New Jersey’s Stockton University has filed a million claim against Caesars Entertainment saying the casino company promised to resolve a dispute—which it never did—that eventually blocked the school’s use of Atlantic City’s closed Showboat casino after the school bought it from Caesars.
Stockton bought the Showboat from Caesars for $18 million in December and planned to turn the property into an Atlantic City campus. However, the neighboring Trump Taj Mahal invoked a 1988 covenant it held with Caesars that said the Showboat property could only be used as a casino.
Caesars actually sold the property with a deed restriction saying it cannot be used as a casino.
The school says Caesars promised it could resolve the issue and clear the way for the city campus before the purchase. In bankruptcy court filings, the school is now seeking $22 million in damages from Caesars as the restriction has stymied the school’s plans for the campus. It is also trying to reverse the Caesars deed restriction, which is complicating a potential resale of the property.
Stockton’s claims against Caesars includes breach of contract, fraud, intentional of negligent representations, fraudulent, intentional and negligent concealment of material facts, and unjust enrichment.
Caesars Entertainment Operating Co. has a pending Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Northern District of Illinois, as does the company it set up for the Showboat property, Showboat Atlantic City Propco L.L.C.
In its proof-of-claim filing, the school said Caesars representatives claimed they could bypass the 1988 covenant restricting the property to use as a first-class casino-hotel.
“The decision by Stockton University to purchase the Showboat Property after learning of the existence of the 1988 Use Covenant was made based upon the explicit representations of representatives of Caesars regarding their allegedly informed belief that the necessary waiver or release could be obtained from the Trump Entities,” the school said. “Unbeknownst to Stockton University, however, such material representations were false and misleading and either intentionally or negligently made by Caesars.”
Caesars officials have not commented on the claim.
Stockton is asking for enforcement of a clause in the sale agreement that said Caesars would hold Stockton harmless from costs and expenses related to resolving the 1988 covenant. The school also says it was unaware that Caesars was on the verge of bankruptcy when it made the purchase.
Caesars’ also failed to provide Stockton any information regarding several significant lawsuits in which CEOC and certain of its affiliates were involved, the claim states.
According to the claim, Caesars officials contacted Trump Entertainment before the sale, but Trump representatives said they could not waive or release the 1988 covenant because of that company’s own bankruptcy proceedings. Caesars, however, continued to tell the university that it believed the legal challenge would be resolved.
Trump Entertainment has objected to the sale saying that it does not want underage students living and attending classes next door to its casino.
“These filings will protect and preserve Stockton’s rights,” said Acting Stockton President Harvey Kesselman in a press release. “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.”
The situation over Showboat is continuing to cost the university about $400,000 a month to maintain the building. It has also slowed a plan by the school to sell the property for $26 million to developer Glen Straub, who has just purchased the also-closed Revel casino in the city.
That deal is still reportedly on, but Stockton still does not have clear title to the property. The deal includes an escape clause for Straub if it is not finalized by July 3.
