57053 Transcript From Venetian v Two Roads Hearing on Motion for Summary Eviction 11-13523 Tagged

7/28/2019 57053 Transcript From Venetian v Two Roads Hearing on Motion for Summary Eviction 11-13523 Tagged

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E HIBITE

Docket 57053 Document 2011-13523


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TRANCASE NO . A- 24932-CDEPT . NO . 3

DISTRICT OURT

CLARK OUNTY NEVADA

VNETIAN RESORT HOELCASINO LL.

Plintiff

vs.

TWO ROAD S LAS V EGAS

Defenda nt .

REPORTER ' S TRANSRIPTOF

MTN FOR SUMMARY EVITION

EFORE TH E HONORALE DOUG LAS HERNDONDISTRICT COURT UDGE

DATED WEDNESDAY S EPTEMER 29 201 0

REPORTE D Y SHARON HOWARD . . R . NO . 45


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APPEARANCES

For the Plainti ff

For the Defe ndant

2

MICHAEL FEDER SQ

WI LLIAM COULTHAD ESQ .

* * * * *

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LAS VEGAS NEVADA ; WEDNES DAY S EPT EMER 29 201 0

P R O C E E D N G S

THE COURT Page 1 Veneti an vs . o

Roads Las Vegas LLC .

This i s plaintiff ' s eparte appliation for a o rder

to show ase why smmary evitio shold not be

granted.

MR . FEDER Good moring yor Hoor .

Mihael Feder and Mihael Lynh of Leis and Roa on

behalf of the Venetian .

With s at the table i s Fred Crowl geeral onsel

for Venetian . Also is Gstavo Crger from the Veetia n

as soia te onsel . And Patri k Dmont who is VP o f

orporate for Venetian .

MR . COULTHARD Good morning yor

Honor .

i l l Co lthard a n d Matt Cart e r o f Kemp on es &

Colthard appearing on behalf of Two Roads L as Vega s LLC .

Also present is Mr . Fisher Tony Fisher general manager

and lient representative for the other ten restarants

and operation Dos Caminos .

THE COURT All ri ght . They don t make

lea ses eas y anymore .25


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MR. FEDER We think they do yor

Honor .

MR. COULTHARD ges s proe drall y yor

Honor old j st as k eli eve that ease i t omes

efore th e o r t i n a n iqe pr o ed ra l set t ing tht a s

the Defendant the t enant have the rden of pr f

today. The order to sho ase is direted at my lient

that in e ffet m the mving party and old re qest to

proeed f irst and have a rettal respons e .

THE COURT Any ojet ion .

MR. FEDER Yor Honor al l o l d s a y i s

think proedral ly it i s niqe in terms of ho this

proess ork the 5day notie . They filed thei r

affi davit . think tehnially e ar e the moving party

t don t a re i f the y go first .

think e al l kno the argments . think they re

laid ot in the papers . All ill say i s in rettal if

anything ne i s rai sed ant to r ese rve my right t o

ret the rettal as ell .

THE COURT had a sene this asnt

going to e a 1 2 3 . There is a 4 5 as ell . t

go ahead Mr. Colthard.

MR . COULTHARD Thank yo yor Honor .

appreia te it .

t omes efor e the ort on an orde r to sho as e .


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tink it mes -- it i s a niqe preral fash n in

tat t e efe nants my l ien t T as La s ea

atally file te initial pleain i is r

affiavit rearin leal efense t te smmary eitin

preein i really is the first atin file in

rt n tin k nt nl y is t e preral p st re f

te ase nsal abt tink te relatinsip i a

little bit nsal beteen te parties in tat T as

Las eas LLC is t e tenant an te tenant i s mr ie

f 1 1 7 DC Las eas ih i s t e manaer an the B

es t pera tr f te re starant an C enetian as in

e s rts Tse t ent i t i e s ma ke p t e ten an t Bt t e

lanlr i s al s C enetian Casin esrt S they ' re

ea rin a p le f at s in t i s S e s s my pi nt i s

it s prerally nsal t is als nsal an nsal

nt sta nar tenant lanlr rel at ins ip

Te nerlyin lease it s a 1- year lease fr 18

sqare feet n te fir st flr f te Pal az z Te

ent ran e t te s Camins esta ran t pen s rit t

nt te asin flr Over 18 sqare feet t ' s t

a ple f -- t pti ns bel ieve ea f tse

pti ns t exten te lea se term fr 5 year pti ns S

ptential ly a 2-year lease

11 /7 te peratr -- 11 /7 C Las eas is te entity

that i s ne an ntr lle by Mr Steven Hans n is


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e ner an prinipa l f B Ges e paren in

mpany i s r eal ly e r es aran pe rar in t is LLC

re la i ns ip Tey ave a prven r ak re r

Teny re s arans arss e nry Primari y in

Ne Yr k B a anfl f res aran s ere in La eas

n frankly tey' ve been an Mr Hansn an i rp

f prfessinals ave been exremely sessfl

resaraer an perars an ink a reall is

smein a e r sl ns ier en y ' re

lkin a i s relainsip n frankly ink i ' s

smein a eneian Casin esrs lke a iniially

en ey enere in e LL C pe rain a reeme n B

al s ms impranly fr ay ' s pr eeins en ey

ene re in e Jne 2 8 sen amenmen ink

m ns iera in as iven e lai n f is

res ara n e imprane f is re sa ran bein ere

an l ave e bes pprniy iven e rren

enmi eep eep reessin a e nry as fain

N nly e nry b La s eas a s a iy as a l e

an e as in ins ry Tis as exremely imes

an e pera r i e bes ane mainai n is

prper y keep i a via ble r es aran i e rs

pen n ar k in e asi n r ir el y a aj aen

e asin as B Ges an Mr Hansn

Frankly Mr Hansn in 2 8 , as prepare alk


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aay fr m is re sar an an prepare c is ss es .

n a as c er ai ny my cien ' s i ne n a e ie e

sec n amenmen as en ere in i .

S i a back rp ink i ' s impran

kin f sep back a ie an say kay a are e ere

fr ay an reay a is e sanar f revie a

is c r as cns ier in is s mmary evici

prceein.

ain e ay is rke e ere serve i an

nfie 5ay nice pay ren r qi . We mve

frar i r fiin ic as e affiavi rarin

ea efense smmary evic in prcee ins fi e

prsa n N S 4 . 25 .

n e sae s are re a cear . Tey icae a

enan may fie an aff iavi i e cr s a in enan

as p a i ren r i s n i n efa f e ea s e f r

paymen f ren . f e a an e i a en

e mve f rar in ay ' s ea rin.

Tay ' s eari n e sa e is rea cear NS 4 . 25

saes if e cr eermines a ere is a ea

efen s e a s e a ee naf e aine r e cr

sa refse ran eier pary any reief an sa

reqir e frer p rceeins prsan NS 4 . 29

4 . 42 .

S ay ' s prceeins is es e ea


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sffici ency f te affi avit f Mr Hansn n tat ' s

te sta nar an tat ' s at yr Hnr as t I f

tere is a basis tat e sbmit tat tere is a leal

efense t te nlafl etainer ac tin -- ic I elieve

e av e ten y can nt rant s mary j ment

I l aplize becase I tl yr la clrk n

Friay I ln ' t be f ili n anytin els e Bt t n e

i We t k a lk at t e ca se l a an e ere

primaril y relyin n te stat te Bt e tk a l k at

te ca se la i n Nevaa an e ave s me case la

crrent Nevaa case l a 2 7 n pint n tat ca se

ives s me rea ll y ianc t te crt It i nvi

vs GL 1 6 Paci fic r 4 Te crt a

cns ieri n te stanar fr prceeins tay I t is a

i s t a na r

Te crt inica te tat smary evict in pr ceins

are anal s t smary j ment prceeins If t ere

is a t ri able is se f fact ten j st as y are in

sar y j ment prceeins y are pre cl e fr m

ranti n smmary evicti n

I t i s a i stanar becase j st as a smary

jment is a ispsitive mtin tis trly cl be a

ispsi tive mti n i f y ere t rant smmary evict in

e l b t f tat pera ti n an it l be

es sent ia ll y a fait acc mpl i ba se pn a 5-ay in an


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orr to s o as r t parti s a not on a ny

i sovry n larly bli v tr ar triabl isss

of fa t

So t ort st intntionally a vry i stnar

n aain t nvi as os on t sa ys t oays

proins ts t t sff iiny of t affi avit t o

trmin if a lal fns i s availabl So ' r

tst in t Stv Hanson affiavit n ' m not sr of

t qal ity o f t opy tat yor Honor ot bt rta inly

t initial opis a o f Mr Hanson ' s affi avit r

prtty ark an iffilt to ra ' m not sr o t

v o f f il ins o it am ot

THE COUT : f yo av a bttr on ' ll

ta k it

M FEE: ' ll tak on too

M COULTH: kno ty av m a ba

on apoloiz raliz as avin trobl an

bas tat is an important affiavit ant to t

yor Honor -- opflly tat ' s not t opy mark p

W ' v ivn yo a lot on ' t ant to iv yo my

not s or ilits lik t impor tant part

So t Nvaa Sprm Cort as ivn yo som

ian n tin k in a ommr ial l as s tt in

st anar for toay ' s proins t ort lays ot an

it as in tat as it as a isp t a s to t


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1 ntr ata prvis ins Tere as t e parti es er in

