Sierra Development Company v. Chartwell Advisory Group Ltd.

MOTION for Summary Judgment MGM Parties' Motion For Summary Judgment

D. Neb.October 7, 2016

1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 Todd L. Bice, Esq., Bar No. 4534 TLB@pisanellibice.com Dustun H. Holmes, Esq., Bar No. 12776 DHH@pisanellibice.com Robert A. Ryan, Esq., Bar No. 12084 RR@pisanellibice.com PISANELLI BICE PLLC 400 South 7th Street, Suite 300 Las Vegas, Nevada 89101 Telephone: 702.214.2100 Facsimile: 702.214.2100 Attorneys for Counterclaim Defendants MGM Resorts International, MSE Investments, Inc., Gold Strike Investments, Inc., Newcastle Corp., and Ramparts, Inc. UNITED STATES DISTRICT COURT DISTRICT OF NEVADA SIERRA DEVELOPMENT CO. d/b/a CLUB CAL NEVA, Plaintiff, v. CHARTWELL ADVISORY GROUP, LTD. Defendant. CASE NO. 3:13-cv-00602-RTB-VPC MGM PARTIES’ MOTION FOR SUMMARY JUDGMENT CHARTWELL ADVISORY GROUP, LTD., Counterclaim Plaintiff, v. SIERRA DEVELOPMENT CO., et al., Counterclaim Defendants. I. INTRODUCTION Counterdefendants' MGM Resorts International (“MGM”) and MSE Investments, Inc., Gold Strike Investments, Inc., Newcastle Corp., and Ramparts, Inc. (collectively the “MGM Parties”) move for summary judgment as to all claims asserted by Counterclaimaint Chartwell Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 1 of 17 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 Advisory Group, Ltd. (“Chartwell”).1 Chartwell’s claim for breach of contract fails because none of the MGM Parties entered into any contract with Chartwell. The only entity affiliated with the MGM organization that ever contracted with Chartwell – Mandalay Resort Group – is not a party to this case. Beyond the lack of any contractual relationship between the MGM Parties and Chartwell – a fatal fact – its contractual-based claims would still fail because of the explicit terms of the Professional Service Agreement which provided that it would only be compensated by way of a contingency fee payment in the event it successfully obtained a refund for Mandalay. But Chartwell’s principal witness and part owner, Stephen Deviney (“Deviney”) admits that Chartwell achieved no such refund. Indeed, its failure largely stems from its own making. In fact, as Deviney’s own testimony confirms, Chartwell ended up exposing its own clients to potentially greater tax liability because it failed to bind the Nevada Department of Taxation (the "Department") to a resolution on what Chartwell sold to its clients as a test case. As Chartwell failed to bind the Department, Chartwell concedes that the only client to actually receive a refund was its client Sparks Nugget, the named party in the test case. Because of Chartwell’s failure, the Department was able to switch positions and assess sales tax on the exact same transactions upon which Chartwell was supposed to have secured a refund. Thus, no refund ever occurred. Nor can Chartwell avoid its faulty contract-based claim by asserting a claim for quantum meruit simply because it failed to fulfill the required contractual terms. Once again, Deviney has admitted that all of the services for which it seeks compensation and quantum meruit by the MGM Parties were services that it provided to Mandalay under the Professional Services Agreement, the very same agreement where Chartwell agreed to work only on a contingency basis and for which it failed to obtain a refund. As a matter of law, Chartwell cannot circumvent contractual terms by 1 In its Second Amended Answer and Counterclaim, Chartwell defined "MGM" as also including Colorado Belle Corp. and Edgewater Hotel Corp. But those entities ceased having any affiliation with the MGM organization in 2007, many years before Chartwell filed this action. Neither Edgewater nor Colorado Belle have appeared in this case and only recently has Chartwell claimed that it served Edgewater. (See Proof of Service [ECF No. 525]). Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 2 of 17 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 suing non-contracting parties for quantum meruit because it failed to satisfy the contractual terms for payment. II. STATEMENT OF UNDISPUTED FACTS Pursuant to LR 7-1, the MGM Parties bring this Motion based on the following undisputed material facts: A. Chartwell Puportedly Discovers the Nevada Food Issue and Sells it to the Gaming Industry. Chartwell Advisory Group (“Chartwell”) was a tax consulting company formed in 1991 by Steveny Deviney, Larry Kent and Maurice Kent. (Ex. 4, Tr. of Depo. of Steven Deviney, Chartwell’s 30(b)(6), Vol 3, pp. 739:7-23). The purpose and general business model of Chartwell was to provide tax refund services on a contingent fee basis. (Id. at p. 744:11-14). Chartwell performed tax refund consulting services throughout the country, including