Why MGM Resorts wants its day in federal court

The Mandalay Bay Resort and Casino in Las Vegas. Photo credit: MGM Resorts

In mid-July, MGM Resorts filed pre-emptive federal complaints against more than 1,000 victims of the October 2017 shooting at the Mandalay Bay Resort and Casino in Las Vegas, but the company isn’t seeking any damages against these victims. Instead, MGM is looking to consolidate the thousands of lawsuits levied against the company in the wake of the shooting and shift the discussion to federal court.

The filing is what is referred to as a “declaratory release,” and seeks to reclassify the shooting as an act of terrorism under the Support Anti-Terrorism by Fostering Effective Technologies Act of 2002. The SAFETY Act provides federal protection to organizations in situations where acts of terror or mass violence take place. MGM is seeking to prove the act protects it because the company employed a security organization certified by the Department of Homeland Security—in this case, Contemporary Services Corporation.

An MGM spokesperson said the company is not asking for money or attorney’s fees, and its complaint is directed solely at those who have already sued the company or have threatened to sue in the future.

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The spokesperson also pointed to the Department of Justice’s Crime Victims’ Fund, which as of 2015 was stocked with more than $12 billion. MGM is arguing that these funds should be awarded to the victims of the shooting in the same manner as those awarded to the victims of the Boston Marathon bombing in 2013.

MGM isn't actually suing shooting victims; instead the company is looking for a way to minimize liability through the SAFETY Act. Photo credit: Getty Images/utah778 

Defining Terror

As for whether or not the Mandalay Bay shooting will qualify under the SAFETY Act, opinions are split. Jim Connors, attorney at law firm Marshall Dennehey Warner Coleman & Goggin, said the act is notoriously vague in determining what is in fact a terrorist act, but he also argued that federal court is the best place to settle cases like these for both the plaintiffs and defendants. According to Connors, this is because of the discrepancies surrounding what is awarded to the victims of such events based on various state laws, while companies protected by the act will be shielded from liability.

“Some states have exorbitant awards for events like these, while other states impose caps on recovery usually in the range of $250,000 - $1 million for non-economic catastrophic damages,” Connors said. “States like New York have no cap at all. So it has to be addressed from a federal standpoint.”

Connors said the act was created to protect industries from destruction in the event of a terrorist attack, and it does so by placing a cap on liability for companies and barring punitive damage claims, noneconomic damages, prejudgment interest and noncompensatory damages. The act also provides a prohibition on joint and several liabilities for noneconomic damages.

Determining whether or not the Mandalay Bay shooting was an act of terror now rests on the Secretary of Homeland Security, Kirstjen Nielsen. Mark A. Dombroff, an attorney at law firm LeClairRyan, said Nielsen will be bound by the wording in the SAFETY Act, which he reiterated is esoteric, and even then the government could choose to appeal either decision in court.

“Some would say the SAFETY Act only covers antiterror technology such as metal detectors, but it also includes services,” Dombroff said. “The scope of the act goes beyond hardware into systems and processes.”

As for which direction the Department of Homeland Security will rule in, Connors said it remains to be seen.

“They are saying ‘We hired a certified security supplier under the SAFETY Act, and therefore we are entitled to immunity from lawsuits under the act,’” he said. “It’s kind of a stretch, and it’s never been tested. We have to determine what [MGM] hired [CSC] for, and you may have people asking what Congress intended the act for at the time of its signing.”

The Las Vegas Strip. Photo credit: Getty Images/Glenn Guinita

SAFETY Dance

Connors said MGM is taking a risk simply filing a declaratory statement. He pointed to the negative public perception of the filing as just one risk, as well as the potential that it could lose in federal court.

“It looks like they are walking away from this situation by reaching for the SAFETY Act, but really they are addressing a financial attack,” Connors said. “They are asking for an advisory opinion to see if they fall under this statute’s protection. If you happen to be one of those that are severely injured, that’s kind of in your face.”

Dombroff said that if MGM were his client, he would also have counseled the company to file a declaratory action, but he was critical of the manner in which the action was filed.

“I would have advised MGM to expect a high-profile reaction from families, victims, the media and talking heads following the announcement,” Dombroff said. “As a hospitality company, public perception matters. [The public] only understands MGM is suing these poor victims, but MGM is really seeking judicial immunity.”

Dombroff also said that every hotel operator should seek SAFETY Act approval because it was created for situations such as these, despite its broad language.

“The alternative is litigating in both state and federal court over hundreds of lawsuits,” he said. “This is why something like a declaratory release statute exists.”

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