REPORT FROM THE U.S.—The legal battle that awaits MGM Mirage and Perini Building Company is certain. The only question still remaining is who will oversee the bludgeoning.
Perini, who served as general contractor for MGM’s CityCenter project, filed a lawsuit 25 March against several entities controlled by MGM Mirage and Infinity World Development Corporation, 50/50 joint venture partners for the project, seeking US$492 million for unpaid construction work.
The filing reveals that countless design changes and project modifications, submitted as much as a year or more late by MGM, bumped Perini’s US$3.5-billion contract to US$6.8 billion, according to The Las Vegas 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.
A previous contract between the involved parties included a provision that disagreements would be settled by a retired Las Vegas judge acting as arbitrator, but Perini’s lawsuit indicates an attempt to bypass that step to take the case straight to court, according to Alan Feldman, spokesperson for the gaming giant.
“The contract called for arbitration,” he said. “We submitted for arbitration. Perini feels that they’d prefer to be in court. It’s our belief and in the belief of the lawyers for some of the various subcontractors that arbitration is a faster way to go.”
Ron Tutor, chairman and CEO of Tutor Perini, the Perini’s Sylmar, California-based parent company, did not return two calls for comment.
Perini’s attempt to advance the suit to court has been blocked by MGM. The decision now will be decided in Las Vegas’ district court.
“If the district court for some reason believes that it’s better heard there, then obviously we’ll pursue whatever we need to pursue,” Feldman said. “For the moment, the only thing that’s in front of us is a jurisdictional dispute.”
Perini’s attempt to bypass arbitration is a departure from standard operating procedures given the difficulty of the feat, according to David Neff, a partner specializing in the hotel and leisure practice of Chicago-based law firm Perkins Coie.
“It’s very difficult to avoid a mandatory arbitration clause in an agreement,” he said. “Courts largely enforce such clauses.”
The contractor’s attempt to fight through that uphill slog could stem from any number of reasons, said Robert Braun, a partner in the Los Angeles office of Jeffer Mangels Butler & Marmaro.
“The problem is that when an arbitrator makes a decision, it’s fully binding. So if you don’t like the results of the decision, then you want to be able to go to court ... to have an appeal,” he said. “That’s a reason people don’t like arbitration.”
The nature of the dispute might also be a factor.
“If you feel that your case is not really within the (contract), and you want to make some kind of plea, you might want to go to court. Judges have a greater discretion to take evidence,” Braun said.
Court proceedings are also more transparent, Neff said. The plaintiff might believe the public nature of the trial might put pressure on the other side to settle—especially if particularly contentious, damaging allegations are aired.
And finally, the plaintiff might be seeking damages above and beyond what could be achieved through arbitration.
“Generally an arbitration provision will limit the kinds of damages that the arbitrator can impose. Even when it doesn’t, arbitration tends to stick pretty close to the paper. Judges and juries aren’t quite as bound by that,” Braun said.