Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 1 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

Paul S. Aronzon (CA State Bar No. 88781) Thomas R. Kreller (CA State Bar No. 161922) MILBANK, TWEED, HADLEY & McCLOY LLP 601 South Figueroa Street, 30th Floor Los Angeles, California 90017 Telephone: (213) 892-4000 Facsimile: (213) 629-5063 Reorganization Counsel for Debtors and Debtors in Possession

Bruce T. Beesley (NV SBN 1164) Laury Macauley (NV SBN 11413) LEWIS AND ROCA LLP 50 West Liberty Street, Suite 410 Reno, Nevada 89501 Telephone: (775) 823-2900 Facsimile: (775) 823-2929 bbeesley@lrlaw.com; lmacauley@lrlaw.com Local Reorganization Counsel for Debtors and Debtors in Possession

UNITED STATES BANKRUPTCY COURT DISTRICT OF NEVADA In re: STATION CASINOS, INC
Affects this Debtor Affects all Debtors Affects Reno Land Holdings, LLC Affects River Central, LLC Affects Tropicana Station, LLC Affects FCP Holding, Inc. Affects FCP Voteco, LLC Affects Fertitta Partners LLC Affects Northern NV Acquisitions, LLC Affects FCP MezzCo Parent, LLC Affects FCP MezzCo Parent Sub, LLC Affects FCP MezzCo Borrower VII, LLC Affects FCP MezzCo Borrower VI, LLC Affects FCP MezzCo Borrower V, LLC Affects FCP MezzCo Borrower IV, LLC Affects FCP MezzCo Borrower III, LLC Affects FCP MezzCo Borrower II, LLC Affects FCP MezzCo Borrower I, LLC Affects FCP PropCo, LLC

Chapter 11 Case No. BK-09-52477 Jointly Administered DEBTORS’ MOTION PURSUANT TO 11 U.S.C. §§ 105(a) AND 363(b) FOR ORDER AUTHORIZING PAYMENT OF EMPLOYEE CONTRACT BONUSES Hearing Date: Hearing Time: Place: TBD TBD 300 Booth Street Reno, NV 89509

Motion to Shorten Notice Requested

#4814-3405-8245

¨0¤„8m*#) )7« 0952477100309000000000009

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 2 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

TO THE HONORABLE UNITED STATES BANKRUPTCY JUDGE, UNITED STATES TRUSTEE AND ALL PARTIES IN INTEREST: Station Casinos, Inc. (“SCI”) and its affiliated debtors and debtors in possession (collectively, the “Debtors”) in the above-captioned chapter 11 cases, hereby submit this motion (the “Motion”) for an order pursuant to sections 105(a) and 363(b) of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (the “Bankruptcy Code”), authorizing SCI to pay certain employee-related contractual salary obligations. In support of the Motion, Debtors submit the declaration of Thomas Friel (the “Friel Declaration”) and respectfully represent as follows: I. Jurisdiction and Venue

This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. This is a core proceeding pursuant to 28 U.S.C. § 157(b). II. 1. Factual Background

The Debtors commenced these chapter 11 cases (the “Chapter 11 Cases”)

on July 28, 2009 (the “Petition Date”). SCI and its non-debtor subsidiaries (collectively, the “Station Group”) constitute a gaming entertainment enterprise that owns and operates under the “Station” and “Fiesta” brand names ten major hotels/casinos (two of which are 50% owned) and eight smaller casinos (three of which are 50% owned) in the Las Vegas metropolitan area. 2. Previously, as one of its “first day” motions Debtors filed Motion

Pursuant to 11 U.S.C. §§ 105(a), 363(b) and 507(a) For Interim and Final Orders (I) Authorizing Payment of Wages, Compensation and Employee Benefits, and (II) Authorizing and Directing Financial Institutions to Honor and Process Checks and Transfers Related to Such Obligations, dated July 28, 2009 (the “Prior Wages & Benefits Motion”). 3. In the Prior Wages & Benefits Motion, the Debtors sought and obtained an

interim and a final order authorizing the Debtors to pay in the ordinary course of business claims for, inter alia, prepetition wages, accrued vacation, and other benefits, including, but not limited to medical plans, dental plans, disability plans and incidental employee-related costs. The Court granted the Prior Wages & Benefits Motion by interim order [Docket No. 24] and final order
#4814-3405-8245

