Mandalay Bay club closes as court allows eviction

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Mandalay Bay club closes as court allows eviction

Post by Alasted on Sat Aug 21, 2010 1:44 pm

Mandalay Bay in Las Vegas has won the right to evict the Rumjungle nightclub there and the club is now closed.

The club closed Monday and Mandalay Bay is evaluating new concepts for the space. It likely will be a restaurant/lounge concept, Gordon Absher, spokesman for Mandalay Bay owner MGM Resorts International, said Thursday.

Rumjungle employees worked for Rumjungle’s parent company, not Mandalay Bay. Employees displaced by the closure and interested in working elsewhere on the property are encouraged to apply through the company website, Absher said.

A spokesman for Rumjungle’s owners didn't have an immediate comment on the closure.

Mandalay Bay and Rumjungle’s owner have been engaged in litigation for two years over Mandalay Bay’s claim that Rumjungle is behind on rent; and Rumjungle’s claim that actions by Mandalay Bay have caused financial problems for the club.

Particularly, Rumjungle claims Mandalay Bay’s opening of the eyecandy lounge violated the lease agreement allowing Rumjungle to be the lone nightclub at the 3,211-room casino resort on the Las Vegas Strip.

On March 16, Rumjungle filed for bankruptcy protection to block its eviction, but attorneys for MGM Resorts International later managed to have the bankruptcy case thrown out.

Then, on June 28, Mandalay Bay moved to evict the 20,000-square-foot Rumjungle and even chained the doors closed, but a judge issued a restraining order allowing Rumjungle to temporarily stay in its leased space.

That episode was followed by two days of hearings in Clark County District Court on the issue and a ruling issued Aug. 6 by Judge Kathleen Delaney.

"Rumjungle has failed to provide sufficient evidence that Mandalay’s actions in renovating an existing casino lounge to operate an ultra-lounge constitutes a violation of Rumjungle’s exclusive rights to operate a nightclub," an order signed by Delaney says. "Rumjungle has failed to provide sufficient evidence to show that its failure to pay any `percentage rent’ under the lease was related to Mandalay’s operation of its lounge and not attributable in whole or in part to other factors, including, but not limited to, outside competition and the general economic downturn in Las Vegas."

Court records show Rumjungle was obligated to pay both minimum rent and percentage rent.

The percentage rent clause in the lease allowed Mandalay Bay to terminate the lease should Rumjungle fail to generate sufficient cash flow so that 60 percent of that annual cash flow would total $1.1 million in rent.

"For 2009, the 11th lease year, Mandalay did not receive $1.1 million in percentage rent. In fact, Mandalay received no percentage rent from Rumjungle for the 11th lease year," Delaney’s order said.

In granting Mandalay Bay’s motion for a preliminary injunction, Delaney barred Rumjungle officers and employees from interfering with Mandalay Bay’s re-entering of the premises and ordered that they cannot be on the premises without Mandalay Bay’s authorization.

She also ordered Mandalay Bay to post a $100,000 bond as security for the entry of the preliminary injunction.

Rumjungle immediately appealed Delaney’s ruling to the Nevada Supreme Court. The $100,000 bond posted by Mandalay Bay could cover potential damages sustained by Rumjungle should Delaney’s ruling be overturned or Rumjungle prevails in the underlying lawsuit.

Rumjungle has complained it spent $10 million to build out the nightclub and that its investment may now be wiped out – while attorneys for Mandalay Bay have argued that instead of paying percentage rent since 2007, Rumjungle has been using that money to unnecessarily file for bankruptcy and to litigate against Mandalay Bay.

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