Las Vegas Sun

March 3, 2024

Settlement reached in lawsuit over flawed Strip hotel tower


Steve Marcus

A view of the Harmon tower in CityCenter on Friday, Nov. 14, 2014. The planned 47-story tower, stopped at 26 floors, is being demolished by MGM Resorts.

Updated Tuesday, Dec. 16, 2014 | 2:46 p.m.

Harmon Tower Demolition

An exterior view of the Harmon tower in MGM Resorts' CityCenter on Thursday, Aug. 7, 2014. The 26-floor tower, deemed structurally unsound, will be demolished piece by piece. Launch slideshow »

A last-minute settlement avoided trial that was set to start Tuesday involving casino giant MGM Resorts International and six of seven contractors in a massive civil breach-of-contract lawsuit over a never-opened Las Vegas Strip tower called the Harmon.

Several jurors gasped when Clark County District Court Judge Elizabeth Gonzalez announced an agreement had been reached that avoided a trial that lawyers for MGM Resorts subsidiaries and general contractor Tutor Perini Corp. had said could take a year or more.

The eight men and 12 women had been through six weeks of jury selection, and opening statements alone were scheduled to last two days — two-hour blocks for each of the seven parties.

One lawyer in the case noted that just a list of exhibits — not the exhibits themselves — filled 100 banker's boxes.

"Because of the complexity of this case, it was going to be impossible to try it," said Michael Infuso, lawyer for Show Canada Inc., the only litigant that didn't sign on to the global settlement.

Show Canada, an architectural firm that designed a showroom at the Aria resort, agreed to have its claim against Tutor Perini heard by Gonzalez without a jury in February.

Aria is one of several buildings in the 67-acre master-planned development built by MGM Resorts and Dubai World. It includes the glassy Veer, Vdara and Mandarin Oriental hotel towers, a casino and the upscale Crystals shopping and restaurant complex.

Work on the Harmon stopped in 2008, after inspectors found steel used on the first 26 stories wouldn't support the remaining 22 floors. The rest of the $8.5 billion CityCenter development opened in 2009.

The CityCenter joint venture that MGM Resort co-owns is now paying for the Harmon deconstruction.

The lawsuit was launched with Tudor Perini arguing that MGM Mirage failed to pay bills and MGM arguing the contractor was responsible for the building flaws. Other litigants included steel companies and buyers of condominiums that were designed but never built.

Lawyers for all sides called the settlement confidential, with no admission of liability or fault.

But MGM Resorts laid out general terms in a financial filing Tuesday with the Securities and Exchange Commission.

CityCenter Holdings gets $110 million more than the $85 million it received through prior insurance claim settlements.

That brings CityCenter's settlement proceeds to $195 million, including $20 million from MGM Resorts to the CityCenter division it co-owns with Dubai World.

MGM Resorts is paying a total of $153 million to Tutor Perini, including $72 million MGM Resorts had in escrow from CityCenter condominium sales.

Overall, the settlement represented an end to a $500 million dispute.

Fitch Ratings financial analyst Alex Bumazhny said the Harmon litigation wasn't a big concern for investors, but the settlement was welcome news.

MGM's credit profile has improved in the last two to three years, he said, and the financial community knew MGM Resorts had $72 million in escrow to pay Harmon liabilities and litigation costs.

Infuso called it a strategic move for MGM Resorts to take the complicated construction defect case to a jury, and noted that litigation could have stretched on for years. No matter what the outcome would have been in the Las Vegas courtroom, the case would have been appealed to the Nevada Supreme Court.

George Ogilvie, lead attorney for Tutor Perini, cited a client policy and declined to comment about the agreement.

Mark Ferrario, lead attorney for MGM Resorts, referred to "a number of moving parts," but told Gonzalez the parties were "confident the case has been resolved."

"I think everyone is happy to put this behind them and move on," Ferrario told reporters afterward.

Chief Clark County District Court Judge Jennifer Togliatti, who brokered the settlement during 15 months of negotiations, arrived in Gonzalez's courtroom moments before the result was announced.

Gonzalez dismissed the jury, after telling them they had been essential to the process even though they never heard a word of testimony. Their service began with summonses to 6,000 people last summer, and continued through six weeks of direct questioning, beginning Oct. 28.

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