The Missed Deadline: What Does it Cost? The Story of Vail's Takeover of the Park City Ski Area b/c of a missed lease renewal

The story of the missed lease renewal in Park City, Utah

This simple story consists essentially of missing a deadline. Unlike missing a flight, a conference call, a weekly meeting, or missing a bill payment, this error cost a major ski resort operator millions of dollars in present and future value; literally changing the course of the company’s future. The instructions weren’t confusing; they're written in plain English on a lease; and yet, they missed it. This story also involves economics, management, law, history, negligence, opportunity, litigation, blame shifting, and most of all a ski resort! 

Introduction:

Had management recognized this lease document represented one of the company’s most valuable assets, it would have exerted all means necessary to see that its value and longevity were protected. Instead, it acted like the “third steward” entrusted with the care of money, in the Parable of the “Talents,” by locking the lease away in a file cabinet, where no one would get to it. (see Matthew's gospel, Ch. 25)

Call it negligence, but lack of care for the valuable asset of the very ground upon which they worked, caused an irreparable rip in the fabric of the company. In short, carefully inventorying assets and protecting those of highest economic value by watching them, reading them, encouraging them, nurturing, growing, and maintaining them in whatever form, must be a management priority.

The Operator:

Powdr Corp., privately held company founded in 1994, operates ski resorts, and is one of the three big companies like this in North America. It runs resorts in Vermont and Oregon, but its headquarters are in Park City, Utah. This corporation and its employees are the tragic characters of this story, because all this waste could have been prevented.

 The Resort:

Ultimately, this battle centered on the ski area called Treasure Mountain Resort opened in 1963,  with a single gondola, base and summit lodges, a chairlift, a J-bar, and a 9-hole golf course. Like any asset it grew into the wintry jewel of Utah.

By 1966, it changed its name to Park City Ski Area, and ground-leased the terrain from United Park City Mines, ("UPCM") with an annual lease payment of only $155,000 per year. A ground lease allows a business to operate as if they were landowners, for long periods of time.

In 1975, the parties amended the lease to expire on April 30, 1991; but added options to extend the lease for (3) three 20-year terms, possibly extending the lease out through 2051.

The Combatants:

The aggrieved party is Powdr Corp., who purchased Park City Ski Area in 1994 and renamed it Park City Mountain Resort ("PCMR").

Your opportunistic jerk is Canada-based, Talisker, acquiring United Park City Mines in 2003.

The ground lease between the successors-in-interest, Talisker and PCMR, covered approximately 2,852 acres of prime ski terrain, much larger than Aspen, Colorado; indeed, twice the size of the Texas Medical Center, and over 3 times the size of Central Park.

The Problem:

PCMR missed sending a timely 1^st renewal notice letter to Talisker (successor to UPCM). The lease required at least 60 days notice of the extension before the expiration  of the lease agreement, which was April 30, 2011. At a minimum, the letter had to be sent by March 1^st, 2011. Boom.

Seeing economic opportunity to make a better lease deal than they had w/ PCMR, Talisker decided to lease the land to Vail Resorts, Inc., one of Powdr Corp.’s biggest competitors. (Villain Vail could then link the PCMR land to their adjacent resort “Canyons”, making one of the biggest ski areas in North America).

Villain Vail paid much more in annual rent than PCMR’s $155,000; but they controlled 2 of the 3 resorts in the Park City Ski area (see map above). Twenty (20) years after the renewals were instituted, on the first opportunity to renew, PCMR failed to properly execute on the agreement. It was their fatal mistake.

The Lawsuit:

It took Talisker 8 months to respond to PCMR’s mistake but when they did, the lessee, PCMR filed suit against Talisker, claiming that Talisker waived, or was “estopped” by its own conduct from enforcing the notice provision in the lease. It was a desperate plea.

For these reasons and many others, this “high-profile lawsuit” involved most of the terrain underlying one of the largest ski resorts in North America. At one point in the litigation, PCMR foolishly presented a fake, "backdated" letter to make it seem as if the renewal was timely submitted; nevertheless, this tactic didn’t even come close to working, and they were severely punished by the court.

After Talisker reached their new lease agreement with the new tenant, Vail, they commenced an eviction action based on the expired lease with PCMR, sort of like getting rid of the ex-wife! The new marriage between Vail and Talisker was a 50-year deal, w/ six 50-year renewal options. Vail agreed to pay at least $25 million a year in lease rent; but the contract also leaves Talisker with the development rights to 4 million square feet of real estate on the resort. It was a win-win for the new parties to this agreement; but PCMR was left out in the snow without any skis.

The Ruling:

In 2014, Utah's 3rd District Court Judge Ryan Harris ruled in favor of Talisker because the resort missed a 2011 lease renewal deadline. He ordered eviction unless the parties could get together to settle the case before the 2014-2015 ski season. Naturally, PCMR wanted to appeal, but the parties couldn’t even agree on a bond amount for PCMR to post during the continuing court proceedings. Meanwhile, in June, 2014, the judge ordered the parties to Mediation.

