Park City Mountain Resort fought the good fight yesterday as they appeared in Summit County Utah’s 3rd District Court. It was finally time for Judge Ryan Harris to hear both sides in the issue of whether PCMR renewed its lease with Talisker Land Holdings. The judge had originally decided the lease should be construed under a strict landlord/tenant standard (i.e. you sign a lease, you have a duty to notify the landlord of your intent to renew when it expires and if you don’t, you lose your lease) but PCMR had made a motion for summary judgment for reconsideration. In other words they want to court to overturn that initial ruling so that they can go to trial where presumably a jury of peers would decide whether PCMR had an implied lease renewal.
You see, once you filter out all the legal mumbo jumbo and puffery, yesterday’s hearing boiled down to two arguments. 1- could PCMR reasonably believe that they had constructively renewed the lease even if they didn’t send over written notification by the lease deadline and 2- are there additional interests involved in this lease that would suffer undue harm if they had to vacate?
At dispute is a longstanding lease that PCMR had with United Park City Mines to allegedly pay $155,000 a year to run a ski resort on its land. There was an option to renew clause that would extend the lease (for the same terms) through 2051 and all PCMR had to do was notify them in writing by April 30, 2011. UPCM transferred its land rights to Talisker in 2003 making Talisker the new landlord and the recipient of the letter of intent.
The renewal deadline came and went without written notice but it took Talisker nine months to speak up. The following year Talisker announced it was leasing Canyons Resort to Vail and that as part of the multi-million dollar deal, Vail would also get to take over the PCMR property either as a landlord or land operator depending on the outcome of the case.
PCMR’s attorneys argued that when a landlord grants an option to extend the lease he can’t go out and look for a more favorable tenant as soon as the original lease is up. The judge questioned that if it was so important that the property remain in PCMR’s hands until 2051, why not just put it in the lease? Why even create the option to extend if you could write one, 80-year lease? PCMR explained that because there is a risk of failure or decreased revenue in the ski industry they wanted some flexibility that would allow them to terminate the lease.
Harris asked, “If Vail is willing to come in and pay more why does it matter (to have to keep the original tenant)?” To which attorney Mark Sullivan said, “The property is tied up so a new tenant can’t just set up shop and make use of the property.” PCMR owns the base facilities, parking structures and lower lifts so that even if Vail assumes the lease they won’t have access to the resort from Park City’s base area. “A landlord can’t replace the tenant with someone who can’t come in and operate the property in the way it was intended to be used,” Sullivan explained. Underneath this argument is the assumption that the city only approved PCMR’s master development plan because it intended for PCMR alone to run the show from base to peak. And PCMR contends that Talisker agreed to be bound by this master plan agreement.
“Talsiker agreed that the leased premises would continue to run relevant to the 1998 development agreement. They committed to PCMR,” said Sullivan. He described how PCMR relied on Talisker’s previous discussions of a long-continued relationship to sink more than $100 million in improvements on the land since 1998. “They would talk about how much they looked forward to working with us and joked about how old they were going to be in 2051. There was a common understanding that the lease would continue. What Vail hopes to obtain is a windfall where everyone has operated on the assumption that the lease would not expire till 2051,” he said.
Talisker’s attorney Howard Shapiro simply stood, looked at PCMR’s table then said to Harris, “They only had to provide 60 days’ notice and they failed to do that. All Supreme Court cases make clear that that is not to be excused. They have negligently slaughtered the golden goose that has been laying eggs for decades.” He also refuted PCMR’s suggestion that to invalidate the lease would cause undue hardship on creditors and the city. “There is no harm to anyone else if you give Vail the business. The land in question would continue to support a vibrant ski area.”
Shapiro continued, “You can’t ignore the reality of the leases,” he said. “Even extended they expire in 2051 not in perpetuity. This day was bound to come but due to their negligence it’s here today. The Court must resist the temptation to ignore legal principles.”
Judge Harris told the court that he gives himself 60 days to rule on these matters but because of the complexity it might be a little longer. The next chapter in the Park City saga is next Tuesday, April 8, 2014. PCMR will argue that Talisker had no right to enter into talks with Vail without notifying them first and making the same offer to them.
PCMR said in court yesterday that they would like to settle and that they have made “plenty of offers” but that Vail and Talisker are unresponsive. There’s still time for the parties to work it out but it probably won’t happen before the judge decides on these issues. It might have to be the prospect of a jury trial that forces someone to bend.