Opinion
No. CV 03 0090036S
November 22, 2005
MEMORANDUM OF DECISION
This case arises out of a series of business disputes between the plaintiffs, John "Skip" Barber, III (" Mr. Barber") and Lime Rock Associates, Inc. ("Associates"), and the defendant, Skip Barber Racing School, LLC ("the New School"). Prior to the trial of this case to the court, there was a two-day evidentiary hearing on competing motions for prejudgment remedy. By stipulation of the parties, the testimony and exhibits in that hearing were made a part of the record in the trial of this case. The trial lasted nine additional days in which the parties contested a variety of issues. The court made a site visit with the attorneys, and the parties submitted extensive post-trial briefs.
I. Pleadings
The original complaint is in eight counts, the first of which relates to Mr. Barber, and the next seven of which relate to Associates. The New School filed an answer, a special defense and ten counterclaims. On January 14, 2004 the defendants filed an Amended Counterclaim which added an eleventh counterclaim. The plaintiff answered the Amended Counterclaim on March 3, 2004. On March 3, 2004 the plaintiff filed an Amended Complaint which adds a ninth count. The court file does not indicate that the defendants ever answered this ninth count. Neither party presented evidence or briefed this ninth count.
The New School obtained permission to implead, as a third-party defendant, the Skip and Judith Barber Charitable Remainder Unitrust ("the Trust"). The Third-Party Complaint filed against the Trust seeks monetary damages, interest and attorneys fees. The answer to the Third-Party Complaint is dated March 3, 2004.
II. Facts
The general facts will be stated here. More specific facts will be stated in connection with each issue. Mr. Barber is a former professional race car driver. In 1975 he established an auto racing school at Lime Rock Park ("the Track") in Lakeville, Connecticut known as Skip Barber Racing School, Inc. ("the Old School"). The Track property contains a 1.53-mile paved auto racing track together with supporting areas and buildings. The owner of the Track at that time worked out a verbal agreement with the Old School concerning the portions of the Track property which could be used by the Old School, the schedule of usage, and the schedule of payments to compensate the Old School. The Old School eventually expanded to other tracks throughout the United States and Canada, added a defensive driving component, and established a racing series for their former students.
In 1983 Associates purchased the Track. In the early 1990s, Mr. Barber became the controlling stockholder in Associates, and was then in control of the Track property and the Old School. In the spring of 1999 Mr. Barber sold 80% of his stock in the Old School to an investor known as Sports Capital, LLC with Mr. Barber staying on as CEO of the Old School. As a part of the stock purchase, Sports Capital required that Associates and the Old School negotiate a written agreement covering the usage of the Track and the compensation paid by the Old School. Sports Capital insisted that the agreement contain protection against excessive rate increases which might be imposed on the Old School by Associates. The result was a 15-year written Usage Agreement which was signed by Mr. Barber as CEO of both Associates and the Old School. The Usage Agreement was intended by Associates and Sports Capital to continue the verbal agreement which had governed the Old School's use of the Track, subject to new "price protectors" to prevent Associates from making unjustified increases in the rates charged to the Old School. Several of the issues in this case involve the interpretation of the Usage Agreement.
The Old School suffered extreme financial distress during the ownership of Sports Capital. In December 2001 the assets of the Old School were purchased by the defendant, Skip Barber Racing School, LLC ("the New School") pursuant to a written Asset Purchase Agreement ("the APA"). Prior to the purchase, First Equity conducted due diligence concerning all aspects of the Old School's finances including the Usage Agreement. First Equity was rightly concerned about whether the Usage Agreement provided adequate protection against steep price increases by the Track. Ultimately, the asset purchase took place without any changes made in the Usage Agreement. The New School is owned by a venture capital company known as First Equity, the principals of which are highly sophisticated investors. The APA provides that the New School assumed only a portion of the debts of the Old School.
III. American Express charges
The first count of the Amended Complaint is brought by the plaintiff Mr. Barber to recover for American Express charges, which he guaranteed, made by employees of the Old School for business-related travel expenses in the days leading up to the defendant's purchase of the assets of the Old School. Mr. Barber claims that the APA obligates the New School to reimburse him for these charges.
§ 2.03(c)(E) of the APA provides that:
"Purchaser [New School] shall not assume any liabilities or obligations of the Company [Old School], whether such liabilities are known or unknown, actual or contingent, liquidated, except that Purchaser agrees to assume from after the Closing, . . . (E) medical claims exposure (including related administrative costs) and employee expense reimbursement . . ."
Mr. Barber argues that the charges on the American Express card are for "employee expense reimbursement" as intended by § 2.03(c)(E), and that as a guarantor on the card he is entitled to reimbursement from the defendant. The defendant argues that § 2.03(c)(E) applies only to employee medical expense reimbursement, and that there was never any proof Barber actually guaranteed the payment of the charges.
I agree with the defendant that § 2.03(c)(E) relates to medical claims and reimbursement, not to a broad promise to assume responsibility for reimbursement of any kind of employee expense reimbursement. Subsection (E) follows a series of subsections which are each devoted to one, and only one, subject. They are all part of subsection (c) which reads "all liabilities or obligations to Employees arising from or relating to (A) earned or accrued vacation pay, (B) earned or accrued sick leave, (C) short-term or long term disability benefits, (D) severance pay, (E) medical claims exposure (including related administrative costs) and employee expense reimbursement and (F) any other benefits . . ." It is not probable that subsection (E) would be devoted to two subjects § — medical claims and employee expense reimbursement — unless the employee expense reimbursement also related to medical claims.
Furthermore, Mr. Barber did not sustain his burden of proof on the balance of the claim.
Although his name and the Old School name are both on the American Express billing, there was no evidence that he signed a guarantee which can be enforced. It is clear from the testimony that this American Express credit card was a business card used by the Old School for business obligations. Although it would not be unusual for the principal of the business to have signed a personal guarantee, there was never any evidence of this claim. It is unusual that American Express has not sued Mr. Barber for charges that are now over three and one-half years old. In any event, Mr. Barber had the burden of proof on this claim and failed to sustain it.