in Nevada. (Id. at p. 746:4-747:21). All of Chartwell’s services in Nevada were performed pursuant to contingency based contracts. (Id.); see also (Id. at 749:23-750:3 “Q. Do you recall those contracts that you had with – prior to the food case that Chartwell had with its clients? Do you have any recollection of the terms? A. No, other than they were contingent fee terms.”) Each contract calculated the contingency fee based on a percentage of the refund or credit, but only if Chartwell obtained an actual refund or credit for the client. (Id. at 750:4-751:19). In approximately 2001 or 2002, Chartwell claims it identified a potential tax refund for complimentary and employee meals provided by gaming entities to its patrons in the state of Nevada. (Ex. 2, Tr. of Depo. of Steven Deviney, Chartwell’s 30(b)(6), Vol 1, pp. 80:10-81:1). According to Charwell, it had concluded that for years the Nevada Department of Taxation (the “Department”) had been improperly collecting use tax – assessed on the cost of goods – for two areas: use tax upon the cost of goods used in the serving of complimentary meals to gaming customers and use tax upon the cost of goods used in the serving of complimentary meals to employees of those same gaming entities (the “Nevada Food Issue”). (Id.) Chartwell’s theory on the Nevada Food Issue evolved based on its own independent research and its discussions with John Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 3 of 17 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 Bartlett, a Nevada attorney and former employee of the Nevada Department of Taxation. (Id. at pp. 82:21-83:16). Following these conversations, Chartwell created a memo providing a brief overview of its analysis and findings on the Nevada Food Issue. (Ex. 2, Deviney Depo, Vol 1 at pp. 93:20-96:5); see also (Ex. 14, Memo to File re: Nevada Complimentary Food Issues, dated 2/20/2002, Bartlett000890). Chartwell used this memorandum to begin marketing itself to the Nevada gaming industry as a whole. (Ex. 2, Deviney Depo, Vol 1 at pp. 107:21-109:7). The purpose of the memo was to demonstrate to potential gaming entities that this was a serious idea and that Chartwell had the ability and resources to process and pursue refund requests for these overpaid use taxes. (Id.) In order to solicit as many gaming entities as it could, Chartwell worked as a team and sent a technical person to each prospective client to discuss and explain the issues. (Ex. 5, Tr. of Dep. of Steven Deviney in related Case No. A-13-692673-C, pp. 60:1-61:20). Around that timeframe, Chartwell had close to thirty employees and multiple offices throughout the United States. (Id. at pp. 52:11-53:12). But by the time of this dispute, it is now down to essentially one employee and no offices. (Ex. 10, Tr. of Dep. of Lawrence Palmer, pp. 29:15-30:4). In fact, Chartwell concedes that it is simply winding up its affairs. (Id. at p. 33:9-11); see also (Ex. 2, Deviney Depo, Vol 1 at p. 32:4-10). After Chartwell had initially made contact with a prospective client, it would provide the client with a form professional services agreement (“PSA”) as a starting point for discussions. (Ex. 2, Deviney Depo, Vol 1 at p. 130:19-25; p. 135:5-22) Throughout each discussion, Chartwell had a policy to discuss major changes with Deviney before agreeing to them. (Id. at 133:5-18). In this respect, Chartwell maintained control over the content of each PSA, specifically rejecting changes to which it would not agree. (Id. at pp. 133:19-134:1). B. Chartwell and Mandalay Enter into the Mandalay PSA. On approximately September 29, 2003, Chartwell entered into one such PSA (the “Mandalay PSA”) with Mandalay Resort Group, a Nevada entity that Chartwell has not named. (Ex. 17, Professional Services Agreement between Mandalay Resort Group and Chartwell Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 4 of 17 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 Advisory Group, dated September 29, 2003, Chartwell0000963-964).2 Chartwell could not recall the specifics of its negotiations with Mandalay. (Ex. 2, Deviney Depo Vol. 1 at pp. 294:3-18) (Deviney testified “[y]ou’re asking me about 13 years ago for one event so I can’t answer that. I don’t know what I thought at that moment. I can only tell you what I think now.”) However, the actual terms of the Mandalay PSA are not in dispute. Article 1.G. defines Total Refund as: “The Total Refund shall include all sales and use taxes, interest and penalties refunded as a result of the efforts of Chartwell.” (Ex. 17, Mandalay PSA, p. 1). This definition of Total Refund was the standard used by Chartwell. (Ex. 2, Deviney Depo, Vol 1. At p. 140:11-21). Article 2.A. required Chartwell “to use its best efforts to obtain refunds or credits of