A federal court jury in Las Vegas on Sept. 7 decided that Rod Stewart and his company, Stewart Annoyances Ltd. (SA), should return a $2 million deposit plus interest to Rio Properties (owned by Harrah

A federal court jury in Las Vegas on Sept. 7 decided that Rod Stewart and his company, Stewart Annoyances Ltd. (SA), should return a $2 million deposit plus interest to Rio Properties (owned by Harrah's Entertainment) for a cancelled 2000 concert.

The parties have been litigating the case since 2001, which means that there must have been more to the story than a simple show cancellation and failure to repay a deposit. The following is a summary of the main issues involved at trial.

Background Facts: According to the trial briefs, Rio and SA entered an agreement in 1999 for Stewart to perform a concert in Las Vegas on Dec. 31, 1999 -- the Millennium Concert -- for $3 million. In 2000, they amended the agreement to add another concert a year later for $2 million, scheduled for Saturday, Dec. 30, 2000, over the three-day New Year's Eve weekend. Rio paid $2 million as a deposit in January 2000.

Stewart performed the Millennium concert. The following March during a routine physical medical examination, a tumor was found on his thyroid. To save his life, he had a thyroidectomy in May 2000.

His neck was opened up and an incision was made through the skin, fascia and muscles, and a breathing tube was inserted between and through his vocal cords. His vocal cords and vocal nerves were adversely affected, but they were not irreparably damaged. Yet he had not healed 100% in time for the 2000 concert.

The parties had discussed rescheduling the concert for the following June 2001; he was ready and began his world tour at that time.

Stewart claims that Gary Loveman, chairman/CEO of Rio's parent company Harrah's Entertainment, put a stop to the rescheduling because he was taking Rio in a direction away from high-end, high-roller entertainment and was "acutely mindful that Rio expected a multi-million dollar loss on the concert."

The Agreements: The 1999 agreement included a force majeure clause. It stated (in part) that if any party's obligations were rendered impossible by any Act of God ... or any other cause beyond the party's reasonable control, "then there shall be no claim for damages by either party to this Agreement, and the performance shall be rescheduled to a mutually agreeable time."

Following this clause was a provision covering illness. It provided that in the event Stewart was ill or incapacitated for any reason and was unable to perform -- as determined by Stewart within his absolute discretion -- "then the show(s) will be canceled" and Stewart or SA must refund the payment made by Rio.

In the 2000 amendment, one section referred to changing the scheduled date of the concert. It stated (in part) that the second concert "may be changed by Stewart by written notice to Rio on or before Sept. 30, 2000, (Notice Date) in the event that Stewart elects to accept an offer for a paid concert performance to be performed on Dec. 31, 2000, at a location which would require Stewart to arrive at the 31st venue by not later than 6 p.m., local time at the venue, on Dec. 31, 2000, and Stewart would be unable to do so on transportation provided by Rio. ... If, by the Notice Date, Stewart concludes that it is not possible to perform Dec. 30, 2000, for the reasons stated above, Stewart shall so notify Rio and the 2000 Concert shall be rescheduled...."

The amendment also provided that except as specifically amended, the terms of the first agreement applied for all purposes to the 2000 concert amendment.

Rio pointed out that SA in November 2000 sold the right to Stewart's exclusive services for 100 concerts beginning Dec. 31, 2000, to Clear Channel for $25.3 million. Though Stewart claimed he was ill and it was impossible to perform the Las Vegas concert, he said nothing about this illness or inability to sing to the New Orleans promoter from whom Steward was paid $100,000 for a (cancelled) performance on Nov. 29, 2000.

Earlier Court Actions: Rio filed a motion for summary judgment in 2001, claiming that the written contract was clear and unambiguous -- Stewart could only reschedule if there was a conflicting Dec. 31 concert and that if cancelled for illness, the deposit must be returned. Therefore, under the parol evidence rule, no evidence other than the written contract could be considered that could change the interpretation of the contract.

Rio argued that under the contract, it did not have to reschedule the concert and the deposit should be returned. The court agreed, granting the motion. SA and Stewart appealed.

The Ninth Circuit Court of Appeals reversed the summary judgment, saying that the force majeure provision could apply to the case. It would be for the jury to decide if Stewart's condition made his performance impossible to perform after hearing additional evidence.

The Trial: According to the trial briefs, Rio believed that it was not obligated to reschedule the concert. It also argued that SA would be violating its Clear Channel deal if it rescheduled the Las Vegas show, so Stewart could not have been ready, willing and able to perform another show.

Rio also argued that if Stewart cancelled the show because he had not recovered from his surgery, then the "illness" clause permitted Rio to a return of its deposit -- and no obligation to reschedule the concert.

SA and Stewart argued that the Clear Channel deal excluded Las Vegas, permitting a rescheduled Rio concert.

They also claimed that the "illness" clause only applied to the Millennium concert because it was a once-in-a-lifetime concert that could not be rescheduled, and it was the only concert scheduled when that agreement was made. The force majeure clause in the original agreement -- which applied because the amendment adopted all the terms in the main agreement -- required Rio to reschedule.

They also argued that Rio was working with them to reschedule until Loveman decided that Rio would lose money from the concert. He prevented others in the company from rescheduling -- he had "buyer's remorse" which was not permitted under the contract.

The Result: The jury found in favor of Rio and ordered the deposit returned plus interest.

One of Stewart's attorneys, Louis "Skip" Miller with Christensen, Miller, Fink, Jacobs, Glaser, Weil & Shapiro in Los Angeles, tells ELW that even though the Court of Appeals ordered the jury to decide whether the illness fell under the force majeure provision requiring rescheduling, the District Court judge gave a jury instruction permitting the jury to find that there was never a "meeting of the mind" -- never a contract.

Miller says this is what the jury decided.

Indeed, the Associated Press reported that jury foreman Stevan Jorgensen, 56, said the case boiled down to a misunderstanding of the contract between the British rocker and the casino. "We felt it was only fair," he said, "that if Mr. Stewart didn't perform the concert that he should give the money back."

SA and Stewart will appeal, Miller says.