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September 18, 2014

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DAILY MEMO: courts:

Club in Palazzo opens, but legal fight isn’t over

Adelson says delays hurt resort’s business

Restaurateurs Marc Packer and Richard Wolf have at last unveiled the nightclub Lavo, their latest Strip creation.

The New York businessmen have invested $21 million and two years of planning to put themselves in a position to launch a soft opening.

There is plenty of upside here.

They’ve got a prime tourist-heavy location just off the main lobby of the Palazzo. They’ve got a reputation for wooing a well-heeled nightclub crowd. A star-studded grand opening is planned for Sept. 13.

Then there is the downside.

Their wealthy, litigious landlord is still trying to kick them out for failing to open on time. Packer and Wolf have been locked in a legal battle with Palazzo owner Sheldon Adelson since March, when he had the locks changed.

Their lawyer, Mark Ferrario, obtained a court order preventing Adelson from canceling their lease, for now. Packer and Wolf have the distinction of owning the highest-grossing restaurant in the country, a popular venue called Tao Las Vegas, which earned $55.2 million its first year, 2006.

Tao happens to be inside Adelson’s Venetian, next to the Palazzo.

“If you go back and look at the history of Tao, they took a space in the Venetian that really wasn’t doing well and turned it into the No. 1 restaurant in the United States,” Ferrario says. “It’s no accident that we ended up in that space at the Palazzo.”

Ferrario says he “can’t figure out for the life of me” why Adelson would not welcome another successful business.

Others in the legal community are just as perplexed. “It’s very difficult to understand,” said a former general counsel for a Strip property. “On its face, it’s highly unusual, but given the fact that it involves Sheldon, a lot of things about Sheldon are unusual.”

One of them is the way many of his business dealings over the years have wound up in court.

“He seems to embrace the court system whether he’s right or wrong,” says a lawyer who has gone up against Adelson in court. “He just likes to fight.”

When the Venetian was being built in the late 1990s, Adelson became embroiled in a legal dispute with its general contractor over construction delays. The dispute lingered in the courts years after the Venetian opened.

In an affidavit filed in May, Adelson shed some light on his thinking in the Palazzo case, and again it involves construction delays.

He insisted his anger stemmed from a lack of urgency on the part of Packer and Wolf. The nightclub sits across from the Palazzo’s busy registration desk. He accused the restaurateurs of repeatedly changing their designs, which delayed the opening for months and hurt the Palazzo’s upscale business.

Adelson’s lawyers have pounded home those concerns in court papers since then.

But the club has opened, and Ferrario is hoping it brings a smile to Adelson’s face so his clients can start smiling, too.

“In spite of having to fight this battle, they’ve made it to the finish line,” Ferrario says. “Our hope is that we can focus on a mutually beneficial business relationship, rather than the litigation.”

Well, not quite yet.

Although there were settlement talks that fizzled as quickly as they surfaced a few weeks ago, the legal battle has actually intensified.

Adelson is refusing to give Packer and Wolf a $3 million loan they contend was agreed upon in their 2006 contract to put the finishing touches on Lavo. So Ferrario is adding that claim to the litigation.

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