overpaid sales and use taxes for [Mandalay].” (Ex. 17, Mandalay PSA, p. 1). Notably, the agreement specified that Chartwell was only retained to obtain refunds or credits. (Id.); see also (Ex. 2, Deviney Depo., Vol. 1 at p. 150:3-19). Deviney confirmed this when he testified as follows: Q. Well, would your staff point out any deficiencies in terms of the recordkeeping to the clients or was their only job to identify refund opportunities? A Our engagement was to find refund opportunities. And I think the agreement says in the back its not an audit, if I’m not mistaken, in paragraph 7-I. So we weren’t auditors in this service and we clearly say that. So would we at times, if we saw a big exposure item, tell someone about it? Yes, we would tell them about it, but we were not engaged to do that. Q And you said that you were not engaged to identify under- reportings. A Well, that’s just what I was just speaking to. 2 In 2005, MGM Resorts International acquired the Mandalay Resort Group through an acquisition of stock from Mandalay’s public shareholders. (Ex. 8, Tr. Deposition of Shawn Sani, p. 19:20-20:8). Mandalay was and remains an existing Nevada corporate entity today. (Id. at p. 20:1- 8). Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 5 of 17 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 (Id.). In fact, Chartwell acknowledged that when it drafted up the various PSAs, including the Mandalay PSA, it only envisioned obtaining a refund or a credit. (Id. at p. 154:13-18) (“Q. So was there other forms of – were you going to obtain [the Clients] something else other than refunds or credits of overpaid sales and use tax? A. At that time what we were doing is we thought that would be the form that the overpayments would be reimbursed in.”); see also (Id. at p. 155:4-8) (“Q. Did you ever tell any of the clients that there would – that there would be a settlement at the time that you asked them to sign [the PSAs]? A. We never envisioned that at this point in time”). This fact is further confirmed by the plain language of the PSAs, including the Mandalay PSA. Specifically, Article 4.A. states that “Chartwell’s fees for services rendered to Client shall be thirty percent (30%) of the Total Refund on all items except for complimentary food and employee meals. Complimentary food and employee meals shall be at 20% of the Total Refund.” (Ex. 17, Mandalay PSA at p. 1). And Article 4.B. clarified that “[a]ll fees due to Chartwell by way of this Agreement shall be invoiced when the proceeds of the refund process have been received by [Mandalay] who agrees to pay all invoices within fifteen (15) days thereafter.” (Id.) Thus, as Chartwell acknowledged, the plain language of the Mandalay PSA only envisioned obtaining refunds and credits and provided that payment would be due only upon receipt of those proceeds. (Id.). Under the Mandalay PSA, if there was no total refund received or retained by Mandalay, then Chartwell would not be entitled to any fee. (Ex. 2, Deviney Depo, Vol. 1 at p. 196:13-17). Chartwell even conceded that the terms of the PSA permitted clients to drop their refund petitions and not pay Chartwell a fee. (Ex. 2, Deviney Depo, Vol. 1 at pp. 168:21-169:6). In fact, Chartwell acknowledged that its clients would never have agreed to a provision requiring the clients to continue fighting if they wanted to drop their claims. (Id. at pp. 170:21-171:10). Devineny, himself, acknowledged that he would not sign such a provision because he would not have known what risks could have materialized. (Id. at 171:5-173:1). When later asked specifically as to the Mandalay PSA, Mr. Deviney confirmed that prior to obtaining a total refund, Mandalay had the ability to abandon claims against the state without incurring any liability to Chartwell. (Id. at p. 300:2-9). In short, Chartwell confirmed that the Mandalay PSA did not require Mandalay to continue to its refund claims if it was not in Mandalay’s Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 6 of 17 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 best economic interest, considering the additional risks that may arise throughout the course of Chartwell’s retention. (Id. at p. 173:2-18). Indeed, as long as a party did not receive a refund, they were free to abandon the issue without any obligations to Chartwell. (Id. at p. 195:24-196:8). C. Chartwell files the Refund Petitions and Claims it Reaches an Agreement with the State to Hold Most in Abeyance. With the Mandalay PSA in place, Chartwell began to prepare the refund petitions. Specifically, Jim Malone, an employee of Chartwell performed the review at the Mandalay properties to prepare the petitions. (Ex. 9, Tr. of Depo. Of James Malone, pp. 210:17-211:9). Malone spent approximately one week at each property