Bold move, Perini Building Company.
In filing your mechanics lien seeking US$492 million in unpaid bills from gaming giant MGM Mirage and other owners of Vegas’ CityCenter—a move that would bypass arbitration as laid out in a 2005 contract—you’ve either got some damn convincing evidence on your side or you’re bluffing without a leg to stand on.
At this point, I really can’t tell which.
But here are three things I do know:
1) Arbitration is incredibly difficult to bypass
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Two industry lawyers told me it’s difficult to avoid a mandatory arbitration clause, which you signed in a 2005 contract with MGM and others. “Courts largely enforce such clauses,” said David Neff, partner specializing in the hotel and leisure practice of Chicago-based law firm Perkins Coie.
“Courts tend to favor arbitration because they tend to uphold the deals people put together,” said Robert Braun, partner in the Los Angeles office of Jeffer Mangels Butler & Marmaro.
To avoid arbitration, you need compelling evidence that shows your circumstances are outside the realms of the contractual agreement or that your sought-after damages are reasonable, but yet above and beyond what could be collected in arbitration.
2) You’re under pressure from lawsuits of its own
When daddy doesn’t get paid, he has a hard time bringing home the bacon. Likewise, you aren’t getting paid, Perini, so you can’t pay your subcontractors. Call it a domino effect.
You and MGM have both been sued by at least two CityCenter subcontractors, according to the Las Vegas Sun.
3) (And perhaps most damning) Your own executives admitted fault on the project!
Your lawsuit reveals that countless design changes and project modifications, submitted as much as a year-plus late by MGM, bumped your US$3.5-billion contract to US$6.8 billion, according to the Sun. CityCenter was subject to tens of thousands of changes requested by the owner, including approximately US$500 million worth that came after agreed-upon deadlines.
Some of those changes, however, were introduced because of alleged construction errors on the Harmon Hotel.
The Harmon, one of six major components of CityCenter, originally was designed as a 49-story mixed-use condo/hotel. But when a structural engineer deemed the project compromised after discovering 15 floors worth of improperly placed reinforcing bar, construction was stopped at 28 floors. MGM Mirage later cancelled the residential condominium component altogether.
During the CityCenter grand opening in December, I spoke with Pat Hubbs, your executive VP of field operations. Hubbs admitted that builders for Perini and Pacific Coast Steel (a subcontractor) were improperly laying the concrete over rebar.
“(We) should have stopped that whole process (of laying concrete over the rebar) long ago,” he said. Hubbs did argue the project could have been completed as designed.
Richard Rizzo, your vice chairman, said the construction errors weren’t conducted in a vacuum, and that many involved parties were aware of the modifications.
He said: “There were many people that were involved who were at that point aware of what was being done and were OK with that. It was only after a point where it was discovered by … the structural engineer that what had been done as a modification, he wasn’t comfortable with that, so he put a stop to that. And that started the whole exercise of re-evaluating and deciding what really he felt needed to be done structurally.”
Rizzo said who is at fault is “very blurred,” and that “everybody’s a part of it.” When asked whether he thought MGM would file suit over the construction errors, he said the property owner “can do pretty much what they want to do,” but was confident that recouping damages through litigious action was not the casino operator’s intention.
Now that you’ve fired the first shot, Perini, it would seem MGM’s intentions could—and probably will—change. I just wonder if they’ll prove as bold.