Opinion
Case No. 99-2019-JWL.
January 5, 2001.
MEMORANDUM AND ORDER
A trial to the court was held in this breach of contract and declaratory judgment action arising out of a retail lease agreement between plaintiff American Multi-Cinema, Inc. ("AMC"), as tenant, and defendant Southroads, L.L.C., as landlord. In essence, AMC alleged that Southroads breached the lease, and certain amendments thereto, by failing to deliver timely to AMC physical possession of the leased premises (thereby breaching the "Turnover Date" clause of the lease) and by failing to complete timely various tasks associated with the shopping center of which AMC was one tenant (thereby breaching the "Completion Date" clause of the lease). AMC sought liquidated damages pursuant to a stipulated damage provision in the lease. On October 17, 2000, the court issued its findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). See American Multi-Cinema, Inc. v. Southroads, L.L.C., 119 F. Supp.2d 1190 (D.Kan. 2000). Briefly put, the court concluded that AMC was entitled to recover liquidated damages based on Southroads' breach of the Turnover Date clause in the lease. With respect to the Completion Date clause, however, the court concluded that AMC was not entitled to recover the stipulated sum set forth in the lease because the stipulated sum was an unenforceable penalty.
This matter is now before the court on two post-trial motions-one filed by each party. AMC has filed a motion to amend the pretrial order to conform to a stipulation between the parties regarding certain amounts due AMC and to alter or amend the judgment to reflect those amounts due (doc. #152). Southroads has filed a motion to amend the court's findings and the judgment in various respects (doc. #154). As set forth in more detail below, both motions are denied.
• AMC's Motion to Amend Pretrial Order and Judgment
Pursuant to Federal Rules of Civil Procedure 15(b) and 59(e), AMC moves the court to amend the pretrial order to conform to a stipulation between the parties regarding amounts due AMC and to alter or amend the judgment to reflect that amount. By way of background, Southroads and AMC entered into an agreement whereby AMC promised to reimburse Southroads for costs incurred in connection with fireproofing the back wall of the theater building and Southroads promised to reimburse AMC for costs incurred in connection with construction of an exit corridor, a trench drain within that corridor, and various sidewalks adjacent to the theater. This agreement is memorialized in a letter signed by both parties and dated April 24, 1997. See Trial Exhibit 222.
Prior to trial, the parties stipulated to certain facts, including the fact that Southroads owed AMC $145,227.97 under the April 24, 1997 letter agreement. That stipulation states as follows:
Pursuant to the April 24, 1997 letter agreement between the parties (Exhibit C to AMC's Complaint), the amount of $145,227.97 is due AMC. This obligation is separate and apart from any claims asserted in this suit.See Stipulations, ¶ 8 (filed Sept. 1, 2000). No evidence or argument was presented at trial concerning the parties' obligations under the letter agreement. While the court was preparing its findings of fact and conclusions of law, AMC's counsel sent a letter to the court advising that the court, in resolving the parties' obligations to one another, need not concern itself with the amount due AMC under the letter agreement because counsel for both parties had agreed "that the amount in question will be netted out by the parties once a final judgment is entered and payment is made one way or the other." Thus, the court did not consider any amounts due under the letter agreement in rendering the judgment in this case. Sometime after judgment was entered, Southroads apparently advised AMC that it expected to recover approximately $126,000 from AMC under the letter agreement for costs incurred by Southroads in connection with certain fireproofing work performed. AMC disputes this amount and now, in its motion, essentially moves the court to enforce the stipulation filed by the parties prior to trial and amend the judgment to reflect the $145,227.97 owed to AMC. The court declines to do so. Significantly, the parties' obligations under the letter agreement have simply never been and are not a part of the dispute that is the subject of this litigation. This dispute centers on Article 5 of the lease between the parties and, more specifically, whether the stipulated damages provision in Article 5 is enforceable. AMC never alleged in its complaint that it was entitled to any amounts under the letter agreement. AMC never raised the issue in connection with the preparation of the pretrial order. In fact, the court was unaware of the issue until the parties filed their stipulation. Short of the