Bloomberg BNA’s Corporate Law & Accountability Report is available on the Corporate Law Resource Center. This news service keeps corporate practitioners informed of legal developments of...
July 18 — Investors can't proceed on a lawsuit alleging that Wynn Resorts Ltd. directors breached their fiduciary duties and wasted corporate assets by authorizing the hotel and casino company's $135 million donation to the University of Macau Development Foundation, a federal appeals court ruled July 18 ( La. Mun. Police Emps.’ Ret. Sys. v. Wynn , 2016 BL 229530, 9th Cir., No. 14-15695, 7/18/16 ).
The derivative lawsuit also challenged the board's decision to forcibly redeem a $2.77 billion stake in the company held by Kazuo Okada—the only director to oppose the donation—in exchange for a $1.9 billion promissory note.
The U.S. Court of Appeals for the Ninth Circuit agreed with a lower court that the shareholder plaintiffs failed to show a pre-suit demand on the Nevada corporation's board to take action would have been excused (12 CARE 325, 3/21/14).
Under Nevada law, before investors can sue on a company's behalf, they must ask the company's board to take action. However, they don't have to make a pre-suit demand if they can show that a majority of the directors had a conflict of interest in the matter.
According to its website, the University of Macau Development Foundation is a nonprofit that promotes and supports the university. The investors alleged that the donation—made a month before the Macau government accepted Wynn's application for a lease agreement to build a resort and casino—appeared suspicious, causing the company to incur legal expenses and exposing it to potential liability.
According to the court's decision, Wynn opened its first hotel in Macau in 2006 under a lease from the government. In the same year, the company applied for a second agreement to build a new resort and casino.
The investors claimed that five years later, the lease was approved after Wynn made a donation to the foundation, which is overseen by many of the same government officials that control the territory's gaming and real estate industries.
The Securities and Exchange Commission initiated an investigation into the donation, but ended the probe without taking any action. The Nevada Gaming Commission Board also investigated the matter and found no violations of state law.
Writing for the Ninth Circuit, Judge Diarmuid O'Scannlain said the plaintiffs failed to show that a majority of Wynn's board lacked independence or faced a substantial likelihood of incurring personal liability. “Most importantly, even assuming that the Macau donation did in fact violate the [Foreign Corrupt Practices Act], the allegations do not create a reasonable inference that any of the individual directors intended or knew that it would do so, as Nevada law would require,” he wrote.
To contact the reporter on this story: Michael Greene in Washington at email@example.com
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
The opinion is available at http://www.bloomberglaw.com/public/document/LOUISIANA_MUNICIPAL_POLICE_EMPLOYEES_RETIREMENT_SYSTEM_BOILERMAKE.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)