The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

Resorts World Bimini’s majority owner is demanding that the $600m damages claim launched against it by the project’s original developer be dismissed because it failed to obtain the Bahamian Supreme Court’s permission prior to bringing the action.

Genting Americas, which owns 78 percent of Bimini’s largest resort and ‘anchor property’, is arguing that the lawsuit brought against it by RAV Bahamas, the corporate vehicle owned by Cuban-American developer Gerardo Capo and his family, should be struck out because the nature of its claim requires the Supreme Court’s go-ahead before it can be pursued in a foreign court.

RAV Bahamas, since launching its action alleging that the Malaysian conglomerate has turned Resorts World Bimini into a “financial wasteland” by dumping hundreds of millions of dollars in liabilities incurred elsewhere in its global hospitality empire on the property’s books, has joined BB Entertainment to its south Florida federal court claim as a fellow plaintiff.

BB Entertainment, which is a Bahamian-domiciled company, is the immediate holding entity for Resorts World Bimini that is jointly owned by Genting Americas and RAV Bahamas - the latter wth a 22 percent minority interest. It was added as a party after the south Florida court determined that the claim launched by Mr Capo and his family is a so-called “derivative” action - meaning that the alleged injury they have suffered flowed from the alleged liability-dumping’s impact on BB Entertainment.

However, Genting is arguing that established legal precedent involving UK common law jurisdictions such as The Bahamas required Mr Capo’s company to first obtain permission from this nation’s Supreme Court before it can bring such a “derivative” action - especially since BB Entertainment is domiciled here. This, it claims, was not done and thus RAV Bahamas’ claim should be dismissed for this legal procedural failing - something the latter is furiously resisting.

“RAV’s derivative claims on behalf of BB Entertainment must be dismissed because RAV has failed to seek or obtain leave of the Bahamian court,” Genting Americas os arguing.

“Bahamian law clearly mandates litigants to obtain leave of the Bahamian Supreme Court as to any claims pled derivatively. As multiple US courts have held, this pre-requisite simply cannot be waived or forfeited, and RAV must seek leave of the Bahamian court in order to pursue its claims derivatively.” It added that the south Florida court had previously determined that Bahamian law is triggered because BB Entertainment is based in this nation.

RAV Bahamas, though, in legal filings obtained by Tribune Business, is countering furiously that its Resorts World Bimini partner, with whom it has fallen out spectacularly, is effectively making a ‘mountain out of a mole hill’ by turning a Bahamian legal procedure into a major problem that warrants its claim being struck out.

“Defendants’ threshold argument that this action cannot proceed absent leave from the Bahamas Supreme Court fails for several independent reasons. The argument is inconsistent with this court’s prior Order, mischaracterises a purported foreign procedural mechanism as a substantive defect, and seeks an extraordinary remedy not supported by controlling law,” Mr Capo and his family are asserting.

“Federal procedural rules govern how derivative claims proceed in this court, and even assuming some foreign law consideration ultimately proves relevant, dismissal at the pleading stage is not warranted.” The south Florida federal court has yet to rule on whether RAV Bahamas’ claim can survive this latest knock-out bid.

The dispute, which has now dragged on for some 18 months, threatens to paralyse Board decision-making for the 300-plus room property, which features amenities such as a casino and marina. It has yet to impact staff-related decisions, but this could become more of an issue the longer the Miami courtroom battle drags on.

“With respect to whether RAV’s claims are derivative, ‘Bahamian law applies’ because ‘BB Entertainment is a Bahamian company’, Genting Americas reiterated. “Consistent with this principle where, as here, the law of the place of incorporation requires leave of a local court to proceed derivatively, US courts have dismissed purported derivative actions where such leave had not been obtained….

“Bahamian law mirrors that of the British Virgin Islands and Antiguan law by requiring leave of a local court in order to pursue a derivative claim. Under Bahamian law, the court’s permission is no mere formality; rather, it is a mandatory step that permits the court to ensure that certain thresholds have been met, including whether the purported derivative claim has a sufficient interest to initiate these proceedings, and whether a reasonable Board of Directors could conclude that the pursuit of such claims is appropriate.

