Club owner tied to Privé sues Mandalay over lease changes

By Cara McCoy

Published Tuesday, Dec. 15, 2009 | 3:12 p.m.

Updated Wednesday, Dec. 16, 2009 | 2:35 a.m.

Prive at Planet Hollywood

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The legacy of July’s Privé nightclub scandal is continuing to play out on the Strip.

The notorious nightspot is at the heart of a court battle between Mandalay Place and the Rose, a burlesque cocktail lounge long planned for the mall at Mandalay Bay.

On its face, the dispute appears to hinge on changes the landlord wants to insert in the lounge’s lease.

But court documents reveal Mandalay’s concerns go beyond the lease. They note that the Rose at one point was going to be managed by three men who previously ran Privé. The state Gaming Control Board fined Planet Hollywood, which houses Privé, an unprecedented $500,000 for allowing that club to run wild. Investigators had noted prostitution, drug use and underage drinking at Privé, resulting in its closure for about three weeks at the end of the summer.

Regulators at the time put the gaming industry on notice that too much lawbreaking in nightclubs could cost casinos their gaming licenses.

Mandalay Place executives contend in legal papers that three men who were listed as managers of the Rose on March 19 “are the same individuals who were involved in the Privé Nightclub at Planet Hollywood, which, as public records reveal, lost its liquor license because of their involvement.”

The dispute began to bubble as the Rose and Mandalay Place, which is controlled by Mandalay Bay and parent company MGM Mirage, were amending leasing papers. Many changes seemed inconsequential and were agreed upon.

But last month, Mandalay Place tried to amend the lease to change its terms from five years to month to month, which raised the ire of Vegas South Partners, operators of the Rose. On Dec. 3, Vegas South sued, and the company’s motion to prevent the lease change will be heard in District Court today. Vegas South is seeking more than $1 million in damages, saying it had hoped to open the nightclub earlier this month.

Vegas South is asking the court to intervene so it can open the Rose as soon as possible. Without a lease, the company can’t get business and liquor licenses from the county. Vegas South says it lacks only a valid lease to complete the county’s licensing process.

“There is strong public policy favoring the opening of the Rose in time for the 2009 end-of-year holiday season and avoiding the waste of significant promotional expenditures, business reputation and loss of over 70 employees who will be unemployed if the Rose is not permitted to open,” the lawsuit contends.

The three previously listed managers of the Rose are no longer showing up in more recent lease documents. Instead, veteran nightclub operators Roman Jones and Mitchell Rubinson, who were tapped to clean up Prive’s operations in August, are listed as the Rose’s managers. The Rose would occupy the space previously used by Ivan Kane’s Forty Deuce.

MGM Mirage said it has made no official announcement about plans regarding that space and wouldn’t comment on pending litigation per company policy, a spokesman said.

Vegas South’s lawyers also declined to comment.

Privé, meanwhile, continues to deal with its own problems.

Privé Vegas LLC, which includes the nightclub’s lounge, Living Room, and sister company PVPH LLC, filed for Chapter 11 bankruptcy protection Nov. 11 in Miami.

Privé was saddled with legal problems and costs after a yearlong investigation by the Nevada Gaming Control Board that resulted in the county pulling its liquor license. Using the argument that the club is now under new management, Jones and Rubinson are trying to get the county to give them permanent licenses for Privé and Living Room. The clubs are operating under temporary liquor licenses set to expire Jan. 7.

In its initial complaint, Vegas South claims it will otherwise “suffer irreparable harm, including but not limited to, loss of goodwill, damage to reputation, substantial negative publicity, loss of jobs, loss of scheduled entertainers, and the wasting of substantial promotional expenses for the 2009 end-of-year holiday grand opening.”

Also in court filings, Vegas South’s lawyers argued that in the lease negotiations, Mandalay Place had demanded the change in the nightclub’s management, which was done. Vegas South says the new management passed security checks.

The nightclub company complains, too, that Mandalay Place waited until Vegas South had spent another quarter million dollars on the property before “springing its rewrite of the lease on Vegas South.”

Mandalay Place’s attorneys claim that Vegas South owes more than $200,000 in unpaid back rent.

If Mandalay believed that was a reason to terminate the lease, it could have filed a default notice, Vegas South’s lawyers countered. “Mandalay has not done this for the past several months because the parties clearly understood that Vegas South was spending a fortune on the build-out of the Rose and that the rent would be paid when the Rose was ready for its grand opening.”

Vegas South says it can give the court the disputed rent money to hold until the case is resolved.