-2-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 3 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

[Docket No. 620]. In the Prior Wages & Benefits Motion, however, the Debtors did not request authority to pay any bonuses to employees under the Debtors’ various prepetition bonus programs, which include, retention bonuses, guaranteed employment contract bonuses, “stretch” bonuses, and discretionary target bonuses. To the contrary, the Debtors specifically excluded a request to pay bonuses from the Prior Wages & Benefits Motion. 4. In this Motion, SCI seeks authority to pay three employees their

guaranteed employment contract bonuses (collectively, the “Contract Bonuses”) pursuant to the terms of three separate, prepetition employment contracts (the “Employment Contracts”) entered into with the subject employees (collectively, the “Subject Employees”).1 5. A chart of the Contract Bonuses to be paid is annexed hereto as Exhibit 1.

Redacted copies of the Employment Contracts are annexed hereto as Exhibit 2. The Employment Contracts and the identities of the Subject Employees are redacted to protect the privacy of the Subject Employees and pursuant to the confidentiality provisions of the Employment Contracts. Moreover, redacting the Employment Contracts and maintaining the privacy of the Subject Employees is in SCI’s best interest as it ensures that confidential business information is not available publicly to its competitors. 6. None of the Contract Bonuses, denominated either a “supplemental

bonus” or a “guaranteed bonus” in the Employment Contracts (see Exhibit 2: Employee “A” Contract, p. 4, para. 3.3 [“supplemental bonus” of $180,000]; Employee “B” Contract, Letter Addendum dated August 2, 2000, para. 1 [“guaranteed bonus” of $33,750]; Employee “C” Contract, p. 5, para. 3.3 [“supplemental bonus” of $50,000]) are conditioned upon the performance of SCI or of the subject employee and are not discretionary. Each of the Contract Bonuses functions as annualized compensation to the respective Subject Employee. The Subject Employees are each corporate vice-presidents of SCI and the Contract Bonuses, combined with their other compensation, constitutes fair and appropriate compensation for the level of services

1

The Debtors do not seek authority in this Motion to pay any retention bonuses, “stretch” bonuses, or discretionary target bonuses.
#4814-3405-8245

-3-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 4 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

provided to SCI. Further, each Contract Bonus automatically becomes payable on its annual payment date. 7. In 2009, the same amount of bonuses, $263,750, was paid to the Subject

Employees for the year 2008. No guaranteed bonuses remain unpaid for 2008. 8. In order to receive a Contract Bonus, each Subject Employee must be

employed on December 31, 2009 and also on the date that the Contract Bonus is paid in order to be entitled to payment. Accordingly, Debtors believe the Contract Bonuses are post-petition contract obligations which can be paid in the ordinary course. In an abundance of caution, and in light of the fact that Contract Bonuses were excluded from the Prior Wages & Benefits Motion and cover a twelve-month period of employment that includes several months of services rendered prepetition, SCI now seeks Court authority to pay the Contract Bonuses. By seeking authority to pay the Contract Bonuses, SCI does not seek to deviate in any way from the interim or final orders approving the Prior Wages & Benefits Motion and does not seek to affect, alter or otherwise modify the Employment Contracts. Most important, in the Motion, SCI does not seek to assume the Employment Contracts or otherwise affect its rights (or the rights of the Subject Employees) under the Employment Contracts, including, but not limited to SCI’s rights under section 365 of the Bankruptcy Code. III. 9. Basis for Relief Requested

The Bankruptcy Code provides a variety of bases for the relief requested

herein. As discussed in detail below, pursuant to section 363(b) of the Bankruptcy Code, a debtor is authorized to use property of its estate in the ordinary course of business. The Debtors contend that section 363(b) authorizes SCI to honor and pay the annual compensation set forth in the Employment Contracts, including the Contract Bonuses due and owing to the Subject Employees. Further, the retention of the Subject Employees is necessary for the continued operation of SCI’s business. Consequently, the “necessity of payment” doctrine set forth in section 105 of the Bankruptcy Code also supports the requested relief.