Just two days after PCMR announced that it would pay the $17.5 million bond required to continue litigation and operate the ski area during the 2014-2015 season, PCMR's owner, Powdr Corp., announced the sale of the ski area to Vail Resorts, Inc. for $182.5 million in cash.

It was finally over, and the sale cancelled the bond and ended over 4-years of litigation between Toronto’s Talisker Land Holdings, LLC and PCMR, costing many millions of dollars in legal fees. Vail Resorts now owned both Canyons and PCMR in the Park City Utah ski area (colored purple and orange in the picture above). PCMR had to absorb decades of lost profits, for what was basically one simple sentence in a lease.

The Aftermath:

Previously, Talisker showed that Powdr CEO testified that the chief financial officer of Powdr Corp. was responsible for "understanding the lease," CEO Cumming said in his deposition, however:

 "that a 'combination of people' had responsibility for the Leases and that, as CEO of Powdr Corp., he was ultimately responsible for renewing the Leases."

CEO Cumming also said in his deposition:

"I run this business. Ultimately I'm responsible. And I have chosen not to try to pin the tail on the donkey . . . So the miss has been pinned squarely on me." Mr. Cumming viewed written confirmation as a “mere technicality.” 

At one point, Mr. Cumming, who was also a member of the board of directors of Powdr Corp., encountered a distraught PCMR President and General Manager, Jenni Smith, on May 2, 2011, after the deadline was missed:

"He explained that he was 'trying to tell her that things like this happen. Things like this mess that's going on right now happen,'"

Powdr Corp.'s chief financial officer at the time, Jennifer Botter, testified that:

"she thought the option to extend was 'automatic.'" According to court records, Botter, "actually testified that she believed the Leases had been extended because the renewals were 'automatic and . . . had already been gained verbally."

Botter resigned from Powdr in 2014. The moral of the story: don't let "things like this happen," read the lease and follow its provisions; or risk losing your business, a good job, and your favorite ski run.

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[much of this story is summarized from earlier news reports, but the fair use of any copyrighted material shown or paraphrased herein, is not an infringement of copyright. 17 USC.Sec.107]

Opinions©Mark H. Pillsbury

Easy as A, B, C: Maturity and the Plight of the Litigator in the Legal Profession

Easy as A, B, C:

Maturity and the Plight of the Litigator in the Legal Profession

Recently, I saw the most trendy, upscale Justice on the Texas Supreme Court introduce an attractive new law clerk, also an attractive, voguish young woman, and it made me consider style versus substance? How can snappy young lawyers dressed to kill have the experience that years of legal battles give a seasoned litigator? It takes time, and handling thousands of files. So how can someone who just graduated from law school advise the highest court in our state? Maybe they should just look up case law at first?

Decompressing after another long conference call negotiating, I got off the phone and thought how many arguments I’d survived in 25 years in the legal profession. Sometimes it feels like all I do is quarrel. Any lawyer’s advocacy can result in conflict—it’s part of the job; if you play football you have to be ready to get hit. After every fight I wonder what I could have done or said differently, which is not an easy thing to do. Self-criticism is important, and we learn the best through adversity.

Without years of study and experience coming from preparing for disagreements and then plowing through the client’s legal and factual points from their frame of reference; young lawyers can’t know how to accept stressful encounters. Until they’ve lived through enough bloodshed to stay calm, engaged, and strategic, even during the opponent’s barrage, they don’t realize the toll taken by advocacy. Even though many young lawyers have early professional opportunities, will they pay attention to the old warriors, or does law school stamp out narcissistic upstarts one-after-the-other, constantly seeking to be right, or win above all other priorities?

Lawyers have clients, and we all must study the law which applies to our client’s story. By definition, the question before the lawyer is an obstacle or complication of our client which requires a lawyer’s assistance. The client’s pickle usually contains an antagonist represented by opposing counsel. This is the stock-and-trade of the legal profession. But there’s more of a nuance between the Main Character in the story and the Protagonist in the story. Lawyers who learn this difference are far more productive. The Main Character (Client) represents the audience’s eyes into the story; the Protagonist (Lawyer) pursues the goal of the story.

Law students practice debate and their professors fight circumlocution from the first day of law school; however, young lawyers don't even realize how oblique their opponent’s references will be when there isn’t much intelligence coming from the other side (as opposed to a law professor). What is the best way to oppose one-sided, unjustifiable positions? Surely it doesn’t include yelling, profanity, threatening sanctions, or discourteous behavior we called "Rambo" litigation back in the 1990s; however, sometimes as we go deeper into an argument, we only convince ourselves, the stronger we force ourselves over opposing counsel.

