LAS VEGAS -- An appellate court ruling will force Wynn Resorts, Limited into arbitration over a disputed fee to an investment bank it hired in the depths of the recession but ultimately did not use.
Atlantic-Pacific Capital of Greenwich, Conn., was retained in March 2009 to raise equity to buy three unidentified Nevada resorts that faced "particular distress as they had capital demands, debt maturities and an ongoing business dispute," according to a court statement by Wynn chief financial officer Michael Maddox. In December 2012, Wynn dropped Atlantic-Pacific after the economy improved and the properties came off the market, remaining with the same owner to this day.
But the next year, Atlantic-Pacific filed an arbitration claim for $32 million in fees based on having lined up $1.5 billion in investment commitments. The dispute eventually landed in U.S. District Court in Las Vegas.
On Tuesday, the 9th U.S. Circuit Court of Appeals decided that the case belonged in front of an arbitrator instead of a federal judge. Not only does the court give arbitration clauses preference when written into contracts, the eight-page opinion stated "that presumption applies with particular force where, as here, the arbitration clause is phrased in broad and general terms."
U.S. District Judge Kent Dawson's ruling last year that he would decide on arbitration was overturned.
Wynn attorney James Pisanelli wrote in court papers that the move to arbitration was a ploy to "coerce a payout from Wynn by threatening it with a huge demand ($32 million). Wynn intends to expose this baseless claim for what it is - a shakedown."
Even though the Nevada transaction never happened, Atlantic-Pacific contended that its contract designated it the "exclusive global placement agent" for any "special purpose vehicle" put together by Wynn. That included Wynn Macau Ltd., which raised $1.6 billion through an initial public stock offering in September 2009, while Atlantic-Pacific was still under contract.
Atlantic-Pacific court papers depicted the stock offering, conducted by different underwriters, as a way to cut it out of the action. Its agreement with Wynn was formally severed in December 2009.
But Pisanelli said Wynn will have to make its case in front of the arbitrator that the stock offering was already moving ahead even before Atlantic-Pacific started working for Wynn Resorts.
"They provided no service, no benefit and had nothing to do with Wynn Macau," he said. "They are just seeking a windfall."
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