#4814-3405-8245

-4-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 5 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

A.

Paying the Contract Bonuses is Permissible under Section 363(b) of the Bankruptcy Code Section 363(b)(1) of the Bankruptcy Code further supports granting the

10.

relief request herein. Section 363(b)(1) provides that “[t]he trustee, after notice and a hearing, may use, sell, or lease, other than in the ordinary course of business, property of the estate.” 11 U.S.C. § 363(b)(1). Courts acknowledge that a debtor’s relationship with its employees, including the terms and conditions of employment, are matters that are subject to the business judgment of the debtor and may be managed by the debtor in the ordinary course of business. See, e.g., In re Pac. Forest Indus., Inc., 95 B.R. 740, 743 (Bankr. C.D. Cal. 1989) (“debtors’ employees do not need court permission to be paid and are usually paid as part of the ongoing operation of the business.”). Courts permit debtors to pay wage claims in the ordinary course of business. See COLLIER ON BANKRUPTCY ¶ l507.05[1], at 507-26 (15th ed. rev. 2006). Accordingly, the Debtors’ employee-relations matters are within the ordinary course of business, including employee compensation and benefits matters. 11. Ultimately, payment of the Contract Bonuses in accordance with the

Employment Contracts and pursuant to SCI’s business practices is in the best interests of the Debtors’ estates, creditors and all parties in interest and will enable the Debtors to continue to operate their businesses in an economic and efficient manner without disruption. Moreover, the relief sought herein – payment of $263,750 in guaranteed bonuses – does not materially harm the Debtors’ estates or creditors. B. 12. Paying the Contract Bonuses is Necessary for the Debtors’ Rehabilitation The “necessity of payment” doctrine of section 105 of the Bankruptcy

Code supports the request for relief. Under the “necessity of payment” doctrine, first enunciated by the United States Supreme Court in Miltenberger v. Logansport, C. & S.W.R. Co., 106 U.S. 286 (1882), a bankruptcy court may use its equitable powers under section 105 of the Bankruptcy Code to permit a debtor in possession to pay prepetition claims when payment is necessary to effectuate the Debtors’ bankruptcy goals. See In re Ionosphere Clubs, Inc., 98 B.R.
#4814-3405-8245

-5-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 6 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

174, 175 (Bankr. S.D.N.Y. 1989) (approving payment of prepetition wages due current employees where it is necessary to pay such claims in order to preserve and protect its business and ultimately reorganize and retain its currently working employees and maintain positive employee morale). 13. The Ninth Circuit Court of Appeals has acknowledged the doctrine of

necessity, stating in dicta: “[c]ases have permitted unequal treatment of pre-petition debts when necessary for rehabilitation, in such contexts as . . . pre-petition wages to key employees . . . .” Burchinal v. Cent. Wash. Bank (In re Adams Apple, Inc.), 829 F.2d 1484, 1490 (9th Cir. 1987). 14. The necessity of payment doctrine “teaches no more than, if payment of a