stipulation, the court has no information about the merits of the parties' dispute under the letter agreement because no evidence was presented at trial on that subject. That having been said, the stipulation was an appropriate manner for the parties to address the letter agreement. Clearly, the tipulation was made in an effort by the parties to wrap up a loose end concerning a separate and distinct aspect of the business relationship between the parties and the court was fully prepared to consider the stipulation in connection with the ultimate judgment rendered in the case. That stipulation, however, was effectively withdrawn by the parties when counsel assured the court that it need not concern itself with the issue of amounts due under the letter agreement and that the parties had agreed to work it out between them. The parties, then, agreed that the issue would be, essentially, taken from the court. The court cannot now enforce the agreement with respect to Southroads' obligations with no consideration of what AMC's obligations under that agreement might be. To do so could impair Southroads' ability to pursue its claim in a subsequent lawsuit should it so desire. By declining to address in any way this entirely collateral issue, the court leaves room for both parties to pursue the issue in a separate suit without concerning themselves with whether this court's judgment precludes consideration of the issue in that suit. For these reasons, AMC's motion is denied.
One minor exception is Trial Exhibit 255 — various spreadsheets computing AMC's claim for damages which included a line item for amounts due under the letter agreement. Although Southroads did not object to the admission of Exhibit 255, there is some question whether Southroads knew that the line item was contained in the Exhibit. In any event, there was no testimony about the amount due under the letter agreement or the parties' obligations under the agreement.
Southroads also filed a counterclaim for unpaid rent — rent that AMC had withheld in light of the stipulated damages provision.
• Southroads' Motion to Amend Findings and Judgment Pursuant to Federal Rules of Civil Procedure 52(b) and 59(e), Southroads moves the court to amend its findings of fact and, accordingly, the judgment rendered. As an initial matter, Southroads contends that one of the court's most significant findings of fact is premised on a misunderstanding of the evidence relied upon by the court in finding that fact. Specifically, the court found that AMC, in December 1996, was still anticipating a Summer 1997 opening for its theater. In making this finding, the court relied primarily on Trial Exhibit 207-a photograph depicting a large sign erected at the Southroads shopping center advertising the theater's opening in Summer 1997. In discussing Exhibit 207, the court stated as follows:
According to Darrell Kent, MBK's on-site project manager for construction of the Southroads 20, this sign remained in place until at least mid-February 1997. This sign demonstrates that AMC, at least until as late as February 1997, still believed that a Summer 1997 opening was possible. There is simply no reasonable business explanation for AMC to advertise to the public a Summer 1997 opening if in fact AMC knew that it would not open until November 1997. At trial, much was made of the fact that AMC was new to the Tulsa market and was concerned about Tulsa's first impressions of AMC. It is simply not conceivable that AMC would risk alienating the public by knowingly misrepresenting to the people of Tulsa the anticipated opening of the theater. The only reasonable conclusion is that AMC still hoped for a Summer 1997 opening (albeit late Summer 1997) until Southroads' delays extended through February and into March 1997.See American Multi-Cinema, Inc. v. Southroads, L.L.C . , 119 F. Supp.2d 1190, 1198 (D.Kan. 2000). With the benefit of the trial transcript, Southroads advises that Mr. Kent did not testify that the sign "remained in place until at least mid-February" but, instead, testified that the sign was "erected" in mid-February 1997.
This finding was particularly significant because if AMC in December 1996 (the time when AMC could have begun construction of its theater if Southroads had turned the pad site over in a timely fashion) was not anticipating a Summer 1997 opening (and, instead, was anticipating opening during November 1997), then AMC would have suffered no harm as a result of Southroads' breach of the Turnover Date clause. In other words, if AMC, at the time it would have been able to begin construction had it been provided a pad site, had planned on opening its theater in November 1997, then Southroads' delay in turning over the pad site would have caused no harm to AMC because AMC did, in fact, open its theater in November 1997.
