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Former Grant Hotel Management Firm Receives Favorable Ruling

Michael Gallegos, who heads American Property Management, said he has received an appeal to a court decision that reverses a lower court ruling that favored the Sycuan Band of the Kumeyaay Nation in lawsuits that both parties filed after the tribe fired APMC as manager of the US Grant Hotel.

“All of (Sycuan’s) claims have been reversed and all of our liability has been reversed,” Gallegos said.

Tribal Chairman Danny Tucker, who was out of the country last week, could not be reached for comment, nor could Adam Day, the tribe’s spokesman. A call to Anthony Dain of the office of Procopio Cory Hargreaves & Savitch, who represented Sycuan at trial, was not returned.

APMC, which is the county’s largest hotel company, owns or operates 45 hotels in the United States and Mexico. Its management of the historic 272-room US Grant on Broadway began when Sycuan purchased it in December 2003 and ended in February 2004 when the tribe terminated its 10-year contract.

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Sycuan sued APMC for $2.8 million in damages, and APMC countersued for $6 million it said it was owed, including payment for the remainder of its contract.

On the face of it, the case that went to San Diego Superior Court in January 2006 was about which entity breached the management contract for the hotel. On a deeper level it was about the reputations of both the tribe and APMC with early testimony stating mismanagement on the part of the property manager, and APMC countering that some tribal members had turned the hotel into “party central.”


Contract Obligations

Sycuan said APMC was fired for cause, including late payment of bills and transferring money from one bank account to another without authorization.

APMC said that Sycuan failed to honor its contractual obligation to give it notice of the pending termination and that the tribe did not allow it to cure grievances.

A decision in the lower court trial rendered on Jan. 26, 2006, awarded Sycuan $1.38 million, including $1.35 million the jury said APMC wrongly took after it was fired. The sum also included $36,000 for meals and hotel stays for relocated employees, some of whom were Gallegos’ family members.

Gallegos said he transferred some relatives to fill key positions because he trusted them to stay mum about the unsavory conduct of some tribal members who partied at the hotel.

According to the Oct. 16 decision by the Fourth District Court of Appeal, the lower court was “prejudicial” in not allowing APMC to present key stipulations of its contract as evidence it was entitled to notification of termination and an opportunity to cure performance deficiencies.

The decision also reversed APMC’s liability for “conversion of funds,” meaning that its contract allowed the transfer of funds from one account to another to pay bills, including money it was owed.


Legal Fees

The appeal court further reversed the lower court’s ruling that APMC would have to pay Sycuan’s legal fees.

Gallegos said those fees amounted to more than $2 million.

“APMC intends to pursue further litigation to seek remedy of the term of our contract which involves a lump sum payment of close to $6 million, plus interest over the past three years, damages yet to be determined and reimbursement of our attorney fees,” Gallegos added. “Based on the court of appeals ruling we are confident that we can achieve a summary judgment without the necessity of a new trial.”

Joel R. Wohlfeil, now a Superior Court judge, represented APMC in the trial and Jon Williams handled the appeal.

Sycuan purchased the US Grant for $52 million. The tab for renovation during the two years it was closed was $56 million, but industry sources say it was more. The hotel reopened as a Starwood Hotels & Resorts Luxury Collection property under Starwood’s management in the fall of 2006. In addition to the US Grant, the tribe owns the Sycuan Resort & Casino on its reservation east of El Cajon and the nearby Singing Hills Country Club & Resort.

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