Venetian builders win first round over construction liens

David Strow

Monday, April 10, 2000 | 11:32 a.m.

A state judge ruled that 13 mechanics liens against the Venetian hotel-casino were properly filed -- a move that will allow the contractors to argue in court how much they claim to be owed for their work on the $1.5 billion Strip resort.

Though Senior District Court Judge James Brennan has only ruled on a handful of the 42 mechanics liens challenged by the Venetian, his ruling in late March set a precedent for the remainder of the challenged liens -- a precedent that makes it far more likely the rest of the liens will also be found too have been properly filed.

In his rulings, Brennan said the Venetian could not use a "no-lien" clause in the construction contracts to throw out the liens, because the clause used "tricky language" to obscure its effect from contractors.

Since this clause was central to the Venetian's legal challenges to the liens, the ruling makes it likely that the rest of the liens will also be found too have been properly filed. Once that occurs, each contractor will be given a chance to prove in court how much, if any, they are owed.

Venetian officials could not be reached for comment on Brennan's ruling.

The resort is no longer at risk of foreclosure, since the Venetian "bonded around" $300 million in mechanics liens by posting $470 million in bonds. If the contractors were awarded damages, those damages would be paid by the bonds. The Venetian challenged 42 of the 92 liens filed against the resort.

The ruling, however, does not effect the largest lien posted against the Venetian -- the $145 million lien filed by general contractor Lehrer McGovern Bovis. The status of the Bovis lien will be determined at a later date.

Bovis, also the target of liens, has settled with about half of the contractors for partial payment. The Venetian argued that these settlements also absolved the resort of liability, but Brennan ruled against this claim as well.

The Venetian attacked each of the liens as frivolous based on paragraph 19.13 in the contractors' contracts with Lehrer McGovern Bovis. This clause, in part, stated that contractors "shall not suffer or permit any lien or other encumbrance to be filed ... as a claim against the building or the project site ... ." Each contractor on the project signed a contract with this clause.

Had Brennan upheld this paragraph as valid, all of the contractor liens against the Venetian would have been thrown out.

However, Brennan ruled that the intention of this paragraph was murky. He noted that many portions of the contract -- but not the crucial paragraph -- were put in boldface.

"By emphasizing only certain portions of the (contract), the Venetian and LMB hide and obscure what is of most importance to the trade contractors, i.e., the right to lien the Venetian property for payment," Brennan wrote.

Moreover, Brennan noted that the contract used the term "suffer and permit" in its lien waiver clause -- not "waive and release," the term customarily used among contractors in Las Vegas. As a result, he ruled, the clause's language was made even less clear.

"For the reasons above stated the court finds that paragraph ... is unenforceable and invalid on its face," Brennan wrote. "The Venetian and LMB had a duty not to hide and use tricky language ... (but) to convey the meaning they intend to convey ... by clear, understandable, unequivocal and common language ... ."

Although this ruling set a precedent for the remaining liens, each lien must still be examined separately to determine if they were filed properly and in a timely fashion.

The Venetian can appeal Brennan's ruling to the Nevada Supreme Court, but has not indicated yet whether it will do so. Barring any delays, Brennan will begin the first hearings to determine potential damages this summer.