claim which arose prior to reorganization is essential to the continued operation of the [business] during [the] reorganization, payment may be authorized even if it is made out of [the] corpus.” In re Lehigh & New England Ry. Co., 657 F.2d 570, 581 (3d Cir. 1981); see also Am. Hardwoods, Inc. v. Deutsche Credit Corp. (In re Am. Hardwoods, Inc.), 885 F.2d 621, 625 (9th Cir. 1989) (section 105 endows the bankruptcy court with general equitable powers, where not inconsistent with more specific law); In re Gulf Air, Inc., 112 B.R. 152, 154 (Bankr. W.D. La. 1989) (“[R]etention of skills, organization, and reputation [. . .] must be considered valuable assets contributing to going concern value and aiding rehabilitation.”); In re Chateaugay Corp., 80 B.R. 279, 287 (Bankr. S.D.N.Y. 1987) (explaining that a bankruptcy court may exercise its equity powers under section 105 to authorize the payment of prepetition claims where such payment is necessary to “permit the greatest likelihood of survival of the debtor and payment of creditors in full or at least proportionately”). 15. Finally, since the Contract Bonuses are part of the Subject Employees’

contractual compensation, any delay in paying the Contract Bonuses will adversely affect SCI’s relationship with the Subject Employees and cause the Subject Employees harm at a time when the dedication, confidence and cooperation of these employees is most critical.

#4814-3405-8245

-6-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 7 of 9

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
#4814-3405-8245

IV.

Conclusion

WHEREFORE, the Debtors respectfully request entry of an order, substantially in the form attached hereto as Exhibit 3, granting the relief requested herein together with such other and further relief as the Court may deem just and appropriate. Dated: March 8, 2010 Respectfully submitted, By: /s Robert C. Shenfeld Paul S. Aronzon, CA SBN 88781 Thomas R. Kreller, CA SBN 161922 Robert C. Shenfeld, CA SBN 228181 MILBANK, TWEED, HADLEY & McCLOY LLP 601 South Figueroa Street, 30th Floor Los Angeles, California 90017 Reorganization Counsel for Debtors and Debtors in Possession Bruce T. Beesley, #1164
Laury Macauley, #11413

LEWIS AND ROCA LLP 50 W. Liberty Street, Ste. 410 Reno, NV 89501 bbeesley@lrlaw.com; lmacauley@lrlaw.com Local Reorganization Counsel For Debtors and Debtors in Possession

-7-

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 8 of 9

Exhibit 1

Exhibit 1
#4814-3405-8245

Case 09-52477-gwz

Doc 1065

Entered 03/09/10 16:04:52

Page 9 of 9

Proposed Contract Bonus to Be Paid to Subject Employees Pursuant to Employment Contracts
The actual names of the employees have been withheld to protect privacy. Debtors will identify individual employees as required and pursuant to a confidentiality agreement.

Employee
Employee “A” Employee “B” Employee “C”

Proposed Bonus
$180,000 $33,750 $50,000

#4814-3405-8245

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 1 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 2 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 3 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 4 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 5 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 6 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 7 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 8 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 9 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 10 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 11 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 12 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 13 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 14 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 15 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 16 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 17 of 18

Case 09-52477-gwz

Doc 1065-1

Entered 03/09/10 16:04:52

Page 18 of 18

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 1 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 2 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 3 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 4 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 5 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 6 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 7 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 8 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 9 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 10 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 11 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 12 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 13 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 14 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 15 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 16 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 17 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 18 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 19 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 20 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 21 of 22

Case 09-52477-gwz

Doc 1065-2

Entered 03/09/10 16:04:52

Page 22 of 22

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 1 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 2 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 3 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 4 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 5 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 6 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 7 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 8 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 9 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 10 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 11 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 12 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 13 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 14 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 15 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 16 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 17 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 18 of 19

Case 09-52477-gwz

Doc 1065-3

Entered 03/09/10 16:04:52

Page 19 of 19

Case 09-52477-gwz

Doc 1065-4

Entered 03/09/10 16:04:52

Page 1 of 4

Case 09-52477-gwz

Doc 1065-4

Entered 03/09/10 16:04:52

Page 2 of 4

Case 09-52477-gwz

Doc 1065-4

Entered 03/09/10 16:04:52

Page 3 of 4

Case 09-52477-gwz

Doc 1065-4

Entered 03/09/10 16:04:52

Page 4 of 4

Sign up to vote on this title
UsefulNot useful