Legal Watch: Is the Future of Park City Really in Jeopardy?

Posted By: The Ski Channel on March 13, 2012 2:20 pm

Park City LogoFor many Winter enthusiasts, the sport of skiing is synonymous with breathtaking scenery, rugged terrain, deep snow and outdoor fun with friends. For real estate moguls behind the scenes however, the high-revenue industry of ski resort ownership and operation is just like any other for-profit, real estate venture — it’s business.

Last Friday, The Ski Channel reported that plaintiff-parties operating Park City Mountain Resort (“PCMR” or “the Resort”) filed a lawsuit against defendant-land owners, for wrongfully terminating agreements between the parties and ultimately, jeopardizing the future of PCMR.

The suit – Greater Park City Company and Greater Properties, Inc. vs. United Park City Mines Company and Talisker Land Holdings, LLC – was filed by Greater Park City Company (“GPCC”), which owns and operates PCMR, and Greater Properties, Inc. (“GPI”), which by agreement allows GPCC to use some of the land on which the Resort is located.

“In its complaint, Park City Mountain Resort seeks several forms of relief relating to two tracts of land it leases from Talisker and on which PCMR operates a large portion of the ski resort,” commented attorney David B. Cronheim, Chief Legal Analyst to The Ski Channel.

As stated in their complaint, “the central issue in this case is whether the agreements under which GPCC and GPI has operated the Resort and occupied the premises for more than forty years expired in 2011.” Defendants, United Park City Mines Company (UPCMC) and Talisker Land Holdings, LLC (Talisker) contend the agreements expired due to Plaintiff’s inaction and thus, are no longer legally enforceable. On the other hand, PCMR argues that although it failed to enter into a formal lease extension for either tract, the parties’ actions demonstrated that PCMR successfully exercised its right to extend the leases until 2051.

A seemingly course-of-business contract dispute…right? Wrong. As Plaintiffs highlight, the high-stake ramifications and scope of the suit’s outcome makes this case is anything but typical.

According to Plaintiffs, a ruling against their position could lead to the demise of one of the nation’s premier ski resorts. “If we do not prevail . . . Park City Mountain Resort could be forced to close,” Jenni Smith, the president and general manager of PCMR, told reporters Friday afternoon.

Such an outcome, Plaintiffs argue, would in-turn have dire consequences for both the State of Utah and the Resort’s numerous employees. Currently, PCMR employs more than 1200 Utah residents, draws hundreds of thousands of skiers and other tourists to the State every year, and annually generates hundreds of millions of dollars of economic benefit for business and individuals throughout the State.

GPCC and GP therefore seek a declaration of the Court that the relevant agreements have not terminated, but have instead been extended for an additional term of forty years to the year of 2051.

As Cronheim explained: “The method by which PCMR is seeking to obtain a decision as to whether it extended the lease is a declaratory judgment. Plaintiffs normally seek declaratory judgments when a question exists as to their rights or duties,” continued Cronheim. “Declaratory judgments are intended to clarify the positions of adverse parties without forcing either party to expose itself to additional losses. In this case, PCMR argues that it is entitled to a declaratory judgment because: (1) it did provide adequate notice pursuant to the leases; (2) even if it did not provide adequate notice under the leases, Talisker either waived its right to object or should be estopped (prevented) from objecting; or (3) that equity demands that the failure to provide written notice should be excused because PCMR made an “honest mistake” that could cost it over $100M. PCMR also asks the court for an injunction preventing Talisker from evicting PCMR from the land which is the subject of the two leases until the case is complete.”

 If the court fails to grant the declaratory judgment in PCMR’s favor, and UPCM and Talisker are permitted to eject GPI from the premises, GPCC and GPI alternatively have asked the court for an award of damages for fraudulent/negligent nondisclosure and for Defendants’ breach of the convenient of good faith and fair dealing.

Cronheim opined, “PCMR seeks damages of over $7M – the cost of the infrastructure improvements made after the expiration of the leases. However, these claims are last resorts. In all likelihood, PCMR would much prefer the declaratory judgment that the lease was extended. The other claims are less likely to succeed.”

Ultimately summing up the case, Cronheim stated, “Both Talisker and PCMR are sophisticated parties who obviously had copies of the leases. Both are chargeable with knowledge of the covenants contained therein.  PCMR’s complaint all but concedes it failed to give the required formal written notice of its intention to extend the leases prior to their expiration. If this is the case, PCMR made a major and inexcusable mistake. Before commencing $7M worth of infrastructure improvements, it should have been 100% certain that the Talisker tracts were still under lease. That said, PCMR has highlighted the inference that Talisker’s ownership of nearby Canyons Resort led it to deal underhandedly with PCMR in an effort to damage its major competitor.  The court might be sympathetic to the argument that Talisker strung PCMR along with the intention of pulling the rug out from underneath them or otherwise wreaking havoc on PCMR’s operations. Either way, animosity between Talisker and PCMR is certainly not good for the Utah ski industry as a whole, particularly at a time when the state legislature is pushing a plan to link the seven Park City and Cottonwood Canyons resorts. Such an ambitious plan requires cooperation, not litigation.”

In a statement posted on a PCMR website created to outline the lawsuit, the resort said it “can’t say for certain” whether the resort will open for the next ski season. Smith did say however, that PCMR would operate as usual through the rest of the current ski season and through the coming summer season. Additionally, in a prepared statement, the Resort vowed to “fight as long as it takes to keep Park City Mountain Resort locally owned and locally operated.”

Talisker has also stated they are hopefully an agreement can be reached, but are disappointed by the filing of the lawsuit. “We had hoped to reach terms on the new lease that would be fair to both parties. Unfortunately it appears that PCMR is attempting to use litigation to better its position, and avoid reaching a mutually fair outcome.” Talisker continued, “At no time in these negotiations has Talisker contemplated or threatened to close Park City Mountain. We believed the negotiations were continuing and we are disappointed by PCMR’s action today.”

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