Q&A: Mark Hutchison

By Buck Wargo

Friday, Dec. 18, 2009 | 3 a.m.

Amid all the hoopla of CityCenter’s opening this holiday season, one local law firm has come across as Scrooge to some.

Hutchison & Steffen, co-founded in 1996 by Mark Hutchison, is taking on MGM Mirage to get the gaming company to further lower prices it is charging for its condominiums at CityCenter.

Hutchison, a Las Vegas native who attended BYU’s J. Reuben Clark Law School, said the firm doesn’t mind taking on giants such as MGM, threatening litigation if its clients don’t get their way.

Hutchison said he doesn’t have any remorse picking on a project that is so important to the city’s success right now, as he must advocate for his clients.

“I don’t feel that way for the same reason that lawyers represent clients in difficult situations,” Hutchison said. “Our job as lawyers is to be advocates in the interest of our clients. If that results aversely to CityCenter, which I feel is an important element to Las Vegas, then so be it. We cannot surrender our professional obligation to our clients because it may have a bad impact on the city.”

CityCenter has sold more than half of its 2,500 residential units. Mandarin Oriental has 217 residential units that are above a hotel. Veer comprises two towers of 670 residential-only units. Vdara has 1,570 units that are hotel rooms owned by individuals.

IBLV: Were you thinking about a career in law in your early college days?

Hutchison: No. I wanted to be a coach and high school teacher, and then I found out that a first-year teacher with two children qualified for federal assistance (laughs). I thought that wasn’t the best course for me to pursue. I served an LDS mission and one of my companions — his father was a professor at BYU Law School — started talking about that. I took a look at that and decided to pursue a career in law.

What prompted that?

I started to think, what am I good at? I always have been able to talk very well, and I love trying to persuade. You can either be a professional politician, debate coach or a trial lawyer (laughs).

You worked as a lawyer for a national firm in Chicago and Los Angeles and moved back to Las Vegas and ultimately started your own firm. Why did you branch out on your own?

It had always been a goal of mine to have my own law firm and be able to hire lawyers and control my own practice.

How did it come about?

I knew John Steffen. We had been friends. In 1996 we both got together and said it would be great to go out and start a practice. Las Vegas was booming. If you had a heart beat you did well. We had a handful of clients. Both of us left on very good terms with our law firms. We got a lot of referral business from our old law firms. They were very generous to us, and away we went.

What was it like to start?

It was just John and me and our firm administrator. It was incredibly stressful. Both John and I ended up in doctors’ offices for heart palpitations. We both thought we were dying. It was all stress related. For the first two years of practice, I saw John three or four times as much as I saw my wife.

What kind of cases did you handle back then?

We were litigators and still are. We were doing civil litigation, commercial litigation, business litigation and business disputes, contract disputes, employment disputes.

What is one of the most interesting cases you have ever handled?

I started in 1998 — the biggest piece of litigation I have handled in my professional career. It turned out to be the largest jury verdict in Nevada’s history. That was the Hiatt v. the Franchise Tax Board of California. We went to trial in that case in April 2008, 10 years later.

What was the case?

Gil Hiatt was an electrical engineer and inventor. He had lived in California, and finally in 1990 he gets a very important patent on, among other things, the microprocessor chip and other computer and electronic technologies. As a result, he had the potential to make a lot of money. He was licensing and making licensing efforts with Japanese companies and Asian companies. He said he was going to move to Nevada, and he moved to Nevada in 1991 and began to experience a lot of financial success and became very wealthy.

In 1993 the Franchise Tax Board said, “Let’s take a look at this guy.” (Some people) read an article about him, and they decided to perform a residency audit. They said, “We think you moved to Nevada six months after you said you did and as a result, we are going to get our piece of that.” He made millions and millions of dollars and so they assessed on him millions in taxes, and they slapped him with fraud penalties. He said, “This is wrong. I moved to Las Vegas. I rented an apartment. I can show you my driver’s license. I registered to vote.” He got the audit file and we determined the Franchise Tax Board engaged in rampant fraud and violated his privacy. We sued the Franchise Tax Board — the first time it had ever been sued outside California. It can’t be sued in the state of California. It has absolute immunity.

What happened?

