In re Tropicana Entertainment, LLC

2019 WL 2320810 (2019)

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In re Tropicana Entertainment, LLC

United States District Court for the District of Delaware
2019 WL 2320810 (2019)

Facts

William J. Yung III (defendant) was director and chief executive of Tropicana Casinos and Resorts, Inc. (TCR), formerly known as Wimar Tahoe Corporation (Wimar) (defendant). TCR was the parent company of Tropicana Entertainment, LLC and other affiliated hotels and casinos (collectively, the Tropicana Entertainment entities). In May 2008, the Tropicana Entertainment entities filed for bankruptcy. After the bankruptcy filing, TCR was renamed Wimar. In May 2009, the bankruptcy court approved reorganization plans for certain Tropicana Entertainment entities. The plans created a litigation trust to pursue causes of action for the benefit of unsecured creditors. The court appointed Lightsway Litigation Services, LLC (Lightsway) (plaintiff) as trustee of the litigation trust. Lightsway commenced an adversary proceeding against Yung, Wimar, and another of Yung’s companies, Columbia Sussex Corporation (Columbia) (defendant). Lightsway asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing based on Yung’s, Wimar’s, and Columbia’s alleged gross mismanagement of certain Tropicana Entertainment casino and hotel properties in violation of service contracts between the properties and Wimar or Columbia. The Wimar contracts obligated Wimar to provide casino-management services, including supervising casino operations and providing regulatory-oversight and regulatory-compliance assistance. The Columbia contracts obligated Columbia to provide services, including supervising hotel operations and preparing financial reports for combined hotel and casino operations. Lightsway alleged generally that poor supervisory and managerial services—including removing mandatory security personnel, failing to establish an independent audit committee, drastically reducing staffing, and failing to update and refurbish hotel rooms—had destroyed the properties’ value. Lightsway supported its allegations with evidence, including an expert report estimating the properties’ lost profits due to mismanagement and a 63-page order issued by the New Jersey Casino Control Commission regarding the decision to deny one casino’s license renewal. Yung, Wimar, and Columbia moved for summary judgment.

Rule of Law

Issue

Holding and Reasoning (Carey, J.)

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