IV. Disputes Over Use of Various Areas
Paragraph 14 of the Second Count states: "Furthermore, Lime Rock and the School have been unable to agree as to which of them owns the capital improvements that the School contends that it made to the Park's facilities." The plaintiff seeks a declaratory judgment as to "the identity of the party(ies) holding legal right, title, and interest in and to any capital improvements effected at the Park."
A. The second autocross course
At the time the Usage Agreement was signed in March 1999 there was only one autocross course on the track property. It was included in the Upper Area referred to in the Usage Agreement. In July 1999, the Board of Directors of the Old School approved a capital expenditure, submitted by Mr. Barber as the President and Chief Executive Officer of the Old School (he was, of course, also the majority owner of Associates at that time), of $242,000 for the construction of a second autocross course to be used by the Old School so that it could have two programs running concurrently, or be used together with the original autocross course to form a larger course. This second autocross course was constructed in late 1999. In his effort to persuade the Board of Directors to pay for this work, rather than having Associates pay for it, Mr. Barber stated that "the new paving was only useful to the [Old School] and actually detracted from the Lime Rock property itself." There was no discussion about the Old School paying extra rent to Associates for using this new autocross course.
The expenditure of $242,000 was recorded on the balance sheet of the Old School as a leasehold improvement. The Old School used the new autocross course in its operations without charge until its assets were sold to the New School in December 2001. The New School continued to use the second autocross course, without charge, through the 2002 season. In March 2003 a footnote appeared in the memorandum prepared by Associates that the New School was not entitled to use the second autocross course for free, but was paying for it through charges of $1,250 per day of use applied against a credit for the construction cost of $242,000. As of April 2004, Associates claims that the New School had used up the credit created by the $242,000 cost of construction and was required to pay rent for the second auto course at the rate of $1,250 per day of use.
It is clear that the credit arrangement claimed by Associates was not made part of the minutes of the Board of Directors of the Old School at the time Mr. Barber convinced it to pay for the construction of the course. Nor was the Usage Agreement ever amended to reflect it. Nor was the New School informed of it until more than a year after it purchased the assets of the Old School. During the "due diligence" period, the only information provided to the New School was that the Old School paid for the second autocross course and that the Old School was not making any cash payments for its use. It is clear to the court that Associates only raised the issue of payment for the second autocross course after the New School stopped paying the full amount billed by Associates under the Usage Agreement, and at a time when Associates began to rent the second autocross course to a go karting organization.
§ 2.1 of the Usage Agreement provides, in part, that:
"Barber [The New School] shall have the right to use the Track, the Upper Area and their associated garages, parking areas and related facilities . . ." The Upper Area is defined as the area shown on Exhibit D, a map of the entire park. There is a rectangular area surrounding the "Skip Barber Autocross Course" which is labeled "Upper Area." Although this map is not drawn to scale, it is my estimation from my site visit that the second autocross course is built at least partially within this rectangle. It is also clear to me that the second autocross course is a "related facility" to the first autocross course. It is connected to the first autocross course by short paved roads so that cars can use both courses together as one.
A declaratory judgment shall enter that the second autocross course is a "related facility" to the Upper Area and its use is subject to the terms of the Usage Agreement in all respects.
B. Braking Zone/Midway
The "braking zone" is a wide, straight section of road located between the chalets and the skid pad. It has been used by the Old School and the New School to conduct braking and lane change exercises. The court observed these exercises during the site visit. There has never been an additional charge for use of the braking zone. This same area is also known as the "midway" which Associates rents to various vendors for sales tents during major race weekends.
Associates asks the court to declare that the braking zone/midway is not included under the Usage Agreement and that it can prevent the New School from using it, or require the New School to pay some unspecified charge for its use. Associates argues that the braking zone/midway is not located within the Upper Area, and that the New School can use the autocross courses for braking and lane change exercises. Associates argues that it has permitted the Old School and the New School to use the braking zone/midway, without charge, as an accommodation only. Associates feels justified in asking for a determination that this accommodation can be discontinued now that the New School has refused to pay the usage billings in full.
This issue is controlled by the intent of the parties to the Usage Agreement as expressed by the words used. The Usage Agreement provides that the Old School, and now the New School "shall have the right to use the Track, the Upper Area and their associated garages, parking areas and related facilities . . ." It is clear from the map attached to the Usage Agreement that the braking zone/midway is not within the rectangle marked "Upper Area" although it leads to the skid pad which is designated as being in the Upper Area. But it is also clear that the parties to the Usage Agreement intended the braking zone/midway to be a "related facility" to the Upper Area. The Old School used it, at no charge, as part of its school facilities before and after the Usage Agreement was signed. It continues to be used by the New School, subject, of course, to Associates' rights to exclusive use of this area on the days necessary to prepare the midway for race weekends. Although Associates argues that braking exercises could be done on the autocross course, this would severely restrict the New School's ability to conduct autocross activities simultaneously with braking practice. My own site visit included an observation of driving school braking lessons being conducted by the New School on the braking zone/midway at the same time that the autocross course was being used for another activity. It is not probable that the parties to the Usage Agreement intended to prevent this kind of simultaneous activity. A declaratory judgment shall enter that the braking zone/midway is a "related facility" to the Upper Area and its use is subject to the terms of the Usage Agreement in all respects.
C. The "B" Paddock
The "B" Paddock is an area of the Track property which is not specifically mentioned in the Usage Agreement although it is shown on the map attached to it. It is adjacent to the Maintenance Building. The Usage Agreement provides that the New School has the right to use 90% of the space in the Maintenance Building at the rate of $2,800 per month. The evidence of prior use of the "B" Paddock by the Old School and by the New School was for short-term overflow parking. There are photographs in evidence, confirmed in the court's site visit, that the New School occasionally parks race cars and trailers there near the maintenance building. Beginning in June 2002 Associates began to impose a $1,500 daily fee for the New School's use of the "B" Paddock. It now claims that the New School owes $159,250 for use of the "B" Paddock in 2002, 2003 and 2004.
