57053 transcript from venetian v two roads hearing on motion for summary eviction 11-13523 tagged
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7/28/2019 57053 Transcript From Venetian v Two Roads Hearing on Motion for Summary Eviction 11-13523 Tagged
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E HIBITE
Docket 57053 Document 2011-13523
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TRANCASE NO . A- 24932-CDEPT . NO . 3
DISTRICT OURT
CLARK OUNTY NEVADA
VNETIAN RESORT HOELCASINO LL.
Plintiff
vs.
TWO ROAD S LAS V EGAS
Defenda nt .
REPORTER ' S TRANSRIPTOF
MTN FOR SUMMARY EVITION
EFORE TH E HONORALE DOUG LAS HERNDONDISTRICT COURT UDGE
DATED WEDNESDAY S EPTEMER 29 201 0
REPORTE D Y SHARON HOWARD . . R . NO . 45
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APPEARANCES
For the Plainti ff
For the Defe ndant
2
MICHAEL FEDER SQ
WI LLIAM COULTHAD ESQ .
* * * * *
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LAS VEGAS NEVADA ; WEDNES DAY S EPT EMER 29 201 0
P R O C E E D N G S
THE COURT Page 1 Veneti an vs . o
Roads Las Vegas LLC .
This i s plaintiff ' s eparte appliation for a o rder
to show ase why smmary evitio shold not be
granted.
MR . FEDER Good moring yor Hoor .
Mihael Feder and Mihael Lynh of Leis and Roa on
behalf of the Venetian .
With s at the table i s Fred Crowl geeral onsel
for Venetian . Also is Gstavo Crger from the Veetia n
as soia te onsel . And Patri k Dmont who is VP o f
orporate for Venetian .
MR . COULTHARD Good morning yor
Honor .
i l l Co lthard a n d Matt Cart e r o f Kemp on es &
Colthard appearing on behalf of Two Roads L as Vega s LLC .
Also present is Mr . Fisher Tony Fisher general manager
and lient representative for the other ten restarants
and operation Dos Caminos .
THE COURT All ri ght . They don t make
lea ses eas y anymore .25
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MR. FEDER We think they do yor
Honor .
MR. COULTHARD ges s proe drall y yor
Honor old j st as k eli eve that ease i t omes
efore th e o r t i n a n iqe pr o ed ra l set t ing tht a s
the Defendant the t enant have the rden of pr f
today. The order to sho ase is direted at my lient
that in e ffet m the mving party and old re qest to
proeed f irst and have a rettal respons e .
THE COURT Any ojet ion .
MR. FEDER Yor Honor al l o l d s a y i s
think proedral ly it i s niqe in terms of ho this
proess ork the 5day notie . They filed thei r
affi davit . think tehnially e ar e the moving party
t don t a re i f the y go first .
think e al l kno the argments . think they re
laid ot in the papers . All ill say i s in rettal if
anything ne i s rai sed ant to r ese rve my right t o
ret the rettal as ell .
THE COURT had a sene this asnt
going to e a 1 2 3 . There is a 4 5 as ell . t
go ahead Mr. Colthard.
MR . COULTHARD Thank yo yor Honor .
appreia te it .
t omes efor e the ort on an orde r to sho as e .
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tink it mes -- it i s a niqe preral fash n in
tat t e efe nants my l ien t T as La s ea
atally file te initial pleain i is r
affiavit rearin leal efense t te smmary eitin
preein i really is the first atin file in
rt n tin k nt nl y is t e preral p st re f
te ase nsal abt tink te relatinsip i a
little bit nsal beteen te parties in tat T as
Las eas LLC is t e tenant an te tenant i s mr ie
f 1 1 7 DC Las eas ih i s t e manaer an the B
es t pera tr f te re starant an C enetian as in
e s rts Tse t ent i t i e s ma ke p t e ten an t Bt t e
lanlr i s al s C enetian Casin esrt S they ' re
ea rin a p le f at s in t i s S e s s my pi nt i s
it s prerally nsal t is als nsal an nsal
nt sta nar tenant lanlr rel at ins ip
Te nerlyin lease it s a 1- year lease fr 18
sqare feet n te fir st flr f te Pal az z Te
ent ran e t te s Camins esta ran t pen s rit t
nt te asin flr Over 18 sqare feet t ' s t
a ple f -- t pti ns bel ieve ea f tse
pti ns t exten te lea se term fr 5 year pti ns S
ptential ly a 2-year lease
11 /7 te peratr -- 11 /7 C Las eas is te entity
that i s ne an ntr lle by Mr Steven Hans n is
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e ner an prinipa l f B Ges e paren in
mpany i s r eal ly e r es aran pe rar in t is LLC
re la i ns ip Tey ave a prven r ak re r
Teny re s arans arss e nry Primari y in
Ne Yr k B a anfl f res aran s ere in La eas
n frankly tey' ve been an Mr Hansn an i rp
f prfessinals ave been exremely sessfl
resaraer an perars an ink a reall is
smein a e r sl ns ier en y ' re
lkin a i s relainsip n frankly ink i ' s
smein a eneian Casin esrs lke a iniially
en ey enere in e LL C pe rain a reeme n B
al s ms impranly fr ay ' s pr eeins en ey
ene re in e Jne 2 8 sen amenmen ink
m ns iera in as iven e lai n f is
res ara n e imprane f is re sa ran bein ere
an l ave e bes pprniy iven e rren
enmi eep eep reessin a e nry as fain
N nly e nry b La s eas a s a iy as a l e
an e as in ins ry Tis as exremely imes
an e pera r i e bes ane mainai n is
prper y keep i a via ble r es aran i e rs
pen n ar k in e asi n r ir el y a aj aen
e asin as B Ges an Mr Hansn
Frankly Mr Hansn in 2 8 , as prepare alk
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aay fr m is re sar an an prepare c is ss es .
n a as c er ai ny my cien ' s i ne n a e ie e
sec n amenmen as en ere in i .
S i a back rp ink i ' s impran
kin f sep back a ie an say kay a are e ere
fr ay an reay a is e sanar f revie a
is c r as cns ier in is s mmary evici
prceein.
ain e ay is rke e ere serve i an
nfie 5ay nice pay ren r qi . We mve
frar i r fiin ic as e affiavi rarin
ea efense smmary evic in prcee ins fi e
prsa n N S 4 . 25 .
n e sae s are re a cear . Tey icae a
enan may fie an aff iavi i e cr s a in enan
as p a i ren r i s n i n efa f e ea s e f r
paymen f ren . f e a an e i a en
e mve f rar in ay ' s ea rin.
Tay ' s eari n e sa e is rea cear NS 4 . 25
saes if e cr eermines a ere is a ea
efen s e a s e a ee naf e aine r e cr
sa refse ran eier pary any reief an sa
reqir e frer p rceeins prsan NS 4 . 29
4 . 42 .