At first blush, the mere fact that AMC erected the sign in mid-February (as opposed to some earlier time) does not appear to undermine in any way the court's conclusion that AMC would not advertise to the public a Summer 1997 opening if in fact AMC knew that it would not open until November 1997. As Southroads points out, however, if in fact the sign was not erected until mid-February 1997, then the court's conclusion is not so easily drawn. It was undisputed at trial that the construction of the theater would take between 8 and 9 months. In mid-February 1997, construction of the theater had not even started. Thus, Southroads asks, why would AMC erect a sign in mid-February 1997 announcing to the public a Summer 1997 opening when they must have known that an opening was at least 8 months away? It was also undisputed at trial that on February 19, 1997, AMC signed a construction rider that contained a construction completion date of November 5, 1997. Why, then, Southroads asks, would AMC erect a sign announcing to the public a Summer 1997 opening at the same time it signed a construction rider that contemplated a November 1997 opening?
Q: Do you recall when this sign was erected?
Southroads surmises that AMC was simply "puffing" when it erected the sign in February 1997 — that AMC wanted Tulsans "on the edge of their seats in anticipating the opening of the theater." According to Southroads, "it is no different than when a retail store has a `going out of business — everything must go' sale, and that sale goes for a year and then the store remains open." The court is not persuaded by this analogy. The retail store in Southroads' analogy presumably already has earned the goodwill of its customers — customers who, in all likelihood, would not be disappointed or disgruntled if the store decided to remain open after a year-long "going out of business" sale. In other words, that store probably has nothing to lose by deciding to stay open after the sale (and, perhaps, has something to gain by having the sale in the first place). By contrast, AMC would have much to lose by advertising to the public a Summer 1997 opening when, in fact, it had no intention of opening until November 1997. Unlike the retail store described by Southroads, AMC had no established market in Tulsa. By opening later than it had advertised, AMC risked alienating the public (customers it did not yet have) by leaving a negative impression with the people of Tulsa. For this reason, Southroads' "puffing" explanation makes little sense to the court. So what is a reasonable explanation? The court believes it is likely that AMC erected the sign earlier than Mr. Kent recalled, probably in early January 1997, a time when AMC could have reasonably believed it was still possible to catch the "back end" of the summer business. Significantly, Mr. Kent's testimony at trial concerning when the sign was erected was far from decisive. The relevant exchange between counsel and Mr. Kent was as follows:
A: I don't recall specifically. I would gather it was erected during the month of February.A: I'd say mid February, if I have to venture a guess . In the end, the court need not determine when the sign was actually erected. For even assuming that AMC, in mid-February 1997, anticipated a November 1997 opening, the court would nonetheless conclude that AMC, in December 1996, still anticipated a Summer 1997 opening. As even Southroads admits, ignoring Exhibit 207 and Mr. Kent's testimony, the only evidence regarding whether AMC believed in December 1996 that it would make a Summer 1997 opening is the testimony of Doug Seibert, AMC's director of design and development for the Southroads 20. According to Southroads, Mr. Seibert testified unequivocally that AMC "knew at some time before December 10, 1996 that it was not going to make a Summer 1997 opening." The court disagrees. While Mr. Seibert agreed with defense counsel's statement on cross-examination that "at some point in late '96, AMC saw they were going to miss the '97 summer opening," this statement, when read in context with Mr. Seibert's other testimony, is insufficient to support the conclusion that Southroads suggests. A closer review of Mr. Seibert's testimony reveals that once AMC recognized at the end of 1996 the very real possibility that they were going to miss a Summer 1997 opening, AMC began analyzing different ways in which to shorten the construction period and open the theater for summer, including accelerating the project by paying overtime and doubling up on subcontractors of a specific trade. Mr. Seibert further testified that in December 1996, it was still "important to AMC to get the project opened for summer" and that there was a lot of pressure on him from his superiors to get the theater opened by that time. Thus, the record supports the court's