Legal News

Leaving Las Vegas? Dubai World Sues MGM Over Mammoth Project

By Ashby Jones

We know it’s only March, but we’re going to go out on a limb and say that a lawsuit filed on Monday in Delaware has at least an outside chance of becoming the Law Blog’s Civil Lawsuit of 2009.

In the suit, (click here for the complaint), a subsidiary of investor Dubai World is alleging that the casino operator MGM Mirage violated certain provisions of an agreement to jointly develop a mammoth casino/condo/hotel/shopping mall on the Las Vegas strip called City Center (pictured). (Don’t let the picture fool you; the Web site says that City Center is “destined to be one of the great urban places of the world.” Uh, okay.)

Frankly, the suit has it all: an international element (Dubai World is owned by the Dubai government); big names (Kirk Kirkorian owns MGM Mirage); big money (it’s an estimated $8.6 billion project, which some have called the largest privately-funded development projects in U.S. history); serious drama (what happens if Dubai World is allowed to walk away?); and an outlandishness found only in Vegas, Baby! (The Cirque du Soleil at ARIA — one of the casinos planned for City Center — is slated to “present a hip-swiveling production celebrating the timeless musical legacy of Elvis Presley.”) Click here for a map and renderings of what the thing’s supposed to look like.

In the lawsuit, Dubai World has asked to be released from having to make any more payments and fulfilling other obligations under the project largely because, it alleges, MGM has breached the joint venture by running afoul of financial covenants under a senior credit facility. The complaint also accuses MGM of massive cost overruns and claims the company, as stated in a recent 10-K, might not have the financial wherewithal to continue as a going concern. Click here for the WSJ story on the suit’s filing; here for the Bloomberg story.

MGM fired back on Tuesday, calling the lawsuit “completely without merit.” A spokesman later added that the company “is ready, willing and able to fund its share of the costs to complete CityCenter, including a required payment this week.”

Lawyers for Quinn Emanuel are handling the suit for Dubai. No word yet on who’s been tapped to handle the suit for MGM Mirage.

Full post as published by Law Blog - WSJ.com on March 24, 2009 (boomark / email).