Fontainebleau dispute with banks to be decided in court

Fontainebleau Las Vegas' dispute with banks over the stalled multibillion-dollar project resort will go to trial, a federal judge has ruled.

"Material issues of fact exist as to whether defendants were excused from their obligations under the credit agreement," U.S. District Judge Alan Gold in Miami said in his 24-page ruling. Gold said a trial is needed to decide whose interpretation of the contract is right.

A discovery hearing is scheduled for Sept. 25 in Miami.

Fontainebleau filed the $3 billion lawsuit in April against the lenders, led by Bank of America and JPMorgan Chase, for allegedly violating financing agreements by halting payments for construction of the 63-story Strip resort, which is 70 percent complete.

Fontainebleau Resorts filed a request for a $656 million judgment without a trial, contending there were no factual issues in dispute. The issue involved whether Fontainebleau was able to draw on a revolving line of credit before another loan had been exhausted.

Fontainebleau is incorrect in its interpretation of the loan agreement, Gold said in his Wednesday ruling. Even if the lenders' interpretation isn't correct, their argument is plausible, Gold said. Based on the loan agreement alone, Fontainebleau isn't entitled to win the lawsuit, Gold said.

The banks argued in bankruptcy court motions in July that the $656 million will not be anywhere near enough to complete the project, which is estimated to need another $1.5 billion to complete.

The case was originally filed in Clark County District Court, but the banks had it moved to Nevada federal court, and Fontainebleau refiled it as part of the project's Chapter 11 bankruptcy case in June in the U.S. Bankruptcy Court in the Southern District of Florida.

Gold granted the banks' motion Aug. 5 to move the case to his court.

Fontainebleau Las Vegas and two affiliates filed for Chapter 11 bankruptcy protection from creditors June 9, listing assets and debt of more than $1 billion each.

Fontainebleau Las Vegas could not be reached for comment. The project is on 24 acres on the corner of Las Vegas and Riviera boulevards.

Bloomberg News contributed to this report.