Murren and Lee, in court documents, say they and others discussed forming a partnership with Schaeffer in 2002 that would own a vineyard and winery.
They say Schaeffer, who formerly headed the Mandalay Resort group in the US, sought capital contributions from them for the proposed partnership and when doing so either stated or implied that they were part-owners of the Woollaston Estates Vineyard, which later changed its name to Mahana.
They allege that Schaeffer, after 2008, made further representations to them that they were part owners of a vineyard and winery in New Zealand.
Mullen says he and his trust have personally paid Schaeffer US$1.6 million while Lee says he paid US$700,406.
Mullen and Lee allege the representations made to them were false and say the payments they made were not used to make the investments promised but instead for the assets he holds as a shareholder of New Zealand company Woollaston Estates Holdings.
The pair's case alleges the representations breached the Fair Trading Act, that Schaeffer breached a duty of care he owed and that he knew the representations were false.
A 10-day hearing for the case is scheduled to begin next month.
But Schaeffer made two bids this month to halt the action or delay it.
He alleges that last year, during a mediation to try to settle the dispute, Lee threatened him.
"He knew where I lived, knew where my family lived and knew where my dogs lived," Schaeffer claimed.
"He said if I did not give him back his money that he would bury me in the desert like in the old days, he would destroy my children's lives and bankrupt my ex-wife and travel to Omaha to kill my three show dogs. He ended his threats with the words 'give me my f***ing money'," Schaeffer said Lee alleged.
Lee disputes Schaeffer's account.
While he told Schaeffer that Las Vegas gaming executives in the "old days" might have ended up buried in the Nevada desert, after saying this he claims he pointed out that things were done differently now and he had come to the mediation to settle the lawsuit.
He denies threatening Schaeffer's family or show dogs and Murren supports Lee's recollection of what was said.
Schaeffer applied to put a halt on the lawsuit on the basis that the alleged threats meant he could not adequately defend the proceedings and was unfairly constrained because he feared of repercussions.
But Justice Peter Churchman was not convinced this would be the case and refused the bid.
Schaeffer is appealing that ruling and in the meantime brought a separate application to try to delay the case.
Schaeffer's lawyer said that the vineyard owner and possibly two witnesses were too fearful to properly help prepare a defence.
However, Justice David Collins refused to delay the hearing.
"It is in the overall interests of justice for this proceeding to be heard and
determined," Justice Collins said.
The judge said that the action was more than three years old and that Murren, Lee and witnesses had made arrangements to be in Nelson for the case next month.
"It would clearly cause significant inconvenience for the plaintiffs if the trial were to be adjourned, particularly as another hearing date is unlikely to be available until mid-2019 at the earliest."
"Furthermore, if Mr Schaeffer and some of his witnesses are feeling intimidated
by Mr Lee, it is likely they will continue to feel intimidated at the time of any hearing of the trial, even one that is adjourned to next year," the judge said.
