 581032 (D.Nev.1997)). Thereafter, this Court granted Plaintiffs' Motion to Alter or Amend Judgment and for Leave to Amend, upon the discovery of new evidence obtained in a related bankruptcy proceeding. (Order (# 188)).
Plaintiffs filed a Second Amended Complaint (hereinafter "SAC") which alleged claims based upon: Sections 11, 12(2) and 15 of the Securities Act of 1933; Sections 10(b), 20(a) and 20A of the Securities and Exchange Act of 1934; and Sections 90.570, 90.660 and 207.350 of the Nevada Revised Statutes. Upon considering Defendants' Motion to Dismiss, this Court dismissed all claims against the Underwriter Defendants and certain claims against the other Defendants. See In re Stratosphere Corp. Sec. Litig., 1 F.Supp.2d 1096 (D.Nev.1998). Defendants have now brought a Motion for Summary Judgment or, in the Alternative, Summary Adjudication in order to dismiss the remaining claims.
This case is a class action suit brought on behalf of all persons, other than Defendants, who purchased common stock and/or call options of Stratosphere Corporation stock during the period between and including March 3, 1995 and July 22, 1996 (the "Class Period"). The Stratosphere Corporation ("Stratosphere") owns and operates the Stratosphere Tower, Hotel and Casino (the "Stratosphere Tower") located in Las Vegas, Nevada.
The prequel to the events disputed in this motion begin in the early efforts to raise funds for the construction of the Stratosphere Tower. The initial public offering of Stratosphere stock, which raised $51.4 million, occurred on February 23, 1994. On March 3, 1995, Stratosphere also completed a public offering of Mortgage Notes (the "Notes Offering") which raised roughly $203 million. To add to these funds, Grand Casinos also agreed to invest an additional $33.5 million. These funds, totaling $333.4 million, set the initial seed or estimated budget money for the construction of the Stratosphere Tower.
The construction project was ambitious. Its central feature was a 1,149-foot Tower that, upon its completion, would have the distinction as being the tallest freestanding observation tower in the United States. Construction work was divided into two stages, entitled Phase I and Phase II. Phase I was slated to include the erection of the Tower, a hotel, a 97,000 square-foot casino, and considerable numbers of slot machines and gaming tables. Phase II featured various enhancements upon the original design, including a new 1,000-room hotel, expanded and reconfigured retail and casino areas, a remodeled 1,000-seat showroom, a new parking lot, and other amenities. Construction began on May 1995. The target date for completion of Phase I was April 1996. Taylor International Corporation ("Taylor") served as Defendants' construction manager.
It is here that the events lying at the center of this motion take place. In order to acquire additional funds needed to complete the Stratosphere Tower construction project, Stratosphere completed a public offering of common stock on December 19, 1995. In conjunction with this offering, a Prospectus was issued that made various statements about the Stratosphere Tower construction budget and Stratosphere's general operating goals. The Prospectus also stated that an additional loan of $50 million (hereinafter the "Completion Guarantee") might be sought from Grand Casinos, in the event that such funding might prove necessary in order to complete Phase I. Other statements about construction progress and budgetary status were made by Stratosphere in: the March 11, 1996 Annual Report on Form 10-K; the May 15, 1996 Quarterly Report on Form 10-Q; and various press releases. Plaintiffs contend that Defendants knew that these statements were false and misleading when made, due to Defendants' intentional submission of last-minute changes to construction crews, thereby purposely raising project costs. Plaintiffs allege that when the actual circumstances regarding Stratosphere's financial condition were revealed in July of 1996, the price of Stratosphere stock plummeted from its artificially-inflated level, resulting in actionable losses to Plaintiffs.
Defendants vigorously deny these allegations of securities fraud. In their defense, Defendants contend that, through no fault of their own, construction costs and the state of the Stratosphere venture were extremely confused during the Class Period. Defendants assert that their access to information was limited solely to information provided by their construction manager, Taylor, and the internal budget analyses prepared by Stratosphere's management on the basis of such data. The reliability of these internal analyses, Defendants contend, was rough and somewhat speculative in nature. Defendants also claim that from January of 1996, construction activity increased to an almost feverish pitch in order to meet the April 1996 opening date. During the final 90 days of construction, Defendants contend that it suffered through a virtual "information blackout" of budgetary information.
By the end of the Class Period on July 22, 1996, the stock had dropped from a high of $14 per share to just $3 per share.1 Predictably, litigation soon ensued. On April 8, 1998, this Court entered an Order granting in part and denying in part the Motion to Dismiss filed by Defendants. What remains of the action are Plaintiffs' claims of (1) false and misleading statements and omissions made in relation to the sources and uses of funds for the construction of the Stratosphere project and (2) general statements of optimism regarding the performance of the Stratosphere Tower. Defendants now seek summary judgment dismissing these claims. In conjunction with this motion, Defendants have also filed motions to strike Plaintiffs' expert reports and separate statement of facts.
In connection with their Motion for Summary Judgment, Defendants have moved to strike Plaintiffs' Separate Statement of Disputed Facts (# 245) and Plaintiffs' Expert Reports (# 246-248). Defendants' Motions to Strike are interrelated, as Defendants mainly seek to strike portions of Plaintiffs' Separate Statement on the grounds that the Statement "relies heavily upon the written opinions of plaintiffs' designated `experts,' whose written opinions are without foundation ... [and] conclusory." (Defs.' Mot. to Strike # 263(a) at 1). The Court will consider Defendants' requests as the disputed materials arise during consideration of the Defendants' Motion for Summary Judgment.
Federal Rule of Evidence 702 provides that: "If scientific, technical, or other specialized knowledge will assist the trier of fact to understand the evidence or to determine a fact in issue, a witness qualified as an expert by knowledge, skill, experience, training, or education, may testify thereto in the form of an opinion or otherwise." Generally, a district court should not grant summary judgment where an expert's testimony supports the nonmoving party's case. See Southland...
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