Stockton University Taking Legal Action Against Caesars and Showboat Over Purchase of Shuttered Casino

Stockton University has filed proofs of claim in the Chapter 11 bankruptcy cases of Caesars Entertainment Operating Company (“CEOC”) and Showboat Atlantic City relating to the University’s $18 million purchase of the Showboat, the University announced Tuesday morning.

Stockton is asserting claims for damages that arose under the December 12, 2014 Purchase and Sale agreement with Caesars. They are a result of Caesars’ failure to resolve the 1988 covenant restricting the use of the Showboat property as a hotel and casino.

The University seeks as much as $22 million and equitable relief, as well as declaratory relief with respect to the enforceability of the 2014 restriction Caesars imposed on the Showboat property that further limits the property’s use and clouds its title.

The claim seeks to enforce Caesars’ indemnification and guarantee obligations requiring Caesars to defend and hold Stockton harmless from all costs and expenses relating to the resolution of the 1988 covenant.

“These filings will protect and preserve Stockton’s rights,” Acting Stockton President Harvey Kesselman said. “It puts the entities that have filed for Chapter 11 bankruptcy, along with the creditors and other parties of interest in the bankruptcy cases, and the U.S. Bankruptcy Court, on notice that we intend to protect the University and exercise our contractual and equitable rights. Keeping Stockton financially sound and ensuring that our students are not harmed in any way are our foremost goals.”

Stockton’s claims against Caesars include:

- breach of contract;

- breach of express representations, warranties and covenants;

- fraud in the inducement and/or execution;

- fraud in the performance;

- intentional or negligent misrepresentations;

- fraudulent, intentional and negligent concealment of material facts, and

- unjust enrichment and unclean hands.

Stockton claims it went ahead with the purchase of the Showboat after it was assured by by Caesars that the 1988 covenant was going to be resolved and/or Caesars would indemnify the University and not hold it liable for any monetary damages associated with the resolution of the covenant.

Stockton said neither CEOC or Showboat Atlantic City told the University of its intention to file Chapter 11 bankruptcy. Stockton alleges it was also unaware of several lawsuits involving CEOC and certain affiliates.

At least one of these lawsuits sought the appointment of a receiver to manage CEOC’s property and operations, including the Showboat property. This lawsuit was initiated a few weeks prior to the sale of the Showboat property by Caesars to Stockton. Caesars did not disclose any of these lawsuits prior to the sale.

Stockton purchases the former casino building last year with the intention to transform it into an island campus. It is currently in the process of selling the property to Glen Straub for $26 million.