“Under Bahamian law, ‘derivative claims are an anomaly or exception because they potentially enable a litigant to prosecute a claim which does not belong to it’. The requirement to seek leave serves a dual purpose: It ‘enables the court’ to promote the public interest in ‘prevent[ing] abuse’ of narrowly-tailored exceptions to its corporate law while ‘protect[ing] the interests of the company and other shareholders’ —here, BB Entertainment and BBIH respectively.”

The latter entity, BBIV (BB Investment Holdings), holds Genting Americas’ 78 percent stake in Resorts World Bimini. The Malaysian conglomerate added: “RAV is bound by this requirement, and may not pursue its claims derivatively absent leave from the Bahamian Supreme Court. Because it is undisputed that RAV has not obtained, or even sought, leave of the Bahamian court, its claims should be dismissed on that basis.”

Mr Capo and RAV Bahamas, though, have counter-attacked by arguing that a previous Order from the south Florida court did not mean they had to obtain the Bahamian Supreme Court’s permission before proceeding. “Defendants attempt to transform a purported foreign procedural mechanism into a dispositive defect on the merits. That approach is inconsistent with the settled distinction between substantive rights and procedural rules,” they argued.

“Nothing in the Order imposed a requirement that plaintiff first obtain leave from a Bahamian tribunal. At most, defendants have identified a potential procedural issue that might be addressed later in the litigation. It does not render plaintiff’s claims implausible or deficient…

“Ultimately,defendants’ position would create a sweeping rule that derivative claims involving foreign corporations cannot proceed in US courts without prior approval from a foreign tribunal. That rule has no basis in federal law and is inconsistent with this court’s prior ruling. Because plaintiff has.. followed the court’s directive to proceed derivatively, dismissal on this ground should be denied.”

Seeking to uphold their claim, and signal they are not backing down, Mr Capo and RAV Bahamas reiterated their complaints about Genting’s conduct. “Defendants attempt to reframe this case as nothing more than a failed business venture and a routine dispute over accounting judgments. That characterisation is wrong,” they argued.

“This case is not about ordinary business losses. It is about a years-long scheme through which Genting systematically burdened BB Entertainment with illegitimate and undisclosed liabilities, misrepresented the nature of those charges, and concealed the resulting financial harm from BB Entertainment and its minority shareholder, RAV.

“Defendants also attempt to trivialise the allegations by pointing to the scale of Genting’s investment and BB Entertainment’s financial under-performance. But the size of defendants’ investment does not immunise them from liability; if anything, it underscores their ability to manipulate BB Entertainment’s finances without meaningful oversight,” RAV Bahamas added.

“Nor does business failure excuse fraud. The issue is not whether BB Entertainment struggled, it is whether defendants exploited that struggle to obscure improper conduct and transfer costs to BB Entertainment that did not properly belong there.”

RAV Bahamas said the liabilities on BB Entertainment’s books hit $890m by 2022 after loans and financial support from other Genting entities financed Resorts World Bimini’s construction from 2013 onwards. Some 99.4 percent of these liabilities were owed to Genting affiliates, it claimed.

“In addition to loan obligations, BB Entertainment was charged for services and expenses allocated by Genting Americas and affiliated entities, including personnel costs, shared services and administrative support,” Mr Capo and RAV Bahamas alleged. “Because BB Entertainment lacked independent infrastructure, it relied on employees and functions performed by affiliated entities.

“The allocation of those costs, however, was determined by defendants [Genting Americas], who exercised control over BB Entertainment’s financial reporting and accounting treatment. Defendants caused BB Entertainment to incur excessive or unsupported allocations, including portions of employee compensation and other overhead costs, resulting in increased liabilities and expenses recorded on BB Entertainment’s financial statements.”