2 ispt e a s t at te ntra t meant Te rt ays

nstrtin f a ntrat is a qestin f a i

4 yr Hnr is e aare

Bt ever in inte rpret in te ntr at t rt

6 sa take sa effetate te intent f te part ie s

7 i may be ete rmine in i t f t e s rr nin

8 irmstanes if nt ear frm te ntrat itsef

9 Ten it es n n tis is re a y te rx f

er e e a re t ay Te rt sta te s a nt rat i s

1 1 ambis en i t i s sbj et t mre t an ne r ea sab e

1 2 interpreta tin S my ient I an te y e n ' t

1 be ieve tat ntr at is ambis We bei eve en I

say te ntrat fr yr Hnr ' s arif iati n I ' m

ref err in t te rn ease a reement te LLC pe rat in

16 areement an te se n amene Te fi rs t amenment

1 7 as b t it ' s nt reay reevant t tay' s

1 8 pree ins

1 9 THE COUT : Uners t

M COULTH : C e a r y te sen

21 ame nment I ' m re ferr in t te ntr at rea ti nsip as

22 t se ment s Imprtant y t e se n amenment

2 spei fi a y sta te s in te sen ere as it stat es tat

24 er e a s t e part i e s i s t amen t e a re eme nt t r efe t

erta in anes t teir bsines s r eat insip as s et


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frt in tis a reement, an t amen te e as e ns istent

it t e prvi s i ns f t e e a s e a reeme nt S i e te

se n amenment i s an amenment t te LLC perat in

areement, it a s effe tat e an amenment t te

ner yin rn ea se areement S a ntr at i s

ambi s en it i s sbj et t mre t an ne rea s nab e

interpre tat in

Ce ar y en y revie te par tie s inte rpreta ti ns,

te mpeti n part ie s, T as, te tenan t, an te

an rs, a s t at tat se n amenment es an

prvies fr a s t te eferre rent, rrent re nt, an

te biati ns t pay rent, eary tere are iff erent

int erpr et at ins f at tat areement mean s n

fran ky, my ien t bei eves t ey ' re ri t n, sp t n it

te ay tat sen amenment itates --

THE COU T : Smetimes ner an it

nt be ambis, if bt f y ave s strny e

beiefs

M COULTH: Tey are abs te y

iametr iay ppse n be ieve tat tse aain,

my i e n t f e e s a b s t e y i t ' s - - f r an k y i t i s n t

ambis n tat my ient i s r it an as mp ie

it t e terms an ni t i ns f t at s e n amenment

' rn tr tse Bt franky, tey are

iametriay ppse


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S te rt in nvi say s i t i s t be ns ir e

ambis i f it ' s sbjet t reasnable mpetin

reasnable interpretatins .

S real ly at are te mpeti n an te rt

imprtantly es n t state tat tis ambiity ain

te t mpetin reasnable interpretatins reates a

enine is se f material f at as t te parti es int ent

i i s a l e al e fe ns e t a req est fr sma ry

evitin

ne En f stry Smary eviti n t ay i n tese

pree ins annt frar ner bt te s ta tt e an

te Nevaa Spreme Crt en e ave reasnable

mpetin interpretatins f te nerlyin ntratal

areement M li ke a smary jment an ' t appen

tay

S a ain tat ' s ere believe te a rment stps

an te rt ' s interpretatin ens Bt tink tere

are s inifiant i sse s at sta ke an s I nee t ntine

n a l it tl e frt er int my ar ment

s t te fa ts f tis as e an menti ne t e

nerl yin basi s menti ne in 2 8 te enmy is

ba bs ine ss is ba Tere ave been ns trtin el ays

it t e Pala z z it t e Pal a z z s ps it t e

rest arants Tere ave been elays ass iate it

fini sin te tenant bilts ll f tat a a very


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neative impa t n te 2 7 per at ins f te res t rant .

Te s Camins esta rant .

Cmbine it tat it te enmi eep eep

enmi reessin tis ntry an tis ity as

experienin tey re in a rl f rt . Bt te tey

bein bt te l anlr an tenant n ' t ant t e

per at ins t ark . ai n imprt ant latin

imprtan t per at in fr te es ts f te te l . n

tey re j int ventre partners in a bsine ss tat t ey ' ve

n pre mil li ns an mill ins f ll ar s int tt te

nly pes f ettin it t is t sessflly trn tis

rest arant arn. S tey ente re int te sen

amenment .

n te s en amenment te ene ti an a rees t efe r

te late 2 8 rent . n efer all f tat rent - -

imprtantl y efer is iffe rent ten aivin. Oka .

efer elaye . Tat s at e ' re t al kin abt ere .

enet ian in t aive any f tis rent . Te ef erre it

t anter a ntil a time en tis peratin an

affr t pa tat eferre rent . S tey eferre te

at tat pint in time te expire te past e an

in rent . Bt t en tey se t p n a in frar ba si s

tr tis sen amene tey set p a meanism an a

pri ri ty f te as f l l be spent . n it ' s

ita te . ' m sre yr Hnr as rea it .


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Bt te pri ori ty of payments af te r te en of

2 alenar year 2 8, are speifial ly spelle ot i

pararap 4 of te seon amene. n tose ros

4 operatin revenes from te resta rant tere i s a

at e rfa l l e f fe t o f o t ey a re p a i .

6 Fir st to pay all operatin expenses ll o f t e

7 expenses t o rn an operate tat bsines s . ll o f te

8 spplie rs all of t e tir parti es te employers all o f

9 te operatin bsines s expenses et p ai f irst .

Se on te manaement expens es . ai n tey ant

1 1 te eneti an ants Mr Hanson . Tey ant B Gest . Tey

1 2 ant t e pro ve n operator i n t er e . T ey an t t o

1 inentives tat operator an tey ant to pay im te

1 4 manaement fees base pon is perentae areement ner

te LLC .

1 6 Tir te eneti an to pay rrent pe rio rent s

1 7 Well tere as not sffiient money to pay a ll rrent

1 8 perio rents oin forar. Bsiness is startin to trn

1 9 aron . an al k te ort tro tose ross

revenes . Bt importantly tey ol not make rrent

21 perio rents ner tis aree pon payment sele

22 ner t e se on amenment 4-; oper atin expense s

manaement fees ten te balane of t os e fns any

24 fns avail able a fter tose t o priorit ies aree pon

prior iti es are p ai oes to t e enetian for r ent

1


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Thats what haened under this agr eement . And th er e is

no aegation whatsoever that my cients have vioted the

ro vi s ion o f this -A .

THE COURT That was fo r a finite er iod

though ri ght . That was unti intere st on the sea

contriution was aid unti the secia contriutin was

ai d un t i ac k rents were aid .

MR. COULTHARD That is the Veneti ns

interretatio n But that is not my cients

inter ret ati n . My ci ents interretat ion is that any

rent that they coudnt ay during those current eriod

rents after they made the rir exenses -- after they

made the rior exenses a cash goes to the Venetian .

And thats the way theyve oerated.

But if it s short on the current eri od rents i t then

fa s into the category of deferred rents . And there is a

mechani sm under the su-aragr ah 6 f that the

deferred rents then -- again they are having to wait .