gathering up the information necessary to prepare the petitions. (Id. at p. 212:16-22, p. 215:3-14). Once he finished gathering materials, it took him and Chartwell’s administrative staff approximately another week and a half to put the information together to prepare the refund petition. (Id. at p. 212:16-22, p. 223:6-11). Thereafter, Malone testified that he also assisted each Mandalay property when an auditor came out following the filing of the petitions, which took approximately one day per auditor (Id. at pp. 231:12-232:16). Other than this work and minor status updates and reports, no other work was done by Chartwell for Mandalay. (Id. at p. 232:17-20). Once Malone completed his work, Chartwell would essentially file a refund petition, which consisted of a cover letter, with schedules showing a breakout of the complimentary and employee meals and any other schedule for any other tax issues, along with a power of attorney permitting Chartwell to file tax petitions on behalf of the various gaming entities. (Id. at pp. 40:8-41:6). Chartwell filed several of these petitions for Mandalay. (Ex. 8, Sani Depo at pp. 16:2-6). Chartwell acknowledged that all services it performed for its clients were performed pursuant to the respective PSAs. (Ex. 3, Deviney Depo, Vol. 2 at pp. 340:9-341:22) (testifying that all services as of January 2012 were still being performed pursuant to the PSAs); see also Id. at 355:7-13 (testifying that all work done as of August 2012 was done pursuant to the PSAs).. Generally, once a refund petition is filed, it gets analyzed by an auditor at the state level, who makes a decision to either accept or reject the petition. In this case, Chartwell anticipated that all of the refund petitions filed by all parties would be denied and Chartwell would need to file a Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 7 of 17 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 petition for redetermination for each claim. (Ex. 6, Bartlett Depo, Vol. 1 at p. 133:1-12). In order to file the petition for redetermination, Chartwell hired John Bartlett. (Id. pp. 118:18-119:8); see also (Ex. 16, Retention Letter and Fee Agreement between Chartwell and John Bartlett, Station000098-000100). In short, Chartwell would receive the denials of the use tax refund petitions and forward them to Bartlett, who would file petitions for redetermination. (Ex. 6, Bartlett Depo, Vol. 1, pp. 133:16-134:1). The next step would be to take these petitions for redetermination through the administrative law process, but due to the volume of these claims being filed in 2002 and 2003, Chartwell claims it reached an agreement with the Department of Taxation. (Id. at pp. 140:24-141:7). According to Chartwell, it reached an agreement with the Department that a different Chartwell client, Sparks Nugget, would serve as a test case concerning the propriety of all of the refund petitions, while all other Chartwell clients, would have their claims held in abeyance pending the ruling in the Sparks Nugget case. (Id. at pp. 140:24-142:14); see also (Ex. 5, Deviney State Court Depo at pp. 92:20-93:21). Deviney specifically testified that his understanding of the agreement with the State was: Q. All right. And so describe to me what you understood the agreement that Bartlett had made with the state? A. What I had indicated to you before, that those – the state did not want a hundred and 50, 200 cases going up in front of them. So what they wanted was to hold – to have one case go and whatever the ultimate result or decisions in that case was, it would be binding on the state for all of the other agreements. (Ex. 5, Deviney State Court Depo at p. 104:3-12). Thus, Chartwell claims that both it and the Department agreed to live by the outcome of the Sparks Nugget test case once it reached and was decided by the Nevada Supreme Court. (Id.) But as addressed in more detail below, Chartwell failed to document this agreement or bind the Department to the agreed outcome, a failure that exposed all of Chartwell’s clients to years of litigation. Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 8 of 17 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 D. The Nevada Supreme Court Decides Sparks Nugget leading to more Litigation for each Client. On March 27, 2008, the Nevada Supreme Court announced its decision in the case of: Sparks Nugget, Inc. v. State Department of Taxation case, holding that the Nevada Constitution precluded the collection of "use tax" on complimentary meals to casino patrons or casino employees. Sparks Nugget, Inc. v. State Department of Taxation, 124 Nev. 159, 179 P.3d 570 (2008). However, in footnote 15, the Nevada Supreme Court Court expressly left open the question of whether the Department could nonetheless subject these very