Judge: Former gaming CEO can compete against previous employer

By Steve Green

Monday, Nov. 22, 2010 | 2:47 p.m.

Dan Lee, former CEO of Las Vegas-based casino operator Pinnacle Entertainment Inc., remains free to compete against Pinnacle in Louisiana and elsewhere after a ruling in state court Monday.

Clark County District Court Judge Kathleen Delaney denied a motion by Pinnacle that she issue an injunction barring Lee from competing against it and soliciting its employees.

Pinnacle charged in a Nov. 12 lawsuit that Lee, who left the company last year, had violated terms of his separation agreement when he disclosed confidential information to the port of Lake Charles in Louisiana and tried to hire away Pinnacle employees for his own project.

The port is central to the lawsuit: Pinnacle has a casino there called L’Auberge and as Pinnacle’s CEO, Lee worked to develop an adjacent casino called Sugarcane Bay.

But after Lee left the company, Pinnacle canceled Sugarcane Bay.

Lee then arranged with the port to develop at the same site a casino resort called Mojito Pointe -- a deal contingent on Lee winning Louisiana’s 15th and final casino license. The Louisiana Gaming Control Board plans to hear presentations Dec. 16 from Lee and developers of competing projects at various locations.

Delaney, after hearing from attorneys from both sides on Monday, ruled Pinnacle had failed to present convincing evidence at this early stage of the litigation that would warrant issuance of an injunction.

But the litigation appears likely to continue, with attorneys for Lee and Pinnacle making plans to take depositions from several witnesses and to collect written evidence including emails and phone records.

"Everything Mr. Lee knew as CEO was not confidential," Delaney said, remarking that an injunction barring him from competing based on the evidence on the table now would have serious public policy implications.

She said discovery needs to proceed and if violations of the separation agreement are confirmed, Pinnacle will then have other remedies including monetary damages.

"There are some concerns here about if confidentiality has been honored," Delaney said.

Delaney repeatedly said an injunction barring Lee from competing was too drastic of a solution with the evidence now available.

"Stopping unfairness and stopping competition are different things," she said.

Lee’s attorney, Todd Bice of the Las Vegas law firm Pisanelli Bice PLLC, said during the hearing that evidence Pinnacle presented so far amounts to hearsay that Lee had solicited employees and amounts to nothing as far as Lee disclosing confidential information.

E-mails between Lee and a port official uncovered by Pinnacle covered issues about real estate involving the port that are common knowledge, Bice said.

"There’s not a lick of evidence from Pinnacle that this was confidential information," Bice said.

But Patrick Hicks, an attorney representing Pinnacle with the law firm Littler Mendelson, said that Lee has received millions of dollars as part of his separation agreement and part of that agreement allowed Lee to compete against Pinnacle -- but only fairly.

"Pinnacle was being very fair about this," Hicks said. "They allowed Mr. Lee to compete."

Pinnacle in the litigation intends to show Lee violated provisions in the separation agreement regarding confidential information and solicitation of employees -- and Pinnacle says the penalty should be an order barring him from competing for one year.

"You can go compete. You can compete fairly. But if you use our confidential information and solicit our employees -- that’s unfair competition," Hicks said in describing the agreement.

The provision in the separation agreement blocking Lee from soliciting employees is now a moot point since it expired Nov. 7.

Bice noted Pinnacle is also in litigation with the port in Louisiana. He charged that Pinnacle’s motive in suing Lee just a month before Louisiana gaming regulators hear from casino developers was to prevent Lee from gaining a gaming license.

Bice asked Delaney not to give Pinnacle an injunction that Pinnacle could then present to the Louisiana regulators in an attempt to undermine Lee.

"Pinnacle is quite desperate to make sure Mr. Lee doesn’t get a license for a site they don’t like," Bice said. "Pinnacle is trying to keep Mr. Lee out of the market."