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In re Caesars Entertainment Operating Company, Inc.

United States Bankruptcy Appellate Panel of the Ninth Circuit

August 20, 2018

In re: CAESARS ENTERTAINMENT OPERATING COMPANY, INC., Debtor.
v.
DESERT PALACE, INC.; PARIS LAS VEGAS OPERATING COMPANY, LLC; PHWLV, LLC; BOARDWALK REGENCY CORPORATION, DBA Caesars Atlantic City; ROWEN SEIBEL; LLTQ ENTERPRISES, LLC; LLTQ ENTERPRISES 16, LLC; FERG, LLC; FERG 16, LLC; TPOV ENTERPRISES, LLC; TPOV ENTERPRISES 16, LLC; DNT ACQUISITION, LLC; GR BURGR, LLC; J. JEFFREY FREDERICK, Appellees. MOTI PARTNERS, LLC; MOTI PARTNERS 16, LLC, Appellants, LLTQ ENTERPRISES 16, LLC; LLTQ ENTERPRISES, LLC; FERG, LLC; FERG 16, LLC, Appellants,
v.
DESERT PALACE, INC.; PARIS LAS VEGAS OPERATING COMPANY, LLC; PHWLV, LLC; BOARDWALK REGENCY CORPORATION, DBA Caesars Atlantic City; ROWEN SEIBEL; MOTI PARTNERS, LLC; MOTI PARTNERS 16, LLC; TPOV ENTERPRISES, LLC; TPOV ENTERPRISES 16, LLC; DNT ACQUISITION, LLC; GR BURGR, LLC; J. JEFFREY FREDERICK, Appellees.

          Argued and Submitted on July 27, 2018 at Las Vegas, Nevada

          Appeal from the United States Bankruptcy Court for the District of Nevada Honorable Laurel E. Babero, Bankruptcy Judge, Presiding

          Nathan Q. Rugg of Barack Ferrazzano Kirschbaum & Nagelberg LLP argued for Appellants;

          Jeffrey Zeiger of Kirkland & Ellis LLP argued for Appellees.

          Before: LAFFERTY, BRAND, and TAYLOR, Bankruptcy Judges.

          OPINION

          LAFFERTY, BANKRUPTCY JUDGE

         INTRODUCTION

         Appellants challenge the bankruptcy court's orders: (1) remanding certain removed claims to Nevada state court based on lack of subject matter jurisdiction; and (2) denying as moot Appellants' motions to transfer venue to the Bankruptcy Court for the Northern District of Illinois.

         Because 28 U.S.C. § 1447(d) prohibits review of remand orders that are based on a lack of subject matter jurisdiction, we DISMISS these related appeals.

         FACTUAL BACKGROUND

         The Caesars-Seibel Restaurant Agreements

         Caesars Entertainment Operating Company ("Caesars") and its various affiliates operate multiple casinos in numerous states. Between 2009 and 2014, Caesars affiliates Desert Palace, Inc. ("Desert Palace") and Boardwalk Regency Corporation d/b/a Caesars Atlantic City ("Boardwalk") entered into agreements with entities affiliated with Rowen Seibel (the "Seibel Agreements") to design, develop, construct, and operate restaurants in Caesars' casinos in Las Vegas, Nevada, and Atlantic City, New Jersey.

         Specifically, in 2009, Desert Palace contracted with Seibel affiliate MOTI Partners, LLC ("MOTI") to design, develop, construct, and operate the Serendipity restaurant at Caesar's Palace in Las Vegas, Nevada. In 2012, Desert Palace contracted with Seibel affiliate LLTQ Enterprises, LLC ("LLTQ") to design, develop, construct, and operate a restaurant branded under the name of celebrity chef Gordon Ramsay at Caesar's Palace in Las Vegas. In 2014, Boardwalk contracted with Seibel affiliate FERG, LLC ("FERG") to design, develop, construct, and operate a second Ramsay-branded restaurant at Caesars Atlantic City in New Jersey.

         Each of the Seibel Agreements included representations, warranties, and conditions to ensure that Caesars and its affiliates (the "Caesars Affiliates") were not entering into business relationships that would jeopardize their good standing with gaming regulators. To ensure that the Caesars Affiliates were not doing business with an "Unsuitable Person," as defined in the agreements, the Seibel Agreements required Mr. Seibel to provide at the outset of the business relationships "Business Information Forms," in which Mr. Seibel represented that he had not been a party to a felony in the last ten years and that there was nothing that would prevent him from being licensed by a gaming authority. The Seibel Agreements also required Mr. Seibel and his entities to update those disclosures if they became inaccurate; they never provided an update. Unbeknownst to the Caesars Affiliates, when the parties entered into the Seibel Agreements, Mr. Seibel was engaged in criminal conduct that rendered him "Unsuitable" as defined by the Seibel Agreements. Specifically, beginning in 2004 Mr. Seibel was using foreign bank accounts to defraud the IRS. In April 2016, Mr. Seibel was charged with and pleaded guilty to one count of a corrupt endeavor to obstruct and impede the due administration of Internal Revenue Laws. In August 2016 Mr. Seibel was sentenced to federal prison, home confinement, and community service. Mr. Seibel never informed the Caesars Affiliates of any of his criminal activities or his conviction, which the Caesars Affiliates discovered from August 2016 press reports. The Caesars Affiliates terminated the Seibel Agreements on September 2, 2016.

         The Caesars Bankruptcies

         Caesars and numerous affiliates including Desert Palace and Boardwalk each filed chapter 11[1] bankruptcy petitions in the Bankruptcy Court for the Northern District of Illinois in January 2015. The cases were ordered jointly administered, with Caesars designated as the lead case.

         In June 2015, Caesars moved to reject the LLTQ and FERG agreements related to the operation of the Ramsay-branded restaurants. In January 2016, Caesars moved to reject the MOTI agreement related to the operation of the Serendipity restaurant. LLTQ and FERG filed a request for payment of administrative expenses in November 2015. MOTI and MOTI Partners 16, LLC (the "MOTI Entities") filed a request for payment of administrative expenses in November 2016. The motions to reject and requests for payment of administrative expenses-which involve the impact of Mr. Seibel's criminal activity on the parties' rights and liabilities under the Seibel Agreements-remain pending before the Illinois bankruptcy court.

         Caesars' plan of reorganization was confirmed on January 17, 2017, and the plan's ...


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