As stated previously, § 2.1 of the Usage Agreement provides, in part: "Barber [the New School] shall have the right to use the Track, Upper Area and their associated garages, parking areas and related facilities . . ." The evidence is that the area of the "B" Paddock adjacent to the Maintenance Building is a "parking area" as provided for in § 2.1 but solely as overflow parking for the Track and Upper Area. Associates is not entitled to bill the New School separately for such overflow parking.
Although there was evidence that, on occasion, the New School has used the B Paddock for driving school exercises, this evidence was not sufficient to prove the number of days of such use beyond the incidental parking which is permissible without extra fee. Therefore, damages for use of the B Paddock must be rejected. However, a declaratory judgment will issue that the New School is only entitled to use the B Paddock for overflow parking incidental to the Track and Upper Area. Any other use of the B Paddock requires the permission of Associates and the payment of a fee at retail price.
V. Prices Charged for Use of the Track A. Track and Upper Area
The largest single item in dispute concerns the prices to be charged to the New School for 2002 and subsequent years for the track and upper area. There were no disputes until 2001 because the Usage Agreement specifies fixed prices for use of the track and upper area for 1999, 2000 and 2001. Exhibit E to the Usage Agreement is titled "Track and Upper Area Fees. Track Retail Prices." It lists retail prices for the track for each day of the week, except Sunday, for 1999, 2000 and 2001. Below this listing is the following: "The retail price for the Upper Area is $1,200 per day. Except for Barber Race Weekends, Barber pays 1/2 of the Track and Upper Area retail prices." So, for 1999, 2000, and 2001 Associates billed 50% of the retail prices shown on Exhibit E for use of the track and upper area. These billings were paid without dispute.
By virtue of an injunction issued many years ago, no racing may be done on Sundays.
The parties have very different interpretations of the Usage Agreement's provisions for calculation of prices for subsequent years. Beginning on January 1, 2002 the Usage Agreement provides for prices to be calculated in accordance with a procedure set forth in § 4.2. Associates has calculated the prices to be charged and has submitted regular invoices to the New School.
The New School has regularly paid only a portion of these invoices based upon its own interpretation of the proper calculation of prices. Associates claims that the New School owes approximately $1,000,000 in unpaid invoices.
§ 4.2 of the Usage Agreement provides, in relevant part:
"All prices paid by Barber to Lime Rock shall be as set forth in this Agreement and shall be fixed for a period of one (1) year after the date hereof provided that the fees for the Track set forth in Exhibit E shall be fixed until December 31, 2001. After a price ceases to be fixed hereunder, it shall increase . . . (b) for the Track and Upper Area no more than once each year by an amount so that such price is competitive with both (i) the amount charged therefore by other comparable tracks to Barber, and (ii) the amounts charged by Lime Rock therefore to other customers of Lime Rock. The fifty percent (50%) discount specified in Exhibit E shall apply to rates for the Track and Upper Area for the period after the fixed period identified in Exhibit E. The prices charged by Lime Rock to Barber shall be the lowest prices charged by Lime Rock to any customer of Lime Rock for use of the Track and/or the Upper Area, other than for bona fide charitable events and promotional, marketing and introductory or demonstration events not competitive with the business of Barber."
Associates argues that § 4.2 means that the proper procedure is that 1) Associates will establish its retail rate for all track users for the upcoming year, 2) Associates will charge the New School a price which is 50% of this retail rate for weekdays and 100% of the retail rate for Barber Race Weekends (Thursday, Friday and Saturday) unless those rates violate one of the "protectors" to be discussed later. The New School argues that the proper procedure is 1) to determine the average price charged to the New School at comparable tracks, 2) Associates will charge the New School 50% of this average. In essence, the difference in the two readings of § 4.2 is whether the market comparison "protector" is made before or after the 50% discount is applied.
In order to interpret § 4.2 it is necessary to state the general principles of contract interpretation. "As with the interpretation of all contracts, we must construe the instrument to effectuate the intent of the parties, which is determined from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction. The intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract . . . Where the language of the contract is clear and unambiguous, the contract is to be given effect according to its terms. A court will not torture words to import ambiguity where the ordinary meaning leaves no room for ambiguity . . . Similarly, any ambiguity . . . must emanate from the language used in the contract rather than from one party's subjective perception of the terms . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous . . . If the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous . . . By contrast, language is unambiguous when it has a definite and precise meaning . . . concerning which there is no reasonable basis for a difference of opinion." (Citations and internal quotation marks omitted.) Goldberg v. Hartford Fire Ins. Co., 269 Conn. 550, 559 (2004).
The first issue to be addressed is whether § 4.2 is ambiguous. The answer to this question is that part of § 4.2 is ambiguous and part is not ambiguous. As to the essential question of whether the market comparison comes before or after the 50% discount I can find no ambiguity. The language of § 4.2 uses the word price when referring to the amount to be billed to the New School. The first sentence begins "All prices paid by Barber [the New School] to Lime Rock [Associates] . . ." The second sentence begins "After a price ceases to be fixed hereunder, it shall increase . . . no more than once each year by an amount so that such price is competitive with both (i) the amount charged therefore by other comparable tracks to Barber . . ." The words such price are clear: they mean the price to be charged to the New School. They do not mean, as argued by the New School, the retail price charged by Associates to other users of the Track. The New School is to be billed at 50% of the Track retail price. Retail prices at the Track clearly mean the prices which Associates charges its customers who use the track and the upper area. Such price charged to the New School must be 50% of the retail price charged by Associates provided that such price does not violate any of the protectors. Repeated readings of § 4.2, and application of the requirement to accord the language used its common, natural and ordinary meaning and usage, have failed to reveal to me any ambiguity on this point. The court cannot torture words to import ambiguity even though the New School has advanced a different interpretation and has offered substantial collateral evidence on the meaning of § 4.2. The ambiguity must emanate from the language used in the contract rather than from one party's subjective perception of the terms. Id. This means that the price actually charged the New School (50% of the retail rates for weekday use of the track and upper area) must be competitive with the amount charged to the New School at comparable tracks.
