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D|J|P Scores Two Ninth Circuit Victories

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DJP SCORES TWO NINTH CIRCUIT VICTORIES

Congratulations to the Las Vegas litigation teams of Craig Newman and Anthony Ager, and to Michael Thomas in the St. George office, on their recent victories in the Ninth Circuit Court of Appeals.

Newman/Ager successfully defend Summary Judgment in Casino marker case for Aria

Earlier this year, the firm was successful in securing a Ninth Circuit Court of Appeals decision affirming that casino credit instruments, commonly known as casino markers, are valid and enforceable by legal process.

In Morales v. Aria Resort & Casino, LLC, the debtor applied for and received $500,000 in gambling credit at the Aria through the issuance of casino markers.  Following standard practice, Morales completed a credit application.  He also signed seven markers totaling $500,000.  The date and banking information were left blank.  During his visit to Aria in May 2010, Morales lost $500,000.  Shortly thereafter, he departed for his home without paying the debt. Aria completed the required information, including the date and bank information, and presented the markers.  The bank returned the markers for the reason that the account was closed.  Morales sued Aria alleging various contract and tort theories.  Aria counterclaimed seeking recovery of $500,000 for the unpaid casino markers. The trial Court granted summary judgment for Aria on all claims.

Notably, the appellate decision states:  “the primary object of the parties’ credit agreement [was] the loan of money and the repayment of that money…These are the only facts material to whether Aria was entitled to summary judgment, and Morales has not put any of them into dispute.”

This case is extremely important because it provides casinos a shield against potential defenses by players that the credit application and instruments do not independently create a duty to pay.  As the District Court notably stated:  “[M]arkers are merely instruments for collection on a gambling debt, as distinct from the debt itself, and redeeming a marker is not the only means by which a gambling establishment may seek to collect on an outstanding debt.” The Court was not persuaded to follow Morales’ arguments that the casino’s purported irregularities in enforcing the instruments absolved him of liability.   Such language seems to broaden at least this Court’s reasoning concerning the enforcement of gaming debts in Nevada.

Newman/Thomas successfully defend Judgment in Deficiency Action for KeyBank affiliate

After OREO Corp., an affiliate of KeyBank, prevailed in federal district court on a post-foreclosure deficiency claim for a multimillion-dollar construction loan, the borrower appealed to the Ninth Circuit Court of Appeals.  The borrower challenged the district court’s holding by arguing that: (1) the statute of limitations barred OREO’s claim because OREO substituted as the party in interest after the six-month limitations period for a deficiency action; (2) the evidence was insufficient to support the district court’s valuation determination; and (3) post-judgment interest should apply at the interest rate mandated by federal statute (less than 1%) rather than the contractual default rate provided in the parties’ loan agreement.

In a Memorandum Decision filed March 17, 2016, the Ninth Circuit found that the statutory interest rate should apply to post-judgment interest but otherwise affirmed the district court’s decision and sided with the arguments DJP presented on OREO Corp.’s behalf.  The Ninth Circuit agreed that OREO’s claims as the substituting plaintiff related back to the timely deficiency action filed by KeyBank, OREO’s predecessor in interest.  Therefore, the statute of limitations did not bar OREO’s claims.  The Court also agreed that the district court’s determination of fair market value based on expert testimony consistent with financial industry standards was not clearly erroneous.  The Court recognized that trial courts can “properly consider all relevant evidence in determining the value of the property.”