same complimentary transactions to sales tax. Id. at 165, 179 P.3d 575, fn. 15. Now, due to Chartwell’s failure to bind the State, the decision in Sparks Nugget resulted in a refund only for Sparks Nugget. (Ex. 5, Deviney State Court Depo at pp. 110:25-111:12). Chartwell conceded that no other party received a refund as a result of Sparks Nugget. (Id. at p. 111:13-18). In fact, even as of March 2011, Chartwell concedes that the Sparks Nugget test case did not result in a refund for any party, other than Sparks Nugget. (Id. at Ex. 3, Tr. of Depo of Steven Deviney, Vol. 2, p. 326:5-21). Deviney admitted: Q All right. In the case that went up to the supreme court, Sparks Nugget had actually received its actual refund, correct? A That’s correct, yes. Q So as of 2011, this is March of 2011, none of your – none of Chartwell’s other clients had received an actual refund, correct? A Correct. (Id. at p. 326:14-21). Following the Sparks Nugget decision and several meetings with the State, Chartwell acknowledged in a solicitation email to Terry Melia at the Wynn that no one, including its clients, would receive a refund absent future litigation because the Department was now permitted to claim that these very same transactions were subject to sales tax liability. (Ex. 2, Deviney Depo, Vol. 1 at pp. 245:17-247:22); see also (Ex. 19, Email from Steven Deviney to Terry Melia, dated January 5, 2009) (stating that the State has “concluded that they will not issue any refunds in connection with these cases and that they will continue litigation of the refunds on the consideration issue. Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 9 of 17 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 What this means is that no refunds will be issued and that each taxpayer will now have to take their refund claims thru the administrative and judicial process to obtain the refund.”). Simply put, Deviney informed Melia that after Sparks Nugget, each gaming entity would have to hire counsel and pursue its refund through the litigation process. Id. Deviney even confirmed that he would have told his existing clients the same thing he told Melia – that the State was going to pursue the sales tax issue and they were going to have to fight it. (Ex. 2, Deviney Depo, Vol. 1 at p. 251:7-14). The clients would thus become embroiled in discovery and years more of administrative and court litigation. E. Litigation Continues with the State Determining which cases move Forward. As litigation between the Department and the taxpayers continued on the new sales tax theory, the Department continued to hold many of the cases in abeyance, essentially acting as a “gatekeeper” for which proceedings would move forward. (Ex. 7, Tr. of Depo of John Bartlett, Vol. 2, pp. 261:2-262:20). The first group chosen by the department was Harrah’s/Caesars. (Id. at p. 262:21-25). After Harrah’s/Caesars, was Boyd, then Exber and then Station. (Id. at p. 263:4-9). Meanwhile, the remaining Chartwell clients, including Mandalay, were held in abeyance, unable to even pursue their refund through the litigation process. (Id. at pp. 261:2-262:20). Although Chartwell had characterized itself as the driving force behind the dispute, its involvement in fighting the sales tax assessment was more limited. For instance, two of the main cases pushed in litigation were Caesars and Boyd. (Ex. 6, Bartlett Depo, Vol. 1 at pp. 182:3-186:12) (testifying as to the order of cases moving forward, the amount of discovery and that Boyd and Harrah’s were moving through the process before the remaining parties). However, Boyd was not represented by Chartwell, it was represented solely by Mr. Bartlett. (Id. at p. 150:9-18). Additionally, Caesars had terminated Chartwell and was proceeding on its own without Chartwell or Mr. Bartlett (Id. at p. 168:23-169:16); see also (Ex. 18, Caesars Termination Letter). Thus, the two lead cases following Sparks Nugget on the sales tax issues did not even involve Chartwell. Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 10 of 17 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 F. The NRA Negotiates a Settlement. In 2012, after several attempts to resolve the use and sales tax issues, the Nevada Resort Association (“NRA”), comprised of leading members of the State's largest gaming companies, realized the near decade-long dispute had no positive end in sight. One of its lobbyists, Pete Ernaut, started discussions on a resolution with the Governor. (Ex. 12, Tr. of Depo of Pete Ernaut, pp. 12:22-13:19). Although several attempts were made in late 2012, a serious push to resolve the cases was not made until approximately April of 2013. (Id. at 51:9-23). But from the very beginning of Ernaut’s involvement, the governor’s office and Department made it clear they