S ay ' s prceeins is es e ea
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sffici ency f te affi avit f Mr Hansn n tat ' s
te sta nar an tat ' s at yr Hnr as t I f
tere is a basis tat e sbmit tat tere is a leal
efense t te nlafl etainer ac tin -- ic I elieve
e av e ten y can nt rant s mary j ment
I l aplize becase I tl yr la clrk n
Friay I ln ' t be f ili n anytin els e Bt t n e
i We t k a lk at t e ca se l a an e ere
primaril y relyin n te stat te Bt e tk a l k at
te ca se la i n Nevaa an e ave s me case la
crrent Nevaa case l a 2 7 n pint n tat ca se
ives s me rea ll y ianc t te crt It i nvi
vs GL 1 6 Paci fic r 4 Te crt a
cns ieri n te stanar fr prceeins tay I t is a
i s t a na r
Te crt inica te tat smary evict in pr ceins
are anal s t smary j ment prceeins If t ere
is a t ri able is se f fact ten j st as y are in
sar y j ment prceeins y are pre cl e fr m
ranti n smmary evicti n
I t i s a i stanar becase j st as a smary
jment is a ispsitive mtin tis trly cl be a
ispsi tive mti n i f y ere t rant smmary evict in
e l b t f tat pera ti n an it l be
es sent ia ll y a fait acc mpl i ba se pn a 5-ay in an
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orr to s o as r t parti s a not on a ny
i sovry n larly bli v tr ar triabl isss
of fa t
So t ort st intntionally a vry i stnar
n aain t nvi as os on t sa ys t oays
proins ts t t sff iiny of t affi avit t o
trmin if a lal fns i s availabl So ' r
tst in t Stv Hanson affiavit n ' m not sr of
t qal ity o f t opy tat yor Honor ot bt rta inly
t initial opis a o f Mr Hanson ' s affi avit r
prtty ark an iffilt to ra ' m not sr o t
v o f f il ins o it am ot
THE COUT : f yo av a bttr on ' ll
ta k it
M FEE: ' ll tak on too
M COULTH: kno ty av m a ba
on apoloiz raliz as avin trobl an
bas tat is an important affiavit ant to t
yor Honor -- opflly tat ' s not t opy mark p
W ' v ivn yo a lot on ' t ant to iv yo my
not s or ilits lik t impor tant part
So t Nvaa Sprm Cort as ivn yo som
ian n tin k in a ommr ial l as s tt in
st anar for toay ' s proins t ort lays ot an
it as in tat as it as a isp t a s to t
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1 ntr ata prvis ins Tere as t e parti es er in
2 ispt e a s t at te ntra t meant Te rt ays
nstrtin f a ntrat is a qestin f a i
4 yr Hnr is e aare
Bt ever in inte rpret in te ntr at t rt
6 sa take sa effetate te intent f te part ie s
7 i may be ete rmine in i t f t e s rr nin
8 irmstanes if nt ear frm te ntrat itsef
9 Ten it es n n tis is re a y te rx f
er e e a re t ay Te rt sta te s a nt rat i s
1 1 ambis en i t i s sbj et t mre t an ne r ea sab e
1 2 interpreta tin S my ient I an te y e n ' t
1 be ieve tat ntr at is ambis We bei eve en I
say te ntrat fr yr Hnr ' s arif iati n I ' m
ref err in t te rn ease a reement te LLC pe rat in
16 areement an te se n amene Te fi rs t amenment
1 7 as b t it ' s nt reay reevant t tay' s
1 8 pree ins
1 9 THE COUT : Uners t
M COULTH : C e a r y te sen
21 ame nment I ' m re ferr in t te ntr at rea ti nsip as
22 t se ment s Imprtant y t e se n amenment
2 spei fi a y sta te s in te sen ere as it stat es tat
24 er e a s t e part i e s i s t amen t e a re eme nt t r efe t
erta in anes t teir bsines s r eat insip as s et
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frt in tis a reement, an t amen te e as e ns istent
it t e prvi s i ns f t e e a s e a reeme nt S i e te
se n amenment i s an amenment t te LLC perat in
areement, it a s effe tat e an amenment t te
ner yin rn ea se areement S a ntr at i s
ambi s en it i s sbj et t mre t an ne rea s nab e
interpre tat in
Ce ar y en y revie te par tie s inte rpreta ti ns,
te mpeti n part ie s, T as, te tenan t, an te
an rs, a s t at tat se n amenment es an
prvies fr a s t te eferre rent, rrent re nt, an
te biati ns t pay rent, eary tere are iff erent
int erpr et at ins f at tat areement mean s n
fran ky, my ien t bei eves t ey ' re ri t n, sp t n it
te ay tat sen amenment itates --
THE COU T : Smetimes ner an it
nt be ambis, if bt f y ave s strny e
beiefs
M COULTH: Tey are abs te y
iametr iay ppse n be ieve tat tse aain,
my i e n t f e e s a b s t e y i t ' s - - f r an k y i t i s n t
ambis n tat my ient i s r it an as mp ie
it t e terms an ni t i ns f t at s e n amenment
' rn tr tse Bt franky, tey are
iametriay ppse
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S te rt in nvi say s i t i s t be ns ir e
ambis i f it ' s sbjet t reasnable mpetin
reasnable interpretatins .
S real ly at are te mpeti n an te rt
imprtantly es n t state tat tis ambiity ain
te t mpetin reasnable interpretatins reates a
enine is se f material f at as t te parti es int ent
i i s a l e al e fe ns e t a req est fr sma ry
evitin
ne En f stry Smary eviti n t ay i n tese
pree ins annt frar ner bt te s ta tt e an
te Nevaa Spreme Crt en e ave reasnable
mpetin interpretatins f te nerlyin ntratal
areement M li ke a smary jment an ' t appen
tay
S a ain tat ' s ere believe te a rment stps
an te rt ' s interpretatin ens Bt tink tere
are s inifiant i sse s at sta ke an s I nee t ntine
n a l it tl e frt er int my ar ment
s t te fa ts f tis as e an menti ne t e
nerl yin basi s menti ne in 2 8 te enmy is
ba bs ine ss is ba Tere ave been ns trtin el ays
it t e Pala z z it t e Pal a z z s ps it t e
rest arants Tere ave been elays ass iate it
fini sin te tenant bilts ll f tat a a very
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neative impa t n te 2 7 per at ins f te res t rant .
Te s Camins esta rant .
Cmbine it tat it te enmi eep eep
enmi reessin tis ntry an tis ity as
experienin tey re in a rl f rt . Bt te tey
bein bt te l anlr an tenant n ' t ant t e
per at ins t ark . ai n imprt ant latin
imprtan t per at in fr te es ts f te te l . n
tey re j int ventre partners in a bsine ss tat t ey ' ve
n pre mil li ns an mill ins f ll ar s int tt te
nly pes f ettin it t is t sessflly trn tis
rest arant arn. S tey ente re int te sen
amenment .
n te s en amenment te ene ti an a rees t efe r
te late 2 8 rent . n efer all f tat rent - -
imprtantl y efer is iffe rent ten aivin. Oka .
efer elaye . Tat s at e ' re t al kin abt ere .
enet ian in t aive any f tis rent . Te ef erre it
t anter a ntil a time en tis peratin an
affr t pa tat eferre rent . S tey eferre te
at tat pint in time te expire te past e an
in rent . Bt t en tey se t p n a in frar ba si s
tr tis sen amene tey set p a meanism an a
pri ri ty f te as f l l be spent . n it ' s
ita te . ' m sre yr Hnr as rea it .
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Bt te pri ori ty of payments af te r te en of
2 alenar year 2 8, are speifial ly spelle ot i
pararap 4 of te seon amene. n tose ros
4 operatin revenes from te resta rant tere i s a
at e rfa l l e f fe t o f o t ey a re p a i .
6 Fir st to pay all operatin expenses ll o f t e
7 expenses t o rn an operate tat bsines s . ll o f te
8 spplie rs all of t e tir parti es te employers all o f
9 te operatin bsines s expenses et p ai f irst .
Se on te manaement expens es . ai n tey ant
1 1 te eneti an ants Mr Hanson . Tey ant B Gest . Tey
1 2 ant t e pro ve n operator i n t er e . T ey an t t o
1 inentives tat operator an tey ant to pay im te
1 4 manaement fees base pon is perentae areement ner
te LLC .
1 6 Tir te eneti an to pay rrent pe rio rent s
1 7 Well tere as not sffiient money to pay a ll rrent
1 8 perio rents oin forar. Bsiness is startin to trn
1 9 aron . an al k te ort tro tose ross
revenes . Bt importantly tey ol not make rrent
21 perio rents ner tis aree pon payment sele
22 ner t e se on amenment 4-; oper atin expense s
manaement fees ten te balane of t os e fns any
24 fns avail able a fter tose t o priorit ies aree pon
prior iti es are p ai oes to t e enetian for r ent
1
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Thats what haened under this agr eement . And th er e is
no aegation whatsoever that my cients have vioted the
ro vi s ion o f this -A .
THE COURT That was fo r a finite er iod
though ri ght . That was unti intere st on the sea
contriution was aid unti the secia contriutin was
ai d un t i ac k rents were aid .
MR. COULTHARD That is the Veneti ns
interretatio n But that is not my cients
inter ret ati n . My ci ents interretat ion is that any
rent that they coudnt ay during those current eriod
rents after they made the rir exenses -- after they
made the rior exenses a cash goes to the Venetian .
And thats the way theyve oerated.
But if it s short on the current eri od rents i t then
fa s into the category of deferred rents . And there is a
mechani sm under the su-aragr ah 6 f that the
deferred rents then -- again they are having to wait .