But there is a mechanism where they are then ater aid

THE COURT I guss Im referring t -A

Quote "Beginni ng n anuary st 2009 and continuin g

unti a interest on the secia contriution has een

reaid the entire amount f the secia contriution has

ee n returne d t o Ve ne t ia n Ve ne tian ha s e en a id a

deferred rnts nd management has een aid a the


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deferred oerator/management fee the riority wi a s

e ow

Right .

MR. COULTHARD : A deferred rents I

e i eve an d my c ie nt eieve s -- i t s a i d ou t i the

affidavit that a deferred rents woud incude an

current eriod rents that they were unae to ay nder

this schedue of ayments -A

So they aid those monies Any excess cash fow goes

to the Veneti an Any current eri od rents at that oint

that arent aid through this cash fow gross revnue

ayme nt er i o d th en those rents fa into th e de fr re d

rent category and they are aid in the future at such

time as these artners and the oerator can ay ak those

deferred rents Therein ie s the disute your Hoor and

the i nterretations and the intent of the artie s

ecause my cients ei eve that agai n any of the current

2009 200 rents that there is insuffi cient cash to ay

goes into the category of deferred rents and is aid in

the future when cash fow is moving forward

THE COURT : How are the current eriod

rents deferred rents Theyre j ust ow riori ty rents

23 Theyre no t d efer red rents

2 The deferred are the ones that from 2008 t o t h e

end o f 2008 and efor e where Veneti an says Im going to


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defer coecting on those . I st rugge with how you re

characte riz ing current eriod rents as deferred .

oosed to simy eing ow riority ayments right now

unti oerating exenses, et cetera, goes u and we ay

these things off .

MR. COULTHARD: We , I think when ou

oo k at the aragrah 3 oerato r management fes , and the

ve ry ast sentence of that aragrah efore this age 3 of

the agreement, it says, for a urose s of this

amendment, current eriod sha refer to oerator

management fees and rents that have not een deferred as

ro vide d i n t hi s agreement . Th ere we re no o er a to r

management fees deferred at the time they entered into

this agr eement. And my ci ent s ei eve that any o f the

current eriod rents under this cash fow ayment schedue

that they are mandated to foow woud then e deferred.

And that s the agreement they have een oerating nder .

And that is their interretation of the oerating

agre ement, and the underying amended ea se agreement .

They have an oigation to ay that, ut they ay at

such time as this restaurant is oerating under sufficient

caaci ty to s tand on its own two feet . And they are

comying with thi s agreement .

Vene tia n, made that dea, your Honor . Thats the

dea they cut . And I eieve at this juncture things are


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saring o urn around. I ve go a schedue of e

g r o s s - -

THE COURT Le me as k you his . I erms

of aragrah 4-A e s se as ide he issue of he

deferred rens . Bu do you agree or disagree ha a he

ineres o f he s ecia conriuion was aid.

MR. COULTHARD I ei eve i s a een

ai d . Tha wa s on e o f h e co nd iions h a Ve ne i a

reques ed o have he s ecia conri uion reaid ih a

ineres and ha has een reaid

THE COURT So a he secia

conriuion and he secia conriuion ineres ad

e n a i d s o yo ur ony -- yo ur os i i on ony a o wha

hasn haened is deferred rens in ar ecause you

e i ev e he cu rr en re n s are de fe rred ec ause h ey can

e a i d .

MR . COULTHARD There are wo ca ego ri es

of defe rre d ren . There are he re- Decemer

re - an uary 2009 o d deferred ren s . And h en he re a r e

he curren eriod rens ha aren comeey aid . And

hos e dro ino he deferred rens on a going forward

as i s Th a wa s h e in en o f h e agreemen .

The inen of he agreemen was o afford his

resauran and his enan sufficien reahing room o

increase is oeraions increase is cash fow o e ae


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to ay a these rents That ' s what again thee is no

aeg ation that we haven ' t een doing that Every sing e

enny after o era t in g exe nses an d a fte r th e man agment

fees have gone to ay the rents we ai d in exces s o f a

mi i on do ars in rent and they wi catch u if the

us in e s s co nt inues to increa s e And we ' ve gon e frm ov er

7 mi ion do ars in 2007, to - I was rovided a evenue

summary ut 7 mi ion doar s in 2008 at the time this

was entered into ; 2009, over 9 , 03 8 , 000 . 00 g r o s s r e e n ue s ;

200 yeartodate with the rojected to coming in t just

under 0 mii on So this res taurant is turning te

corner and going to e in a osition to ay these ents

and ay ack these deferred rents to its artner the

Venetian

Franky they dont i ke the dea they cut an now

they ' re trying to change the terms and conditions of that

dea

THE COURT Let me fin is h on what I wa s

trying to ring out in aragrah A I agree with your

characterization that the rents can e divided into two

catego rie s Regardess o f whether we ' re using the term

defe rr ed right now But theres re-anuary 2009 Then

theres anuary 2009 moving forward

Do you agree that a of the deferred rents from 2009

ac kwards th e 2008 ac kwa rds t o 2007 , a o f tha t has

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n aid off, a s w

MR COULTHARD It has not I thi k

t h r s i n xc s s o f $ 3 du and owing I iv

t ha t s n um r s i n Mr C r ug r s a f f i da v it sunta

a ffidavit I want to say $ 3 4 . But a of ths

rnta aymnts that ar ing aid now on a

month-tomonth asis out of this xcss rmaining ash is

i ng a id t o tho s r an uar y 2 9 d f r r d

rnt s So that numr is ing ai d down

But I do not agr with th Vntian s intr r tation

that uon th ay ack of th ranuary 29 dfrrd

rnts that this cash fow, watrfa gross rvnu aymnt

schdu undr A xirs I won t unti such t im

THE COURT I undrsand that s your

os i t io n Yo u agr th at a s soon a s a th cond i t io ns

ar mt, howvr thy intrrt it , thn th ririty

changs ac k I man, that s th intnt of Scti on 4 is

to hav this riority stay unti w gt a ths

conditions mt, and w r dis uting what th conditi on

actuay is Onc thy v n mt, th rior ity switchs

ac k

MR COULTHARD Th ony condit ion I

i v i s th dfrr d rnt s An d yo ur Ho nor f o cu s d

right in on th diffring intrrtations I s it ony th

r an ua ry 2 9 dfrr d rnts tha t onc th y r ai d

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b a c k t h i s S e c t io n g o es a wa y . T ha t ' s th e V en e t ia s

os i t i on .

The tenant Two oads ' os ition i s until such t ime as

the 2009 2000 unaid rent s which are d eferr ed

until they ' re aid ack this mechanism this A

waterfall ayment agreed uon contractual term sta in

la ce . And tha t i s th e reasonab l e interre tat ion f tw o

cometing interretations of this agreement that fankly

re cl ud e yo ur Honor from gra nt ing suma ry ev iction

today.

T HE C OU T : I do n ' t kn ow t h at i t ' s o f

great cons equence to me in my mind in making a de ci s ion

toda y but j us t you know humor me for a minute m

curiosity.

How much time in your os it ion ar e you loo kin g

until you get to t he oint where you ' re aying curre nt

er i o d rent s on t ime Ha ve yo u a l l do ne s ome ki nd o f

financial analysi s to t ry and figure out when we ' ll get

that remaining $ 300000. 00 deferred rents aid off and

when we ' ll be able t o sta rt aying the current rent s in a

timely fashion Or is it too s eculative to even addre s

that .

M . COULTHAD I think I will say we ' re

coming out of the sumer which is tyically the slower

times . And the hotel i s busine ss . And the Venetian

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Casino Resort is in a etter osition to answer th t .

Busines s is oo king u. And the roj ections are gi ng

forward . And to give a defi nit ive time I wou dnt e the

er s on to do that . I m ce rt a i n my c ient s coud c r n ch

those numers ut is your -- I coudnt do it as stand

here in oen cort . I think its not -- its cerin y a

finite erod of time unti we reach that osition where

a deferred rent s oth from 08 09 and 00 ar

cometey aid and then go ack to the underying

this -A exires and go ack to the underying grond

ea se ayment oig atio ns .

THE COURT Okay .

