Las Vegas Sands Corp. v. Ace Gaming LLC
| Decision Date | 24 May 2010 |
| Docket Number | Civil Action No. 06-5441 (JEI/JS). |
| Citation | 713 F.Supp.2d 427 |
| Parties | LAS VEGAS SANDS CORP., and Las Vegas Sands, LLC, Plaintiffs,v.ACE GAMING, LLC, and Atlantic Coast Entertainment Holdings, Inc., Defendants. |
| Court | U.S. District Court — District of New Jersey |
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Duane Morris LLP by Steven Friedman, Esq., Sheila Raftery Wiggins, Esq. John T. Crutchlow, Esq., Newark, NJ, for Plaintiffs, Las Vegas Sands Corp. and Las Vegas Sands, LLC.
Sills Cummis Epstein & Gross P.C. by Kenneth F. Oettle, Esq., Newark, NJ, Briol & Associates PLLC by Mark J. Briol, Esq., William G. Carpenter, Esq., Minneapolis, MN, for Defendant ACE Gaming, LLC.
Sterns & Weinroth by Marshall D. Bilder, Esq., Jason S. Feinstein, Esq., Trenton, NJ, for Defendant Atlantic Coast Entertainment Holdings, Inc.
This is a diversity breach of contract suit.1 The contract at issue is the “SANDS” trademark “License Agreement” between Las Vegas Sands, Inc.2 and Greate Bay Hotel and Casino, Inc. (“Greate Bay”) 3, predecessor in interest to Defendant ACE Gaming, LLC (“ACE”). Defendant Atlantic Coast Entertainment Holdings, Inc. (“Atlantic”), is the parent holding company of ACE.
Each party has moved for summary judgment. For the reasons stated herein: (1) Las Vegas Sands' motion for summary judgment against ACE will be granted; ACE's cross-motion will be denied; and (2) Las Vegas Sands' motion for summary judgment against Atlantic will be denied; Atlantic's cross-motion will be granted. Specifically, the Court holds that the License Agreement's termination fee is not an unenforceable penalty under Nevada law; ACE breached the License Agreement by failing to include the Madison House revenues in its royalty fee calculation; Las Vegas Sands did not breach the License Agreement, either by terminating the License Agreement, or taking steps toward opening a Sands casino in Bethlehem, Pennsylvania; and Atlantic may not be held liable for ACE's breach under either an alter ego or agency theory.
In the License Agreement, executed on July 14, 2004, Las Vegas Sands granted Greate Bay, and subsequently ACE 4, a license to use the “SANDS” trademark at the Atlantic City Sands Hotel and Casino. In exchange, ACE agreed to make royalty payments. ( Id.) The term of the agreement extended to May 19, 2086.( Id.) The agreement's exclusive area extended to Atlantic City's city limits. ( Id.) The specific terms relevant to the present disputes will be discussed at length infra.
The parties' disputes began around the time when Defendant Atlantic and Pinnacle Entertainment, Inc. (“Pinnacle”) announced, on September 5, 2006, that they had “signed a definitive agreement under which Pinnacle agreed to purchase the entities that own The Sands [ (including ACE) ] ... in Atlantic City, [New Jersey].” (Crutchlow Cert. Ex. 36) Pinnacle's press release announcing the deal made clear Pinnacle's intentions for the Sands Hotel and Casino:
( Id.) It is undisputed that the Atlantic City Sands Hotel and Casino permanently terminated operations on November 11, 2006. The ACE-Pinnacle transaction closed on November 17, 2006. The Atlantic City Sands was subsequently demolished.
Around the time of the Pinnacle announcement, Las Vegas Sands invoked its right under the License Agreement to audit ACE's books, records, and accounts with respect to the computation of royalties. (Crutchlow Cert. Ex. 37) PriceWaterhouseCoopers LLC conducted the audit, and concluded that ACE had underpaid royalties for the period of January 2001 5 through June 2006 because it had excluded the rooms contained in the Madison House-a historic building attached to the Sands, and also operated by ACE-in the royalty calculations.6 (Crutchlow Cert. Ex. 35)
On November 14, 2006-three days after the Sands shutdown, and three days before the ACE-Pinnacle closing-Las Vegas Sands sent ACE a formal termination letter:
This suit followed. The Amended Complaint asserts seven counts: (1) declaratory judgment that the License Agreement is terminated; (2) anticipatory breach of the License Agreement; (3) breach of contract by failing to pay termination fees; (4) breach of contract by underpaying royalties-by excluding the Madison House from the royalty calculations; (5) breach of contract by underpaying royalties-by undervaluing “comped” rooms when making the royalty calculations 7; (6) recovery of books and records inspection fees due under the contract 8; and (7) unjust enrichment. Las Vegas Sands seeks recovery on all claims against both ACE and Atlantic: against ACE as a party to the License Agreement; and against Atlantic (ACE's parent holding company) on corporate veil piercing and agency theories.
As previously noted, both Defendants, ACE and Atlantic, have moved for summary judgment. Las Vegas Sands has cross-moved against both Defendants for summary judgment on Counts 3 (termination fees), 4 (royalty calculation-Madison House), 6 (inspection fees) and 7 (unjust enrichment).
“[S]ummary judgment is proper ‘if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(c)). In deciding a motion for summary judgment, the Court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. Am. Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir.1986). The role of the Court is not “to weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The summary judgment standard is not affected when the parties file cross-motions for summary judgment. See Appelmans v. City of Phila., 826 F.2d 214, 216 (3d Cir.1987). Such motions “ ‘are no more than a claim by each side that it alone is entitled to summary judgment, and the making of such inherently contradictory claims does not constitute an agreement that if one is rejected the other is necessarily justified or that the losing party waives judicial consideration and determination whether genuine issues of material fact exist.’ ” Transportes Ferreos de Venez. II CA v. NKK Corp., 239 F.3d 555, 560 (3d Cir.2001) (quoting Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir.1968)). If after review of cross-motions for summary judgment the record reveals no genuine issues of material fact, then judgment will be entered in favor of the deserving party in light of the law and undisputed facts. Iberia Foods Corp. v. Romeo, 150 F.3d 298, 302 (3d Cir.1998).
The Court first addresses ACE's motion for summary judgment and Las Vegas Sands' corresponding cross-motion, and then turns to Atlantic's motion and Las Vegas Sands' corresponding cross-motion.
With regard to Las Vegas Sands' claim for termination fees (Count 3), ACE argues that the termination fee clause is an unenforceable liquidated damages clause (i.e., penalty) under Nevada law; 9 and even if the clause is enforceable, ACE's failure to pay termination fees is excused as a matter of law by Las Vegas Sands' breaches of the License Agreement.
Las Vegas Sands seeks to recover termination fees pursuant to paragraph 11(c) of the agreement, which states:
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