But there is a mechanism where they are then ater aid
THE COURT I guss Im referring t -A
Quote "Beginni ng n anuary st 2009 and continuin g
unti a interest on the secia contriution has een
reaid the entire amount f the secia contriution has
ee n returne d t o Ve ne t ia n Ve ne tian ha s e en a id a
deferred rnts nd management has een aid a the
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deferred oerator/management fee the riority wi a s
e ow
Right .
MR. COULTHARD : A deferred rents I
e i eve an d my c ie nt eieve s -- i t s a i d ou t i the
affidavit that a deferred rents woud incude an
current eriod rents that they were unae to ay nder
this schedue of ayments -A
So they aid those monies Any excess cash fow goes
to the Veneti an Any current eri od rents at that oint
that arent aid through this cash fow gross revnue
ayme nt er i o d th en those rents fa into th e de fr re d
rent category and they are aid in the future at such
time as these artners and the oerator can ay ak those
deferred rents Therein ie s the disute your Hoor and
the i nterretations and the intent of the artie s
ecause my cients ei eve that agai n any of the current
2009 200 rents that there is insuffi cient cash to ay
goes into the category of deferred rents and is aid in
the future when cash fow is moving forward
THE COURT : How are the current eriod
rents deferred rents Theyre j ust ow riori ty rents
23 Theyre no t d efer red rents
2 The deferred are the ones that from 2008 t o t h e
end o f 2008 and efor e where Veneti an says Im going to
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defer coecting on those . I st rugge with how you re
characte riz ing current eriod rents as deferred .
oosed to simy eing ow riority ayments right now
unti oerating exenses, et cetera, goes u and we ay
these things off .
MR. COULTHARD: We , I think when ou
oo k at the aragrah 3 oerato r management fes , and the
ve ry ast sentence of that aragrah efore this age 3 of
the agreement, it says, for a urose s of this
amendment, current eriod sha refer to oerator
management fees and rents that have not een deferred as
ro vide d i n t hi s agreement . Th ere we re no o er a to r
management fees deferred at the time they entered into
this agr eement. And my ci ent s ei eve that any o f the
current eriod rents under this cash fow ayment schedue
that they are mandated to foow woud then e deferred.
And that s the agreement they have een oerating nder .
And that is their interretation of the oerating
agre ement, and the underying amended ea se agreement .
They have an oigation to ay that, ut they ay at
such time as this restaurant is oerating under sufficient
caaci ty to s tand on its own two feet . And they are
comying with thi s agreement .
Vene tia n, made that dea, your Honor . Thats the
dea they cut . And I eieve at this juncture things are
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saring o urn around. I ve go a schedue of e
g r o s s - -
THE COURT Le me as k you his . I erms
of aragrah 4-A e s se as ide he issue of he
deferred rens . Bu do you agree or disagree ha a he
ineres o f he s ecia conriuion was aid.
MR. COULTHARD I ei eve i s a een
ai d . Tha wa s on e o f h e co nd iions h a Ve ne i a
reques ed o have he s ecia conri uion reaid ih a
ineres and ha has een reaid
THE COURT So a he secia
conriuion and he secia conriuion ineres ad
e n a i d s o yo ur ony -- yo ur os i i on ony a o wha
hasn haened is deferred rens in ar ecause you
e i ev e he cu rr en re n s are de fe rred ec ause h ey can
e a i d .
MR . COULTHARD There are wo ca ego ri es
of defe rre d ren . There are he re- Decemer
re - an uary 2009 o d deferred ren s . And h en he re a r e
he curren eriod rens ha aren comeey aid . And
hos e dro ino he deferred rens on a going forward
as i s Th a wa s h e in en o f h e agreemen .
The inen of he agreemen was o afford his
resauran and his enan sufficien reahing room o
increase is oeraions increase is cash fow o e ae
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to ay a these rents That ' s what again thee is no
aeg ation that we haven ' t een doing that Every sing e
enny after o era t in g exe nses an d a fte r th e man agment
fees have gone to ay the rents we ai d in exces s o f a
mi i on do ars in rent and they wi catch u if the
us in e s s co nt inues to increa s e And we ' ve gon e frm ov er
7 mi ion do ars in 2007, to - I was rovided a evenue
summary ut 7 mi ion doar s in 2008 at the time this
was entered into ; 2009, over 9 , 03 8 , 000 . 00 g r o s s r e e n ue s ;
200 yeartodate with the rojected to coming in t just
under 0 mii on So this res taurant is turning te
corner and going to e in a osition to ay these ents
and ay ack these deferred rents to its artner the
Venetian
Franky they dont i ke the dea they cut an now
they ' re trying to change the terms and conditions of that
dea
THE COURT Let me fin is h on what I wa s
trying to ring out in aragrah A I agree with your
characterization that the rents can e divided into two
catego rie s Regardess o f whether we ' re using the term
defe rr ed right now But theres re-anuary 2009 Then
theres anuary 2009 moving forward
Do you agree that a of the deferred rents from 2009
ac kwards th e 2008 ac kwa rds t o 2007 , a o f tha t has
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n aid off, a s w
MR COULTHARD It has not I thi k
t h r s i n xc s s o f $ 3 du and owing I iv
t ha t s n um r s i n Mr C r ug r s a f f i da v it sunta
a ffidavit I want to say $ 3 4 . But a of ths
rnta aymnts that ar ing aid now on a
month-tomonth asis out of this xcss rmaining ash is
i ng a id t o tho s r an uar y 2 9 d f r r d
rnt s So that numr is ing ai d down
But I do not agr with th Vntian s intr r tation
that uon th ay ack of th ranuary 29 dfrrd
rnts that this cash fow, watrfa gross rvnu aymnt
schdu undr A xirs I won t unti such t im
THE COURT I undrsand that s your
os i t io n Yo u agr th at a s soon a s a th cond i t io ns
ar mt, howvr thy intrrt it , thn th ririty
changs ac k I man, that s th intnt of Scti on 4 is
to hav this riority stay unti w gt a ths
conditions mt, and w r dis uting what th conditi on
actuay is Onc thy v n mt, th rior ity switchs
ac k
MR COULTHARD Th ony condit ion I
i v i s th dfrr d rnt s An d yo ur Ho nor f o cu s d
right in on th diffring intrrtations I s it ony th
r an ua ry 2 9 dfrr d rnts tha t onc th y r ai d
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b a c k t h i s S e c t io n g o es a wa y . T ha t ' s th e V en e t ia s
os i t i on .
The tenant Two oads ' os ition i s until such t ime as
the 2009 2000 unaid rent s which are d eferr ed
until they ' re aid ack this mechanism this A
waterfall ayment agreed uon contractual term sta in
la ce . And tha t i s th e reasonab l e interre tat ion f tw o
cometing interretations of this agreement that fankly
re cl ud e yo ur Honor from gra nt ing suma ry ev iction
today.
T HE C OU T : I do n ' t kn ow t h at i t ' s o f
great cons equence to me in my mind in making a de ci s ion
toda y but j us t you know humor me for a minute m
curiosity.
How much time in your os it ion ar e you loo kin g
until you get to t he oint where you ' re aying curre nt
er i o d rent s on t ime Ha ve yo u a l l do ne s ome ki nd o f
financial analysi s to t ry and figure out when we ' ll get
that remaining $ 300000. 00 deferred rents aid off and
when we ' ll be able t o sta rt aying the current rent s in a
timely fashion Or is it too s eculative to even addre s
that .
M . COULTHAD I think I will say we ' re
coming out of the sumer which is tyically the slower
times . And the hotel i s busine ss . And the Venetian
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Casino Resort is in a etter osition to answer th t .
Busines s is oo king u. And the roj ections are gi ng
forward . And to give a defi nit ive time I wou dnt e the
er s on to do that . I m ce rt a i n my c ient s coud c r n ch
those numers ut is your -- I coudnt do it as stand
here in oen cort . I think its not -- its cerin y a
finite erod of time unti we reach that osition where
a deferred rent s oth from 08 09 and 00 ar
cometey aid and then go ack to the underying
this -A exires and go ack to the underying grond
ea se ayment oig atio ns .
THE COURT Okay .
