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Arnold M. Knightly

Site first fight for LV resort

26 June 2009

LAS VEGAS, Nevada –- The bankruptcy court in Las Vegas is the proper venue to hear the Fontainebleau Las Vegas restructuring case, according to two motions filed last week by creditors who want the case moved from Miami.

The Fontainebleau Las Vegas and two of its affiliates filed for Chapter 11 bankruptcy June 9 in U.S. Bankruptcy Court in the Southern District of Florida, the home base of the project's owner.

Judge A. Jay Cristol in Miami issued an order Tuesday directing the developer and other interested parties opposed to moving the case to file responses by July 2.

The judge will determine if a hearing on the request will be held or whether an order will be entered after the papers are submitted.

Las Vegas bankruptcy attorney Greg Garman, who is representing a group of creditors asking for the change, said the Nevada bankruptcy court is the appropriate place to hear the case since the case will have a significant effect on Southern Nevada.

"This case is going to revolve around issues of Nevada mechanics lien law," Garman said. "This is going to revolve around issues of Nevada gaming law. This is a case that is central to jobs in the economy here in Las Vegas, and there's no better place to have the case than here."

One of the motions, filed by 17 creditors holding more than $111 million liens, notes that 715 of the project's creditors are in Clark County, compared with 93 creditors in Florida.

The motion also says that the Fontainebleau subsidiaries are Nevada entities.

"These are Nevada entities. Their assets are in Nevada, their management team, except for minor exceptions, are located in Nevada," Garman said. "I believe, as set forth in the motion, that the venue is simply improper in Florida. It's not that it's just inconvenient for the parties, the case can not properly exist in Florida."

The creditors said Fontainebleau Resorts is a Delaware-registered company that said its place of business was on Paradise Road in Las Vegas in a filing with the Florida Department of State in April.

Fontainebleau Resorts officials declined to comment on the motions.

In a June 10 filing, however, Fontainebleau Resorts Chief Restructuring Officer Howard Karawan said "all critical decisions in respect to the project -- operational and restructuring -- are and shall be made in Miami," where the company's directors are.

The company co-owns and operates the Fontainebleau Miami Beach.

Fontainebleau Resorts is controlled by its chairman, Jeff Soffer, a Miami-based developer and a principal in the real estate and condominium development company Turnberry Associates.

Turnberry Associates was founded in 1967 outside Miami by Soffer's father, Don Soffer.

Garman said he doesn't believe the Soffers are trying to use their history in the community to gain an advantage in court.

"I don't have any reason to believe that there was some improper motive other than it was where (the Soffers) are located," Garman said. "They're originally from Miami. Some of their other entities that are not in bankruptcy operate in Miami."

Moving a bankruptcy case to another jurisdiction can typically be difficult, but not impossible, bankruptcy attorney Brian Shapiro said.

Florida probably has jurisdiction because the executives are in Miami, but "it would be easier for the creditors to litigate the case," in Las Vegas, Shapiro said.

Shapiro is not involved with the Fontainebleau case.

Garman said that because so many creditors are in Nevada, a change of venue is essential for a proper hearing.

"The intent of bankruptcy is to have as much participation as possible," Garman said. "Participation in Miami is going to be difficult, particularly for the smaller creditors in the case. Given that there are only a relatively small number of creditors in Florida versus the overwhelming numbers that are in Las Vegas, we think that justice and the right to participate, that the case should be brought back."