Metro Riverboat Associates, Inc. v. Bally's Louisiana, Inc.

706 So. 2d 553, 97 La.App. 4 Cir. 1672, 1998 La. App. LEXIS 16, 1998 WL 12481
CourtLouisiana Court of Appeal
DecidedJanuary 14, 1998
Docket97-CA-1672
StatusPublished
Cited by17 cases

This text of 706 So. 2d 553 (Metro Riverboat Associates, Inc. v. Bally's Louisiana, Inc.) is published on Counsel Stack Legal Research, covering Louisiana Court of Appeal primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Metro Riverboat Associates, Inc. v. Bally's Louisiana, Inc., 706 So. 2d 553, 97 La.App. 4 Cir. 1672, 1998 La. App. LEXIS 16, 1998 WL 12481 (La. Ct. App. 1998).

Opinion

706 So.2d 553 (1998)

METRO RIVERBOAT ASSOCIATES, INC.
v.
BALLY'S LOUISIANA, INC.

No. 97-CA-1672.

Court of Appeal of Louisiana, Fourth Circuit.

January 14, 1998.
Rehearing Denied February 17, 1998.

*554 Daniel Lund, Stephen P. Schott, Montgomery, Barnett, Brown, Read, Hammond & Mintz, L.L.P., New Orleans, and James G. Hunter, Jr., Latham & Watkins, Chicago, IL, for Defendant/Appellant Bally's Louisiana, Inc.

Richard A. Goins, Ronald J. Triche, The Goins Law Firm, New Orleans, and William W. Hall, William W. Hall & Associates, Metairie, and Michael J. Almerico, Metairie, for Plaintiff/Appellee Metro Riverboat Associates, Inc.

Before KLEES, LOBRANO and MURRAY, JJ.

MURRAY, Judge.

In this contractual dispute, defendant Bally's Louisiana, Inc. appeals the trial court's denial of its demand for arbitration as well as the court's grant of a preliminary injunction in favor of the plaintiff, Metro Riverboat Associates, Inc. We affirm the judgment in part and vacate it in part, and remand for further proceedings consistent with this opinion. In addition, we deny plaintiff's motion to supplement the appellate record.

*555 FACTS AND PROCEEDINGS BELOW

In June 1993, Belle of Orleans, L.L.C. (Belle Company) was formed by Metro Riverboat Associates, Inc. (Metro) and Bally's Louisiana, Inc. (Bally's), two Louisiana corporations, for the purpose of owning and operating a gambling riverboat in Orleans Parish. Two months later, a comprehensive Operating Agreement was executed by Metro and Bally's to govern their respective rights and obligations in the conduct of Belle Company's business affairs, including capital contributions, voting rights, distribution of income and allocation of losses, and the resolution of disputes. Although Metro had a majority ownership interest under this contract, the Operating Agreement essentially required the consent of both members for any significant business decisions.

In conjunction with the Operating Agreement, Belle Company and Bally's[1] entered into an equally detailed Management Agreement to govern the operations of the casino itself. This contract was signed on behalf of Belle Company, as owner, by both Metro and Bally's on the same date as the Operating Agreement. A state gaming license subsequently was awarded to Belle Company, and "Bally's Casino Lakeshore Resort" began operations in July 1995 in accordance with the applicable agreements.

The instant litigation was triggered by the December 1996 merger of Bally Entertainment Corporation into Hilton Hotels Corporation. Under Metro's interpretation of the Operating Agreement, this transaction resulted in a "change of control," an event which was defined as permitting most decisions to be made by a simple majority rather than by unanimous consent. Additionally, because Hilton Hotels had an ownership interest in another Orleans Parish riverboat casino,[2] Metro interpreted the merger to result in Bally's violation of the noncompetition provision of the Operating Agreement. The contract provided that, unless cured, this default would deprive Bally's of any voting rights and could lead to the dissolution of Belle Company.

Metro made these interpretations clear to Bally's at a members' meeting conducted by telephone in February 1997. Minutes prepared by Metro's sole shareholder, Norbert Simmons, reported that eight resolutions had been passed, despite Bally's negative votes. The resolutions authorized actions that previously had required unanimity. Following that meeting, Mr. Simmons, purporting to act on behalf of Belle Company, directed Bally's, in its capacity as manager of the casino, to make significant changes in routing revenues and certain expense payments in order to comply with those resolutions. In a separate letter, Metro notified Bally's that it had thirty days to cure its breach of the Operating Agreement's noncompetition clause.

Asserting that the transaction with Hilton Hotels had no impact on their contracts, Bally's responded with its own notice of breach as well as a formal request for a meeting, which was the first step in the dispute resolution procedures outlined in the Operating Agreement. Both parties then agreed to a brief "stand still" period to attempt a negotiated settlement.

At the expiration of the "stand still" period Bally's made written demand on Metro for binding arbitration of all their differences, asserting that this was required by the Operating Agreement. However, that same day, Metro filed this suit asking that Bally's be prohibited from pressing any demand for arbitration and that it be ordered to implement the resolutions passed at the February meeting pending judicial interpretation of the contracts. After the parties presented testimony and evidence on Metro's motion for a preliminary injunction, the matter was taken under advisement.

On April 18, 1997, the trial court granted Metro's motion for a preliminary injunction and ordered Bally's to (1) specify signatories *556 for a new Belle Company checking account under Metro's control; (2) transfer all casino revenues except that needed for daily operations and its management fees to the new Belle Company checking account; and (3) to disburse funds from the new checking account in accord with Metro's directives as controlling member of Belle Company. In addition, Bally's was prohibited from proceeding with its demand for arbitration and from taking any action on its assertion that Metro had breached the Operating Agreement. In separate reasons for judgment, the court explained that the issues in dispute were not within the scope of the arbitration clauses of either the Operating or Management Agreements, and that the December 1996 Bally-Hilton merger represented both a violation of the Operating Agreement's noncompetition provision and a change of control under the language of that contract.

Bally's appeals the judgment granting the preliminary injunction, asserting that the prohibition of arbitration was erroneous (assignments of error 1, 2 and 3) and that Metro did not establish that it was entitled to injunctive relief (assignments of error 4 and 5). In addition to arguing in support of the judgment, Metro moves to supplement the appellate record with additional documentary evidence. We will address each of these issues separately below.

ARBITRATION

Article XIII of the Belle Company Operating Agreement is entitled "Dispute Resolution" and consists of two sections, 13.01 "Notice of Dispute; Arbitration" and 13.02 "Failure to Arbitrate." Section 13.01(a) is the provision at issue here:

In the event a dispute arises between any two (2) Members with respect to the management or operation of the [Belle] Company, either such member (the "Notifying Member") may deliver written notice to the other such member (the "Responding Member") of a date... on which the Notifying Member is prepared to meet with the Responding Member to resolve the dispute.... If the Members are unable to resolve a dispute involving a Major Decision [as enumerated and defined in Section 5.02] at the meeting... or if either Member fails to attend the meeting without a good faith material basis for their absence, then, except as otherwise specifically provided in this Agreement, either of the Members may elect... to submit such disagreement or dispute to binding arbitration....

Bally's asserts that the trial court's failure to order arbitration in the face of this provision violated the Louisiana Arbitration Law, La. R.S. 9:4201 et seq.,

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Bluebook (online)
706 So. 2d 553, 97 La.App. 4 Cir. 1672, 1998 La. App. LEXIS 16, 1998 WL 12481, Counsel Stack Legal Research, https://law.counselstack.com/opinion/metro-riverboat-associates-inc-v-ballys-louisiana-inc-lactapp-1998.