One of the reasons that the New School urged the court to find an ambiguity on this point is its argument that any ambiguity in the Usage Agreement must be construed against Associates because Barber allegedly drafted the language used in this section in the Usage Agreement. It is well-settled that "ambiguous contractual language should be construed against the interest of the party that drafted it." Levine v. Advest, Inc., 244 Conn. 732, 755-56 (1998). But, even if there were an ambiguity on this point, the New School did not prove, by a fair preponderance of the evidence, that Associates or Barber drafted the Usage Agreement. Sports Capital, a sophisticated investor, insisted on the drafting and execution of this written agreement so as to protect itself against unreasonable rate increases. Sports Capital was represented by Fulbright Jaworski, a well-known national law firm. The purchase of the Old School by Sports Capital was financed by IMG/Chase Equity Partners, an experienced lender. It is unreasonable for the court to conclude, without evidence, that Associates or Barber unilaterally drafted the important provisions concerning the rates to be paid by the Old School. On the contrary, the evidence supports a finding that the Usage Agreement was the result of negotiation between Associates and Sports Capital. Therefore, even if the language of the Usage Agreement were ambiguous in the ways suggested by the New School, it would not be construed against Associates.
Another reason why the New School argued so strongly for an ambiguity is so that the court would be able to make use of evidence it presented that prior to the closing Barber assured the New School that "you always pay 50% of what you pay at other tracks." This statement is contrary to the clear language of § 4.2 and could only be used by the court to interpret § 4.2 if it were ambiguous. But, this evidence was disputed by Barber who testified that he never told the New School that the formula involved comparing the Track's retail prices against the rates at comparable tracks. Even if § 4.2 were ambiguous on this point, the evidence was not sufficient for the court to find, by a fair preponderance of the evidence, that this statement was actually made by Barber, either prior to the closing or after the closing.
The position taken by Associates as to the meaning of § 4.2 is more equitable, reasonable and rational than that of the New School. Prior to the Usage Agreement, Associates and the Old School had a verbal agreement that the Old School would pay weekday prices which were 50% of the retail prices for other users of the Track. The Usage Agreement carries this forward with the addition of the "protectors" which do produce a measure of ambiguity. But when trying to determine the meaning of the "protectors" the court must continue to give meaning to the statement in Exhibit E that "Except for Barber Race Weekends, [the New School] pays 1/2 of the Track and Upper Area retail prices." The interpretation suggested by the New School would render superfluous this statement. The New School's interpretation makes no use of the Track and Upper Area retail prices in calculating new rates to be charged to the New School. It depends solely upon the average rates charged to the New School at comparable tracks. "The law of contract interpretation militates against interpreting a contract in a way that renders a provision superfluous." United Illuminating C.V. Wisvest-Connecticut, LLC, 259 Conn. 665, 674 (2002).
A more reasonable interpretation is that the first step in the price setting process is for Associates to set its retail price for all other users; the price charged to the New School is 50% of the retail price. The second step in the price setting process is to check to see if 50% of the retail price for other users violates any of the "protectors." These "protectors" can be expressed in the following questions:
1. Has the price charged to the New School been increased more than once in any given year?
2. Is the price charged to the New School "competitive" with the amounts charged to the New School by "comparable" tracks?
3. Is the price charged to the New School "competitive" with the amounts charged by Associates to other customers of Lime Rock?
4. Is the price charged to the New School the lowest price charged by Associates to any customer for use of the Track, other than for bona fide charitable events and promotional, marketing and introductory or demonstration events not competitive with the business of the New School?
There is no dispute that the answer to question 1 is "no." Nor is there any dispute that the answer to questions 3 and 4 is "yes." In order to answer question 2 we must discuss the meaning of the words "competitive" and "comparable." The parties spent a great deal of time and effort to provide the court with evidence on these points. Having reviewed all of this evidence in detail, I find that the billings sent to the New School by Associates do not violate protector 2, even if the court uses the meaning of "competitive with" and "comparable tracks" suggested by the New School.
The New School argues that "competitive with" must be given a meaning of "equal to the average of" the rates charged at comparable tracks. Associates seems to take the position that "competitive with" means "less than the average of" the rates charged at comparable tracks. This latter interpretation conforms to the dictionary definition of "competitive." "Competitive. Adj. Able to attain desired response or results in a competitive situation, as the prices, services, or quality of products of a business organization." Webster's New Universal Unabridged Dictionary, p. 300. The prices of similar products do not have to be equal in order to be "competitive." The prices charged at certain discount stores are said to be "competitive with" prices charged at other stores even though they are always lower. From 1918 until last season the Yankees and Red Sox teams were said to have been "competitive with" each other ("the greatest rivalry in sports") even though the Yankees had won 26 World Series titles and the Red Sox none. The prices charged to the New School can be "competitive with" the prices charged at comparable tracks even though they are not equal to a mathematical average of those prices.
The parties disagree heatedly over the meaning of "comparable tracks." Associates argues that "comparable tracks" are limited to four other tracks called "base locations" because they: 1) can run a driving school, 2) are in a desirable location, 3) have good reputations, 4) can host major spectator events, 5) will provide a major volume discount, and 6) will offer sufficient days to run the New School programs. The New School takes a wider view. It argues that "comparable tracks" includes all tracks at which the New School conducts similar programs to those conducted at the Park. Interestingly, the average rates charged to the New School at the "base locations" is lower than the average rates at all locations used by the New School. And, both averages are higher than the rates charged to the New School by Associates. For example, the average weekday price paid by the New School in 2002 at all of its tracks is $4,676 while the average price paid at the base locations was $4,137. The price charged by Associates was $2,500, a price which is comparable regardless of which average is used. The same situation occurs with the prices of 2003 and 2004 as well as the weekend rates for all those years; the averages for the base locations and for all "tracks" are well above the rates charged by Associates.
