One of the most exciting parts of visiting the Grand Canyon was opened to the public only five years ago. The Grand Canyon Skywalk, which opened in 2007, is a fantastic, U-shaped walkway that allows visitors to walk directly out over the chasm and look down through a clear glass bottom. It is owned and operated by Sa’ Nyu Wa, Inc., a subsidiary corporation of the Hualapai Tribe.
Unfortunately, revenues from the landmark have been in dispute since early in its operation. The developer Sa’ Nyu Wa, Inc. hired in 2003 to build and operate the Skywalk sued the tribe for breach of contract in regards to ticket revenues he was owed to cover the cost of management and get a return on his own investment. The Skywalk attracts an estimated 370,000 visitors each year.
The suit went to arbitration, and the developer was awarded $28.5 million. The tribe appealed, but a federal court upheld that award in mid-February.
The developer tried to enforce the award by seizing the Sa’ Nyu Wa corporation’s bank accounts, and the corporation responded by filing for Chapter 11 bankruptcy even as it prepared a further appeal. Since filing for bankruptcy results in an immediate halt of all collection efforts (often referred to as the “automatic stay” in legalese), the developer can’t collect until the bankruptcy is resolved.
So far, this seems to be a reasonably straightforward example of what happens when a lawsuit taxes the financial stability of an operating business. When a lawsuit results in a monetary award, it is enforced through what is called a “judicial lien,” which is a court order to the defendant to pay the award. Even the enforcement of judicial liens is halted by bankruptcy, although ultimately the debt may not be dischargeable.
The twist in this case is that Sa’ Nyu Wa filed for Chapter 11 bankruptcy even though it has no intention of continuing to operate the Skywalk but it also doesn’t intend to auction off its assets to outsiders. Their bankruptcy filing revealed that the tribe has transferred the management of the Skywalk to another tribal entity.
The developer’s attorney calls that “highly unusual and somewhat suspicious.”
It certainly would be unusual to make changes to the business just before bankruptcy. In fact, bankruptcy courts have the ability to undo such changes should it become apparent that they were made in an effort to shield assets from creditors.
Is that the case here? The U.S. Bankruptcy Court in Yuma will have to decide.
- The New York Times Bankruptcy Beat blog, “Tribal Owner of Grand Canyon Skywalk Files for Bankruptcy,” Katy Stech, March 6, 2013
- The Huffington Post, “Courts upholds $28 million award in Skywalk case,” Felicia Fonseca, Feb. 11, 2013