MR. COULTHARD So I guess I j us t focus

on a coue of the i ssues under the affidavit of Mr

Hanso n . You know again he ays out eginning in

aragrah 7 the ur os e o f the a f fi da vi t i s t o

demonstrate that it is not in defaut of the ayments o f

the r ents under the t erms of the ea se o erating a greement

and se cond amended . He ta ks aout the art ie s inte nt of

the s ec ond amendment in oth arag ra h 9 and 0 And the

second amendment acknowedges that Two Roads has een

unae to ay the current rent to andord and the minimum

ercen tage rent s . Bu t the ha ve een movi ng forward nd er

that oerating agreement and aying rents consistent with

the s econd amendment . So they hande th at i ssue .

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They ta k about in aragra h 2 the gros s re venue

And

and the abiit y to ay rent . And it ta ks about te

ri or ity o f ayme nt s co n s i st en t wi th the di s cu ss io s we v

had in court . And ays o ut tho se rior ity aymen ts .

again imortanty n o where in the Venetian s movig

ae r s ha ve the y a ege d tha t we ar e not com yi ng with

the ayment obigations under aragrah A of the second

amendment . The rent is not waived. It is deferre . And

there s franky we re comying with those ters .

He moves on to arag rah sta tes Two Roads ha s

stricty comied with the terms of the ease and the

second amendment and used any and a gross saes evenues

generated in the manner resc ribed by Sectio n of the

seco nd amendment as outi ned above .

At this time I guess aragrah 5 reay a ys out

our int erretation o f the se cond amendment and of t he

ground ea se agreement between the arti es . It is franky

dis uted by the Venetian . But you know a reasonab e

interretat ion on age of 6 of Mr . Hanson s aff idavit

stat es it fo ows that the current eriod rents shoud

ony be aid after those two riorit ies are satis fied . In

effect VCR as andord agreed to accet rent ony to the

extent cash remained after ayment of the higher riority

obiga tio ns of oerating exens es and management fees .

That is recise y what Two Roads has done . Two Roads has

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honor its payment oigations under the eas e and not

in defaut and/or reach of the ea se

So the purpoe ehind the second amendment is to

a ow them reathing room to turn the corne r They are

turning the corner . They' re paying rent They' ve aid in

exces of a miion in rent It i s to defer rents nti

we turn the corner and are out of this recession an

us i n e s i s operat in g Th at ' s in the Ve ne t ian ' s - a s

when it puts its tenant add-on in thei r et intere t

And aso i n their est interest as andord caue these

rents aren ' t eing waived they ' re eing deferred So I

e i ev e yo ur Honor - - an d I s tand ready t o answe r n y

questi ons -- I eieve through the affidavit of

Mr Hanon through the moving papers that we ' ve et our

ur en toda y We ha ve sumi tted a de fe nse tha t we ' re not

in defaut o f the ea se agreement We ' ve met our t andard

under oth NRS 0 . 253 and the Nevada Supreme Court

precedent on t his is sue

This amiguity and this interpretation of deferred

rents under this operating agreement i s in fact a

triae issue that precudes your Honor from granting

suary eviction on today' s proceeding . I woud thank

you fo r your time And if you have any additi ona

quet ions I ' d j ust reerve a rief reutta

THE COURT : Okay

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it ' s

were

go

MR . COULTHARD Thank yo yor Hor .

THE COURT : Conse .

MR . FEDER Thank yo yor Honor .

The more I oo ked at thes e aers the more I wen t

ac k t o th e ada ge wh en I fi rst s t a rt ed r acticing a w

when the aws on yor side yo arge the aw when the

facts ar e on yor s ide yo arge the fact s . I f yo have

neither yo get creative . Creativity does not eqa

amigity yor Honor . And that ' s c ea r when yo eay

ook at the for corners with resect to the secon

amendment of the oera tin g ag reement .

Which critica y yor Honor if yo have to ook at

their own affi davit and thei r own moving aers the y ' ve

a r g e d it h a s n ' t c ome o t o f c o n s e ' s a r gme n t h e r e

an imied amendment to the ea se . Imi ed . I mean

not exressy stated in this docment of any rovision in

the for corners of the second oerating agreement stating

anything aot exressy stating the argment that we

deferring! or s omehow saying kee rnning the sines s

ahead . Kee aying yorse f yor management fee . Do

everything yo want t don ' t worry aot ever aying

rent to s . In eretity according to their own

inte rretation . That was not what the intent was . And

it ' s not what ' s in the for corners of the agreement .

When yo ook at the agreement yo can -- they ike

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to ovrook and thy don t ray touch upon Scti n -A

2 of th scond amndmnt to th opra ti ng agrmnt Whn

3 you ook at Sction -A thr is critica anguag in

thr countr to this who argumnt aout amiguity

5 aout drrd rnts countr to this argumnt that

6 somhow th curr nt p riod r nts com d frrd r nt s .

7 Its spcific as your Honor raisd dfrrd rnt

8 was on y through th nd of 2008 . What w waivd your

9 Honor undr that provision was our right to dcr thm

0 in dfaut undr th trms of th as for faiur to pay

rnt .

2 W waivd hat ri ght . W didnt wa iv thi r

3 oig ati on to pay . W sai d it s df rr d rnt and you

st i hav to rquird to pay . W gt th oig at ion

to vict thm. Waiv that . But thn thr is angag in

th e s ame Section 1-A, your Honor, th at said , we can then

7 rescind, withdraw, nul l ify if the y f a i l to comply with the

8 trms of h as .

THE COURT -B I .

20 MR. FEDER Othr thn th dfrrd rnt

2 thats rfrncd in th Sction -A

22 Thy ar trying to crat this amiguity and its a

mattr o f aw whthr on xists . Thyr coming to your

Honor and sayi ng thr s amiguity . But Sct ion -A

says w can withdraw rscind othrwis nuify such

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waiver decaring them in defaut, to evict them, ad to

enforce a of its rights in the event that -- Suection

2 says, the comany reaches any rovision of the

e a s e - - a r en t he t i c a - - o t he r th e n t h e f a i u r e t a y

rents that have een deferred, as rovided in the

foregoing. Whats in the foregoing, your Honor . his

section is through the caendar year 2008 -- and fis to

cure such reach within the time frame rovided in the

ease .

We gave them not ice, your Honor , i n Ari 20 They

have fa ie d to ay current rent . They didn ' t cure t hat .

They are in defaut . They now ar e j uming, your Hnor, on

Sectio n 4-A, as their saving grace . Whats interes ting

aout 4-A, your Honor, is that this rovisi n was no t

newy created . ts not as Mr . Hanson uts in his

affidavit, the arty drafted the second amendment to

conform to the uncertainty regarding a secific order

ay ing o igations a ft e r th e caendar ye a r 2008 u e s s

what . That riorit y existed are ady in the oera ting

agreement . t exi sted in Sec tion 5

A we did in that second amendment was redefine the

oerat ing agreement, how they were going to uti i ze

ro ce e ds . t we nt from an ord er o f o er at in g exen s e s ,

rent, oan, interes t, and their management fee, to utting

the management fee ahead . t was a rio rity for the

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bine operaion . B ha prio riy and he b ine

operaion doe no affec heir obliaion nder he

erm and he paymen obl iaion nde r he lea e .

How do we know ha , yo r Hono r . When yo o t o

Secion 1 . 15, a exied prior o hi amendmen, t ey

fail o pay ren . ccordin o em and e way ey ' re

ryin o inerpre he amendmen wa ha a he t ime in

2008 when he weren ' payin ren, hey were no i

defal ei her becae hey didn ' have enogh proeed

ecae he order of prioriy hey coldn ' a if . So

now hey are ryin o j mp e leap of faih, yor Honor,

1 2 redefine wa diribable proceed mean wihin te

1 3 confi ne of e o pera ing areemen .

I a gr e e , i ' a w a e r f a ll y o r H on o r . B i ' a

w a e r f a l l a ' d o e n o p r e c l de - a n d i d o e n a y

16 anyhin in he econd amendmen heir obli ai on o

1 7 conine o comply wi he leae.

1 8 In fac, yor Honor, Secion 3 . 3 , wih repec o

1 9 capial conribion acally ay, if yo don ' ave

20 enoh capial, enoh revene o aify yor

21 obli gaion, incldin ren, have a capial call . We

22 didn ' . They fail ed o comply . ain, an aemp o

23 a i fy he obl iaio n nder he r e .

2 S o wen yo o hro he for c orner o f e econd

25 amendmen , yor Honor, hi had noin o do wih heir

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1 obliaions nder he erms of he leas e . o loo a

2 Secion 1-A yo look a Secion -A -- whas criti cal

3 when yo look a -A he las senence of -A is i

acally als abo he special conribion adi ti onal

capial al locaion ha was comin o in Seci on

6 Gess wha i cold have been sed for yor Honor b

7 hey chos e no o . Nmber 3, paymen of crren re .