The way I break this down is just like A, B, C:

Adversity, conflict, or the disagreement of parties in a lawsuit (dialectical reality) is very common for any practicing lawyer. Often the facts of the lawsuit or the way the facts were communicated by your client put the lawyer in a bad position. After years of battles, a seasoned lawyer can survive with the professional perspective that “at least all I have to do is represent my client; I don’t have to take them home!” Older lawyers develop thick skin and grey hair on their way back and forth to the courthouse. Many times the lawyer just can’t take no for an answer; resulting in an inevitable argument and heated negotiations. Most people hate lawyers; but they’ll often tell you they sure like their own?! I learned early that this profession was tough, even though my dad said I'd never have callouses on my hands. It is better for the heart and soul to at least try to reach an agreement that is positive for both parties, although if it comes to a fight, we must do it well for our client.

[The Texas Legislature in their infinite wisdom recently passed a law labeled Senate Bill 534, adding to the lawyer’s oath of office set out in the Government Code, that all incoming lawyers who are licensed by the State to practice law, must also swear: (among their other constitutional duties) to “conduct oneself with integrity and civility in dealing and communicating with the court and all parties.” The bill was signed into law by Gov. Abbott (himself a lawyer) and took effect on September 1, 2015. Yet another attempt by the bar to make civil behavior among its members a cornerstone of the legal profession].

Belief in the position you must take, or the advocacy of the side you represent; the B doesn’t stand for blindness. Well-prepared lawyers know somewhat how the other side will argue, and they fight hard for their position, often against long odds. Reality has to be pushed into the sub-conscious sometimes and one has to internally and externally be consistent in order to be believable. It’s hard not to use hyperbole in place of logic; however if you don’t believe in your argument it probably won’t come across as credible. Yet there's the risk of cognitive dissonance; allowing our beliefs to acclimate to our argument, despite what is apparent. By pushing the opponent farther and farther away, the chances at reaching an agreement become less likely. Although many a lawyer has been deceived by their client, it depends on the case as to whether the lawyer really needs to know the truth; sometimes in order to pursue the goal of the story the lawyer merely needs to be prepared to argue their side and answer logical responses. It takes experience to know how much information is enough. A good example of this is the 1996 film, Primal Fear, with Ed Norton & Richard Gere. Trust me.

Consequences of the argument and the emotional or behavioral requirements required to become an advocate in a situation where the outcome of failure can be extremely unpleasant: I’ve known defense attorneys who take on a “God-complex” when defending a death-penalty case. It’s “Robin hood” taken to the extreme. One cannot always protect their client from their own misdeeds, or even injustice at the hands of the court. The balanced lawyer keeps an even keel, despite the highs of winning and lows of losing. Comparisons kill. Every case is unique, and hopefully in the end, justice prevails despite our flaws. The goal of negotiations should be to find agreement or at least try to find a solution that works for both people involved. Arguing a point just to be adversarial is unproductive, unfair, narcissistic. Each issue addressed is an opportunity to show preparation and the intellect it takes to apply the facts of the story to the law of the case. Law school exams cover an entire semester in one test. Young lawyers soon discover that exams mirror life. Sometimes a lawyer gets but one chance to make or break the case, so they must be vigilant and ready when called upon to argue. That's what is called the burden of proof. Often the case's outcome was destined, the lawyer merely secured a fair process on the road to perdition. The moral of the story is at times, that "it is up to the lawyers to make straight in the desert, a highway for God’s wrath."

Sometimes my dreams contain an escape from Viet Cong sniper fire in a Huey gunship during the Vietnam war. It’s not like litigation rises to the adventure of a firefight during the battle of Ong Thanh; yet, as if in the fog of war, sometimes I rise up from the smoky rice fields trying to strap-in fellow soldiers, wounded and bleeding, as the gunner sprays down a protective .50 cal. gauntlet against these deadly pursuers. Battle is battle, and the same fight or flight stress which affect humans physically and psychologically, manifests daily in litigators just as they did the young soldiers of Vietnam, although surely not as severely. As a non-veteran, are my dreams the result of too much war history, or do they play out in my subconscious the fiery chaos of the battlefield during the last stages of an epic confrontation, like a jury trial?

Finally, there is the topic of the consequences of the high-stakes, high-pressure practice of law which causes greater stress on attorneys as professionals than any other group. A 2016 trailblazing study of over 19,000 lawyers shows an alarming amount of substance abuse, depression, anxiety, and acutely poor mental health among all strata of the profession. Reaching a crisis point, and not being studied seriously in a generation, this study is frightening, and a stark dose of reality, especially for the young lawyers just 10 years or less into the practice of law. Cited here by the Texas Bar Journal (March 2016):

http://heinonline.org/HOL/Page?handle=hein.barjournals/texbarj0079&size=2&collection=texbarj&id=226

©Mark H. Pillsbury