were not going to pay any money, thus no party was going to get a refund. (Id. at 59:7-14). Specifically, Mr. Ernaut stated that, “Again, I – I think it’s important to note that from the beginning of this thing I knew, because the governor’s office and the tax department said to me, that they weren’t going to pay any money.” (Id. at 59:7-10). Thus, the parties eventually agreed to a walk away settlement with each side withdrawing their respective claims. The State would walk away from its contention that the complimentary meals in dispute – for casino customers and employees – were subject to either sales or use tax and the gaming companies would walk away from their attempts to claim that they were owed refunds on those same transactions. (Id. at 18:2-10); (Ex. 11, Canter Depo at pp. 135:18-136:1) (testifying that the settlement agreement was “an ending to it all”); see also (Ex.21, Settlement Agreement, at ¶ 2.2). G. Chartwell Invoices Its Clients for Refunds they Never Received. Despite the fact that it was unable to obtain refunds on behalf of most of its clients, including Mandalay, Chartwell nonetheless sent invoices after the settlement agreement became effective, claiming that it was still entitled to compensation. (Ex. 23, Mandalay Invoices from Chartwell, Chartwell0000778-790). The total amount of all invoices for services that did not result in a refund or credit totaled $2,892,836.00 (Id. at Chartwell0000779). Mandalay refused to pay the invoices that did not result in a refund or a credit because it was not required by the Mandalay PSA. (Ex. 17, Mandalay PSA, p. 1, Article 4). Thereafter, Chartwell filed suit against Mandalay’s parent Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 11 of 17 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 corporation, MGM Resorts International, and several other subsidiaries, but asserted no claims against Mandalay itself. III. LEGAL ARGUMENT A. The MGM Parties Are Entitled to Summary Judgment. The MGM Parties satisfy the summary judgment standard under Federal Rule of Civil Procedure 56, because there is no genuine dispute as to any material fact and they are entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a); Zoslaw v. MCA Distrib. Corp., 693 F.2d 870, 883 (9th Cir. 1982). Material facts are those which may affect the outcome of the case. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. See Id. There is no dispute as to the material facts presented. In determining summary judgment, a court uses a burden-shifting scheme. When the nonmoving party, like Chartwell, bears the burden of proving the claim, the moving parties, like the MGM Parties, can meet their burden in two ways: (1) by presenting evidence to negate an essential element of the nonmoving party's case; or (2) by demonstrating that the nonmoving party failed to make a showing sufficient to establish an element essential to that party's case on which that party will bear the burden of proof at trial. See Celotex Corp. v. Catrett, 477 U. S. 317, 323– 24 (1986). Because the MGM Parties meet this initial burden, the burden then shifts to Chartwell to establish a genuine issue of material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Chartwell cannot avoid summary judgment by relying solely on conclusory allegations that are unsupported by factual data. See Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989). Instead, Chartwell must go beyond the assertions and allegations of the pleadings and set forth specific facts by producing competent evidence that shows a genuine issue for trial. See Celotex Corp., 477 U.S. at 324. Here, there is no genuine dispute as to any material fact, and Chartwell is unable to produce competent evidence showing a genuine issue for trial. Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 12 of 17 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 B. Chartwell has no Contract with any of the MGM Parties. It is a fundamental tenet of contract law that to succeed on a claim for breach of contract, a party must show that a contractual relationship existed between it and the opposing party, and that the opposing party materially breached a duty owed under that contract. Bernard v. Rockhill Dev. Co., 103 Nev. 132, 135, 734 P.2d 1238, 1240 (1987); see also Village Pointe, LLC v. Resort Funding, LLC, 127 Nev. 1183, 373 P.3d 971 (2011) (“To win on a breach of contract claim, the plaintiff must show that a valid contract exists, that the defendant breached the contract, and that the defendant’s breach resulted in damages to the plaintiff.” citing Richardson v. Jones, 1 Nev. 405, 408 (1865)). When no contract exists, damages for breach of contract cannot exist. Insurance Co. of the West v. Gibson Title Co., Inc., 122 Nev. 455, 464, 134 P.3d 698, 704 (2006) (reversing a jury verdict awarding compensatory damages because no contract existed between the parties). Moreover, when no contract exists, a breach of the implied covenant of good faith and fair dealing in contract cannot exist. See Hilton Hotels Corp. v. Butch Lewis Prods., Inc., 107 Nev. 226, 232, 808 P.2d 919, 923 (1991). Here, none of the MGM Parties Chartwell has sued entered into a contract with Chartwell, only Mandalay did. (Ex. 17, Mandalay PSA) In fact, Chartwell’s only apparent theory for naming any of these parties is its allegation that MGM is somehow the successor in interest to Mandalay. (See Chartwell’s Second Amended Answer and Counterclaim [ECF No. 405] at p. 7, ¶ 12) (referring to MGM Resorts International as the “successor in interest to Mandalay Resort Group”). However, Chartwell knows that MGM is not the successor in interest to Mandalay. MGM’s 30(b)(6) specifically testified. (Ex. 8, Sani Depo at p. 20:1-8) (“Q. And after the merger, what happened to Mandalay Resort Group? Did it merge into MGM? A. No. It was an acquisition of stock from public shareholders so it became a subsidiary of MGM Resorts.”) MGM is not the successor in interest to Mandalay and Chartwell has and can produce no evidence showing otherwise. See Village Builders 96, L.P. v. U.S. Laboratories, Inc., 121 Nev. 261, 270, 112 P.3d 1082, 1087 (2005) (holding that “in order to overcome summary judgment on a successor liability claim, the plaintiff bears the initial burden of presenting evidence to establish that the general rule that a successor corporation is not liable for the acts of its predecessor does Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 13 of 17 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 not apply.”). As MGM is simply a parent corporation for Mandalay, not the successor in interest, it cannot be held liable for any claims under the Mandalay PSA. See Roll v. Tracor, Inc., 140 F.Supp.2d 1073, 1078 (D. Nev. 2001) (quoting United States v. Bestfoods, 524 U.S. 51, 61–62, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998)) (explaining the general principle of corporate law that a parent corporation is not liable for the acts of its subsidiaries). Simply put, none of the MGM Parties are parties to any contract with Chartwell. Moreover, MGM cannot be liable as a successor in interest or parent corporation under the Mandalay PSA. Therefore, Chartwell’s causes of action for breach of contract and breach of the implied covenant of good faith and fair dealing against the MGM Parties fail as the most critical element for both claims – the existence of a contractual relationship – does not exist. C. Chartwell Cannot Evade its Failure to Obtain a Refund under the Mandalay PSA through its Claim for Quantum Meruit. "Unjust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience." Nevada Industrial Dev. v. Benedetti, 103 Nev. 360, 363 n. 2, 741 P.2d 802, 804 n. 2 (1987). However, it has long been held that an “[a]ction based on a theory of unjust enrichment is not available when there is an express, written contract, because no agreement can be implied when there is an express agreement.” Ramos v. Liberty Mut. Ins. Co., 2014 WL 4354138, *5 (D. Nev. Sept. 3, 2014) (quoting Leasepartners Corp. v. Robert L. Brooks Trust Dated November 12, 1975, 113 Nev. 747, 756, 942 P.2d 182, 188 (1997). The doctrine of unjust enrichment applies to situations where there is no legal contract but where the person sought to be charged is in possession of money or property which in good conscience and justice he should not retain. Leasepartners Corp., 113 Nev. at 756. There is no dispute that Mandalay and Chartwell entered into an express written agreement controlling the parties' relationship. Accordingly, the unjust enrichment doctrine is inapplicable here. Chartwell cannot side-step the express terms of the agreement through a meritless claim of unjust enrichment. See Lipshie v. Tracy Investment Co., 93 Nev. 370, 379, 566 P.2d 819, 824 (1977) (To permit recovery by unjust enrichment where a written agreement exists would Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 14 of 17 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 constitute a subversion of contractual principles.). Chartwell is not permitted to use unjust enrichment as a fallback position for its failure to obtain a refund under the express terms of the parties' agreement. Chartwell cannot sidestep this result by the mere fact that it has named the MGM Parties, with which it has no contract. Unjust enrichment is the unjust retention of a benefit to the loss of another, or the retention of money or property of another against the fundamental principles of justice or equity and good conscience. Topaz Mut. Co., Inc. v. Marsh, 108 Nev. 845, 856, 839 P.2d 