MR. COULTHARD So I guess I j us t focus
on a coue of the i ssues under the affidavit of Mr
Hanso n . You know again he ays out eginning in
aragrah 7 the ur os e o f the a f fi da vi t i s t o
demonstrate that it is not in defaut of the ayments o f
the r ents under the t erms of the ea se o erating a greement
and se cond amended . He ta ks aout the art ie s inte nt of
the s ec ond amendment in oth arag ra h 9 and 0 And the
second amendment acknowedges that Two Roads has een
unae to ay the current rent to andord and the minimum
ercen tage rent s . Bu t the ha ve een movi ng forward nd er
that oerating agreement and aying rents consistent with
the s econd amendment . So they hande th at i ssue .
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They ta k about in aragra h 2 the gros s re venue
And
and the abiit y to ay rent . And it ta ks about te
ri or ity o f ayme nt s co n s i st en t wi th the di s cu ss io s we v
had in court . And ays o ut tho se rior ity aymen ts .
again imortanty n o where in the Venetian s movig
ae r s ha ve the y a ege d tha t we ar e not com yi ng with
the ayment obigations under aragrah A of the second
amendment . The rent is not waived. It is deferre . And
there s franky we re comying with those ters .
He moves on to arag rah sta tes Two Roads ha s
stricty comied with the terms of the ease and the
second amendment and used any and a gross saes evenues
generated in the manner resc ribed by Sectio n of the
seco nd amendment as outi ned above .
At this time I guess aragrah 5 reay a ys out
our int erretation o f the se cond amendment and of t he
ground ea se agreement between the arti es . It is franky
dis uted by the Venetian . But you know a reasonab e
interretat ion on age of 6 of Mr . Hanson s aff idavit
stat es it fo ows that the current eriod rents shoud
ony be aid after those two riorit ies are satis fied . In
effect VCR as andord agreed to accet rent ony to the
extent cash remained after ayment of the higher riority
obiga tio ns of oerating exens es and management fees .
That is recise y what Two Roads has done . Two Roads has
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honor its payment oigations under the eas e and not
in defaut and/or reach of the ea se
So the purpoe ehind the second amendment is to
a ow them reathing room to turn the corne r They are
turning the corner . They' re paying rent They' ve aid in
exces of a miion in rent It i s to defer rents nti
we turn the corner and are out of this recession an
us i n e s i s operat in g Th at ' s in the Ve ne t ian ' s - a s
when it puts its tenant add-on in thei r et intere t
And aso i n their est interest as andord caue these
rents aren ' t eing waived they ' re eing deferred So I
e i ev e yo ur Honor - - an d I s tand ready t o answe r n y
questi ons -- I eieve through the affidavit of
Mr Hanon through the moving papers that we ' ve et our
ur en toda y We ha ve sumi tted a de fe nse tha t we ' re not
in defaut o f the ea se agreement We ' ve met our t andard
under oth NRS 0 . 253 and the Nevada Supreme Court
precedent on t his is sue
This amiguity and this interpretation of deferred
rents under this operating agreement i s in fact a
triae issue that precudes your Honor from granting
suary eviction on today' s proceeding . I woud thank
you fo r your time And if you have any additi ona
quet ions I ' d j ust reerve a rief reutta
THE COURT : Okay
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it ' s
were
go
MR . COULTHARD Thank yo yor Hor .
THE COURT : Conse .
MR . FEDER Thank yo yor Honor .
The more I oo ked at thes e aers the more I wen t
ac k t o th e ada ge wh en I fi rst s t a rt ed r acticing a w
when the aws on yor side yo arge the aw when the
facts ar e on yor s ide yo arge the fact s . I f yo have
neither yo get creative . Creativity does not eqa
amigity yor Honor . And that ' s c ea r when yo eay
ook at the for corners with resect to the secon
amendment of the oera tin g ag reement .
Which critica y yor Honor if yo have to ook at
their own affi davit and thei r own moving aers the y ' ve
a r g e d it h a s n ' t c ome o t o f c o n s e ' s a r gme n t h e r e
an imied amendment to the ea se . Imi ed . I mean
not exressy stated in this docment of any rovision in
the for corners of the second oerating agreement stating
anything aot exressy stating the argment that we
deferring! or s omehow saying kee rnning the sines s
ahead . Kee aying yorse f yor management fee . Do
everything yo want t don ' t worry aot ever aying
rent to s . In eretity according to their own
inte rretation . That was not what the intent was . And
it ' s not what ' s in the for corners of the agreement .
When yo ook at the agreement yo can -- they ike
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to ovrook and thy don t ray touch upon Scti n -A
2 of th scond amndmnt to th opra ti ng agrmnt Whn
3 you ook at Sction -A thr is critica anguag in
thr countr to this who argumnt aout amiguity
5 aout drrd rnts countr to this argumnt that
6 somhow th curr nt p riod r nts com d frrd r nt s .
7 Its spcific as your Honor raisd dfrrd rnt
8 was on y through th nd of 2008 . What w waivd your
9 Honor undr that provision was our right to dcr thm
0 in dfaut undr th trms of th as for faiur to pay
rnt .
2 W waivd hat ri ght . W didnt wa iv thi r
3 oig ati on to pay . W sai d it s df rr d rnt and you
st i hav to rquird to pay . W gt th oig at ion
to vict thm. Waiv that . But thn thr is angag in
th e s ame Section 1-A, your Honor, th at said , we can then
7 rescind, withdraw, nul l ify if the y f a i l to comply with the
8 trms of h as .
THE COURT -B I .
20 MR. FEDER Othr thn th dfrrd rnt
2 thats rfrncd in th Sction -A
22 Thy ar trying to crat this amiguity and its a
mattr o f aw whthr on xists . Thyr coming to your
Honor and sayi ng thr s amiguity . But Sct ion -A
says w can withdraw rscind othrwis nuify such
2
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waiver decaring them in defaut, to evict them, ad to
enforce a of its rights in the event that -- Suection
2 says, the comany reaches any rovision of the
e a s e - - a r en t he t i c a - - o t he r th e n t h e f a i u r e t a y
rents that have een deferred, as rovided in the
foregoing. Whats in the foregoing, your Honor . his
section is through the caendar year 2008 -- and fis to
cure such reach within the time frame rovided in the
ease .
We gave them not ice, your Honor , i n Ari 20 They
have fa ie d to ay current rent . They didn ' t cure t hat .
They are in defaut . They now ar e j uming, your Hnor, on
Sectio n 4-A, as their saving grace . Whats interes ting
aout 4-A, your Honor, is that this rovisi n was no t
newy created . ts not as Mr . Hanson uts in his
affidavit, the arty drafted the second amendment to
conform to the uncertainty regarding a secific order
ay ing o igations a ft e r th e caendar ye a r 2008 u e s s
what . That riorit y existed are ady in the oera ting
agreement . t exi sted in Sec tion 5
A we did in that second amendment was redefine the
oerat ing agreement, how they were going to uti i ze
ro ce e ds . t we nt from an ord er o f o er at in g exen s e s ,
rent, oan, interes t, and their management fee, to utting
the management fee ahead . t was a rio rity for the
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bine operaion . B ha prio riy and he b ine
operaion doe no affec heir obliaion nder he
erm and he paymen obl iaion nde r he lea e .
How do we know ha , yo r Hono r . When yo o t o
Secion 1 . 15, a exied prior o hi amendmen, t ey
fail o pay ren . ccordin o em and e way ey ' re
ryin o inerpre he amendmen wa ha a he t ime in
2008 when he weren ' payin ren, hey were no i
defal ei her becae hey didn ' have enogh proeed
ecae he order of prioriy hey coldn ' a if . So
now hey are ryin o j mp e leap of faih, yor Honor,
1 2 redefine wa diribable proceed mean wihin te
1 3 confi ne of e o pera ing areemen .
I a gr e e , i ' a w a e r f a ll y o r H on o r . B i ' a
w a e r f a l l a ' d o e n o p r e c l de - a n d i d o e n a y
16 anyhin in he econd amendmen heir obli ai on o
1 7 conine o comply wi he leae.
1 8 In fac, yor Honor, Secion 3 . 3 , wih repec o
1 9 capial conribion acally ay, if yo don ' ave
20 enoh capial, enoh revene o aify yor
21 obli gaion, incldin ren, have a capial call . We
22 didn ' . They fail ed o comply . ain, an aemp o
23 a i fy he obl iaio n nder he r e .
