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Tim O'Reiley

Settlement talks in CityCenter case bear fruit - maybe

27 January 2014

LAS VEGAS -- Settlement talks have started to bear fruit in the high-stakes litigation over the construction of CityCenter, including an insurance company offer to pay $55 million to cover defects at the unfinished Harmon hotel.

But like so much involving the case, no straight lines run between the proposed deals and final signatures. As brought out at a Friday hearing in District Court, CityCenter, managed and half-owned by MGM Resorts International, has not accepted.

“The problem is that (FM Global) has attached a number of conditions to it,” CityCenter attorney Mark Ferrario said. FM Global wrote the policy to cover construction.

Ferrario did not tick off any of the details. Still, he added, it was an offer “that some of us here think is reasonable.”

George Ogilvie III, attorney for former general contractor Perini Building Co., said the payment was “unreasonable” on the low side.

Even if the settlement goes forward, a legal battle could erupt about whether the amount is high enough and how much of a credit Perini Building would receive if CityCenter won damages at trial over Harmon’s construction.

CityCenter has filed a $393.8 million claim with FM Global, saying that pervasive construction defects rendered the Harmon a complete loss that must be demolished.

Perini’s experts, on the other hand, have concluded that the building could be fixed for just under $20 million.

Perini’s request to dismiss CityCenter’s claim for full reimbursement from contractors was turned down by District Judge Elizabeth Gonzalez after technical arguments about how to interpret the hefty prime construction contract.

Perini, a unit of Tutor Perini Building Corp., argued that the terms compelled CityCenter to wring whatever it can from insurance before pursuing contractors, although CityCenter said the contract was much more restricted.

However, Gonzalez added a caveat to her ruling.

“CityCenter must collect from FM Global before it can collect from Perini” and certain other subcontractors, she said.

That would flow from a still undefined process to determine whether the offer was fair and how to assess credit.

MGM had planned to start demolishing the 26-story Harmon one floor at a time in early December. But work was put on hold after FM Global raised concerns that it had not conducted an investigation of the building’s condition. Several court-set deadlines for FM Global to submit its position to the court have been postponed during private settlement talks.

Also, District Judge Jennifer Togliatti brokered a deal as a mediator that covers almost all of the competing claims for everything but the Harmon, such as some uneven floors in the Veer condo towers. The terms of the agreement, reached on Jan. 14, remain confidential, according to court papers filed by CityCenter.

Potential pitfalls could face the case from another angle. As lengthy interviews with potential witnesses kick into high gear, the April 28 scheduled start for a jury trial has been scrapped. Estimates by the different parties project an autumn start.

That looms large because Nevada law requires a trial to start within five years of filing a case, or it will be dismissed. The deadline in this case would be Dec. 5.

Perini, in court papers, said that an 11-month halt in the case imposed by the Nevada Supreme Court while it considered an appeal of one aspect pushes the deadline into late 2015. CityCenter’s research did not produce a definitive answer.

Further clouding the point is the possibility that the trial could move to Northern Nevada to find a jury not tainted by extensive publicity about the case.

“(I)f I have to change the venue… we’re going to be somewhere else where is its harder to get jurors for that period of time,” Gonzalez said.
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