Las Vegas Sun

May 26, 2019

Currently: 78° — Complete forecast

MGM Mirage, Perini trade new charges in CityCenter lawsuit

Attorneys for MGM Mirage's $8.5 billion CityCenter development on the Las Vegas Strip and general contractor Perini Building Co. are trading new charges in the massive lawsuit over nearly $500 million in alleged unpaid construction invoices and construction defects.

CityCenter, which was sued for nonpayment by Perini in Clark County District Court in March, said in court papers last week it wants to pay the subcontractors but is having difficulty sorting out their claims since Perini hasn't provided all the information it needs to make payment decisions.

CityCenter's position in the lawsuit is that its claims for construction defects at the Harmon Hotel and elsewhere at CityCenter may exceed Perini's $491 million claim. Nevertheless, CityCenter says it's working to get the subcontractors paid while it litigates its issues with Perini.

In court papers, attorneys for CityCenter say MGM Mirage faces an enormous task: sorting out the claims of first-tier subcontractors, of which there are more than 220, and hundreds more lower-tier subcontractors. The contractors billed Perini, and ultimately CityCenter, more than $5 billion.

"For CityCenter to determine how much is actually owed to the subcontractors requires a detailed accounting reconciliation, on a subcontractor-by-subcontractor basis, of the amount already paid to each subcontractor and the amount still owed," the CityCenter filing said.

"By engaging in this subcontractor close-out process, CityCenter is performing the role of the general contractor without all the resources and historical information that is ordinarily available to the general contractor," the CityCenter attorneys said.

They said the company has 65 employees including accountants, engineers and project managers working on the process but now needs Perini's payment logs, check registers and other documents reflecting payments to the subcontractors.

"CityCenter is finding that in many cases the amount that a subcontractor claims to have been paid by Perini is different than the amount CityCenter paid Perini on behalf of work performed by that subcontractor," the company attorneys wrote.

Despite these problems, CityCenter said in its filing last week that it's made substantial progress in closing out the subcontractor claims and had reached a tentative agreement with one subcontractor with meetings scheduled with several others.

But attorneys for Perini said CityCenter attorneys have gone overboard in their document requests and that CityCenter hasn't committed to actual deadlines for payments to the subcontractors.

"There are millions and millions of documents related to the construction of the CityCenter project," Perini said in a filing last week. "However, not everything about the project is in dispute in this litigation and certainly not every document is relevant to the issues that are actually in dispute. Nevertheless, CityCenter's proposed (lawsuit) case management order requires the parties to undertake the enormous cost, expense and time involved in disclosing every single document that has any relationship at all to the project ..."

Perini also complained that CityCenter has proposed a process for payment of subcontractor claims that "does not actually do anything to expedite any payment to subcontractors or any determination of amounts due."

"Whereas CityCenter's proposal requests that subcontractor claims should be submitted to a (court-supervised) special master, that special master does not have any power to require any payment of such claims. Instead, the special master only has the power to prepare a report that will ultimately be presented at some unknown future trial date to the trier of fact.

"Under CityCenter's proposal, no payments will be made to the subcontractors until after final adjudication of all claims (and possibly until after final resolution of all appeals). The subcontractors cannot wait that long to receive payment for their work and such proposed procedure is simply unacceptable," Perini said in its filing.

Perini charged that CityCenter's proposal amounts to a violation of due process for the subcontractor claims since the special master would submit recommendations on payments to the "trier of fact" and that trier must approve or reject the recommendations with no provision for the parties to present their claims and defenses.

"There are no actual deadlines involved," Perini added. "CityCenter provides no deadlines or even guidelines as to when any future events may take place and when the matter can be presented to trial."

Perini proposed its own case management order that calls for the subcontractors to receive a "prompt determination" on whether their claims will be paid pending final resolution of the Perini-CityCenter lawsuit.

Under Perini's three-track plan, the first track involves claims agreed to by Perini and subcontractors. Perini proposes to identify these contractors by July 9 and within 45 days after that CityCenter would pay 60 percent of their claim, with the other 40 percent held in escrow. The other 40 percent would be paid by Dec. 3 if all parties agree those subcontractors are not implicated in construction defects.

Where Perini and the subcontractors disagree on the amount owed, the special master would have until Oct. 6 to determine how much should be paid.

Lower-tiered subcontractors to the subcontractors would be paid by the main subcontractors the same percentages the main subcontractors receive. If there are disputes between the subcontractors and their subcontractors, the amount in dispute would be placed in escrow pending resolution of the disputes.

There are provisions to exclude immediate payments to subcontractors implicated in construction defects at the project, with the special master determining how much they should be paid pending resolution of the lawsuit.

Perini proposed that a trial begin in September 2011 on Track 2 construction defect claims. Between now and then, witnesses would be interviewed and evidence would be gathered and examined.

Under Perini's plan, a Track 3 trial would be held in September 2012 for remaining claims that would likely be significantly affected by decisions in Tracks 1 and 2.

Join the Discussion:

Check this out for a full explanation of our conversion to the LiveFyre commenting system and instructions on how to sign up for an account.

Full comments policy