2 S o wen yo o hro he for c orner o f e econd
25 amendmen , yor Honor, hi had noin o do wih heir
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1 obliaions nder he erms of he leas e . o loo a
2 Secion 1-A yo look a Secion -A -- whas criti cal
3 when yo look a -A he las senence of -A is i
acally als abo he special conribion adi ti onal
capial al locaion ha was comin o in Seci on
6 Gess wha i cold have been sed for yor Honor b
7 hey chos e no o . Nmber 3, paymen of crren re .
8 Showin aain ha he obl iaion o conine t o pay
9 ren conined pos ene rin ino his areemen the
seco nd amedmen he opera in areemen No wi th
1 1 respec o he lease .
1 2 THE COURT: I don dis aree ha t hey had
1 3 an obliaion o pay crren rens . I ' m j s looin a
1 he obliaion as o where he prioriy falls o p ay ha
and how lon he -A prioriies were o be in place .
1 6 MR FEDER : B he -A priori i es di d no
1 7 effe c he oliaion o conine o pay he lea se . Se e
1 8 he priori y al l i did when yo wen o he opera in
1 9 areemen a Secion 1 . 15, i had a prior iy alrea dy . All
bsinesses sally lay o a prioriy wha expenses yo
need o pay before here ' s ever a dis ribion wih
22 respec o profis . All hey did was redefine ha in
erms of he bsines s operaions al lowin hem meanin
2 he manaemen company o ake h e anaemen f ee
earl ier on Tha was oriinally all owed in he prioriy
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1 B ha did no elimnae he obliaion o conie o
2 pay ren . I had nohin do wih he leas e . And t heres
3 nohin remember , i s impli ed . They ared im ied .
4 If hey said ha his was oin to somehow be in
5 perpeiy hat his crren rens were oin o be come
6 deferred rens which I don care nder any reaonable
7 ine rprea ion of his areemen ha cold ever be he
8 inerpreaion, with a de respec deferred rents were
9 very specif ic .
1 0 I a lks abo crren period shall refer t o he
1 1 operain manaemen fee hat have no been de ferr ed as
1 2 provided in hi s areemen . Theres only one area tha
1 3 akes abo deferred ren, and has Sec ion 1 1 A a 1
A .
So o s, in erms of he for corners, 1A defie s
he loic of heir enire a rmen . Secion 3, which hey
re li ed pon, defini n how crren rens and throwing i in
deferred. Tha is no referenced in his a reement .
1 9 Secion 4 A was an amendmen prioriy paymen
amendmen o he operain areemen . Nohin o do wih
he obliaions of he lease . If hey waned ha, yor
22 Honor hey shold have p i ino his areemen . I s
23 no her e . And i can be impl ied, bec as e even here
has a lways been an order of pri oriy of paymens . And he
25 redisribion of ha did no effec he obliaion o
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pay rent .
1
THE CURT : So your poition i
3 e ent ial ly that you deerred rent or 008, and
4 beginning in 009 you expected them to be paying o the
deerred rent a well a paying their current leae i n
6 ull, only under thi prio rity where operating expen e
7 were paid irt, management econd, and the lea e thi rd
8 the rent third .
9 MR. FEDER : n term o propr iet y, where
the gro revenue rom the ale rom the operatin, how
1 1 they were going to be appli ed . But it didn t eliminate
1 their obligation to continue to pay rent .
1 3 THE CURT : Not eliminate their
1 4 ob li gat ion . But am correc t . You eem t o b e aying your
po iti on wa a o January 1, 009, they hould have been
16 not only paying their deerred leae payment, but alo
paying in ull their current rental period payment .
1 8 MR. FEDER : Your Honor, we believe they
1 9 were reuired to pa y al l the payment . Epecially the
current paent on a going orward bai , ye .
1 When you take everything that o ccurred pot
we ve been w orking wi th them. And with a l
3
tranaction
due r epect in term o what been happening, we ve been
4 working with them. What intereting in term o certain
o the e payment t hat hae been made, what really
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1 el ling, i there wa a proviion ini de he econ
2 amendmen hat dealt with he managemen ee . I th e
3 managemen ee ever wen above a million dollar, their
4 management ee then became deerred . The pec ial
contribution never go o hat level . In act, in te rm
6 o ome o hee priori y o payment, they allo cat ed
7 certain payment that they e o pay o he pecial
8 contribuion, o i would never rigger the ac that they
9 wouldn ge their 5 percent management ee, your Honor .
Everything that wa laid out in thi econd aendmen
1 1 o the operating agreemen, I m no going o dipute wa
12 an at empt o allow hem o urvive . But it had nothi ng
1 3 o do or deerred any urher their obligaion o
1 4 continue o pay rent .
With repec to , your Honor, ag ain, Sectio n 3A, I
1 6 wa re erring o earlier, about he capital contribui on,
wih repec to he ren, it actually in he operating
1 8 agreemen . It he LL obligat ion . So nothing in
1 9 Sec tion 8 , o he econd amendment to he operat ing
agreement, i ay all erm o he operaing agreemen
21 ta y in place . I mean, everyhing poin to, your Honor,
22 hat thei r interpreation o wha they re rying to do. I
23 give hem credi . They re trying o urvive . I
24 under tand ha . Bu urvival and ryin g o crea e an
ambiguiy one doen exit . To create an argument, o
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tht they dont get properly evicted, enogh is engh
e hve over 3 million dollrs orth of rent tht s not
been pid, tht they js t nt to keep throing bk into
this deferred term, hich is no here interpreted nyhere
in resonble fshion ithin the confines of the second
mendment to the oper ting greement
Yo loo k t the operting greement, i f they nted
it tht y, yor Honor, they shold hve pt it tt y
Their consel s the one ho drfted initilly this
docment Their conse l s the on e ho s involed in
the drfting of this docment No here in ny of these
drft s, nyhere long these lines, hs it ever coe ot
And they kno he is the one ho pt in the lst setion,
Section 4A, bot sing specil contribtion in pying
crrent rents They kne they ere continll y obli gted
They relize the ir bcks re p ginst t he ll , yor
Honor Theyre being cretive Bt the cretivity is not
n mbigity
At this point, e gve them the proper notice nder
the le se They didn t cre e gve them the 5dy
not ice , s reqire d by sttte They hve not cred
ere entitle d to poss es si on, yor Honor Theres
nothing in the 4 corners of the second mendment tht in
ny y shold prevent s from this cort e ntering n
order grnting smry eviction
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THE COURT : Yo o ld ge e tht te
second mendment nd ho it plys ot in Section 4A in
the pi oi tie s old t lest, in pt, esonbl y se em to
be sying tht cent peiod ents e going to b less
of pio ity fo s ight no While e ' e gettig ll
of these bck things pid off s i s lid off in
pgph A, hile ll o f thes e bck thing s e be in g pid
off, the pioity fo ht yo need to be pying is the
opeting expenses, mngement fees, then cent peiod
ents
MR EDER : And then, yo Hono, t tht
point, specil contibtion, inteest, lons, defeed
ent Thee i s hole le vel of p ioity thee
THE COURT : It dopped the pioi ty fo
hen the cent peiod ents needed to be pid in the
gnd scheme of things I ' m not sying yo ' e sying yo
don ' t hve to py them, st it dopped the pioit y of
hee it old be collected
MR EDER: Within the definition of the
di st ibte d poc eeds ithin the opeting geement Bt
kno e ' e getting bck into the lese
THE COURT : Yo positi on is tht doesn ' t
hve ny kind of ecognition tht it might not ll be
pid, tht it ' s e nt these othe things pid fist
We el iz e the e might not b e eno gh money to py ll
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these things, so e ' re going to drop it don in the
priority for right no ntil e cn get the bck stff
pid off
MR EDER No, yor Honor Bec e
tht ' s the bck stff When yo look t Se ction 1A, s
to the deferred rent in 2008, e lloed tht to cntine
to be deferred ntil ith respect to, they don ' t hve
breches nder the te rms of the le se Which incldes the
obligtion to contine t o py crrent rents
There ' s no dispte tht this s n opportni ty t o
give them brething room nd to keep BRG ith respet to
it s mngement fee Bt it d id not in ny y impl icte
or ef fect the terms of the lese Jst s the origi nl
Sect ion 1 15, hich hd n order of prior ity It did not
impct tht pon thei r filre to py rent Under the
originl section they dmit they hve filed They ere
in deflt And e ere iving tht deflt They dmit
tht in the se cond mendment
Tht s bsed pon n order of priority tht s in
the orig inl Section 1 15 They dmit tht they ere in
deflt becse they eren ' t pying rent So the
impliction of the order of priority hs nothing do ith
the ob li gti ons nder the terms of the lese They re
trying t o crete tht correct ion Bt it ' s not connected,
becse yo cn ' t look t Section 1 15 in tht fshion
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15
1 THE COURT : I ' m s t trying to tlk
2 log iclly nd think tht if the secon d mendment i s pt
3 into plce in Jne of 2008, nd it s eems to me to b
4 recognition tht this restrnt s strggling to ke
5 its pyments , nd e recogniz e it ' s g oing to tke s ome
6 time to get ll these things pid off It seems i l logicl
7 to me to think tht the int ent of t his s, s of nry
8 1 st , 2009, to sy no yo hve to py dobl e Tht ' s
9 es sentilly ht yo ' re sying tody
1 0 Yo not only hve to be pying off everything tht
1 1 s deferred, bt yo hv to be mking the fll , crr ent
12 rent l pe ri od pyment
13 MR EDER Tht ' s not ht e ' re s ying
1 4 If yo loo k to the for corners of the greement, in the
order of priori ty, nd yo loo k t the confines of Sectio n
1 6 1 8, here e gree to defe r the 2008 rent , tht
1 7 obligtion to py the 2008 deferred rent s don in level
18 6 in terms of the order of prio rity
1 9 So pon their bility t o py everything, inclding
20 the 2008 deferred rent, s yo lredy broght ot in
21 Sect ion 4-A, this prio rity goes bck to th originl
22 p r i o r i t y, hich pts the rent sec ond s oppos ed to , I
23 think, fifth posit ion
24 Bt ith re spect to the overll obli gtions nder the
25 terms of the lese, I t hink tht ' s here the
1
3 7
diff ti ti ll li Thi h thi t ith
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diffeentiati on eally lies . This has nothing to o ith
ny of the obligati ons nde the leas e . It as an
geement by to bsiness patnes to allo them to
eode the pioity fo hat they ee going to do ith
the gos s evene. Bt Venetian, in its capacity a s a
landlod neve aived and in any capacity neve ageed
to anything in the docment s tating yo don ' t have to pay
ent on a going foad basis . It ' s not in this
geement . It c an ' t be infeed fom thi s age emet .
