Anticipated Breach of Contract by Advanstar’s MAGIC Show Leads Sands Expo Center to File Lawsuit Request for Preliminary Injunction Denied

TSE STAFF
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Las Vegas – The newest battle looming in Las Vegas isn’t a highly publicized boxing match. At issue is a contractual dispute between The Interface Group – Nevada (owner of the Sands Expo & Convention Center and the Venetian Casino Resort), and MAGIC and its owner, Advanstar Communications. Neither Richard Heller, President & General Manager of the Sands Expo nor Joe Loggia, President & CEO of Advanstar would comment on pending litigation, but TSE obtained court documents filed in the U.S. District Court of Nevada.

The lawsuit filed by Interface claims significant damages from Advanstar’s decision to hold the August 2004 WWDMAGIC segment of the MAGIC show  in the Las Vegas Convention Center where the majority of the MAGIC show is held.  Interface says that even if Advanstar pays the rental fee, the Sands stands to lose  an estimated $1 MIL in ancillary revenues  from  exhibitors  such as  electrical, cleaning and telecommunication revenues.  It further states that  the Venetian stands to lose over $1.4 MIL in attendee spending in restaurants, casinos, retail shops, etc.  Finally, the city of Las Vegas and its tourism trade will suffer, the lawsuit claims.

MAGIC says the decision was driven by the marketplace. They say that exhibitors and attendees prefer having the entire show in one location  and expect that the decision will enable the show to grow at least 15% in attendance.  Contrary to hurting the Las Vegas tourism industry, Advanstar says the united show will grow significantly and  thus benefit the city of Las Vegas. The last show, held in February, spanned  over 800,000 net square feet of exhibit space and drew over 90,000 attendees.

This is the second lawsuit this year in which a city or facility has sued  a high profile show for anticipatory breach of contract. In February, the New Orleans Metropolitan Convention & Visitors Bureau filed suit against the National Association of Home Builders when NAHB announced plans to move its 2013 and 2014 International Builders Show out of the city.  (See Trade Show Executive magazine’s E-Clips® Breaking News on Feb. 2nd and the update on May 5th at www.tradeshowexecutive.com under “The Vault.”  TSE also explored the issue in a  Roundtable, “Who Should Compromise When a Show Outgrows a City?,” April 2004, p. 12). The Interface – MAGIC dispute is somewhat  similar to the New Orleans CVB – NAHB controversy because it involves a change of venue which the show organizer says is critical for  future show growth.  In both cases, the venue claims significant lost revenue if such a move occurs.

How the Dispute Began

In August 1998, after several years of holding the MAGIC show at the Las Vegas Convention Center (LVCC), some portions of the event (including WWDMAGIC)  were moved to the Sands Expo because the LVCC could not house the entire show at that time. On July 14, 2003, Loggia met with Heller to inform him that MAGIC was thinking about  uniting  WWDMAGIC  with the rest of the show in the LVCC in 2004 and 2005. Ten days after the meeting, Heller wrote Loggia, stating that the Sands would be working diligently to find another customer to possibly fill the 2004 and 2005 dates.  He wrote, ”It does not help us to sit empty and collect rent only.”  The disagreement about the contracted space in the Sands then began.

In August 2003, Advanstar discussed a number of open issues with Interface including lower pricing for its 2006, 2007 and 2008  shows —  similar to rates enjoyed by other large shows in the facility; a strict non-compete clause for shows on or around the future dates of MAGIC; and the dollar amount of liquidated damages for the three upcoming events moving to the LVCC. However, the two parties did not reach an agreement.  Numerous discussions and meetings were held in the next seven months, but these issues remained unresolved.

In January and February of this year, Interface made clear that if the proposed agreement  (i.e. requirements for specific use of the facility and double the payment of rent) was not signed, Interface would release the dates and space for marketing to other customers.

In March, Advanstar announced to exhibitors and attendees that the August 2004 MAGIC  show  would be held under one roof.  Advanstar claimed that as long as it pays the minimum fee under the agreement, Interface is obligated to leave the authorized area available to MAGIC during MAGIC show dates in 2004 and 2005.  In response, Interface claimed that Advanstar breached the contract and therefore the Sands is “forced and entitled” to book other shows in the authorized area.  It further charged  Advanstar and MAGIC  with restraint of trade for their attempt to prevent the use of the Sands for other trade shows during the MAGIC shows in 2004 and 2005.

Both Sides File Lawsuits;  Injunction Against MAGIC Denied

MAGIC filed a lawsuit on March 19th  against Interface, asking the court to decide the rights of both parties. On March 24th, Interface filed suit against Advanstar, alleging breach of contract and restraint of trade. On April 1st, Interface filed an application for a  temporary  restraining order and motion for a preliminary injunction to bind MAGIC into holding the WWDMAGIC segment  of the  show at the Sands or allow the Sands to re-license the space to another customer. The injunction was denied on April 27th by  the United States District Court in Nevada.

Dispute Centers on  Use of Space and Lost Ancillary Revenue

Advanstar said the facility license agreements stated “permissible uses” for the Sands Expo but did not require any “specific use or occupancy.” They claimed that the license agreements do not require anything more from MAGIC than the payment of rent. Further, Advanstar said it never implied that the licensed space would be vacant but rather had not determined at that point for what specific purpose it would be used. It also alleged that the Venetian was not a third party beneficiary to the Facility license agreement. MAGIC is expected to grow about 15% in attendance which would  translate into additional revenue for  the Las Vegas community, Advanstar claimed.

Interface stated that the contract for the  August 2004 MAGIC show was amended in December 2001 which  reduced the minimum fee and eliminated one hall. The company  said the ancillary services provided by the Sands for MAGIC exhibitors were a material inducement for the lower fees.  These services  have generated revenues of over $1 million per show since 1998 for the Sands. Interface also says MAGIC contracted  a room block of 500 luxury suites at the Venetian Resort before, during and after the  MAGIC Show. During the February 2004 event, MAGIC Show exhibitors and attendees spend $1.4 million for their rooms and the hotel earned substantial revenues from gaming, F&B, entertainment and retail shops. Interface alleges that Advanstar breached its contract and it will be difficult or impossible to lease the space in the Sands in 2004 and 2005. Thus, it  will suffer substantial loss in ancillary revenues.

TSE will provide continuing coverage of this controversy in E-Clips ® Breaking News, on our website and in future issues of Trade Show Executive  magazine.

Source:  Case number CV-S-04-0351-JCM-RJJ filed in the U.S. District Court of Nevada)