They say you can’t beat the house. In litigation sparked by the collapse of the giant Fontainebleau casino project on the Las Vegas strip, neither the project’s borrowers or a group of term lenders have been able to beat the banks.
A few months before the ill-fated Fontainebleau project filed for bankruptcy in June 2009, big lenders Bank of America, JPMorgan Chase, Barclays, Deutsche Bank, and Royal Bank of Scotland refused to extend revolving loans to the developers. Since then, we’ve chronicled the banks’ success fighting off claims from the borrowers and the term lenders in Miami U.S. district court again and again and again. That winning streak continued on Wednesday, when a three-judge panel of the U.S. Court of Appeals for the Eleventh upheld a pair of lower court rulings for the banks in this 17-page opinion.
The Eleventh Circuit affirmed a ruling by Miami U.S. District Judge Alan Gold, who denied Fontainebleu’s request for partial summary judgment in August 2009 and refused to order the banks to provide $656 million in funding to finish the project. Wednesday’s decision also upholds a May 2010 ruling by Judge Gold dismissing claims originally brought by hedge funds Aurelius Capital and Avenue CLO Fund. Gold found that the funds, which had extended term loans for the project, lacked standing to sue the banks.
Simpson Thacher & Bartlett’s David Woll argued for the banks at the Eleventh Circuit. J. Michael Hennigan of McKool Smith Hennigan argued on behalf of the term lenders.
Woll said Thursday that the revolving lenders were "gratified" by the decision. Hennigan didn’t immediately respond to a request for comment.
Still pending before the Eleventh Circuit is an appeal of a third ruling that Judge Gold issued last March finding that Bank of America didn’t breach a disbursement agreement with a group of funds that provided $700 million in initial term loans for the Fontainebleau project. Oral arguments in that appeal were held the same day last December as the Fontainebleau matters decided Wednesday. Jonathan Hacker of O’Melveny & Myers argued for BofA in that appeal. Bancroft PLLC’s Paul Clement argued for the funds.
Correction: An earlier version of this story incorrectly reported the O’Melveny & Myers lawyer who argued for BofA at the Eleventh Circuit. We regret the error.