The fact that they haven ' t paid it they dmit they
h av en ' t p a i d i t . T he fa c t t h ey h av en ' t pa i d i t i s t h e
basi s they ' e i n defalt . They haven ' t ced it . e ' e
entitled to smay eviction.
They ' e tying to ceate the sittion becase e
happen to be both a patne and a landlod . And hat e
need to do is dif feentiate beteen the to . They ae to
diffeent hats yo Hono .
Nothing in this ageement this effected a
ageement by Veneian to agee ithin the opeations of
the bs ine ss ta ke yo management fee . e ndest and .
THE COURT : Yo ageed to agee .
MR. EDER : Ta ke yo management fee . Bt
it di d not effect the tems of the lease hich had al l of
its obliga tions nning the bsines s eveything el se
along those lines inclding the obligation to pay ent .
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Nothing in this docment refers to section of th lese
tht sys yo ' re obligted t o py yor rent on mthly
bsi s on the first dy of the month Nothing in ti s
revise s tht Nothing in the origi nl operti n reement
delt ith the obligtion -- in terms of the obligtion of
the lese Order then n order of prio rity Thts ll
tht hppened, yor Honor, s the chnge in order of
priori ty Bt it didn' t effe ct heir obligtion der the
te rms of seprte, independent contrct tht he yo
loo k t it, they ve dmitted they hven t pid Ad
nothing in the s econd mendment to the op erting
greement, nothing cn be impl ied s they rge -- tht
effe cted the terms of the lese If it s, it old
hve been in the se cond mendment stting, thi s prvis ion
of the lese is no mended
TH COURT : Wht is the prpo se in yor
pleding bot tlking bot iving the $ 300, 000. 00 in
chnge tht ' s de s to the pst deferred rent
MR DR : We ' re shoing tht, yor
Honor, tht, gin, sing my term, the cretivity in theirrgment We ' re sho ing tht if yo tke the i r rgment
t o the end reslt, here logic cn reslt, they dmit tht
there is nothing left in the specil contribtion on
pr incip le nd int eres t So e ent hed nd ived the
remining 350 It goes bck to the order of prio rity,
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1 hae not been deferred . But only rent that ' s been
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y
2 deferred expressly n Secton 1B, s the 2008 ren
3 When you really look at t and you really get nto
4 the documentaton and you really look at the amendent,
5 second amendment to the operatng agreement, what ere the
6 applc atons before, what was the applcaton aft er , ts
7 always been an order of pror ty That ' s the only hng
8 that was hanged. othng to do wth ther obl gaons to
9 contnue to pay.
1 0 THE COURT : Was there eer any ds us so n
1 1 under the way you ' re tal kng about whch I unde rs tand .
1 2 I understand your poston s that operatng expenses
1 3 under 4A hae pr ort y. Operat ng expense s, management
1 4 fees would be pad . Current lease rental perods w ll be
1 5 pad n full . Then 4, 5, and 6, nterest , contrbuto n
1 6 all of that t o be pad oertme .
17 Was there eer any dscus son about has to how
1 8 much how that was gong to be pad oer tme? Are
they s t j ust what ' s left oer gets equally dded
20 among nte res t and contr but on . Or t all goes towards
21 nterest frst, then starts on contrbuton later on?
22 MR . FEDER: Your Honor, f you take what
Secton 4 states, t talks about what was gong to
happen wthn the busnes s .
Agan, our poston s that was how they were gong
41
1 to deal wth gross proceeds gross sales reenues mng
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14
1 to deal wth gross proceeds, gross sales reenues mng
2 out of the operatons of the busness How they wr e
3 requred under the operatng agreement to apply t n
4 terms of operatng expenses I mean, accordng t them
f they hae enough reenue to pay operatng expen es,
6 they don ' t hae t o pay ther thrd-party endors e ther
7 Es senal l, we ' re no d fferent, n terms of
8 landlord, then any of the thrd-party endors who re
9 prodng them supples for the restaurant You cn ' t
l o ok - - a s I sa d , t ' s a n o r de r o f p r or t y T ha t ' s al l
1 1 t s . Busnesses do t all the tme n an operatng
1 2 agreeent They want t defned Here ' s what you ' re
1 3 gong to do wth the money wthn the operatons But t
d oe s n ' t e f f e ct o r l m t a n y o f y o u r o th e r o bl g a t n s t o
pay rent Thrd-party endors , anybody. Okay
1 6 In ths scenaro just because Venetan wears two
1 7 hats , n terms of both an owner and a landlord, shuld not
1 8 mpact the fact that nothng n th s agre ement effe cted
1 9 the oblgatons under the le ase That ' s clearly - t ha t ' s
w ha t ' s c r t ca l 21 I f you read the four corners of ths -- I know I ' m
22 r e pe a t n g my se l f - - o r de r o f p r o r t y d o es n o t qu a l d on ' t
23 pay rent I f they wanted t that way, they should hae
24 put t n that way It doesn ' t say anywhere n ths
agreeent that any term, any secton, any subparagraph of
1
42
the le as e has been amended othng
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THE COURT : Okay
Mr Co lth ard
MR COULTHARD: I thnk I ll start
respondng rght there and wor k ba ckwards
It says the second amendment doesn t amend th leas e
And they want to separate the LLC bsness oblgatons
from the lease That s not what the partes ntend
That s not what the part es say n the second amenment
T he y s t a t e whe r e a s - - l e t s s e e W he r e a s , t h e p a r t e s
wsh to amend the agreement to reflect certan chages to
ther bsess relatonshp as set forth n ths
agreement and t o amend the lea se cons stent wth the
pros ons of ths agreement
Ths second amendment amended the lease oblgatons
to pay rent And t s set p a prorty to pay al l the
rent -- deferred all of ths rent
Venetan ddn t wae any rent I t set t p n a
waterf all te ar nder Secton 4, operatng expenses,
management -- then to pay the rents
Yor Honor, yo ht the nal on the head Yo sad,
s o they wanted them to pay doble There wasn t ca sh to
pay the crrent rents at that pont There wasn t
sff cen t cash from operatons to pay the 200 pa st de
and owng r ent That s why they entered nto ths
4
1 agreement your Honor to allow this restaurant to s tay in
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2 business all ow this business entity t o hae some
breathing ro om unti l they could pay thi s amount
4 You asked a question about the deferral of thse
current period rents I f you go through this water fall
6 paragraph 4 it does in fact define exactly how hose
7 rents would be paid in the future under Subsection 6
S Six to the Venetian and management on an equal
9 dollar for dollar basis to pay deferred rents on th one
hand and deferred operating management fees on the o t h e r
1 1 until the entire amount o f the deferred rents o n the one
1 2 hand deferred operating management fees on the oth er get s
1 paid in full That s the deal they entered int yur
1 4 Honor
I want to step back a litt le Okay We re here on a
1 6 summary eicti on procee ding All right This act ion got
1 7 filed 10 days ago You got me as a litigator now who s
lS bee n handed this fil e the 1 st o f September You e got
1 9 Lewis and Roca as a liti gator We weren t inoled in the
negotiations o f this deal We weren t inoled in the
21 underlying contractual rela tion from 07 and ' O S . We
22 weren t inoled and can t get in the pa rtie s he ad on what
2 thei r intent was when this was entered into Yet we
24 stand before the court with no discoery on an order to
show cause whih essentially could eict my client and
1
4
gan them a fat accompl and reacqure ths restarant
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under essentally a sumary judgment standard when we
haent done any ds coery .
