If you spend any time here, you know about the increasingly ugly legal battle between Talisker Corp. (and now Vail Resorts as well) over the threatened eviction of Park City Mountain Resort from several thousand acres of ski terrain - or alternatively the forced renegotiation of PCMR's long term ground leases at substantially increased rent.
Ever since the O.J. Simpson criminal trial unfolded during my first year of law school, I've tried not to prejudge high profile cases where I've not been a regular presence in the courtroom. I find it ironic that the indignation and even outrage by members of the general public over "unjust" rulings seems strongest among those with the least knowledge of the cases that so infuriate them. That's why I tend to keep a lid on my feelings about cases other than those I am litigating for my own clients.
But, it's been hard for me not to wonder what is really going on with the Talisker/Vail/PCMR litigation. My curiosity finally got the better of me, and I made some time recently to peruse the parties' filings with the Third District Court in Summit County (you can do the same - they are almost all public records). I was not comfortable with what I found.
At the core of the dispute is Talisker's claim that PCMR failed to exercise a 50 year lease extension in writing by the contractual deadline of April 30, 2011, an allegation the trial court appears to have accepted as accurate at this point. My first reaction to that apparent oversight by a small army of very smart PCMR executives and lawyers was shock. I would have expected that day to be circled in red, highlighted and underlined on dozens of PCMR calendars in light of the value of the contract rights at stake. How could PCMR have missed such an important deadline? I wondered...
But as I read through the court papers, I began to become equally puzzled by the flip side of that same coin. Just as surely as PCMR appears to have missed that date, the court documents suggest that Talisker missed it as well. That's right. For eight months after the apparent default, Talisker continued to accept rent payments from PCMR and pursue business as usual with its neighbor/potential partner/competitor. But just as surely as the offices of PCMR are filled with smart people, so are those of Talisker. With the significance and value of the contract rights at stake, I began to wonder how Talisker could have failed to declare the supposed default as soon as its doors re-opened for business. How could the company have missed such a huge event for so long, not notifying PCMR until December of 2012 about such a glaring and high stakes failure?
The court documents don't provide an adequate answer to that question - yet. But as a lawyer who began doing deals and trying cases in this town more than 20 years ago, only one explanation makes any sense at all. It simply must be the case that as of May 1, 2011 - the day after the deadline - Talisker did not believe the lease to be in default any more than PCMR did. Talisker has never been a company to sleep on its rights. If it thinks it has a legal club, it swings it - usually fast and hard. It and its lawyers pride themselves on that reputation. If Talisker wasn't swinging something at PCMR immediately, it's because Talisker didn't think it had anything to swing.
A layperson might be surprised to hear a lawyer claim that two sophisticated parties could both walk past a critical, multi-million dollar deadline without recognizing that one of them had suddenly gained huge legal leverage over the other. But when parties do business with each other over a course of decades, including ongoing negotiations over vitally important strategic and competitive issues, things are often said, representations are often made, actions are often taken that pull the attention of the parties away from otherwise red-letter dates on calendars. That's not to suggest that parties like these get careless, lazy or distracted. It is simply that core positions can shift and fundamental variables can change over time. The entire landscape can evolve, and parties can change their behavior in ways that lead reasonable, intelligent lawyers and business people to believe that once critical dates or events have been superseded and placed on a back-burner by all parties. Spoken word and courses of conduct can lead (or mislead) parties into believing that their counterparts on the other side of the table share their assessments. When the dust finally settles in this case, it will be stunning if that is not what we all discover to be the case here.
Every indication today is that neither PCMR nor Talisker was watching the clock or the fax machine at 11:59 p.m. on April 30, 2011. Their communications and behaviors had led them both to believe that it was just another Saturday night (yes, it was a weekend). Had PCMR thought otherwise, it would have delivered notice of renewal on Friday. Had Talisker thought otherwise, it would have delivered notice of default on Monday (maybe even Sunday).
If that is all true, then why do we now find ourselves in the mess we face today - with Talisker's successor, Vail Resorts, having just announced the stockpiling of another $5 million for the next 12 months of litigation (rather than for mountain improvements)? Again, having watched and participated in negotiations and disputes in this town for more than 20 years, only one answer makes any sense. Somehow the dynamics between Talisker and PCMR changed in the 8 months between that fateful Saturday night and just before Christmas in 2011. For some reason, Talisker decided in the interim that it needed (or wanted) a club to swing against PCMR, went looking for one, and found it circled in red on a calendar all sides had put in a drawer long ago.
With enormous checkbooks and herds of lawyers stampeding on both sides, I fear we will learn what happened and why Talisker needed (or wanted) such a club the hard way: that is, through years of additional courtroom drama and expense in which both sides struggle not only to prevail, but to reduce their adversaries to ashes.
The $5 million one year war chest referenced in Vail's recent SEC disclosures looks like doubling down, rather than re-thinking. Even if each side stops at that sum, and burns only another $5 million each on litigation, that's $10 million in amenities and improvements up in smoke that could have been used to attract skiers and snowboarders to both mountains - not to mention to the restaurants, shops, hotels and other businesses surrounding them. It's never a good idea to double down on what was a bad idea in the first place.