The former CEO of a luxury hotel operator has quickly settled a lawsuit accusing him of causing the drug overdose death of his girlfriend, On Point has learned –- even though he describes the allegations as “slanderous and bogus.”

Michelle Hatchel	Ed Scheetz

Michelle Hatchel, 23, died Aug. 29, 2007 while staying at a Las Vegas condominium with Ed Scheetz, who was then the chief executive officer of Morgans Hotel Group (NASDAQ: MHG). Members of Hatchel's family sued both Scheetz and Morgans for wrongful death in August, alleging his “hedonistic” behavior mirrored the raunchy “image” of the Hard Rock Hotel & Casino, which Morgans owns.

Earlier this month, the plaintiffs agreed to a settlement with Scheetz and dropped their claims against Morgans. Scheetz admitted no liability in a statement released by his attorneys.

“In August 2007 Michelle Hatchel died of a drug overdose,” attorneys Stanley S. Arkin and Peter B. Pope said. “Her life and death were tragic." They continued:

Even though our client was never served with legal papers and three of the four plaintiffs had no legal standing to bring a wrongful death suit, our client and his business associates decided to settle the lawsuit to bring closure to the Hatchel family and to end the slanderous and bogus accusations against Ed Scheetz by the plaintiffs’ attorney and consultant.

Hatchel family attorney Michael J. Amador of Las Vegas did not respond to a request for comment.

According to the wrongful-death complaint, Scheetz flew Hatchel to Las Vegas from New York on Morgans' private jet for a weekend of cocaine and sex. She was killed, it said, “as a proximate result of the Defendants' ... wrongful and/or negligent acts or omissions” in the three-bedroom penthouse suite leased by Morgans.

Under the doctrine of respondeat superior, an employer is vicariously liable for an employee’s torts committed within the scope of employment. The Hatchel family gave a novel twist to that theory by arguing that since Scheetz's hedonistic lifestyle was a “living example of [the] 'Hardrock' image ... all of his actions, inactions, and/or omissions [at the time of Hatchel's death] were within the course and scope of his employment.”

That argument would probably not have prevailed in court since Nevada has limited employer liability for the intentional conduct of an employee. There also seemed to be no connection between Hatchel's death and Scheetz's duties as a CEO.

Scheetz resigned as CEO of Morgans three weeks after Hatchel's death. He settled an earlier wrongful-death suit filed by her father, reportedly for a “substantial sum.”

By Matthew Heller
1/22/10