We dont know what the nt ent s are . I hae g t to
tell you . I tre d to work my way through the e-ma s by
and between the partes , and the draft agr eements f these
second amendments, and ts dffcult to understand where
the partes were comng from and understand the hstory
It must be extremely dffcult for ths court .
But f the ltgators hae done one thng today n
court, we hae demonstrated that there s an absolte
dsagreement between the nterpretaton and how ths
s econd amendment works . And n that st uato n, under our
eada Supreme Court case law, ths ambguty, whh s,
agan, back to f there s more than one reasonable
nterpretat on of ths 4-A second amendment, creat es a
genune s sue o f a matera l fact as to the part es ntent
Whch s a legal defense to the request for sumary
j udgment
Our eada Supreme Court sad we conclude that
sumary ecton was not approprate n ths case because
there s a legal defense, based upon unresoled ssues of
ma te ra l fact . Cle arly, there s a d spute on how th s
agreement works . Clearl y the lt gators before you today
don ' t know the ntent of the par te s .
Docket 57053 Document 2011-13523
1
45
I can tell my clent ' s ntent that we ' e la d t out
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n the affdat s dametrcally opposed to the
Ve ne t a n ' s a ff da t s . I be l e e t ha t ' s w he re t od y ' s
proceedngs end . o suary no summary ecto n . And
we moe forward under the statutes wth them tryng to
ltgate and we le to fght another day as to wht the
partes ntents are and how ths deal was to work.
I ' e got t o tel l you under the LLC operat ng
agreement there s a dspute resoluton proceedng layout
that contemplate s a medaton between the parte s nd a
fast tracked arbtrat on . S o they dd rese re the rght
to moe for summary ecton . But once we get past that
ss ue f we get past that s sue today then these partes
hae to get together . They hae to try and medat e ths
dspute . If not they end up n arbtraton your Honor .
Frankly I thnk t wll be off of your plate wth all
due respect to your Honor.
Couple more ponts . The specal contrbuton
counsel for Venetan says we could hae used ths specal
contrbuton for rent . Well that ' s fla t out not what the
s econd amendment sta tes . He tres to s ay we set a sde
ths 2 mllon dollars . You ddn ' t draw down. You ddn ' t
us e t for rent . Shame on you . You shoul d hae . He
tred to somehow - you weren ' t far wth your partner .
Wel l take a look at Sect on B . It tal ks about
1
4
ths provson but t specfcaly -- I beleve ' s
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- B
Sorry There s two ponts He sad both spcal
co ntrbuton and the captal contrbuton could be used
for rent That ' s flat out wrong That ' s not what he
agreeent says
Taks about the deferral of rent and t stat s - -
o k ay - - t h e sp e c a l co nt r bu t on - - n o w I ' r ea d n f r o
2-A -- paragraph page 2 of the agreeent
The speca l contrbuton ay be drawn upon onl y n
the event that gross sales revenues are less than
opera tng expense s and operat ng anageent fee s And ay
not be used to pay anythng other than such a shorfall n
operatng expenses and operatng anageent fees ou
can ' t use the specal contrbuton to pay rent I flat
o ut s a y s y ou c a n ' t
Says the sae as to the captal contrbuton I
b e l e ve I h av e t h at I ' c e r t a n t ' s n h e re T a t t
spec fcall y precludes the us e of the captal cont rbuton
for payent of deferred rent I can ' t put y hands on t
your Honor I would j ust subt t on tha and represent
to the court I ' pretty darn sure there ' s a lot of ovng
ssue s but that s specfcally n that provs on So w
c a n ' t
So what can we us e We can use gross revenues and
1
4 7
we ' re complying with giing t hem eery s ingl e pe nn .
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After operating expenses are paid and after the maagement
fees they get all the money . Which is the deal tey
struck. They want out of that deal they should t be
allow to gt out of this deal on a summary eictio
proceedings . Gien the statutory mandates your Hor is
obligated to follow and the eada Supreme Court star e
decisis on this i ssue says this is a Draconian potetial
result analogous to a summary j udgment They shoul d not
be able to be granted summar eiction at this stage of
the proceedings
Your Honor I bel iee we hae submitted it
complete ly a defense through the affidait of Mr . Hanson
to th is summary eiction proceedin g and we would re quest
that it be denied . And the next step for them is t o then
go ahead and moe forward with the filing of their
erifi ed complaint .
Whether we go to mediation or arbitration or in this
distri ct court these issues will get sorted out in the
future But not until there ' s been dis coery into what
the intent of thes e parties were So I would respect fully
request that the summary eiction proceedings should be
denied your Honor .
And if I can address any other questions, I think
I apprec iat e th e cour ts t ime .
1
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THE COURT : I have no questons rght
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I
now .
MR. FEDER: I f I can have a moment .
apologze .
Whats nterestng about ths entre argument s
under the theory they keep on addressng wth respet to
ths ds trbuton of proceeds n the s econd amendmet f
you ta ke that to the effect of what theyre sayng that
they could contnue n the process that theyre dog
r gh t n o w n p e rp e t u t y a s I s a d e a r l e r - - c o l l e ct n g
a management fee and w e would never have the rgh t t o
then demand payment of rent and to then evct them fo r
falure to do so . That was never thats a dramat c
ts dramatc to even thnk that t was ever mpled n
the te rms of ths agreement .
Wth respect to some of the arguments that have been
made the specal contrbuton I was j ust readg your
Honor wth respect to Secton 4 at the end It says
plus your data on the specal contrbuton for purpose s
of makng payments 1 2 and 3 above f necess ary . Three
s the current rents we were ta lkng about .
I understand what they rased n Sect on 2 but what
I was referrng to was Secton 4 In the ordnary
dstrbuton that he was referrng to wth respect to
ther whch defe s ther argument that they ddnt
1
4
hae any o bl gat on t o pay rent .
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Wth respect to, agan, your Honor, t o ths s al l
they had to do was use ther gros s reenue. o bus nes s
can opera te that way, your Honor . They hae an ob l gat on
to pay ther experences .
THE COURT : Let me as k you ths .
The nterest on the specal contrbuton and the
specal contrbuton, accordng to eerybody, has ben
pad off at ths pont .
MR . FEDER : Correct .
THE COURT : Presumably t s been pa d off
from January 1 st , 200 through now .
MR. FEDER: Correct .
THE COURT : Al l r ght .
How much would that hae pad toward current perod
rents n January 1st , 200 forward, f ths had been
appled to he rents ersus nterest and contrbuton.
MR . FEDER : I dont hae that numbe r n
front of me . Ge me a se cond. They only drew
$ 550, 000. 00 on that spec al contr buton .
THE COURT: I m so rry .
MR. FEDER: $550, 000. 00 as t o the
approprate amount of nterest that s Im uncertan
wth respect to how that would apply wth 10 percent
nterest
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THE COURT : The ent fom Januay s t
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2009 would hae bee n what .