finding that AMC, in December 1996, anticipated opening the Southroads 20 in the summer of 1997. To the extent, then, that Southroads moves to amend the court's findings of fact and the judgment on this basis, the motion is denied. In the alternative, Southroads moves the court to amend its finding that AMC, because of Southroads' delay in turning over the pad site, was "delayed 111 days in opening the Southroads 20." According to Southroads, AMC was delayed only 81 days in opening its theater (because AMC was not able to start construction until December 15, 1996) or, at most, 98 days in opening its theater (because AMC planned on opening the theater on August 14, 1997, which is only 98 days prior to the day the theater actually opened). In essence, Southroads contends that AMC is entitled to recover damages with respect to the Turnover Date only for the number of days which Southroads actually delayed the opening of the theater. While Southroads concedes (as it must) that the lease permits AMC to recover damages for each day between the Turnover Date and the date on which Southroads delivered a properly certified pad (in this case, 111 days), it nonetheless contends that the court's findings of fact now preclude such a result. According to Southroads, the court specifically found that the stipulated damages provision was enforceable only to the extent that Southroads' breach actually delayed the opening of the Southroads 20. In support of its assertion, Southroads essentially relies on one sentence from the court's order — "The court concludes that AMC did intend for the stipulated damage provision to compensate AMC for damages it would sustain as a result of Southroads' breach of its Article 5 obligations, but only to the extent that breach actually delayed the opening of the Southroads 20." See Order at 36. When read in context, however, the sentence does not stand for the broad proposition that defendant suggests. Rather, the court made the statement in the context of assessing the reasonableness of the Turnover Date clause in its entirety. The court determined that the clause was reasonable, in part because the court had found that the parties intended the four to one provision to compensate AMC for the damages it would suffer if it was delayed in opening its theater as a result of Southroads' breach. In making the statement cited above by Southroads, the court was contrasting AMC's concern with compensation for its inability to open with AMC's apparent lack of concern with compensation for damages it would suffer in connection with mobilizing construction, lost goodwill or any of the particular completion date items. The court did not suggest in any way that AMC's damages with respect to the Turnover Date would be or should be subject to the piecemeal approach suggested by Southroads and, indeed, the express language of the lease prohibits such a result
Contrary to Southroads' characterization of the court's findings of fact, the court never found that AMC was delayed 111 days in opening its theater. Rather, the court found only that the stipulated sum with respect to the Turnover Date clause was enforceable as liquidated damages and that the sum "represents 111 days of delay (measured from November 15, 1996 through March 6, 1997 as per Article 5 of the lease) multiplied by AMC's daily rent . . . multiplied by four. . . ." See AMC v. Southroads, 119 F. Supp.2d 1190, 1199 (D.Kan. 2000) (emphasis added).
This result does not provide a windfall to AMC. For example, even if AMC was only delayed 98 days in opening its theater, the evidence at trial demonstrated that AMC expended additional costs in connection with its construction efforts in order to get the theater opened on November 21, 1997. These costs, then, are absorbed by the liquidated damages AMC received for the 111-day period.
For the foregoing reasons, the court reaffirms its findings of fact and conclusions of law with respect to AMC's claim for liquidated damages with respect to Southroads' breach of the Turnover Date clause. Southroads' motion to amend is denied in its entirety.
• Amended Judgment
Subject to the issues raised in their respective motions, the parties have agreed on the form and substance of an amended judgment which nets the amounts owed by each party, accounting for payment of claims and interest. Southroads has attached that amended judgment to its motion as Exhibit D. Having reviewed the amended judgment, the court finds it appropriate and will file the same.
IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff's motion for amendment of pretrial order and to alter or amend judgment (doc. #152) is denied; defendant's Rule 59 and Rule 52 motion (doc. #154) is denied. The amended judgment to which the parties have stipulated, as attached to this order, shall be entered accordingly.