We sued it here, and the first thing it said to the courts is, “He can’t sue us here. He has to go to California.” So we had to file all these procedural issues, and then the courts said he can sue here. But (California) said you have to apply our laws under the constitution. It went to the Nevada Supreme Court, and we went to the U.S. Supreme Court. It agreed 9-0 that Nevada can proceed with the litigation. In April 2008 we tried the case in District Court.

What happened?

We had sued the Franchise Tax Board for fraud based on a bad-faith audit, multiple violations of privacy and inflicting emotional distress and other causes of action. The jury found in favor of Mr. Hiatt after four months of trial and awarded him $138.1 million in compensatory damages. And then we want back to consider punitive damages. We put on a case, and the jury awarded $250 million in punitive damages for a total of judgment of $388.1 million. That was good day for Mr. Hiatt. We are right in the middle of the appeal now (with the Nevada Supreme Court).

Has he received any money yet?

He hasn’t gotten a dime yet. It is going to take awhile. (The Franchise Tax Board) is going to fight this to the bitter end, no matter what happens with the Nevada Supreme Court, I assume it will take it to the U.S. Supreme Court … This is the type of litigation we loved to be involved in.”

Why is that? Why did you choose to focus on those areas?

I really like high-stakes bet-the-business, bet-the-farm litigation. It is very intellectually and professionally stimulating, and you also have some of the best lawyers you work with and try cases against.

What do you mean by high stakes? Are you taking such cases on a contingency?

I would not work on a contingency on that case, and we generally don’t work on contingency. When I say high stakes, I generally mean for the client and not for the firm. We get paid fairly on an hourly basis. We prefer the hourly rate.

Is that typical?

There are some firms such as Randall Jones who’s good at handling high-stakes business and commercial litigation on contingency basis. It is a different business model and a different animal that I was just never trained in or accustomed to. I am more comfortable with the hourly rate. But I do think the business and practice of law is changing in that clients are looking more for that. Clients are looking for and we are considering more of a risk sharing with clients. The way we have done that is we will agree to lower our hourly rates for a piece of the successful outcome or maybe a holdback on part of our hourly pay. If we are successful, we may get a multiple of that. I do think, particularly in this economy, clients are looking for a lot of value and creative ways that they can still have top-shelf, high-caliber lawyers without paying a fortune by sharing some of the risk with the outcome.

Is that because they don’t have the money right now?

Legal departments in major corporations are suffering like most departments in major corporations. They are looking for cost-saving measures. Businesses just don’t have much money to invest in litigation as they have in the past.

Does that put you at risk or will you do better?

In the end, our firm will do better for two reasons. One is we are going to be willing to consider some of the risk with the clients and also recognizing clients are in a tough financial position and as a result lower our hourly rates. More regional and national firms have a difficult time justifying that in New York or Boston or Philadelphia. I think that’s a competitive advantage that local firms like ours have.

How are they going to fare in this economy?

I think the national and regional firms that come here with a business model that has worked throughout the country when times were good — they tend to have more of a national and regional hourly rate structure, and that structure is not as flexible as far as lowering hourly rates, taking on risk allocation and taking on different types of clients. A lot of bigger national and regional firms have been in the past averse to taking on more local clients. They want more of the national clients.

How has the economy affected firms?

I can speak for my firm and what I have talked to colleagues about their firms. Our firm, the biggest impact has been clients either not paying and filing bankruptcy or being a lot slower paying. We are as busy as we have ever been for the actual work. But when it comes to the payment for that work, it hasn’t been as good as it has been in the past (laughs).

We just work through the issues and try to work with our clients and be smart working for clients who can pay us and working for clients we have a relationship with. And if we don’t have a relationship with a client, we require a higher retainer.

We have been fortunate in that we haven’t had to lay off any lawyers. There have been other firms who have experienced the same sort of things we have, but there are other firms who have experienced a lot more severe consequences. You have heard of the layoffs, but those are the firms that have been concentrated in areas hardest hit by the economy. If you’ve got firms focused on real estate or focused on construction or financial services, there are going to be layoffs there. They just don’t have that kind of work,

Fortunately, for firms like ours, which is primarily civil litigation; people are litigious in good times and bad. When people are being laid off or partners are experiencing a decrease in revenue or lost business, unfortunately, they start blaming each other.

Are the types of cases you handle in this economy changing?