MR. FEDER: If you deducted fom tat
pont .
THE COURT : ot deductng n to ta l .
MR. FEDER: 3 . 2 m l l o n .
THE COURT : Okay .
And the nteest and specal contbuton payents
would hae been an eghth of what ' s due and owng n ent
essentall y .
MR. FEDER: Es senta lly .
THE COURT : Okay.
Soy fo nteuptng you. Go ahead.
MR . FEDER: You Hono I wanted t bng
up one mpotant aspect n Sect on 1 -A agan whh
doesnt get us to Secton 4. I thn k ts ctcal . When
you go back to Sec ton 1 -A wth espect to ou wae of
ou obl ga ton .
THE COURT: 1- B .
MR. FEDER : 1- B you Hono wth espect
to ths s sue wth espect to the wae of past due
defeed ents .
I thnk ths wod s ctca l you Hono . And I
thnk ts somethng that hghlghts why the agument
doesn ' t make sense . And that s when you get to
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Subsect on 2, t says the company bre aches any pro s on
of the lease any It doesnt say any but wt
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of the lease -- any. It doesnt say any, but, wt
respect to the oblgat on to pay rent . It says, a
pros on .
Agan, f ther ntent was to be somethng oter
than, any proson, t would hae been n ths
document .
Agan, two separate agreements, two separate
oblgat ons Were here n a capacty as a landlor not
an owner . That word, any proson, other than the
deferred rent for 2008, that s crt cal . It defets
the r ent re argument under Sect on 4-A . Theyre n
breach . They hae not cured t . There s no ambgut y .
Your Honor, our post on . They hae fale d t pay
rent . They hae admtted t . They haent cured t .
We ' re enttled to sumary ecton, your Honor .
We dont need to go through any addtonal dscoery.
Al l the papers hae been submtted . We submtted al l the
lett er s . All the payments theye made . We submt ted t
all t o your Honor wth respect to the 5-day notce . That
was submt ted . It s al l there the operatng agreement,
the second amendment, the let ters regardng default, al l
the letters pertanng to sendng those payments . Its
all n the record, your Honor.
There s no ambguty. The nterpretaton s a
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matte of law They e ceating attempting to eate
one but it doesn t exist In an ode of pioit is
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one but it doesn t exist . In an ode of pioit is
with espect to the business ela tio nship not wit
espect to lease obligations yo Hono.
In ou posi tion we e entitle d to eiction ude the
leas e fo failue to pay ent Admittedly fail ue to
pay ent .
Thank you you Hono .
THE COURT : Well I will say that you
know pat of the debate we wee haing to the extent i t
wasn t clea t o you all Pat o f the debate I was haing
philosophically and out of cuiosity and things of that
natue was geaed towad the ambiguit y if any. In my
mind it eally i s to how the inteest and special
contibutions wee being paid in the gand scheme f the
pioity.
ot that the cuent ental peiods wee to be paid
management was to be paid opeating expenses wee to be
paid . It was t o the extent you get down that li st and you
hit inte est is eeything left oe going to intees t
o i g i n a l l y an d l a t e t o s p e ci a l c o n t ib ut i o n o i s
eeythin g le ft oe to be diided up et cetea . But
that s e a l l y - I d o n t t h in k i s e l e a nt t o d e ci d in g th e
issue that we e dealing with . It wa s j ust conusing to
me . That s why I was as king wee you expecting double
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payments on rent, or was t nterest, or was t t
ceter a et cete ra
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ceter a, et cete ra .
So do I thnk that the secnd amendment amend the
lea se, even though t s part of the busne ss agreent .
Yeah, I th nk t amends the l ea se .
Do I thnk there s some consequence to reorderng
the pr orty . Absol utely, I thnk ther es a cons eence
to reo rderng the prorty, n terms o f whos gett g pad
and when theyre gettng pad.
But agan, I dont know that those thngs al tr
oblgat ons to make the payments on the le ase . At th e end
of the day, I cant fnd t to be a reasonable
nterpretaton as to what the defense s puttng frth
about the deferred rents . I j ust I thnk that, n my-
mnd, n readng everythng n here, the reasonable
nterpretaton the partes would have s that the Venetan
was de ferrng the rght to receve rent s fo r al l o f 2008
That begnnng 2009, here s the pro rt y that were gong
t o get our payments . And everythng that were owed from
the deferred standpont, falls way down on the prorty
ls t .
We want you to pay your operatng expenses . Were
gong to bump up the management fees so youre gettng
that a s well . We want our current rents . Then well
slowly be pad back for everythng that was deferred
54
1 I don ' t thnk you can nterpret that reasonab on
2 paragraph -A, where t says deferred rents, to men we
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2 paragraph A, where t says deferred rents, to men we
3 can contnue to not pay our current rents and they somehow
morph nto beng deferred rents
The expectaton n my mnd was we realze you had
6 poblems n 07 and ' 08 and we ' re gong to wae r
7 rght to see k default We ' ll wae our rght to se e k
8 rents r ght now . Begnnng January 2009 we expect t o get
9 back on where rents are beng pad, and we ' ll co ll ect th s
other stuff as we moe forward n the best manner we
1 1 can
1 2 As I sad, t ' s knd of ambguous to me as to how the
1 3 collecton of nterest and specal contrbuton s
1 supposed to be, n terms o f percentages of the le ftoers,
f you wll But t seemed cle ar to me that the on y
1 6 reasonable nterpretaton s that begnnng Januar 2009
1 7 we ' re b ac k n your oblga ton t o pay on your current
18 p e r o d r en t s . I c a n ' t s e e w he r e - - wh a t th e de f e ns e s
puttng forth, n my mnd, s a reas onable nterpretat on
that would ge r se to a legal defense to ecton .
21 S o f o r a l l t ho s e r e a s o n s , I ' l l g r a nt t he ap p l c a t o n
22 for show cause ecton
23 MR. COULTHARD I ' d ask fo r a temporar y
stay of your decson n order that we hae the
opportunty to moe for a more permanent sta y f you feel
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gong to meet these oblgatons gong forward.
It s our poston a stay s unwarranted. They faled
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to pay rent. They ' ll contnue to fal to pay rent . I
thnk we should be allowed to go n there and ect them
at th s po nt .
I f they want to go up to the Supreme Court wth
respect to ther appeal, and wth respect to the stay as
well, they ' re enttled to t . We don t belee they e
met the st andard, nor can they meet the standard fo r stay
pendng appeal n ths type of stuaton.
MR. COULTHARD: Specf cally, respond to
that .
RS 0 8 5 does contemplat e a stay of execut on upon
appeal . And there s specfc dutes of the tenant who
does retan poss ess on o f that premse s durng appeal .
I belee t s , n fact, an oblgaton to pay
current rents from today ' s summary ecton proceedng on
a gong forward bass under the terms of the lease
agre ement .
And so f that s, n fact, what the statute prodes
and we do pay rents I hae to look at the case law
frankly, you know
THE COURT : St art here . Frst off,
nothng s effecte untl a wrtten order gets
ntro duced. Then obously f you fle the appeal you can
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request
request
the stay at the tme you fle the appeal You can
that here, or request t to the Supreme Cort as
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well
I
decde
t
But f
mong partes
days,
to
can be
can
c a n d o
proceed
I
as a
for stay
get the
Then
and a
would prefer to hae t done n wrtng, thn
the ssue on the stay as opposed to orally dong
MR COULTHARD: We ' re happy to br f t
w do hae a stay unt l such tme as we f l our
on the stay, and I ' ll fl e those wthn 7
1 0 days, whateer I can fle them n 5 f w need
Hae a temporary stay untl we fle our moton that
brought on an order shortenng tme, f the court
accommodate us on that And what ' s th e rus h
THE COURT: Underst ood I ' m as sumng you
the wrtten order today
MR FEDER: I ' ll hae t to you today
THE COURT : They hae s ome des re to
w ll ora lly grant a temporary stay, untl s uch tme
notce of appeal wll be fled and a wrtten moton
can be fled
I ' l l ge you one week to do that, next Monday S o
wrtten o rder prepared from whch they can appeal
by next Monday you can get on fle a notce of appeal
wrtten request for stay, whch I ' ll put on
58
1 shortened tme f t ' s gong to be n front of me as
2 opposed to askng the Supreme Court for the stay.