Although it is an academic question based upon the court's interpretation of § 4.2, it is possible that the words "comparable tracks" can encompass a list of tracks which is larger than the base locations only. If the parties to the Usage Agreement had wanted to limit "comparable" tracks to the base locations they could have done so. But, for the years 2002, 2003 and 2004 there was insufficient evidence to prove by a fair preponderance of the evidence that "comparable tracks" include all of the other locations used by the New School. Therefore, "comparable tracks" for 2002, 2003 and 2004 must be limited to the base locations.
A declaratory judgment shall enter that the § 4.2 pricing formula is calculated in accordance with this section of this memorandum of decision.
B. Barber Race Weekends
There are four weekends per season when the New School holds actual racing events on the track. These weekends are known as Barber Race Weekends. Exhibit E to the Usage Agreement provides that "Except for Barber Race Weekends, Barber [the New School] pays 1/2 of the track and Upper Area retail prices." The fair reading of this language is that Associates is not limited to billing 50% of retail on Barber Race Weekends. But, Associates has billed at full retail price for Barber Race Weekends, apparently on the theory that the other protectors do not apply. There is no support for this theory in the language of the Usage Agreement. During these Barber Race Weekends the price charged to the New School may be no higher than permitted by the protectors.
The parties have a dispute over whether "Barber Race Weekends" are Thursday, Friday and Saturday, or Friday and Saturday, or just Saturday. At most tracks a race weekend consists of Friday, Saturday and Sunday, with Friday being the day when the racers practice on the track, and Saturday and Sunday being the days of actual racing. Associates argues that Barber Race Weekends at Lime Rock Park include Thursday as a practice day and Friday and Saturday as the days of actual racing. A long-standing injunction prevents racing at the track on Sundays. Therefore, on the four race weekends each season, Associates bills the New School full retail price for its use of the track on Thursday, Friday and Saturday. The New School argues that Thursday and Friday are not part of the weekend and must be billed as any other weekday use.
The meaning of Barber Race Weekend is illuminated somewhat by a sentence in Exhibit F of the Usage Agreement which provides: "Additional emergency medical technician for Race Weekend (Thursday through Saturday) — $1,000 per day." Also, New School certainly uses the Thursdays of Barber Race Weekends for practice under unlimited passing conditions. In fact, the New School sought a temporary injunction preventing Associates from assigning one of the four Thursdays to someone else. It seems clear that Barber Race Weekends include Thursday and Friday of the four weekends used by the New School for actual racing.
The price which the New School should have been billed for use of the track on Barber Race Weekends should be no higher than the average of the weekend prices paid by the New School at the base locations. For 2002 this price was $4,137 per day; for 2003 it was $4,202 per day; for 2004 it was $4,235 per day.
C. Paving Surcharge
In 2002 Associates began assessing its users a paving surcharge of $1,000 per day to defray the cost of re-paving the track. The New School has refused to pay this surcharge. Since the court's decision on the prejudgment remedy, Associates has simply included this charge into its basic track rent. The balance due on the surcharge is $165,750.
There is no legal justification for this surcharge or the addition of the charge to the rent. The Usage Agreement provides a formula for calculation of the rent to be paid for use of the track. There is no provision for a surcharge. Other users of the track can be charged a surcharge because they do not have long-term agreements with Associates and must negotiate new agreements each year. The Usage Agreement provides protection for the New School against any charges except those specifically provided for in the agreement.
D. Racing Surcharge
This is a confusing issue which arises out of the attempt by Associates to charge the New School for the cost of an increased level of medical preparedness required during racing. Associates claims unpaid surcharge fees of $21,480 of 2003 and 2004. Associates argues that the New School is the only customer which has not paid this surcharge. But, as with the paving surcharge, the New School has a contract with Associates which other customers do not have. The Usage Agreement provides a formula for the calculation of fees to the New School. This formula does not include a surcharge in addition to the $1,000 which can be charged for "Additional emergency medical technician for race weekend (Thursday through Saturday)." This surcharge is denied.
E. Early Opening/Late Close Fee
§ 3.0 of the Usage Agreement provides that the New School shall have the right to use the Maintenance Building at the cost of $2,800 per month. § 2.1.4 of the Usage Agreement provides: "The Track and the Upper Area shall be open from 7:30 a.m. to 6:30 p.m." Exhibit F to the Usage Agreement provides that Associates is entitled to charge $50 per day for "Early Open/Late Close." Associates claims a total of $11,850 for unpaid early open/late close fees in 2003 and 2004 so that the New School could gain access to the maintenance building before 7:30 a.m. or after 6:30 p.m.
The New School objects to all of these charges on the ground that the early open/late close fee only applies when it seeks off-hours access to the track or upper area. It argues that it is entitled to 24-hour access to the maintenance building without charge. I agree. The Usage Agreement states that the track and upper area shall be open from 7:30 a.m. to 6:30 p.m. but specifies no hours for access to the maintenance building. Absent any, it is reasonable to conclude that the early open/late close fee only applies to the track and upper area. If the parties had intended to limit access to the maintenance building (as they did for the track and upper area) they would have said it in § 3.0. The early open/late close fee was not imposed until disputes arose in 2003 about other issues. No damages are awarded for this item.
F. The Chalet
Exhibit F of the Usage Agreement provides that Associates may charge $300 per day for use of the Hospitality Chalet. The New School used the Hospitality Chalet 22 times in 2004 at the total price of $6,600. The New School paid only $3,300. Therefore, there is a balance due of $3,300.
