## Facts

- William J. Yung III was a director and chief executive of Tropicana Casinos and Resorts, Inc. (TCR), formerly known as Wimar Tahoe Corporation.
- TCR was the parent company of Tropicana Entertainment, LLC and affiliated hotel and casino entities (the Tropicana entities).
- After a major acquisition that expanded the Tropicana portfolio, individual casino-hotel entities entered service contracts with Yung-controlled companies to centralize operations.
- Under the Wimar/TCR-related contracts, the provider agreed to furnish casino-management services, including supervising casino operations and assisting with regulatory oversight and compliance.
- Under the Columbia Sussex Corporation contracts, the provider agreed to furnish services tied to hotel operations and back-office functions, including supervision of hotel operations and preparation of financial reports for combined hotel and casino operations.
- In May 2008, the Tropicana entities filed Chapter 11 bankruptcy petitions.
- In May 2009, the bankruptcy court approved reorganization plans that created a litigation trust to pursue certain estate causes of action for the benefit of unsecured creditors.
- Lightsway Litigation Services, LLC was appointed trustee of the litigation trust.
- Lightsway filed an adversary proceeding against Yung, Wimar, and Columbia asserting breach of contract and breach of the implied covenant of good faith and fair dealing, alleging gross mismanagement of certain Tropicana casino and hotel properties in violation of the service contracts.
- Lightsway alleged operational failures that reduced property value and profitability, including removing mandatory security personnel, failing to establish an independent audit committee, drastic staffing cuts, and failing to update and refurbish hotel rooms.
- To support its claims, Lightsway relied on (among other evidence) an expert report estimating lost profits attributed to mismanagement and a lengthy order from the New Jersey Casino Control Commission addressing conditions associated with denial of a casino license renewal.
- Defendants moved for summary judgment on the remaining contract and implied-covenant claims.

## Issues

1. Whether the summary-judgment record raised genuine disputes of material fact that Wimar and/or Columbia failed to perform contractual management, supervision, and compliance-related obligations.
2. Whether defendants’ conduct in operating and staffing the properties could support an implied-covenant claim based on the way contractual discretion was exercised.
3. Whether Lightsway produced evidence from which a factfinder could reasonably find causation and recoverable, non-speculative damages (including lost profits) tied to the alleged breaches.
4. Whether, applying Rule 56, the court could resolve contested questions about contract performance, operational fault, and financial harm as a matter of law.

## Decision

- The bankruptcy court denied defendants’ motion for summary judgment.
- The court found genuine disputes of material fact about the scope of the service-contract duties and whether defendants’ management and supervision met those duties, including claims tied to supervision and staffing levels.
- The court concluded that Lightsway’s evidence—including regulatory findings and expert damages analysis—was sufficient at the summary-judgment stage to permit a reasonable factfinder to consider breach, causation, and damages.
- Because the record reflected contested facts and competing inferences about both operational performance and the causes of financial decline, the court held the claims should proceed to trial rather than be resolved on summary judgment.

## Legal Principles

- Summary judgment is improper where the record permits a reasonable factfinder to find for the nonmoving party on breach and causation; the court must draw reasonable inferences in the nonmovant’s favor and may not weigh credibility.
- Management and service agreements that assign supervisory, operational, and compliance-related functions can create enforceable performance obligations; whether performance was adequate may present fact questions when the agreements use broad service language applied to real-world operations.
- The implied covenant of good faith and fair dealing may apply where a party’s exercise of contractual discretion is alleged to have deprived the counterparty of the agreement’s expected benefits; whether that occurred may depend on disputed facts about how discretion was used in practice.
- At the summary-judgment stage, damages theories supported by record evidence and expert analysis may proceed when disputes remain about the cause and amount of loss; the existence of competing explanations commonly presents a trial issue.

## Conclusion

In *In re Tropicana Entertainment, LLC*, the bankruptcy court denied summary judgment because the litigation trustee presented evidence from which a factfinder could conclude that Wimar and Columbia failed to provide contractually required management and supervisory services and that those failures contributed to measurable financial harm, leaving breach, implied-covenant liability, causation, and damages to be resolved at trial.


In re Tropicana Entertainment, LLC, 2019 WL 2320810 (2019)