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Salem Vegas, L.P. and Salem Vegas Investments, LLC v. Guanci

United States District Court, D. Nevada

October 17, 2014

Salem Vegas, L.P. and Salem Vegas Investments, LLC, Plaintiffs,
v.
Anthony Guanci, Defendant.

ORDER

GLORIA M. NAVARRO, Chief District Judge.

Presently before the Court is the Motion to Dismiss, (ECF No. 98), filed by Defendant Anthony Guanci. Plaintiffs Salem Vegas, L.P. ("Salem Vegas") and Salem Vegas Investments, LLC ("SV Investments") filed a Response in opposition, (ECF No. 122), and Defendant Guanci filed a Reply, (ECF No. 123). The Court entered a Minute Order on September 29, 2014, granting the Motion and dismissing Plaintiffs' Second Amended Complaint. The instant Order sets forth the basis for that dismissal.

I. BACKGROUND

This case centers upon allegations that Defendant Guanci breached his duties as a partner of Salem Vegas (1) by individually entering into a consulting services agreement with a company that had received a loan from Salem Vegas, and, separately, (2) by unilaterally executing a subordination agreement that could have delayed payments to Salem Vegas. (Sec. Am. Compl., ECF No. 89).

Salem Vegas is a limited partnership formed under Delaware law by an agreement that was executed in June 2005 (the "Partnership Agreement"). (Sec. Am. Compl. 2:3-3:13). The Partnership Agreement named Salem Realty, LLC[1] as Salem Vegas' general partner, and Defendant Guanci, Eugene Kessler, Stuart Kessler, and Jack Kessler as limited partners. ( Id. at 3:3-8).

The Partnership Agreement was formed in order to facilitate the partners' investment in a resort construction project known as "Palms Place Vegas." ( Id. at 2:27-3:2). The resort was to consist of "a 50 floor tower... consisting of 599 residential for-sale condominium units... and common facility areas including a full-service spa, swimming pool, recreation spaces, and shell bar and restaurant spaces." (Building Loan Agmt. at 8, ECF No. 39-6). The development of the project was overseen by Palms Place, LLC. (Sec. Am. Compl. 5:3-19).

Under the terms of the Partnership Agreement, Defendant Guanci had sole authority to negotiate with Palms Place, LLC. ( Id. at 4:1-4). The Partnership Agreement specifically provided that no "managing person"[2] could be held liable for any loss to Salem Vegas except in the case of bad faith, gross negligence, or willful misconduct. (Partnership Agmt. § 9.5, ECF No. 39-3). The Partnership Agreement also contained a provision expressly allowing its members to pursue other business opportunities, stating, "each Partner may have other business interests and may engage in other activities in addition to those relating to [Salem Vegas], even if such activities may be in competition with the business of [Salem Vegas]." ( Id. at § 9.6).

In 2005, Defendant Guanci, on behalf of Salem Vegas, executed an agreement (the "Salem Loan") providing that Salem Vegas would loan a sum of up to 10% of the costs of the Palms Place Project that exceeded the amount provided under an anticipated construction loan. (ECF No. 39-4). In return, Salem Vegas was entitled to receive, inter alia, 10% of the proceeds of the sale of each condominium unit. ( Id. at 3).

In March 2005, around the same time that the Salem Loan Agreement was executed, Defendant Guanci entered into a separate agreement with Palms Place, LLC which provided that Defendant Guanci would advise Palms Place regarding planning, construction, architecture, sales, and entitlements in order to ensure the project's timely completion (the "Consulting Services Agreement"). (ECF No. 39-2). In return, Palms Place agreed to pay a fee of $1, 000, 000 to Defendant Guanci that would be distributed in equal monthly installments from the proceeds of the anticipated construction loan. ( Id. ). Plaintiffs allege that they did not become aware of the Consulting Services Agreement until 2012. (Sec. Am. Compl., 6:16-18).

On March 13, 2006, Palms Place obtained a $240, 000, 000 loan for the project (the "Building Loan"), funded by Wells Fargo Bank, Bank of Scotland, and JPMorgan Chase Bank (the "Bank Lenders"). (ECF No. 39-6). The Building Loan Agreement specified that the distribution of these funds was contingent upon Salem Vegas' agreeing to subordinate its interest under the Salem Loan. ( Id. at 20). On that same day, Defendant Guanci executed an agreement (the "Subordination Agreement"), which rendered Salem Vegas' interest junior to that of the Bank Lenders. (ECF No. 10-4). Plaintiffs claim that they did not become aware of the Subordination Agreement until 2012. (Sec. Am. Compl. 6:16-18).

Plaintiffs allege that Defendant Guanci's execution of the Consulting Services Agreement and the Subordination Agreement delayed the repayment of the Salem Loan. ( Id. at 4:23-25, 6:9-12). Based on these allegations, the Second Amended Complaint sets forth claims for (1) Breach of Contract, (2) Contractual Breach of the Implied Covenant of Good Faith and Fair Dealing, (3) Breach of Fiduciary Duty, and (4) Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing. ( Id. at 7:19-11:23).

In the instant Motion, Defendant Guanci argues that Plaintiffs fail to state a claim upon which relief can be granted because his actions were specifically authorized by the Partnership Agreement. Thus, Defendant Guanci asserts that the all of Plaintiffs' claims should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6). For the reasons discussed herein, the Court will grant the motion and dismiss the Second Amended Complaint.

II. LEGAL STANDARD

Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon which relief can be granted. Fed.R.Civ.P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on which it rests, and although a court must take all factual allegations as true, legal conclusions couched as a factual allegation are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 12(b)(6) ...


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