G. Declaratory Judgment
The Second Count of the Amended Complaint seeks a declaratory judgment as to the formula to be used for setting prices under § 4.2 of the Usage Agreement. In Sections V, subsections A, B, C, D, and E of this opinion I have found the meaning of the disputed language of § 4.2. A declaratory judgment shall enter accordingly.
H. Damages
The Third Count of the Amended Complaint seeks monetary damages for breaches of the Usage Agreement. In 2002 the retail prices at the Track were $5,000 per day for weekday track use and $1,500 per day for upper area use. The New School was billed for 98 days of weekday track use at the price of $2,500 per day, and 143 days of upper area use at the price of $750 per day. The prices charged to the New School do not violate any of the protectors. The New School underpaid the track usage billing by $7,154 and the upper area billing by $63,635. Thus, the total underpayment in 2002 for weekday use of the track and upper area is $70,789.
The New School had a net underpaid for use of the track on four Barber Race Weekends in 2002 when it is proper to bill full retail price, subject to limitations imposed by the protectors except for 50% of retail. In 2002 the full retail price for track usage was $5,000 per day on Thursdays, $5,500 per day for Fridays, and $6,500 per day for Saturdays. But, the protectors should have limited the price to $4,137 per day. The New School underpaid $6,840 for the four Thursdays, and overpaid $2,868 for the four Fridays, and $3,504 for the four Saturdays for a net underpayment of $468. The full retail price for the upper area was $1,500 per day for both Friday and Saturday. The New School underpaid for upper area use in the amount of $4,780 for Fridays of Barber Race Weekends and $4,780 for Saturdays of Barber Race Weekends for a total of $9,560. Thus, the total underpayment in 2002 for Barber Race Weekend use of the track and upper area is $10,028.
In 2003 the retail prices at the Track were $5,500 per day for weekday track use and $1,500 per day for upper area use. The New School was billed for 99 days of weekday track use at the price of $2,750 per day, and 129 days of upper area use at the price of $750 per day. The prices charged to the New School do not violate any of the protectors. The New School underpaid the track usage billing by $31,977 and the upper area billing by $57,405. Thus, the total under payment in 2003 for weekday use of the track and upper area is $89,382.
However, the New School had a net overpayment for use of the track on four Barber Race Weekends in 2003. In 2003 the full retail price for track usage was $5,500 for Thursdays, $6,000 per day for Fridays, and $7,000 per day for Saturdays. But, the protectors should have limited the price to $4,202 per day. The New School underpaid $6,676 for the four Thursdays, and overpaid $3,612 for the four Fridays, and $5,152 for the four Saturdays for a net overpayment of $2,088. The full retail price for the upper area was $1,500 per day for both Friday and Saturday. The New School underpaid $4,780 for Fridays of Barber Race Weekends and $4,780 for Saturdays of Barber Race Weekends for a total of $9,560. Thus, the total underpayment in 2003 for Barber Race Weekend use of the track and upper area is $7,472.
In 2004 the retail prices at the Track were $7,750 per day for weekday track use and $1,750 per day for upper area use. The New School should have been billed for 100 days of weekday track use at the price of $3,500 per day, and 145 days of upper area use at the price of $875 per day. The prices charges to the New School do not violate any of the protectors. The New School underpaid the track usage billing by $77,600 and the upper area billing by $81,925. The New School also used one additional track day in March 2004. The parties agreed that this day did not fall within the Usage Agreement. Associates billed the New School $4,250 for the day. Associates had the right to charge the full retail price of $7,750. The New School only paid $2,724 for the day. Therefore, the New School owes $1,526 for that day. Thus, the total underpayment in 2004 for weekday use of the track and upper area is $161,051.
Beginning in March 2004, after the court's decision in the PJR that there was no probable cause to support the paving surcharge, Associates eliminated the paving surcharge as a separate charge and added it to the retail price. For the reasons stated above, Associates is not able to charge the New School for the paving of the track. Therefore, the 2004 retail price of $7,750 per day has been reduced to $7,000, and the price charged to the New School has been reduced to $3,500.
In addition, the New School had a net overpayment for use of the track on four Barber Race Weekends in 2004. In 2004 the full retail price for track usage was $7,000 per day on Thursdays, $8,000 for Fridays, and $8,000 for Saturdays. However, the protectors should have limited the price to $4,235 per day. The New School underpaid $6,044 for the four Thursdays, and overpaid $4,848 for the four Fridays, and $6,472 for the four Saturdays for a net overpayment of $5,276. The full retail price for the upper area was $1,750 per day for both Friday and Saturday. The New School underpaid $5,760 for Fridays of Barber Race Weekends and $5,760 for Saturdays of Barber Race Weekends, for a total of $11,520. Thus, the total underpayment in 2004 for Barber Race Weekend use of the track and upper area is $6,244.
In summary, the total of the underpayment in 2002 for weekday use and for Barber Race Weekend use is $80,817. The total for 2003 is $96,854, and the total for 2004 is $167,295. The figure for 2004 must be increased by $3,300 to reflect the fees for use of the Chalet. This brings the total for 2004 to $170,595. After adding together the sums due for 2002, 2003 and 2004, judgment in the total sum of $348,266 shall enter for Associates on the Third Count of the Amended Complaint plus interest as set forth below.
Associates is entitled to interest on these sums at the rate of 10% per annum in accordance with C.G.S. § 37-3a. Interest on the $80,817 for 2002 shall run from January 1, 2003 until the date of this judgment. Interest on the $96,854 for 2003 shall run from January 1, 2004 until the date of judgment. Interest on the $170,595 for 2004 shall run from January 1, 2005 until the date of judgment.
