Substantial Payouts End Harmon Hotel Legal Battle in Las Vegas
A last-minute deal has effectively ended the long-running CityCenter/Harmon Hotel construction-defect legal saga in Las Vegas—with owner MGM Resorts, contractor Tutor Perini and all but one of the litigants in the case agreed to a Dec. 16 settlement.
Judge Elizabeth Gonzalez announced the agreement a few hours before the start of an anticipated one-year-long jury trial. Clark County Chief Judge Jennifer Togliatti brokered the deal, which is bound by a confidentiality agreement.
The settlement brings to an end what is considered one of the most contentious building-defect cases ever.
At one point in the dispute, the two sides couldn't agree on the actual dangers posed by the defects and whether the 22-story building could collapse during an earthquake.
According to a Dec. 16 US Securities and Exchange Commission filing by MGM Resorts, the company said it would pay $153 million to Perini and $20 million to developer CityCenter.
MGM Resorts is a partner in CityCenter, which is also currently funding the piece-by-piece deconstruction of the building that began in September.
MGM had intended the Harmon to be a 400-room, 49-floor hotel and resort, a centerpiece of the sprawing CityCenter megaproject created during an unprecedented Las Vegas building boom.
But the project was stopped dead by a construction flaw that had implications for seismic safety.
Structural engineer Halcrow Yolles discovered the mistake in July 2008, and subsequent Clark County Building Dept. investigations revealed that Pacific Coast Steel, a San Diego-based subcontractor to Tutor Perini, improperly installed reinforcing steel inside link beams on 15 floors.
Construction was temporarily halted, and a redesign was performed. Eventually, the building was capped and shelled, standing vacant for more than four years.
Demolition is being conducted by LVI Services Inc., New York City, and NCM Group Holdings Inc., Brea, Calif. (the companies merged in April to become North Star Group Services Inc.).
The three-stage demolition process is expected to be complete by mid-2015.
MGM Resorts said in the SEC filing that prior insurance proceeds pushed the settlement on the construction-related defect claims to nearly $200 million.
"The Perini Settlement Agreement, combined with prior Harmon-related insurance settlement proceeds of about $85 million, will result in total settlement proceeds to CityCenter of approximately $195 million on its Harmon construction defect claims," according to the filing.
Insurer FM Global, which provided coverage on the Harmon project, declined to comment to ENR.
The Las Vegas Sun reported that Show Canada, an architectural firm that designed a showroom at the Aria resort, is the only litigant that is not a party to the agreement. Its claim against Tutor Perini will be heard without a jury in February.
All parties must agree to the pact by Dec. 31.
Shortly after, CityCenter must provide replacement insurance for the general liability policies in the Owner Controlled Insurance Program for construction and workers'-compensation claims, according to MGM Resorts' filing.
