The lawsuit alleges that Harcourt and Doherty repeatedlypromised to meet its funding requirements but never came through.The lawsuit claims the plaintiffs "never had any intention ofperforming" under the agreement and, as far back as June 2007,"conspired to, intended to, and, in fact, did exploit [Glen, Smith& Glen], obtaining value for the project through the Plaintiffsefforts, all with the eventually intended result of bankrupting orseriously damaging the Plaintiffs so that the Defendants couldassume control of the project for their sole benefit."

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In its motion to dismiss, Harcourt Nevada claims the fundingrequirement was subject to conditions in the operating agreementthat were never met. Specifically, Harcourt says the operatingagreement specifies that it would be "solely responsible forproviding or arranging all of the financing for any and allprojects costs" provided that (1) "funding is available on areasonable terms in the reasonable opinion of [the members of theLLC]" and (2) "the terms and conditions of loans to the company andits subsidiaries shall be subject to the unanimous approval of themembers." Those conditions were never met, Harcourt claims.

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In recounting the partnership in the court filing, Harcourt saysGlen, Smith & Glen approached the company in April 2006, askingfor assistance in acquiring the land for the project, which GSGsaid was valued at $40 million, according to Harcourt's motion. Thetwo parties' formed their separate LLCs and entered into theoperating agreement in August 2006.

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Beginning in 2007, according to Harcourt's motion, the localmarket for the development and sale of real estate declined, "andland throughout the valley depreciated significantly." Harcourtsays that during 2006 and 2007 it spent approximately $20 millionon the project in addition to the cost of the land. However, due toadverse market factors, Harcourt says construction money for theproject became "scarce on commercially reasonable terms" and thatit advised GSG of the situation.

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"Notwithstanding this fact, GSG charged forward and exhaustedthe entire $41-million pre-construction budget, while sales ofunits at the project languished," Harcourt states in its motion todismiss. "Harcourt Nevada became extremely concerned with GSG'smanagement of the company and continual requests for additionalfunds."

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Harcourt claims that the parties exchanged correspondence forseveral months, attempting to resolve their differences. On April8, 2008, Harcourt says it requested that GSG stop expending moneyon the project until market conditions improve and constructionfinancing is available on more reasonable terms than present. GSGfiled its lawsuit on April 30 and Harcourt was served at the end ofMay.

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Glen, Smith & Glen contend in their lawsuit that itperformed under the agreement, successfully marketing the project,"resulting in substantial sales of condominiums and leasing ofretail property within the development." Also pursuant to theagreement, the lawsuit contends that Glen, Smith & Glen"consistently presented budgets to Defendant Harcourt, spent withinthose budgets, and assured that all marketing costs were approvedby Harcourt."

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Harcourt defaulted on its funding obligations in October 2007,according to the lawsuit, by failing to timely provide sufficientfunding for development and construction of the project, andfailing to fund the overhead for Glen, Smith & Glen to theproject. In response to repeated demands, the defendants"repeatedly promised that funding was imminent," and as recently asFebruary 2008 Harcourt principal Patrick Doherty "personally metwith Plaintiffs" and assured them that Harcourt "would satisfy itsfunding obligations in twenty-four hours."

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Believing Doherty, GSG negotiated with vendors and consultantsto obtain more time to pay, according to the lawsuit. The moneynever came however, resulting in, among other things, "lawsuits andmechanic's liens from contractors, vendors and consultants to theproject. Further, this failure resulted in significant damage toGlen, Smith & Glen's reputation in the Las Vegas businesscommunity and has placed the partnership in default under itsvarious financial commitments."

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Harcourt's local attorney Steve Morris was not immediatelyavailable Tuesday for comment. Regardless, if anyone is at fault,the lawsuit has prevented Harcourt from moving forward on a projectin Jersey--an island off the coast of Normandy, France--that ispart of the Balliwick of Jersey, a British Crown dependency.Government there delayed the approval of a public-privatedevelopment agreement with Harcourt after discovering that Harcourtofficials denied the existence of the Sullivan Square lawsuit tothe Jersey government, according to a recent story in the JerseyEvening Post.

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In a related story in the Jersey Evening Post, Harcourt stronglydenied all the allegations relating to the Sullivan Square project.In a statement released to the newspaper, Harcourt director PatrickPower said: "Any formal proceedings will be vigorously defended byHarcourt's Nevada subsidiary as we maintain that they are entirelywithout merit."

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