VI. Chrysler Sponsorship
The fourth, fifth, sixth, seventh and eighth counts of the plaintiffs' amended complaint all relate to the same set of facts involving Chrysler sponsorships. In November 1994 the Old School entered into a written sponsorship agreement with Chrysler Corporation ("Chrysler") under which Chrysler agreed to provide Dodge vehicles, engines, and yearly monetary payments in exchange for the Old School's promotion of Dodge products. On the same day, Associates and Chrysler entered into a written sponsorship agreement with Chrysler under which Chrysler agreed to provide Associates with Dodge vehicles in exchange for Associates' promotion of Dodge products. This agreement does not refer to any monetary payments.
Associates offered evidence concerning these agreements to which the New School objected as being contrary to the parol evidence rule. The court deferred decision on this objection. The court finds the following facts from this parol evidence. The two Chrysler agreements were negotiated by Ron Smith, a senior marketing manager at Chrysler's Dodge Division, and by Mr. Barber acting on behalf of both Associates and the Old School. The original discussions between these two men were that, in addition to the monetary consideration to be paid to the New School, Associates would receive $170,000 per year. But, before the contracts were written, Mr. Smith requested that the monetary payments be combined so that the Old School would receive an additional $170,000 per year in order to avoid cutting separate checks. Mr. Barber agreed. Therefore, the written contracts reflect no monetary consideration to Associates. The agreements were signed by senior officials at Chrysler who knew nothing about these prior oral negotiations. Barber, acting on behalf of Associates and the Old School, set up an arrangement under which the Old School would pay Associates $170,000 per year to make up for the loss of revenue caused by Chrysler's desire to cut only one check. Chrysler was not a party to this arrangement. In fact, the Old School did make the yearly payments of $170,000 to the Track until the New School purchased the assets of the Old School.
Counts four, five, six, seven, and eight of the amended complaint all contain the same three paragraphs which must be proven in order for the plaintiffs to succeed. These three paragraphs are as follows (note: Associates is referred to as "Lime Rock" and the Old School is referred to as "Original School"):
"3. On or about October 3, 1994, Chrysler Corporation, by its Dodge Car and Truck Division ("Chrysler"), entered into sponsorship agreements with both Lime Rock and the Original School, under which Lime Rock and the Original School would publicize the Dodge brand and other Dodge attributes, in exchange for which Chrysler would remit certain payments to Lime Rock and the Original School.
4. The agreements were structured in such a manner so that the payments to be made by Chrysler to Lime Rock were included in the payments made to the Original School.
5. In furtherance of this payment arrangement, the portion of the Chrysler payments that were owed to Lime Rock that had been forwarded to the Original School were, in turn, forwarded by the Original School to Lime Rock on a quarterly basis, in satisfaction of the amounts owed by Chrysler to Lime Rock."
These allegations, plus representations made during the trial, require Associates to prove a three-party agreement among Associates, the Old School and Chrysler to have the Old School receive payments which Chrysler was obligated to make to Associates, and to remit them to Associates. Proof of the essential allegations of these paragraphs depends upon parol evidence to which the New School objected. Because I find that the parol evidence rule applies to the allegations of the amended complaint, the evidence offered by the plaintiffs in support of this claim is found to be inadmissible.
"The parol evidence rule prohibits the use of extrinsic evidence to vary or contradict the terms of an integrated written contract." Benvenuti Oil Co. v. Foss Consultants, Inc., (Internal quotation marks omitted) 64 Conn.App. 723, 727 (2001). Where there is a merger clause in the contract, this "establishes conclusive proof of the parties' intent to create a completely integrated contract, and the court is forbidden from considering extrinsic evidence on the matter unless there was unequal bargaining power between the parties." Tallmadge Bros., Inc. v. Iroquois Gas Transmission System, L.P., 252 Conn. 479, 504-05 (2000). Here, both agreements with Chrysler contain merger clauses which provide that the written terms embody "the entire agreement of the parties and supersedes any other agreements or understandings between them, whether oral or written." There is no claim that there was unequal bargaining power between the parties. Therefore, both agreements with Chrysler and the APA are fully integrated, and the court cannot consider evidence to vary or contradict the terms of these agreements.
The evidence offered by Associates contradicts the terms of the Chrysler agreements in that it purports to establish a prior collateral oral agreement between Chrysler and the Old School that provides for Chrysler to pay $170,000 yearly to Associates. This evidence, if it had been found persuasive by the court, varies the terms of the agreement between Chrysler and Associates which specifies that the consideration from Chrysler to the Old School is non-monetary only. It also changes the specified amount of monetary consideration for the agreement between Chrysler and the Old School. Therefore, the plaintiffs' evidence of such an oral agreement would be inadmissible under the parol evidence rule.
The plaintiffs argue that the defendant is a "stranger" to the contracts with Chrysler and unable to assert the parol evidence rule. This argument must fail for two reasons. First, under the APA the New School was assigned the Old School's Chrysler sponsorship agreement and assumed all of the Old School's rights and obligations under that agreement. As a result, the New School steps into the shoes of the Old School with respect to the Chrysler agreement and should not be considered a stranger. Second, the authority provided by the plaintiffs does not support the proposition that current Connecticut law prevents a stranger to a contract from invoking the parol evidence rule. In Allen v. Ruland, 79 Conn. 405, 412 (1906), the Supreme court stated that "the rule that written agreements cannot be varied by parol operates in favor of those not parties to the instrument as fully as in favor of those who were parties to it, whenever it was executed by the latter as the final embodiment of their agreement, and the parol evidence is offered to vary the legal effect of the terms in which it is expressed." The plaintiffs have not cited anything which changes this basic proposition.
Without the parol evidence offered by the plaintiff, the plaintiffs cannot prove the allegations of paragraphs 3, 4, and 5 of the fourth, fifth, sixth, seventh and eighth counts of the amended complaint. But, even if the parol evidence were admissible to prove the allegations of these counts, the plaintiff could not recover. First, the parol evidence does not prove that Chrysler was party to the arrangement between Associates and the New School to have $170,000 per year remitted to Associates to compensate it for the loss of revenue occasioned by Chrysler's desire to write one check rather than two. While Ron Smith may have been aware of this arrangement, those in authority at Chrysler who executed the agreements had no knowledge of it and did not agree to pay Associates any monetary consideration.
