Penthouse, Resort End Legal Battle in a Draw

Times Staff Writer

A $522-million libel suit filed over a 1975 Penthouse magazine article alleging organized crime ties to the exclusive La Costa resort has been settled out of court, ending a decade of costly litigation.

According to the agreement reached between owners of La Costa, located in northern San Diego County, and Penthouse publisher Robert Guccione, each side will pay for its own legal costs, estimated at more than $20 million, and that is all.

A lengthy letter scheduled to be filed in court Friday and signed jointly by Guccione and La Costa’s owners, explained the reasons for the settlement. Each side concluded that “continued litigation will only be further torture and cause more expense to all parties. . . . It appears that if the case were to continue through yet additional court proceedings, whoever would ultimately win would enjoy a Pyrrhic victory at best.”

In the letter, Penthouse lauded La Costa resort owners for their “commendable civic and philanthropic” endeavors while La Costa praises Guccione and Penthouse for their “personal and professional awards.”


Penthouse attorney Norman Roy Grutman of New York said in a telephone interview that the settlement was reached last month.

“What is comes down to is we don’t love each other, but after being at each other’s throat for so long . . . there’s nothing to gain by expending more time and expense on litigation,” Grutman said.

The lawsuit was spawned by a 1975 article entitled “La Costa: The Hundred-Million Dollar Resort With Criminal Clientele.” The story by two free-lance writers attempted to link the resort and its owners to organized crime, calling La Costa a meeting place for gangsters.

The resort’s owners, Merv Adelson, Irwin Molasky, Morris B. (Mo) Dalitz and Allard Roen, sued the magazine in 1975. After years of legal maneuvering, during which Dalitz and Roen were dropped as plaintiffs, the case finally went to trial in Compton in 1982.


The jury, after a 5 1/2-month trial, cleared Penthouse of libel. But later the trial judge overturned the jury verdict. Then, last September, the California Supreme Court upheld an appellate court ruling that Dalitz and Roen were not public figures and thus could re-join the lawsuit without the added burden of having to prove that the article was written with malice.

Grutman said the state Supreme Court’s ruling put the matter “back at square one” and predicted that “the appeals would have lasted several more years.”

In the joint letter settling the the case, both sides took a conciliatory stance.

“Penthouse in the article . . . did not mean to imply nor did it intend for its readers to believe that Messrs. Adelson and Molasky are or were members of organized crime or criminals. In addition, Penthouse acknowledges that all of the individual plaintiffs, including Messrs. Dalitz and Roen, have been extremely active in commendable civic and philanthropic activities which have earned them recognition from many estimable people. Furthermore Penthouse acknowledges that among plaintiffs’ successful business activities is the La Costa resort itself, one of the outstanding resort complexes of the world.”


For their part, the La Costa owners in the letter said they had learned “of the the many personal and professional awards and distinctions that have been conferred upon Penthouse and . . . Guccione.”

Attorneys Louis Nizer of New York and Irwin Buchalter of Los Angeles, who represented La Costa, were unavailable for comment.