Wine News Viva Lost Wages: Winery Owner Loses Lawsuit

Viva Lost Wages: Winery Owner Loses Lawsuit

The investors thought they were buying ownership of the winery. The owner saw it differently.
© Mahana Estate | The investors thought they were buying ownership of the winery. The owner saw it differently.
A long-running legal battle involving alleged death threats and Vegas developers has come to a close in New Zealand.
By Wine-Searcher staff | Posted Tuesday, 29-Sep-2020

What happens in Vegas stays in Vegas and New Zealand's highest court has ruled that Vegas law also stays in Vegas – at least when it comes to dodgy financial dealings at a Kiwi winery.

Former Nelson winery owner Glenn Schaeffer, who misled investors and was ordered to pay two Las Vegas casino executives $3.3 million, has had an attempted appeal knocked back by the Supreme Court, according to news website Stuff.

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Schaeffer gained New Zealand residency in 2006 but continued to spend most of his time in the United States up until 2013. He was president and chief executive of Fontainebleau Resorts, a hotel and casino development that was the focus of some major financial upheaval when it went bust back in 2009. As the development stalled, Schaeffer walked out, leaving behind a tangled mess of outstanding loans – more than $1 billion was raised from investors – and lawsuits. Years of litigation ensued, some of which involved Schaeffer.

James Murren and Daniel Lee also had connections to the Vegas leisure industry and invested in Schaeffer's Mahana Estate in Nelson, but sued to get their investments back after discovering financial irregularities. After the case was heard at the High Court in late 2018, Schaeffer was ordered to repay Murren $1.6 million and Lee $700,000, money they had invested in the winery business, plus interest.

Schaeffer appealed that decision in the Court of Appeal on the grounds that New Zealand law had been applied, arguing the court was required to apply Nevada law. That appeal was dismissed in June, with Justice Denis Clifford ordering Schaeffer to pay the outstanding amounts owed to Murren and Lee.

The Court of Appeal agreed with the earlier High Court judgment, finding "no support" for Schaeffer's proposition Nevada law should have been applied. The matter then went to the Supreme Court and its judgment dismissed the application for leave to appeal the earlier Court of Appeal ruling.

The decision, made by Justices Susan Glazebrook, Mark O'Regan and Joe Williams, also ordered Schaeffer to pay Murren and Lee an additional $2500 in costs.

The court said it did not consider that the argument Schaeffer wanted to advance on appeal had sufficient chance of success to justify the cost and expense of a further appeal.

In 2000, Schaeffer acquired an 80 percent interest in a vineyard in Nelson, then called Woollaston Estates, and later invited Murren, Lee and others to invest in the business through a Nevada limited partnership.

The terms were recorded in two agreements, in 2002 and 2006. It was stated or implied that they would be part-owners under a Nevada limited partnership of the vineyard, which changed its name to Mahana Estate. The winery business was placed into receivership in 2018, three years after a High Court lawsuit was brought against Schaeffer by Murren and Lee, who both lost their investments.

"It transpired that Mr Schaeffer had not, in fact, transferred his original 80 percent interest in the vineyard to the limited partnership, and had dealt with the assets intended to be owned by the limited partnership as if they were his own," the judgment read.

In December 2018, Justice David Collins found Schaeffer made negligent misstatements to Murren and Lee about their investments, for which he was liable under the Fair Trading Act and the Nevada Deceptive Trade Practices Act.

The drawn-out legal dispute began in 2015, during which Schaeffer alleged Lee told him he would "bury me in the desert like in the old days", destroy his children's lives and kill his three dogs.

New Zealand retirement fund Booster bought Mahana Estate's major assets last year; the four-level gravity-fed winery, cellar door, tasting room, restaurant and function centre from the receivers, as well as its 21-hectare vineyard.

It now produces Pinot Noir for a number of brands from New Zealand's best wine-growing regions, including Marlborough's Awatere River, Sileni Estates in Hawke's Bay and Bannock Brae in Central Otago.

Schaeffer's former private residence, a seven-bedroom lodge on the Mahana property, is still on the market with an asking price of $2.49m.

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