There is a second reason why Associates could not recover under the fourth, fifth, sixth, seventh and eighth counts of the amended complaint even if the parol evidence were admissible. Under the written APA signed when the New School purchased the assets of the Old School, the New School assumed the obligations set forth in the Old School's written agreement with Chrysler and acquired the right to receive the monetary and non-monetary consideration from Chrysler. The APA provides that the New School does not assume any debts or obligations, whether known or unknown, of the Old School except those that are specifically listed on Schedule 2.03(a) to the agreement. The $170,000 yearly obligation to Associates is not listed on Schedule 2.03. Therefore, it was not assumed by the New School. Although the written agreement with Chrysler is listed on Schedule 2.03(a) there is nothing in that agreement which refers to any payments to be made to Associates. It is unavailing for Associates to point to the Disclosure Schedule to the APA, or to financial statements of prior years which refer to the $170,000 yearly payments to Associates. These documents do not cause the New School to assume responsibility for obligations which the New School does not specifically agree to pay. If the Old School had intended the New School to assume liability for an ongoing obligation to pay $170,000 per year to Associates it should have specifically listed it in the APA. This would have been a simple matter. The fact that this $170,000 per year obligation was not listed is overwhelming evidence that the New School never agreed to assume it.
Section 2.03 of the APA is titled "Non-Assumption of Liabilities" and provides, in relevant part: "Purchaser [the New School] shall not assume any liabilities or obligations of the Company [the Old School], whether such liabilities are known or unknown, actual or contingent, liquidated or unliquidated, except that Purchaser agrees to assume from and after the Closing, (a) the liabilities and obligations of the Company which arise on and after the Closing Date and relate to periods on and after the Closing Date pursuant to any contract, agreement or lease (including without limitation, the Employment Agreement) set forth on Schedule 2.03(a) (the "Assumed Contracts").
Judgment for the New School will enter on the fourth, fifth, sixth, seventh and eighth counts of the amended complaint.
VIII. Counterclaims A. Breach of Fiduciary Duty and Unjust Enrichment
Count One of the New School's amended counterclaims sets forth a claim against Mr. Barber that he breached his fiduciary duty to the Old School by causing transfers of $170,000 per year to Associates without obligation or consideration. The New School alleges that these transfers were for the personal benefit of Mr. Barber who was the owner of Associates. Count Two is a claim against Associates for unjust enrichment based upon the same allegations that there was no consideration for the transfers of $170,000 per year from the old school. The New School alleges that as purchaser of the assets of the Old School it acquired the causes of action set forth in Count One and Count Two of the amended counterclaim.
Both causes of action must be rejected. Although parol evidence could not be used to contradict the terms of the agreement between the Old School and Chrysler, it can be used to prove the oral agreement that existed between the Old School and Associates which created an obligation to pay $170,000 to offset the loss of revenue caused by Chrysler's desire to make payments to the Old School only. There was consideration for this agreement because, if Associates had failed to agree, Chrysler would not have gone ahead with only one agreement. Therefore, the payments from the Old School to Associates were perfectly proper. They ceased when the Old School sold to the New School only because the Old School failed to include them as an obligation assumed by the New School under the APA.
B. Improvements paid for by the Old School
Count Three of the amended counterclaims seeks a declaratory judgment that the New School owns or has the right to use certain improvements at the Track which were paid for by the Old School. The second autocross course has been discussed above and a declaratory judgment has entered that the second autocross course is a "related facility" to the Upper Area and its use is subject to the terms of the Usage Agreement in all respects. An identical declaratory judgment will issue in Count Three of the amended counterclaims. The New School did not offer evidence concerning the other improvements claimed, nor were they briefed. Therefore, no additional declaratory judgment will issue.
Count Four alleges that Associates has been unjustly enriched by the improvements paid for by the Old School. In light of the declaratory judgment issued, judgment will enter for Associates on Count Four.
C. Breach of Contract
Count Five of the amended counterclaims sets forth a claim against Mr. Barber that he breached a representations and warranties made regarding assets of the Old School. This count was not briefed by the New School. There is insufficient evidence to support the allegations made. Judgment will enter for Mr. Barber.
D. Declaratory Judgment re § 4.2
Count Six of the amended counterclaims seeks a declaratory judgment concerning the interpretation of the language of § 4.2 regarding the calculation of prices for use of the track and upper area. This issue is dealt with above and a declaratory judgment has been issued. An identical declaratory judgment will issue on Count Six of the amended counterclaims.
E. Surcharges
Count Seven of the amended counterclaims seeks a declaratory judgment that the New School is not obligated to pay racing or paving surcharges. This issue is dealt with above and an identical declaratory judgment will issue that the New School is not obligated to pay racing or paving surcharges.
F. Declaratory Judgment re B Paddock
Count Eight of the amended counterclaims seeks a declaratory judgment that the New School is not obligated to pay for use of the B Paddock. This issue is dealt with above and an identical declaratory judgment will issue that the New School is only entitled to use the B Paddock for overflow parking incidental to the Track and Upper Area. Any other use of the B Paddock requires the permission of Associates and the payment of a fee at retail price.
G. Declaratory Judgment re Maintenance Building
Count Nine of the amended counterclaims seeks a declaratory judgment that the New School is not obligated to pay the late open/close fee to simply gain access to the Maintenance Building. This issue is dealt with above and a declaratory judgment will issue that the New School is not obligated to pay a early open/late close fee merely to gain access to the maintenance building.
H. Days of Use and Noon Hour
Count Ten and Count eleven were either settled by the parties or abandoned by the New School as no evidence was offered and they were not briefed. Judgment will enter for the plaintiffs.