8 Showin aain ha he obl iaion o conine t o pay

9 ren conined pos ene rin ino his areemen the

seco nd amedmen he opera in areemen No wi th

1 1 respec o he lease .

1 2 THE COURT: I don dis aree ha t hey had

1 3 an obliaion o pay crren rens . I ' m j s looin a

1 he obliaion as o where he prioriy falls o p ay ha

and how lon he -A prioriies were o be in place .

1 6 MR FEDER : B he -A priori i es di d no

1 7 effe c he oliaion o conine o pay he lea se . Se e

1 8 he priori y al l i did when yo wen o he opera in

1 9 areemen a Secion 1 . 15, i had a prior iy alrea dy . All

bsinesses sally lay o a prioriy wha expenses yo

need o pay before here ' s ever a dis ribion wih

22 respec o profis . All hey did was redefine ha in

erms of he bsines s operaions al lowin hem meanin

2 he manaemen company o ake h e anaemen f ee

earl ier on Tha was oriinally all owed in he prioriy

21

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1 B ha did no elimnae he obliaion o conie o

2 pay ren . I had nohin do wih he leas e . And t heres

3 nohin remember , i s impli ed . They ared im ied .

4 If hey said ha his was oin to somehow be in

5 perpeiy hat his crren rens were oin o be come

6 deferred rens which I don care nder any reaonable

7 ine rprea ion of his areemen ha cold ever be he

8 inerpreaion, with a de respec deferred rents were

9 very specif ic .

1 0 I a lks abo crren period shall refer t o he

1 1 operain manaemen fee hat have no been de ferr ed as

1 2 provided in hi s areemen . Theres only one area tha

1 3 akes abo deferred ren, and has Sec ion 1 1 A a 1

A .

So o s, in erms of he for corners, 1A defie s

he loic of heir enire a rmen . Secion 3, which hey

re li ed pon, defini n how crren rens and throwing i in

deferred. Tha is no referenced in his a reement .

1 9 Secion 4 A was an amendmen prioriy paymen

amendmen o he operain areemen . Nohin o do wih

he obliaions of he lease . If hey waned ha, yor

22 Honor hey shold have p i ino his areemen . I s

23 no her e . And i can be impl ied, bec as e even here

has a lways been an order of pri oriy of paymens . And he

25 redisribion of ha did no effec he obliaion o

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pay rent .

1

THE CURT : So your poition i

3 e ent ial ly that you deerred rent or 008, and

4 beginning in 009 you expected them to be paying o the

deerred rent a well a paying their current leae i n

6 ull, only under thi prio rity where operating expen e

7 were paid irt, management econd, and the lea e thi rd

8 the rent third .

9 MR. FEDER : n term o propr iet y, where

the gro revenue rom the ale rom the operatin, how

1 1 they were going to be appli ed . But it didn t eliminate

1 their obligation to continue to pay rent .

1 3 THE CURT : Not eliminate their

1 4 ob li gat ion . But am correc t . You eem t o b e aying your

po iti on wa a o January 1, 009, they hould have been

16 not only paying their deerred leae payment, but alo

paying in ull their current rental period payment .

1 8 MR. FEDER : Your Honor, we believe they

1 9 were reuired to pa y al l the payment . Epecially the

current paent on a going orward bai , ye .

1 When you take everything that o ccurred pot

we ve been w orking wi th them. And with a l

3

tranaction

due r epect in term o what been happening, we ve been

4 working with them. What intereting in term o certain

o the e payment t hat hae been made, what really

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1 el ling, i there wa a proviion ini de he econ

2 amendmen hat dealt with he managemen ee . I th e

3 managemen ee ever wen above a million dollar, their

4 management ee then became deerred . The pec ial

contribution never go o hat level . In act, in te rm

6 o ome o hee priori y o payment, they allo cat ed

7 certain payment that they e o pay o he pecial

8 contribuion, o i would never rigger the ac that they

9 wouldn ge their 5 percent management ee, your Honor .

Everything that wa laid out in thi econd aendmen

1 1 o the operating agreemen, I m no going o dipute wa

12 an at empt o allow hem o urvive . But it had nothi ng

1 3 o do or deerred any urher their obligaion o

1 4 continue o pay rent .

With repec to , your Honor, ag ain, Sectio n 3A, I

1 6 wa re erring o earlier, about he capital contribui on,

wih repec to he ren, it actually in he operating

1 8 agreemen . It he LL obligat ion . So nothing in

1 9 Sec tion 8 , o he econd amendment to he operat ing

agreement, i ay all erm o he operaing agreemen

21 ta y in place . I mean, everyhing poin to, your Honor,

22 hat thei r interpreation o wha they re rying to do. I

23 give hem credi . They re trying o urvive . I

24 under tand ha . Bu urvival and ryin g o crea e an

ambiguiy one doen exit . To create an argument, o

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tht they dont get properly evicted, enogh is engh

e hve over 3 million dollrs orth of rent tht s not

been pid, tht they js t nt to keep throing bk into

this deferred term, hich is no here interpreted nyhere

in resonble fshion ithin the confines of the second

mendment to the oper ting greement

Yo loo k t the operting greement, i f they nted

it tht y, yor Honor, they shold hve pt it tt y

Their consel s the one ho drfted initilly this

docment Their conse l s the on e ho s involed in

the drfting of this docment No here in ny of these

drft s, nyhere long these lines, hs it ever coe ot

And they kno he is the one ho pt in the lst setion,

Section 4A, bot sing specil contribtion in pying

crrent rents They kne they ere continll y obli gted

They relize the ir bcks re p ginst t he ll , yor

Honor Theyre being cretive Bt the cretivity is not

n mbigity

At this point, e gve them the proper notice nder

the le se They didn t cre e gve them the 5dy

not ice , s reqire d by sttte They hve not cred

ere entitle d to poss es si on, yor Honor Theres

nothing in the 4 corners of the second mendment tht in

ny y shold prevent s from this cort e ntering n

order grnting smry eviction

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THE COURT : Yo o ld ge e tht te

second mendment nd ho it plys ot in Section 4A in

the pi oi tie s old t lest, in pt, esonbl y se em to

be sying tht cent peiod ents e going to b less

of pio ity fo s ight no While e ' e gettig ll

of these bck things pid off s i s lid off in

pgph A, hile ll o f thes e bck thing s e be in g pid

off, the pioity fo ht yo need to be pying is the

opeting expenses, mngement fees, then cent peiod

ents

MR EDER : And then, yo Hono, t tht

point, specil contibtion, inteest, lons, defeed

ent Thee i s hole le vel of p ioity thee

THE COURT : It dopped the pioi ty fo

hen the cent peiod ents needed to be pid in the

gnd scheme of things I ' m not sying yo ' e sying yo

don ' t hve to py them, st it dopped the pioit y of

hee it old be collected

MR EDER: Within the definition of the

di st ibte d poc eeds ithin the opeting geement Bt

kno e ' e getting bck into the lese

THE COURT : Yo positi on is tht doesn ' t

hve ny kind of ecognition tht it might not ll be

pid, tht it ' s e nt these othe things pid fist

We el iz e the e might not b e eno gh money to py ll

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these things, so e ' re going to drop it don in the

priority for right no ntil e cn get the bck stff

pid off

MR EDER No, yor Honor Bec e

tht ' s the bck stff When yo look t Se ction 1A, s

to the deferred rent in 2008, e lloed tht to cntine

to be deferred ntil ith respect to, they don ' t hve

breches nder the te rms of the le se Which incldes the

obligtion to contine t o py crrent rents

There ' s no dispte tht this s n opportni ty t o

give them brething room nd to keep BRG ith respet to

it s mngement fee Bt it d id not in ny y impl icte

or ef fect the terms of the lese Jst s the origi nl

Sect ion 1 15, hich hd n order of prior ity It did not

impct tht pon thei r filre to py rent Under the

originl section they dmit they hve filed They ere

in deflt And e ere iving tht deflt They dmit

tht in the se cond mendment

Tht s bsed pon n order of priority tht s in

the orig inl Section 1 15 They dmit tht they ere in

deflt becse they eren ' t pying rent So the

impliction of the order of priority hs nothing do ith

the ob li gti ons nder the terms of the lese They re

trying t o crete tht correct ion Bt it ' s not connected,

becse yo cn ' t look t Section 1 15 in tht fshion

36


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1 THE COURT : I ' m s t trying to tlk

