Financial adviser wants cut from Morton’s N9NE group deal

By Steve Green

Wednesday, March 30, 2011 | 10:29 a.m.

Restaurant and club operator the Nine Group at the Palms casino-resort in Las Vegas can't seem to stay out of court.

After a bruising legal battle resulted in the January departure of restaurateur Michael Morton and a sexual harassment lawsuit was settled, several Nine Group entities were sued March 1 in Clark County District Court by Valtus Capital Group.

Valtus alleges it had been commissioned to sell Morton's interest in the Nine Group, also known as the N9NE Group, last summer.

But after Morton sold his share in the Nine Group, Valtus didn't receive a commission, the lawsuit charges.

Represented by Las Vegas attorney Suvinder Ahluwalia of the firm Sklar Williams LLP, Valtus said in the complaint that in July, Morton engaged Valtus as an exclusive financial adviser for a sales transaction with a commission of 3.5 percent for Valtus upon closing.

Valtus said it did quite a bit of work preparing a valuation, creating marketing information, contacting potential buyers of Morton's interest including Palms owner George Maloof Jr. and Nine Group investor Lawrence Silver of Silver Young Capital; and participating in negotiations with potential buyers.

Morton initially told Viney Singal of Valtus "that he needed a liquidity event, he badly wanted to find a way to cash out of the Nine entities," the lawsuit alleges.

"Mr. Morton told Mr. Singal that Mr. Morton's relationship with Silver Young and Fiesta Palms (owner of the Palms) was so strained that Mr. Morton needed a way out," the suit charges. "The uncertainty about the future of the Palms Casino caused by its outstanding debt was also a great concern to Mr. Morton."

A challenge with the sale was that the Palms was not just an investor in the clubs and restaurants managed by the Nine Group, but that it was also the landlord and had contractual rights to restrict a change of control, the suit says.

Nevertheless, Singal worked on sales options and he and Valtus "created an ultimately successful sale strategy," the suit says.

However, as sales talks proceeded in relation to settling litigation between Morton and Maloof, "Mr. Morton specifically excluded Valtus because he thought that keeping Valtus in the dark would help him avoid paying Valtus its fee," the suit charges.

After Morton sold his interest in the company under undisclosed terms, "Viney Singal of Valtus spoke with Mr. Morton and was told that Mr. Morton had sold everything for a 'fair number' and that he was relieved to be receiving the money," the lawsuit says.

"It is fair to infer that the consideration for the sales transactions was many millions of dollars," the lawsuit says. "Valtus' compensation should be many hundreds of thousands of dollars."

The Nine Group entities have refused to provide any documentation of the transaction and "the company repudiated its obligation to pay Valtus," the complaint says.

Attorneys for some of the entities named as defendants in the suit -- Morton's Nine Group Management Inc. and Nine Group Management Inc. II -- are denying Valtus's allegations and are pointing out that for a time, Valtus received payments on a monthly retainer.

They responded in court papers last week that while Valtus was retained in connection with a "sale transaction," and that "Morton surrendered control of Nine Group LLC and Nine Group II LLC," no sale transaction occurred.

To the extent the Valtus lawsuit asserts a sale transaction occurred, "or that Valtus is entitled to a 3.5 percent success fee for a transaction that it had no part in facilitating or introducing to the defendants, the request is denied," Nine Group Management attorneys said in their response.

"Defendants further deny that Singal or Valtus created an ultimately successful sale strategy," said the response by attorneys Mark Ferrario and Brandon Roos of the law firm Greenberg Traurig. "These answering defendants admit that the settlement of the litigation and the transactions occurring as a consequence thereof will result in the exchange of millions of dollars over time between the parties to the lawsuit. Defendants deny that a sale transaction occurred."

One of the issues attorneys may have to deal with is that in announcing Morton's departure from the Palms' restaurants and clubs on Jan. 4, the Palms said in a press release: "Michael Morton has sold his interest in the venture and will turn his attention to his wine bar restaurant 'La Cave' at the Wynn Resort, along with other business interests."

The "venture" mentioned in the press release referred to N-M Ventures, owned by the Palms and a Nine Group entity.

Attorneys for one of the entities sued -- Nine Group LLC -- have not yet responded to the lawsuit. Its managing members are now investors Silver and Alan Young of Silver Young Capital, who had allied with Maloof in the litigation leading to Morton's departure from the Palms' entities.

An affiliate of the Greenspun family, owner of the Las Vegas Sun, is a minority investor in the Palms.