Yes. In one way, we handle a lot more real estate disputes because the bottom has fallen out of the real estate market, and so partners start to blame each other. Or they blame people initially involved in the transaction. They will blame professionals, creditors and partners and as a result litigation will occur. That’s where we have seen an increase. It is really more real estate dispute litigation and or business failure litigation.

We have a couple of large litigation matters right now where companies purchased a ... business during the boom times and now times aren’t so booming. Instead of recognizing that the economy has caused the decrease in revenue, there are allegations that “You didn’t disclose certain financial materials or certain business aspects and so we are going to sue you now for fraud or breach of your obligations to us.”

So how are the cases different from the boom times?

It is interesting. You typically have the same players involved. You still have businessmen suing each other or partners suing each other, employers and employees suing each other, but it’s over different things. Now, it is over deals gone bad. Before it was, “You promised to sell me this land at $2.5 million, and I thought it was a steal at the time and you breached the contract and sold it to someone for $3 million. Now, I am going to sue you for my lost business opportunity.” Two years ago, everyone wanted to be in Vegas. Now, everyone wants to be out of Vegas (laughs).

What other types of cases?

I don’t think we have seen anything yet with commercial real estate foreclosures. Most economists and businesspeople predict that within the next couple of years, you are going to see commercial real estate foreclosure problems that we saw on the residential side. That is going to spawn a whole series of legal battles. You are going to have lot of issues with guarantees — clients who guaranteed all this real estate and on the other side lenders who got the guarantees. Most of these people who guaranteed these huge projects, all of their wealth is tied up in real estate. We have seen that, and will see a lot more where banks and financial institutions will call those guarantees.

What side are you typically on — the plaintiff or defendant?

Usually, we are representing companies or individuals who have been sued, but we will also represent companies who are seeking to enforce their legal interest against other companies. But more often, we are on the defense side. And a large part of our practice is health care related and we represent a lot of doctors and medical institutions in malpractice actions. We defend those. For example, UnitedHealthcare and Sierra Health Services are big clients of ours.

So lawyers are like bookies in the middle?

I have never quite heard my profession described like bookies. But I guess if you are talking about being in the middle of both sides. We are in the middle of both sides (laughs).

Where is your industry heading?

I think most strong local firms are going to be fine, and the regional firms that came in and merged with good strong local firms will be fine. The regional firms and national firms that are in trouble are the ones that came in that picked up a practice that wasn’t that strong or maybe hired lawyers who weren’t that strong and believed because of their national reputation that they would be able to take over the market. I expect these kind of conditions with our firm to continue for the next two or three years.

My own belief is Las Vegas is going to be challenged coming out of the recession for all the reasons it was booming when the rest of the country wasn’t doing as well. I also believe there are governmental and business policies that won’t be conducive to growth over the next couple of years in Las Vegas. We will have some challenges.

Then we aren’t going to see another flood of attorneys come to town?

No. No. We are not going to have a bunch of out-of-state lawyers to remind us how good they are and how bad we are (laughs).

What was the attitude of locals about that happening?

I would say it was a little disappointment when you would hear lawyers make comments about their clients needed to hire Los Angeles-based lawyers or New York-based lawyers to really take care of legal business in Las Vegas. The reason it was disappointing was because I knew how good the lawyers were in Las Vegas. At the same time, it was motivating because it was fun to send them packing after a hard-fought trial or hearing.

How is a Las Vegas lawyer different from a Los Angeles lawyer or Chicago lawyer?

I practiced in Los Angeles and Chicago. The biggest way Las Vegas lawyers differ is that we know we will see each other again in court for a trial or at a bar function. In Los Angeles, you may never see that lawyer again. I’m not saying there aren’t people who are very civil and professional in Los Angeles, New York and Philadelphia. I think we are more collegial and more professional in our relationship with each other than they are in other parts of the country.

What happens with those lawyers?

Those lawyers who have come in with that type of attitude haven’t fared as well with judges either for the same reason.

Are they smug with the judges?

In general, most lawyers from out of state are professional and collegial, but I have been in court on multiple occasions when a California-based lawyer will tell a local judge, “How we do it in Los Angeles.” That is probably the single worst phrase that an out-of-state lawyer can use with a local judge. The implication is, “You don’t really know how to practice law, and you don’t know how to apply the law, so let me help you out a little.” That is not a good idea. There are some judges that will go unnamed that insist that local counsel not only be present in their courtrooms but engage in a good part of the speaking when addressing dispute issues.

