Wynn Resorts Ltd. board member Elaine Wynn took legal action Tuesday in hopes of invalidating a stockholders’ agreement that restricts her ability to sell her shares — valued at more than $1 billion — in the casino resort company.
She holds some 9.742 million shares of stock, or a 9.7 percent stake, in the Las Vegas-based company.
Shares she and company CEO Steve Wynn formerly held were allocated between them when they were divorced in January 2010.
In an existing federal lawsuit in Nevada pitting Wynn Resorts against board member Kazuo Okada, attorneys for Elaine Wynn on Tuesday filed a claim against Okada and a claim against Steve Wynn.
The filing says that Wynn Resorts’ action earlier this year forcibly redeeming Okada’s $2.7 billion in shares had “frustrated” the purpose of a stockholders’ agreement restricting Okada, Elaine Wynn and Steve Wynn from selling their shares.
Such stockholder lockup agreements are typically aimed at ensuring key people, such as the founders of a company, maintain substantial ownership positions. Also, lockups prevent large stock sales by insiders that could flood the market with shares and drive down the share price.
“The basis for enforcing the agreement’s restrictions has been eliminated” and the restrictions are “onerous,” Elaine Wynn’s filing said Tuesday.
“The central premise and motivating reason for the restrictions were that Kazuo Okada was a significant stockholder whose shares were similarly restricted — but that those restrictions could not continue unless Ms. Wynn’s shares were restricted as well,” her court filing said.
The restrictions now “do not serve a legitimate corporate purpose but rather are intended to maintain the controlling position of Stephen A. Wynn and Mr. Okada. As such they are an impermissible and unlawful restriction on the alienability of Ms. Wynn’s shares,” Elaine Wynn’s filing says.
“Ms. Wynn seeks to invalidate these unlawful restrictions for good and valid reasons. First, having had a long history of involvement in charitable and community endeavors, she desires to realize the value of her stock so that she may provide significant assistance to various important causes she has supported over the years and may support in the future,” her filing says. “Second, Ms. Wynn seeks to invalidate these restrictions so that she may implement estate planning measures that will protect the value of her investment for her children.”
The court filing was necessary, Elaine Wynn’s attorneys said, because “Mr. Wynn continues to contend that Ms. Wynn’s ability to sell her shares is still restricted by the terms of that (stockholders’) agreement. Among other things, he contends that Ms. Wynn may not sell her shares without his consent.”
The filing didn’t say how many shares Elaine Wynn hopes to sell. Her counterclaim against Okada’s company, Aruze USA, also asserts her right to sell her shares.
“Ms. Wynn...seeks an injunction that enjoins Mr. Wynn from instructing Wynn Resorts to not register shares sold or transferred by Ms. Wynn, as well as other injunctive relief against Mr. Wynn and/or Aruze the court deems necessary and appropriate to enforce the declaratory relief granted,” said the filing by her legal team, which includes the Los Angeles office of the law firm Munger, Tolles & Olson LLP, one of the nation’s elite business law firms.
Also working for her in the case is the Las Vegas law firm Jolley Urga Wirth Woodbury & Standish.
Steve Wynn holds a 10 percent stake in the company and was named in an Elaine Wynn cross claim in the Okada lawsuit Tuesday.
Steve Wynn issued a statement Tuesday supportive of maintaining the existing stockholder agreement.
''Today’s cross claim filed by my ex-wife Elaine P. Wynn is a legally baseless attempt to drag into federal court a domestic relations matter that was previously settled in family court here in Las Vegas. The Stockholders’ Agreement, which has provided assurance of stability and continuity to our stockholders and employees since the inception of the company, was amended in 2010 as part of our divorce. It was at the essence of a property settlement between us that was extensively negotiated while Elaine was represented by a top divorce lawyer," Wynn said.
Attorneys for Elaine Wynn declined comment on Tuesday's court filing. But people with knowledge of the case said it was filed for two reasons. First, Steve Wynn had filed a sealed complaint against her recently in Clark County Family Court related to their divorce settlement and the stockholders' agreement. Secondly, Elaine Wynn as a board member had been named as a defendant in an Okada counterclaim in the existing federal lawsuit and she was compelled to respond to his claims.
Elaine Wynn’s filing came in one of the contentious lawsuits in which Wynn Resorts claims Okada, who formerly held a 19.66 percent stake in the company, breached his duties as a director when he provided benefits to gaming regulators from the Philippines, where he’s developing a resort.
Okada has fired back with a counterclaim questioning Wynn Resorts’ conduct in Macau, where it has a valuable gaming license, and challenging the redemption of his shares.