606, 613 (1992) (citations omitted). Here, Chartwell must present evidence that any purported benefit that may have flowed to the MGM Parties occurred under circumstances that would be unjust to Chartwell. Celotex Corp. at 323–24. Chartwell has presented no such evidence. First, Chartwell has presented no evidence that the MGM Parties received any benefit. But even if Chartwell could show that the MGM Parties did receive a benefit, Chartwell would still have to prove that the benefit was “unjustly retained” to the detriment of Chartwell. Chartwell cannot make such a showing because Chartwell admits that it was contractually obligated by its PSAs obligated to perform all the services it performed. (Ex. 3, Deviney Depo, Vol. 2 at pp. 340:9- 341:22; see also Id. at 355:7-13.) This means that Chartwell performed no services for the MGM Parties. Instead, as Chartwell admits, it was performing services for Mandalay and other parties as required by its PSAs. Chartwell cannot equitably claim entitlement to a fee for work it was contractually obligated to perform for another party even if it may have incidentally conferred a benefit to other third parties. The Nevada Supreme Court has already rejected such an inexplicable expansion of the theory of unjust enrichment. See e.g. Nevada Nat. Bank v. Snyder, 108 Nev. 151, 157, 826 P.2d 560, 563 (1992) (abrogated on other grounds by Executive Management, Ltd. V. Ticor Title Ins. Co., 118 Nev. 46, 38 P.3d 872 (2002) (rejecting a claim for unjust enrichment by a contractor against a bank for work performed on a piece of property on which the bank had foreclosed, even though the bank had been benefitted by the work because the work was performed pursuant to a contract with the property’s prior owner). Indeed, if the Court were to accept Chartwell’s theory, then Chartwell would theoretically have a claim for unjust enrichment against each and every patron and employee of one of the Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 15 of 17 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 MGM properties that received a complimentary meal and did not have to pay sales tax. The absurdity of such a result is plain on its face. Thus, Chartwell’s claim for unjust enrichment against the MGM Parties also fails as a matter of law. IV. CONCLUSION Chartwell has no contract with the MGM Parties. It only has a contract with Mandalay, whom it did not sue. Even if Chartwell did sue Mandalay or could somehow hold the MGM Parties liable under Mandalay’s contract, its claims would still fail because, as Chartwell acknowledged, Mandalay was free to walk away from its claims at any point with no liability to Chartwell. Chartwell never contemplated such a result when it signed the Mandalay PSA and cannot now call such a result a “refund.” Finally, Chartwell cannot resurrect its failure to obtain a refund under a claim for unjust enrichment against the MGM Parties. As such, summary judgment in favor of the MGM Parties on all of Chartwell’s claims is appropriate as a matter of law. DATED this 7th day of October, 2016. PISANELLI BICE PLLC By: /s/ Todd L. Bice Todd L. Bice, Esq., Bar No. 4534 Dustun H. Holmes, Esq., Bar No. 12776 Robert A. Ryan, Esq., Bar No. 12084 400 South 7th Street, Suite 300 Las Vegas, Nevada 89101 Attorneys for Counterclaim Defendants MGM Resorts International, MSE Investments, Inc., Gold Strike Investments, Inc., Newcastle Corp., and Ramparts, Inc. Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 16 of 17 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 PI SA N EL LI B IC E 40 0 So ut h 7t h S tre et , S ui te 3 00 La s V eg as , N ev ad a 8 91 01 CERTIFICATE OF SERVICE I HEREBY CERTIFY that I am an employee of Pisanelli Bice, PLLC, and that on this 7th day of October, 2016, I caused to be served the foregoing MGM PARTIES’ MOTION FOR SUMMARY JUDGMENT via electronic mail through the U.S. District Court's CM/ECF system. Calvin R.X. Dunlap Monique Laxalt DUNLAP AND LAXALT 537 Ralston Street Reno, NV 89503 and Joshua D. Wolson DILSWORTH PAXON LLP 1500 Market Street, Suite 3500E Philadelphia, PA 19102 Attorneys for Defendant/Counterclaimant Chartwell Advisory Group, Ltd. Kate H. Easterling Edison McDowell & Hetherington, LLP 1001 Fannin Street, Suite 2700 Houston, Texas 77002 Attorneys for Golden Nugget, Inc., GNLV Corp., and Golden Nugget Hotels and Casinos Michael N. Feder Joel Z. Schwarz Dickinson Wright PLLC 8563 West Sunset Road, Suite 200 Las Vegas, NV 89113-2210 Attorneys for Caesars Entertainment Corporation, Harrah's Las Vegas, LLC, Harrah's Laughlin, LLC, Rio Properties, LLC, Golden Nugget, Inc., GNLV Corp., and Golden Nugget Hotels and Casinos /s/ Shannon Thomas An employee of Pisanelli Bice PLLC Case 3:13-cv-00602-RTB-VPC Document 531 Filed 10/07/16 Page 17 of 17