Stockton files claims against Caesars in Showboat purchase

Caesars Entertainment promised Stockton University it could resolve a 1988 legal restriction on the former Showboat casino property the school wanted for an Atlantic City campus even as Caesars knew that was unlikely, Stockton contended in court filings last weekend.

Stockton bought the property for $18 million in December. Now, in the claims filed Saturday, it is seeking up to $22 million in damages from Caesars as the restriction has stymied the school's plans for the campus.

Caesars Entertainment Operating Co. has a pending Chapter 11 bankruptcy case in the U.S. Bankruptcy Court for the Northern District of Illinois, as does the company it set up for the Showboat property, Showboat Atlantic City Propco L.L.C.

According to Stockton's filing, Caesars representatives claimed they could get around the covenant restricting the property to use as a first-class casino-hotel.

"The decision by Stockton University to purchase the Showboat Property after learning of the existence of the 1988 Use Covenant was made based upon the explicit representations of representatives of [Caesars] regarding their allegedly informed belief that the necessary waiver or release could be obtained from the Trump Entities," reads the filing, a proof of claim in the bankruptcy proceedings.

"Unbeknownst to Stockton University, however, such material representations were false and misleading and either intentionally or negligently made by [Caesars]," it says.

A spokeswoman for Caesars declined to comment, citing a long-standing policy regarding pending litigation.

In its filing, Stockton aims to enforce a clause in the agreement that said Caesars would hold Stockton harmless from costs and expenses related to resolving the 1988 covenant.

Stockton also did not know when it bought the property that Caesars was preparing to file for bankruptcy, the university said.

The university continues to pay maintenance, security, and other costs while the Showboat property sits empty. Stockton spent close to $3 million on the site between Dec. 12 and May 15, averaging about $590,000 a month.

"Obviously, we are between a rock and a hard place," Harvey Kesselman, Stockton's acting president, said Tuesday. Joining the bankruptcy case is a way to protect the university's legal rights moving forward, he said.

Stockton has been struggling for months to resolve legal issues around the Showboat property, which it purchased with the goal of creating an "island campus" for thousands of students.

But the parent company of the Trump Taj Mahal casino next door to Showboat said it would, in fact, enforce the covenant requiring a casino there. Caesars, meanwhile, had restricted the deed when it sold the property to say the site could be anything but a casino.

Stockton is seeking to undo Caesars' deed restriction.

Caesars officials had reached out to Trump Entertainment before selling the Showboat property to Stockton, according to Saturday's filing. Trump representatives said they could not waive or release the 1988 covenant because of that company's own bankruptcy proceedings. Still, Stockton said, Caesars continued to tell the university that it believed the legal challenge would be resolved.

With the status of the property in limbo, Stockton scuttled plans to open the campus for a soft start this summer and full opening this fall. Those classes will instead take place at the university's other locations, including its main campus in Galloway Township and its Carnegie Center in Atlantic City.

In April, Stockton entered an agreement to sell the Showboat property to Florida developer Glenn Straub, with a 90-day escape clause. University officials have said they cannot afford to continue holding the building vacant.

Kesselman and Straub confirmed Tuesday that agreement still stands. Straub's lawyer, Stuart J. Moskovitz, said Straub was exploring using the Showboat property to supply electricity to the nearby Revel casino that Straub has purchased.

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