2 log iclly nd think tht if the secon d mendment i s pt

3 into plce in Jne of 2008, nd it s eems to me to b

4 recognition tht this restrnt s strggling to ke

5 its pyments , nd e recogniz e it ' s g oing to tke s ome

6 time to get ll these things pid off It seems i l logicl

7 to me to think tht the int ent of t his s, s of nry

8 1 st , 2009, to sy no yo hve to py dobl e Tht ' s

9 es sentilly ht yo ' re sying tody

1 0 Yo not only hve to be pying off everything tht

1 1 s deferred, bt yo hv to be mking the fll , crr ent

12 rent l pe ri od pyment

13 MR EDER Tht ' s not ht e ' re s ying

1 4 If yo loo k to the for corners of the greement, in the

order of priori ty, nd yo loo k t the confines of Sectio n

1 6 1 8, here e gree to defe r the 2008 rent , tht

1 7 obligtion to py the 2008 deferred rent s don in level

18 6 in terms of the order of prio rity

1 9 So pon their bility t o py everything, inclding

20 the 2008 deferred rent, s yo lredy broght ot in

21 Sect ion 4-A, this prio rity goes bck to th originl

22 p r i o r i t y, hich pts the rent sec ond s oppos ed to , I

23 think, fifth posit ion

24 Bt ith re spect to the overll obli gtions nder the

25 terms of the lese, I t hink tht ' s here the

1

3 7

diff ti ti ll li Thi h thi t ith


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diffeentiati on eally lies . This has nothing to o ith

ny of the obligati ons nde the leas e . It as an

geement by to bsiness patnes to allo them to

eode the pioity fo hat they ee going to do ith

the gos s evene. Bt Venetian, in its capacity a s a

landlod neve aived and in any capacity neve ageed

to anything in the docment s tating yo don ' t have to pay

ent on a going foad basis . It ' s not in this

geement . It c an ' t be infeed fom thi s age emet .

The fact that they haven ' t paid it they dmit they

h av en ' t p a i d i t . T he fa c t t h ey h av en ' t pa i d i t i s t h e

basi s they ' e i n defalt . They haven ' t ced it . e ' e

entitled to smay eviction.

They ' e tying to ceate the sittion becase e

happen to be both a patne and a landlod . And hat e

need to do is dif feentiate beteen the to . They ae to

diffeent hats yo Hono .

Nothing in this ageement this effected a

ageement by Veneian to agee ithin the opeations of

the bs ine ss ta ke yo management fee . e ndest and .

THE COURT : Yo ageed to agee .

MR. EDER : Ta ke yo management fee . Bt

it di d not effect the tems of the lease hich had al l of

its obliga tions nning the bsines s eveything el se

along those lines inclding the obligation to pay ent .

3 8


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Nothing in this docment refers to section of th lese

tht sys yo ' re obligted t o py yor rent on mthly

bsi s on the first dy of the month Nothing in ti s

revise s tht Nothing in the origi nl operti n reement

delt ith the obligtion -- in terms of the obligtion of

the lese Order then n order of prio rity Thts ll

tht hppened, yor Honor, s the chnge in order of

priori ty Bt it didn' t effe ct heir obligtion der the

te rms of seprte, independent contrct tht he yo

loo k t it, they ve dmitted they hven t pid Ad

nothing in the s econd mendment to the op erting

greement, nothing cn be impl ied s they rge -- tht

effe cted the terms of the lese If it s, it old

hve been in the se cond mendment stting, thi s prvis ion

of the lese is no mended

TH COURT : Wht is the prpo se in yor

pleding bot tlking bot iving the $ 300, 000. 00 in

chnge tht ' s de s to the pst deferred rent

MR DR : We ' re shoing tht, yor

Honor, tht, gin, sing my term, the cretivity in theirrgment We ' re sho ing tht if yo tke the i r rgment

t o the end reslt, here logic cn reslt, they dmit tht

there is nothing left in the specil contribtion on

pr incip le nd int eres t So e ent hed nd ived the

remining 350 It goes bck to the order of prio rity,
http:///reader/full/300,000.00http:///reader/full/300,000.00


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1 hae not been deferred . But only rent that ' s been


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y

2 deferred expressly n Secton 1B, s the 2008 ren

3 When you really look at t and you really get nto

4 the documentaton and you really look at the amendent,

5 second amendment to the operatng agreement, what ere the

6 applc atons before, what was the applcaton aft er , ts

7 always been an order of pror ty That ' s the only hng

8 that was hanged. othng to do wth ther obl gaons to

9 contnue to pay.

1 0 THE COURT : Was there eer any ds us so n

1 1 under the way you ' re tal kng about whch I unde rs tand .

1 2 I understand your poston s that operatng expenses

1 3 under 4A hae pr ort y. Operat ng expense s, management

1 4 fees would be pad . Current lease rental perods w ll be

1 5 pad n full . Then 4, 5, and 6, nterest , contrbuto n

1 6 all of that t o be pad oertme .

17 Was there eer any dscus son about has to how

1 8 much how that was gong to be pad oer tme? Are

they s t j ust what ' s left oer gets equally dded

20 among nte res t and contr but on . Or t all goes towards

21 nterest frst, then starts on contrbuton later on?

22 MR . FEDER: Your Honor, f you take what

Secton 4 states, t talks about what was gong to

happen wthn the busnes s .

Agan, our poston s that was how they were gong

41

1 to deal wth gross proceeds gross sales reenues mng


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1 to deal wth gross proceeds, gross sales reenues mng

2 out of the operatons of the busness How they wr e

3 requred under the operatng agreement to apply t n

4 terms of operatng expenses I mean, accordng t them

f they hae enough reenue to pay operatng expen es,

6 they don ' t hae t o pay ther thrd-party endors e ther

7 Es senal l, we ' re no d fferent, n terms of

8 landlord, then any of the thrd-party endors who re

9 prodng them supples for the restaurant You cn ' t

l o ok - - a s I sa d , t ' s a n o r de r o f p r or t y T ha t ' s al l

1 1 t s . Busnesses do t all the tme n an operatng

1 2 agreeent They want t defned Here ' s what you ' re

1 3 gong to do wth the money wthn the operatons But t

d oe s n ' t e f f e ct o r l m t a n y o f y o u r o th e r o bl g a t n s t o

pay rent Thrd-party endors , anybody. Okay

1 6 In ths scenaro just because Venetan wears two

1 7 hats , n terms of both an owner and a landlord, shuld not

1 8 mpact the fact that nothng n th s agre ement effe cted

1 9 the oblgatons under the le ase That ' s clearly - t ha t ' s

w ha t ' s c r t ca l 21 I f you read the four corners of ths -- I know I ' m

22 r e pe a t n g my se l f - - o r de r o f p r o r t y d o es n o t qu a l d on ' t

23 pay rent I f they wanted t that way, they should hae

24 put t n that way It doesn ' t say anywhere n ths

agreeent that any term, any secton, any subparagraph of

1

42

the le as e has been amended othng


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THE COURT : Okay

Mr Co lth ard

MR COULTHARD: I thnk I ll start

respondng rght there and wor k ba ckwards

It says the second amendment doesn t amend th leas e

And they want to separate the LLC bsness oblgatons

from the lease That s not what the partes ntend

That s not what the part es say n the second amenment

T he y s t a t e whe r e a s - - l e t s s e e W he r e a s , t h e p a r t e s

wsh to amend the agreement to reflect certan chages to

ther bsess relatonshp as set forth n ths

agreement and t o amend the lea se cons stent wth the

pros ons of ths agreement

Ths second amendment amended the lease oblgatons

to pay rent And t s set p a prorty to pay al l the

rent -- deferred all of ths rent

Venetan ddn t wae any rent I t set t p n a

waterf all te ar nder Secton 4, operatng expenses,

management -- then to pay the rents

Yor Honor, yo ht the nal on the head Yo sad,

s o they wanted them to pay doble There wasn t ca sh to

pay the crrent rents at that pont There wasn t

sff cen t cash from operatons to pay the 200 pa st de

and owng r ent That s why they entered nto ths

4

1 agreement your Honor to allow this restaurant to s tay in


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2 business all ow this business entity t o hae some

