Hughes objects to ban on suits against Equinox

Grace Leong

Monday, June 26, 2000 | 11:19 a.m.

Howard Hughes Properties Ltd. Partnership is seeking to recover $525,519 in past-due rents and other charges from the court-appointed receiver for Las Vegas-based Equinox International Corp., which was shut down April 20 as an alleged illegal pyramid scheme.

The big Las Vegas developer, which said rents haven't been paid since April on two properties leased to Equinox, also is claiming a $605,550 security deposit on the properties and is seeking an order to force the receiver, Robb Evans, to continue paying rent until the premises are vacated.

Howard Hughes said it agreed in 1996 to lease to Equinox the properties at 10190 Covington Cross in Summerlin for 10 years and at 985 Trade Center Drive in North Las Vegas for five years with an optional five-year extension.

The receiver is expected to vacate the Covington Cross premises on July 31, and the Trade Center premises in October.

The developer said it is seeking to recover damages from an early termination of the leases. It said the Covington Cross lease, which was to have continued until 2006, has a present rental rate of $116,828 a month, while the Trade Center lease, which was to have continued until 2001, has a present rental rate of $51,705 a month.

Equinox, founded by Bill Gouldd, with its headquarters in Summerlin, was ordered into receivership by U.S. District Court Judge Johnnie Rawlinson on April 20. This followed a settlement between the company and the Federal Trade Commission midway through a trial to determine whether the business constituted an illegal pyramid scheme.

Equinox did not admit any wrongdoing in the settlement, but was forced into closure and liquidation.

Hughes filed a motion last week opposing the receiver's June 6 emergency motion for a six-month temporary stay against pending and anticipated lawsuits against the Equinox estate. Hughes said this would "prejudice creditors' rights, unnecessarily delay the distribution of assets," and "permanently extinguish" its rights to take action against the receiver.

Not only do the leased properties require substantial modification before they can be leased to substitute tenants, Howard Hughes argued, such large commercial properties may take many months to lease once vacant. Even if Howard Hughes is able to find replacement tenants in only seven months, it will still suffer damages in excess of $1 million, it said.

But Howard Hughes stressed that although it requests the receiver's motion for a shield against creditors' suits be denied, it does not oppose a stay on lawsuits by employees or distributors of the receivership entities.

Evans asked for an emergency order to shield the company from claims filed in several state and federal courts alleging product liability and breach of contract, which threaten to "deplete estate assets and may impede the receiver's ability to formulate a plan for distribution of estate assets."

A hearing is scheduled July 5 on the receiver's motion for the temporary shield.

As for the security deposits, Hughes said: "Even if the court determines that the security deposits did not become Howard Hughes' property upon commencement of the leases, they became Howard Hughes' property upon default by Equinox."