The Iowa Supreme Court issued an opinion in favor of John Pavone and Signature Management Group, LLC (SMG) in a civil suit against the owners of Wild Rose Entertainment. Wild Rose owns two Iowa casinos, including Wild Rose Casino and Resort in Clinton.
The decision overturns an appellate court ruling in favor of Gerald M. Kirke and Wild Rose Entertainment, LLC. The opinion also restores the district courts ruling that $10 million in damages was owed to Pavone and SMG due to a breach of a management agreement.
Pavone, who owns SMG, filed suit on March 31, 2006, alleging that Kirke and Wild Rose violated a pre-negotiated agreement that guaranteed SMG right of first refusal on any new casino enterprise. An agreement between SMG and Wild Rose was terminated on May 24, 2005, two and a half months after Wild Rose received a gaming license for a facility in Emmetsburg.
On April 29, 2004 Pavone entered into a consulting agreement with Wild Rose. Pavone was to assist the upstart company, founded by Kirke and his partner, Dr. Michael Richards, in acquiring gaming licenses for potential gaming facilities.
After selecting Ottumwa as a potential location for a Wild Rose Casino, the two parties “generally agree(d)” to have SMG manage all casinos owned by Wild Rose.
Ryan Ross, an attorney for SMG, and Jim Krambeck, an attorney for Wild Rose, eventually worked up a document called “agreement,” that stipulated that SMG would manage Wild Rose Ottumwa. Ross and Krambeck also intended to draft another document that would officially declare SMG as the management company for all Wild Rose Casinos, but the document never materialized.
The relationship began to fall apart following an Iowa Racing and Gaming Commission (IRGC) background check. Wild Rose, which had also decided to pursue acquiring a gaming license for a facility in Emmetsburg, failed to proved the IRGC with an agreement detailing SMG’s involvement with that facility. Additionally, Wild Rose hired Kevin Preston as an operations consultant without approval from Pavone.
Pavone said Wild Rose wanted to renegotiate everything. At one point, the suit alleges that Kirke questioned whether or not Pavone should be involved at all.
“Why should I pay you 4 percent if I could get somebody to do it for $160,000 a year and 2 percent,” Kirk said, referencing the agreement with Preston that was worth less money than the agreement with SMG.
Pavone sent a letter to the IRGC explaining that the two parties would be unable to reach a compromise in the immediate future. Kirke, according to the suit, believed that Pavone sent the letter as an attempt to prevent Wild Rose from obtaining licenses. Negotiating between Wild Rose and SMG ceased.
The appellate court overturned the district court’s ruling because it believed the district court erred when it denied Kirke and Wild Rose a directed verdict. The appellate court also argued that language in the document indicated an “unenforceable agreement to agree.”
When the case was moved to the Supreme Court, the justices found that the jury’s reasoning was sound during the initial trial, and restored the verdict.
It is unclear whether or not Wild Rose will have any cause for a federal appeal. A spokesman for the Clerk of the Iowa Supreme Court said that in 21 days a procedendo will be issued, sending the case back to a lower court. At this point, the opinion becomes an official ruling. The 21 day period allows for the defendant to apply for a re-trial.
Wild Rose spokeswoman Jamie Buelt said that Wild Rose is reviewing the decision and exploring options.