breathing ro om unti l they could pay thi s amount

4 You asked a question about the deferral of thse

current period rents I f you go through this water fall

6 paragraph 4 it does in fact define exactly how hose

7 rents would be paid in the future under Subsection 6

S Six to the Venetian and management on an equal

9 dollar for dollar basis to pay deferred rents on th one

hand and deferred operating management fees on the o t h e r

1 1 until the entire amount o f the deferred rents o n the one

1 2 hand deferred operating management fees on the oth er get s

1 paid in full That s the deal they entered int yur

1 4 Honor

I want to step back a litt le Okay We re here on a

1 6 summary eicti on procee ding All right This act ion got

1 7 filed 10 days ago You got me as a litigator now who s

lS bee n handed this fil e the 1 st o f September You e got

1 9 Lewis and Roca as a liti gator We weren t inoled in the

negotiations o f this deal We weren t inoled in the

21 underlying contractual rela tion from 07 and ' O S . We

22 weren t inoled and can t get in the pa rtie s he ad on what

2 thei r intent was when this was entered into Yet we

24 stand before the court with no discoery on an order to

show cause whih essentially could eict my client and

1

4

gan them a fat accompl and reacqure ths restarant


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under essentally a sumary judgment standard when we

haent done any ds coery .

We dont know what the nt ent s are . I hae g t to

tell you . I tre d to work my way through the e-ma s by

and between the partes , and the draft agr eements f these

second amendments, and ts dffcult to understand where

the partes were comng from and understand the hstory

It must be extremely dffcult for ths court .

But f the ltgators hae done one thng today n

court, we hae demonstrated that there s an absolte

dsagreement between the nterpretaton and how ths

s econd amendment works . And n that st uato n, under our

eada Supreme Court case law, ths ambguty, whh s,

agan, back to f there s more than one reasonable

nterpretat on of ths 4-A second amendment, creat es a

genune s sue o f a matera l fact as to the part es ntent

Whch s a legal defense to the request for sumary

j udgment

Our eada Supreme Court sad we conclude that

sumary ecton was not approprate n ths case because

there s a legal defense, based upon unresoled ssues of

ma te ra l fact . Cle arly, there s a d spute on how th s

agreement works . Clearl y the lt gators before you today

don ' t know the ntent of the par te s .

Docket 57053 Document 2011-13523

1

45

I can tell my clent ' s ntent that we ' e la d t out


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n the affdat s dametrcally opposed to the

Ve ne t a n ' s a ff da t s . I be l e e t ha t ' s w he re t od y ' s

proceedngs end . o suary no summary ecto n . And

we moe forward under the statutes wth them tryng to

ltgate and we le to fght another day as to wht the

partes ntents are and how ths deal was to work.

I ' e got t o tel l you under the LLC operat ng

agreement there s a dspute resoluton proceedng layout

that contemplate s a medaton between the parte s nd a

fast tracked arbtrat on . S o they dd rese re the rght

to moe for summary ecton . But once we get past that

ss ue f we get past that s sue today then these partes

hae to get together . They hae to try and medat e ths

dspute . If not they end up n arbtraton your Honor .

Frankly I thnk t wll be off of your plate wth all

due respect to your Honor.

Couple more ponts . The specal contrbuton

counsel for Venetan says we could hae used ths specal

contrbuton for rent . Well that ' s fla t out not what the

s econd amendment sta tes . He tres to s ay we set a sde

ths 2 mllon dollars . You ddn ' t draw down. You ddn ' t

us e t for rent . Shame on you . You shoul d hae . He

tred to somehow - you weren ' t far wth your partner .

Wel l take a look at Sect on B . It tal ks about

1

4

ths provson but t specfcaly -- I beleve ' s


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- B

Sorry There s two ponts He sad both spcal

co ntrbuton and the captal contrbuton could be used

for rent That ' s flat out wrong That ' s not what he

agreeent says

Taks about the deferral of rent and t stat s - -

o k ay - - t h e sp e c a l co nt r bu t on - - n o w I ' r ea d n f r o

2-A -- paragraph page 2 of the agreeent

The speca l contrbuton ay be drawn upon onl y n

the event that gross sales revenues are less than

opera tng expense s and operat ng anageent fee s And ay

not be used to pay anythng other than such a shorfall n

operatng expenses and operatng anageent fees ou

can ' t use the specal contrbuton to pay rent I flat

o ut s a y s y ou c a n ' t

Says the sae as to the captal contrbuton I

b e l e ve I h av e t h at I ' c e r t a n t ' s n h e re T a t t

spec fcall y precludes the us e of the captal cont rbuton

for payent of deferred rent I can ' t put y hands on t

your Honor I would j ust subt t on tha and represent

to the court I ' pretty darn sure there ' s a lot of ovng

ssue s but that s specfcally n that provs on So w

c a n ' t

So what can we us e We can use gross revenues and

1

4 7

we ' re complying with giing t hem eery s ingl e pe nn .


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After operating expenses are paid and after the maagement

fees they get all the money . Which is the deal tey

struck. They want out of that deal they should t be

allow to gt out of this deal on a summary eictio

proceedings . Gien the statutory mandates your Hor is

obligated to follow and the eada Supreme Court star e

decisis on this i ssue says this is a Draconian potetial

result analogous to a summary j udgment They shoul d not

be able to be granted summar eiction at this stage of

the proceedings

Your Honor I bel iee we hae submitted it

complete ly a defense through the affidait of Mr . Hanson

to th is summary eiction proceedin g and we would re quest

that it be denied . And the next step for them is t o then

go ahead and moe forward with the filing of their

erifi ed complaint .

Whether we go to mediation or arbitration or in this

distri ct court these issues will get sorted out in the

future But not until there ' s been dis coery into what

the intent of thes e parties were So I would respect fully

request that the summary eiction proceedings should be

denied your Honor .

And if I can address any other questions, I think

I apprec iat e th e cour ts t ime .

1

48

THE COURT : I have no questons rght


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I

now .

MR. FEDER: I f I can have a moment .

apologze .

Whats nterestng about ths entre argument s

under the theory they keep on addressng wth respet to

ths ds trbuton of proceeds n the s econd amendmet f

you ta ke that to the effect of what theyre sayng that

they could contnue n the process that theyre dog

r gh t n o w n p e rp e t u t y a s I s a d e a r l e r - - c o l l e ct n g

a management fee and w e would never have the rgh t t o

then demand payment of rent and to then evct them fo r

falure to do so . That was never thats a dramat c

ts dramatc to even thnk that t was ever mpled n

the te rms of ths agreement .

Wth respect to some of the arguments that have been

made the specal contrbuton I was j ust readg your

Honor wth respect to Secton 4 at the end It says

plus your data on the specal contrbuton for purpose s

of makng payments 1 2 and 3 above f necess ary . Three

s the current rents we were ta lkng about .

I understand what they rased n Sect on 2 but what

I was referrng to was Secton 4 In the ordnary

dstrbuton that he was referrng to wth respect to

ther whch defe s ther argument that they ddnt

1

4

hae any o bl gat on t o pay rent .


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Wth respect to, agan, your Honor, t o ths s al l

they had to do was use ther gros s reenue. o bus nes s

can opera te that way, your Honor . They hae an ob l gat on

to pay ther experences .

THE COURT : Let me as k you ths .

The nterest on the specal contrbuton and the

specal contrbuton, accordng to eerybody, has ben

pad off at ths pont .

MR . FEDER : Correct .

THE COURT : Presumably t s been pa d off

from January 1 st , 200 through now .

MR. FEDER: Correct .

THE COURT : Al l r ght .

How much would that hae pad toward current perod

rents n January 1st , 200 forward, f ths had been

appled to he rents ersus nterest and contrbuton.

MR . FEDER : I dont hae that numbe r n

front of me . Ge me a se cond. They only drew

$ 550, 000. 00 on that spec al contr buton .

THE COURT: I m so rry .

MR. FEDER: $550, 000. 00 as t o the

approprate amount of nterest that s Im uncertan

wth respect to how that would apply wth 10 percent

nterest

1

50

THE COURT : The ent fom Januay s t


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2009 would hae bee n what .

MR. FEDER: If you deducted fom tat

pont .

THE COURT : ot deductng n to ta l .

