Investor’s suit over Alexis Park deal settled in L.A.

A $300 million lawsuit filed against Paul Hastings LLP by real estate investor L.A. Pacific Inc. over the redevelopment of the Alexis Park in Las Vegas was settled moments before the trial was scheduled to begin March 16 in Superior Court in Los Angeles, according to a report published online by Law360.

The settlement’s terms have not been disclosed. L.A. Pacific is represented by Greene Broillet &Wheeler LLP. Attempts to reach the plaintiff’s attorneys were unsuccessful.

Court documents show the lawsuit was filed in April 2010. L.A. Pacific alleged it had hired the law firm Paul Hasting Janofsky &Whitaker, as it was known at the time, in 2004 to represent it in the $70 million purchase and redevelopment of Alexis Park. The property consisted of a hotel and an apartment complex.

The controversy arises from L.A. Pacific’s claim that Paul Hastings botched its purchase agreement of Alexis Park, which allowed the sellers to deny the deal and place a lis pendens — a notice that a lawsuit has been filed — on the property, which damaged L.A. Pacific’s ability to sell it, according to court records. L.A. Pacific had received offers of more than $300 million to buy the property.

According to the plaintiff’s trial brief filed in Superior Court last May 16, defendant Paul Hastings failed to properly perform his duties during the purchase of a hotel and apartment building — Alexis Park Hotel and Americana Inns Apartments. Hastings’ failure to disavow the deal prevented the plaintiff from realizing the property’s full value despite receiving offers to buy it for $150 million to $325 million at the height of the real estate boom and despite a property appraisal of more than $300 million.

According to the complaint, Hastings was entrusted with ensuring that an agreed-upon change to pay the final $5 million of the purchase price was extended from 12 months to 60 months. Hastings failed to properly document the change, thus causing substantial damage to the plaintiff. Hastings had the seller sign the incorrect 12-month deal documents, then sent those documents, which had been notarized, to escrow and to the seller’s attorney.

Although aware of the errors, Hastings failed to correct the problem and did not notify his client, L.A. Pacific, the lawsuit charged.

The transaction closed on May 26, 2004, and L.A. Pacific, which was unaware of the 12-month holdback date, obtained approval from the Clark County Commission to build a 25-story, 528-room resort with 120,000 square feet of gaming space and 120,000 square feet of ballroom and convention center area, according to the complaint.

However, on April 20, 2005, L.A. Pacific received a letter from the seller demanding the $5 million payment under the terms of the purchase and sale agreement. On May 4, 2005, the sellers filed a lawsuit in California State Court against L.A. Pacific, according to the complaint.

The lawsuit against L.A. Pacific was resolved on Oct. 27, 2009, when an arbitration panel issued its award in favor of L.A. Pacific. The arbitrators also assessed damages of $140 million against the sellers. However, the sellers filed for bankruptcy after arbitration and were able to pay only a fraction of the judgment. The lis pendens was withdrawn in July 2010, but by then the real estate market had crashed and the property value had diminished significantly, according to the complaint.

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