I know your firm is handling the MGM Mirage CityCenter condominium case. Tell me about that and how that came about?

My partner Mark Connot is handling that. That came in with just a couple of clients who felt like there were problems with MGM at their condos. Then, we (got together) with a couple of Los Angeles-based lawyers and I think a couple in Florida who heard we were starting to do this, and they had clients with concerns and issues. They referred stuff to us. It snowballed and now we represent 40 or 50 or something like that.

What is the beef?

The beef is that the clients were sold a project and a product that has never been delivered.

But it hasn’t been delivered yet. What do you mean?

The beef is there has been a serious decline in the value of the property. You may say that is a decline in the real property of real estate and welcome to the world of real estate. I don’t necessarily agree with that. There is a cause in the decline in the value that goes beyond the market decline. It goes to, in particular, the serious construction defects out there and the product that wasn’t delivered because of that. This was supposed to be top-shelf, high-end living and condo life, and they haven’t been constructed that way.

What about the 30 percent cut in prices MGM offered buyers. What do you want?

I don’t know if Mark has put a percentage on it, but I know we think 30 percent isn’t enough. We think the values have declined through no fault of our clients, more than that.

What is going to happen?

We are trying to negotiate with MGM to come out with a more equitable resolution.

Could you do something separate from other people who are closing on their units?

Yes. We certainly could do something different, and MGM should deal with our clients on a case-by-case basis.

Will buyers close on their units?

I see a real risk of litigation if MGM doesn’t come up with a serious solution. These are not people who are buying $80,000 condos. They are professional, sophisticated men and women who were sold a product that was expected to be delivered, and it wasn’t.

How will closings go in general?

I think MGM will probably negotiate a lot of closings and will wind up probably closing a good portion of CityCenter, but I think the construction defect and other issues I described are not going to go away. They know they have to fully deal with those. The question is what is the price going to be.

How can they deal with them?

They have insurance to deal with that. First, (MGM officials) have to understand the scope of the problem: “What are the construction defects at CityCenter and how much has it affected the value; what are the remedies; and what are the ways we are going to fix it so we can deliver the product to the clients?” There will be a construction litigation evaluation analysis, which is going to take (time). If they don’t go in and say, “We realize we have a problem upfront and we are going to try and make you happy and we are going to try and find a resolution to this,” we are going to wind up with massive construction defect litigation like we have seen in Las Vegas over the last 15 years. Those cases drag on for years and years.

But aren’t those who are closing going to waive rights.

I am sure that MGM, which is represented by a bunch of sophisticated lawyers, if they are going to give a 30 percent discount, they are going to get every possible right and legal remedy that those buyers have waived.

What will be the outcome of your case?

I think the outcome of our case is that our clients will win (laughs). Our clients hope MGM will be reasonable and settle without litigation. We will litigate if we have to.

What are Vegas odds of that?

If MGM doesn’t come up from 30 percent, I would say those odds are good.

Do you get pressure on this case?

We have had comments that we will never do work for MGM in our lives. There are a lot of powerful big players that are important to the economy of Las Vegas, and I don’t expect the MGM Mirage ... is going to hire Hutchison & Steffen to represent them in a big piece of commercial litigation. It isn’t so much the pressure. You understand you are averse to people who are pretty powerful in this town and control a lot of legal work.

Have you worked with them before?

I was involved with MGM on different matters when I worked for Steve Morris.

Could they influence others who hire you?

They could put pressure on other businesses they work with or contractors or suppliers. Do I think they will do that? No. I think they have more class and are a better group of people than that. They understand our clients have a legitimate (complaint). MGM and its executives and shareholders understand this is a legal dispute and it is not a matter of Hutchison & Steffen wanting to crater an important part of the Las Vegas economy. For Pete’s sake, my children are the fourth generation in Las Vegas. I want Las Vegas to succeed as much as anybody else, but I also want my clients to realize their contractual rights.

So you didn’t get an invite to the grand opening at Aria?

I don’t suspect I will be invited to any VIP parties (laughs).

What would you do with your life if everyone got along and there were no disputes?

Let me put it this way: I am not sure what I am going to do in heaven … We are not litigating in heaven. This is not a perfect society, and if it were, there would be nothing for me to do.