MR. FEDER: 3 . 2 m l l o n .

THE COURT : Okay .

And the nteest and specal contbuton payents

would hae been an eghth of what ' s due and owng n ent

essentall y .

MR. FEDER: Es senta lly .

THE COURT : Okay.

Soy fo nteuptng you. Go ahead.

MR . FEDER: You Hono I wanted t bng

up one mpotant aspect n Sect on 1 -A agan whh

doesnt get us to Secton 4. I thn k ts ctcal . When

you go back to Sec ton 1 -A wth espect to ou wae of

ou obl ga ton .

THE COURT: 1- B .

MR. FEDER : 1- B you Hono wth espect

to ths s sue wth espect to the wae of past due

defeed ents .

I thnk ths wod s ctca l you Hono . And I

thnk ts somethng that hghlghts why the agument

doesn ' t make sense . And that s when you get to

1

2

51

Subsect on 2, t says the company bre aches any pro s on

of the lease any It doesnt say any but wt


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of the lease -- any. It doesnt say any, but, wt

respect to the oblgat on to pay rent . It says, a

pros on .

Agan, f ther ntent was to be somethng oter

than, any proson, t would hae been n ths

document .

Agan, two separate agreements, two separate

oblgat ons Were here n a capacty as a landlor not

an owner . That word, any proson, other than the

deferred rent for 2008, that s crt cal . It defets

the r ent re argument under Sect on 4-A . Theyre n

breach . They hae not cured t . There s no ambgut y .

Your Honor, our post on . They hae fale d t pay

rent . They hae admtted t . They haent cured t .

We ' re enttled to sumary ecton, your Honor .

We dont need to go through any addtonal dscoery.

Al l the papers hae been submtted . We submtted al l the

lett er s . All the payments theye made . We submt ted t

all t o your Honor wth respect to the 5-day notce . That

was submt ted . It s al l there the operatng agreement,

the second amendment, the let ters regardng default, al l

the letters pertanng to sendng those payments . Its

all n the record, your Honor.

There s no ambguty. The nterpretaton s a

1

2

52

matte of law They e ceating attempting to eate

one but it doesn t exist In an ode of pioit is


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one but it doesn t exist . In an ode of pioit is

with espect to the business ela tio nship not wit

espect to lease obligations yo Hono.

In ou posi tion we e entitle d to eiction ude the

leas e fo failue to pay ent Admittedly fail ue to

pay ent .

Thank you you Hono .

THE COURT : Well I will say that you

know pat of the debate we wee haing to the extent i t

wasn t clea t o you all Pat o f the debate I was haing

philosophically and out of cuiosity and things of that

natue was geaed towad the ambiguit y if any. In my

mind it eally i s to how the inteest and special

contibutions wee being paid in the gand scheme f the

pioity.

ot that the cuent ental peiods wee to be paid

management was to be paid opeating expenses wee to be

paid . It was t o the extent you get down that li st and you

hit inte est is eeything left oe going to intees t

o i g i n a l l y an d l a t e t o s p e ci a l c o n t ib ut i o n o i s

eeythin g le ft oe to be diided up et cetea . But

that s e a l l y - I d o n t t h in k i s e l e a nt t o d e ci d in g th e

issue that we e dealing with . It wa s j ust conusing to

me . That s why I was as king wee you expecting double

1

2

53

payments on rent, or was t nterest, or was t t

ceter a et cete ra


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ceter a, et cete ra .

So do I thnk that the secnd amendment amend the

lea se, even though t s part of the busne ss agreent .

Yeah, I th nk t amends the l ea se .

Do I thnk there s some consequence to reorderng

the pr orty . Absol utely, I thnk ther es a cons eence

to reo rderng the prorty, n terms o f whos gett g pad

and when theyre gettng pad.

But agan, I dont know that those thngs al tr

oblgat ons to make the payments on the le ase . At th e end

of the day, I cant fnd t to be a reasonable

nterpretaton as to what the defense s puttng frth

about the deferred rents . I j ust I thnk that, n my-

mnd, n readng everythng n here, the reasonable

nterpretaton the partes would have s that the Venetan

was de ferrng the rght to receve rent s fo r al l o f 2008

That begnnng 2009, here s the pro rt y that were gong

t o get our payments . And everythng that were owed from

the deferred standpont, falls way down on the prorty

ls t .

We want you to pay your operatng expenses . Were

gong to bump up the management fees so youre gettng

that a s well . We want our current rents . Then well

slowly be pad back for everythng that was deferred

54

1 I don ' t thnk you can nterpret that reasonab on

2 paragraph -A, where t says deferred rents, to men we


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2 paragraph A, where t says deferred rents, to men we

3 can contnue to not pay our current rents and they somehow

morph nto beng deferred rents

The expectaton n my mnd was we realze you had

6 poblems n 07 and ' 08 and we ' re gong to wae r

7 rght to see k default We ' ll wae our rght to se e k

8 rents r ght now . Begnnng January 2009 we expect t o get

9 back on where rents are beng pad, and we ' ll co ll ect th s

other stuff as we moe forward n the best manner we

1 1 can

1 2 As I sad, t ' s knd of ambguous to me as to how the

1 3 collecton of nterest and specal contrbuton s

1 supposed to be, n terms o f percentages of the le ftoers,

f you wll But t seemed cle ar to me that the on y

1 6 reasonable nterpretaton s that begnnng Januar 2009

1 7 we ' re b ac k n your oblga ton t o pay on your current

18 p e r o d r en t s . I c a n ' t s e e w he r e - - wh a t th e de f e ns e s

puttng forth, n my mnd, s a reas onable nterpretat on

that would ge r se to a legal defense to ecton .

21 S o f o r a l l t ho s e r e a s o n s , I ' l l g r a nt t he ap p l c a t o n

22 for show cause ecton

23 MR. COULTHARD I ' d ask fo r a temporar y

stay of your decson n order that we hae the

opportunty to moe for a more permanent sta y f you feel


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gong to meet these oblgatons gong forward.

It s our poston a stay s unwarranted. They faled


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to pay rent. They ' ll contnue to fal to pay rent . I

thnk we should be allowed to go n there and ect them

at th s po nt .

I f they want to go up to the Supreme Court wth

respect to ther appeal, and wth respect to the stay as

well, they ' re enttled to t . We don t belee they e

met the st andard, nor can they meet the standard fo r stay

pendng appeal n ths type of stuaton.

MR. COULTHARD: Specf cally, respond to

that .

RS 0 8 5 does contemplat e a stay of execut on upon

appeal . And there s specfc dutes of the tenant who

does retan poss ess on o f that premse s durng appeal .

I belee t s , n fact, an oblgaton to pay

current rents from today ' s summary ecton proceedng on

a gong forward bass under the terms of the lease

agre ement .

And so f that s, n fact, what the statute prodes

and we do pay rents I hae to look at the case law

frankly, you know

THE COURT : St art here . Frst off,

nothng s effecte untl a wrtten order gets

ntro duced. Then obously f you fle the appeal you can

1

2

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request

request

the stay at the tme you fle the appeal You can

that here, or request t to the Supreme Cort as


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well

I

decde

t

But f

mong partes

days,

to

can be

can

c a n d o

proceed

I

as a

for stay

get the

Then

and a

would prefer to hae t done n wrtng, thn

the ssue on the stay as opposed to orally dong

MR COULTHARD: We ' re happy to br f t

w do hae a stay unt l such tme as we f l our

on the stay, and I ' ll fl e those wthn 7

1 0 days, whateer I can fle them n 5 f w need

Hae a temporary stay untl we fle our moton that

brought on an order shortenng tme, f the court

accommodate us on that And what ' s th e rus h

THE COURT: Underst ood I ' m as sumng you

the wrtten order today

MR FEDER: I ' ll hae t to you today

THE COURT : They hae s ome des re to

w ll ora lly grant a temporary stay, untl s uch tme

notce of appeal wll be fled and a wrtten moton

can be fled

I ' l l ge you one week to do that, next Monday S o

wrtten o rder prepared from whch they can appeal

by next Monday you can get on fle a notce of appeal

wrtten request for stay, whch I ' ll put on

58

1 shortened tme f t ' s gong to be n front of me as

2 opposed to askng the Supreme Court for the stay.

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57053 Transcript From Venetian v Two Roads Hearing on Motion for Summary Eviction 11-13523 Tagged

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