Airstar Corp. v. Keystone Aviation LLC

• Decision Date: 16 June 2022
• Docket Number: 20190847-CA
• Citation: 514 P.3d 568
• Parties: AIRSTAR CORPORATION, Appellant, v. KEYSTONE AVIATION LLC and Salt Lake City Corporation, Appellees.
• Court: Utah Court of Appeals

514 P.3d 568

AIRSTAR CORPORATION, Appellant,

v.KEYSTONE AVIATION LLC and Salt Lake City Corporation, Appellees.

No. 20190847-CA

Court of Appeals of Utah.

Filed June 16, 2022

David J. Jordan, Salt Lake City, Lauren DiFrancesco, and Chaunceton Bird, Salt Lake City, Attorneys for Appellant

Jonathan O. Hafen, Salt Lake City, Daniel E. Barnett, and Austin J. Riter, Salt Lake City, Attorneys for Appellee Keystone Aviation LLC

Catherine L. Brabson and David F. Mull, Salt Lake City, Attorneys for Appellee Salt Lake City Corporation

Judge Ryan D. Tenney authored this Opinion, in which Judges Gregory K. Orme and Ryan M. Harris concurred.

Opinion

TENNEY, Judge:

¶1 This appeal concerns a parcel of real property at the Salt Lake City International Airport that is used for private hangar space. Salt Lake City owns the property and leased it to Keystone Aviation LLC, and Keystone then subleased it to Airstar Corporation. Airstar's sublease included a clause under which the sublease would terminate if Keystone's lease with Salt Lake City "terminated for any reason."

¶2 In 2015, Keystone and Salt Lake City negotiated a premature termination of Keystone's lease. When this happened, Airstar's sublease terminated too. Airstar later sued both Keystone and Salt Lake City, asserting several breach-of-contract-related claims. But the district court dismissed all of Airstar's claims, and it also awarded attorney fees to Keystone.

¶3 On appeal, Airstar challenges both the dismissal of its claims and the award of attorney fees. For the reasons set forth below, we affirm on both fronts.

BACKGROUND

The Hudson Sublease and the 1992 FBO Agreement

¶4 Salt Lake City leases real property located at the Salt Lake City International Airport to Fixed Base Operators (FBOs). An FBO is a person or entity that provides aircraft services like fuel sales, terminal services, and hangar space. FBOs provide these services to the general aviation industry, which is "the sector of aviation that includes all air operations other than military or commercial air carriers."

¶5 In 1986, Hudson General Corporation entered into an FBO agreement with Salt Lake City. As part of that agreement, Salt Lake City leased a parcel of land, commonly identified in the briefing and record as Hangar 16, to Hudson.

¶6 In October 1992, Hudson and Salt Lake City entered into a new FBO agreement (the 1992 FBO Agreement) that superseded their original FBO agreement and included additional terms and conditions. In the 1992 FBO Agreement, the parties included a provision that the parties have referred to on appeal as the Attornment Clause.¹ The Attornment Clause provided that,

[s]hould this Agreement be terminated for any reason, the City shall succeed to the interest of Tenant under any subleases covering all or any portion of the Leased Premises or the Facility, and shall be bound to each subtenant under such subtenant's sublease to the same extent as Tenant was bound as sublandlord, provided that such subtenant shall attorn to the City and agree to be bound to the City under the terms and conditions of such sublease as if the City were the sublandlord under such sublease. So long as any such subtenant is not in default under the terms of its sublease, such sublease shall remain in full force and effect, and such subtenant's interest and estate under its sublease shall not be disturbed because of a default by Tenant under this Agreement.

(Quotation simplified.)

¶7 Hudson later assigned the 1992 FBO Agreement to a different entity. In August 2011, that entity assigned the 1992 FBO Agreement to Keystone.

The Hangar 16 Sublease

¶8 In 1992, Hudson subleased Hangar 16 to Airstar Corporation (the Hudson Sublease). The Hudson Sublease terminated in 2012. In June 2012, after the 1992 FBO Agreement had been assigned to Keystone, Keystone and Airstar entered into a new sublease for Hangar 16 (the Hangar 16 Sublease).² The Hangar 16 Sublease had an "initial term" of "approximately nine (9) years," which meant that it would terminate in 2021. (Quotation simplified.)

¶9 The Hangar 16 Sublease contained three clauses that are relevant to this appeal: the Termination Clause, the Notice Clause, and the Attorney Fees Clause.

¶10 First, the Termination Clause stated that

Airstar agrees that in the event that the FBO Agreement, or any other agreement or authority to do business at the Airport is terminated for any reason other than an exercise of powers of eminent domain (which shall be addressed in accordance with Paragraph 11 hereof) or a failure of Keystone to timely perform its obligations thereunder (which shall be addressed in accordance with the provisions of Paragraphs 16 and 17 thereof), and Keystone is required to give up possession of the Premises as a result, then this Lease shall terminate as of the date that Keystone is no longer permitted to occupy the Premises under such terminated agreement, without recourse or damages or compensation of any sort being demanded by Airstar .... Keystone shall give Airstar as much notice as possible of any situation which may result in termination of the FBO Agreement or any other underlying lease, agreement, or authority to do business at the Airport, including copies of all notices, communications and information available to Keystone regarding such pending or threatened termination.

(Emphases added.)

¶11 Second, the Notice Clause stated that

[a]ll notices and other communications (each a "notice") required or permitted to be given under this Lease shall be in writing and shall be either (a) personally delivered; (b) sent by certified mail, return receipt requested, postage prepaid; or (c) sent by Federal Express or other nationally recognized air courier, expenses prepaid, to the address set forth in the opening paragraph of this Lease for notice of the party to whom it is to be given. Notice shall be effective upon receipt by the party or upon refusal of delivery of the notice at the address provided herein for such party.

(Quotation simplified.)

¶12 And finally, the Attorney Fees Clause stated that,

[i]n the event of the bringing of any action or suit by either party hereto by reason of any breach of any of the covenants or agreements on the part of the other party arising out of this Lease, then in that event the prevailing party shall be entitled to have and recover of and from the other party costs and expenses of the action or suit, including reasonable attorneys’ fees.

Amendment 7

¶13 In 2013, Salt Lake City hired a consulting firm to assess the feasibility of adding another FBO to the airport. Shortly after the consulting firm completed its study, Salt Lake City reached out to Keystone to talk about this possibility. In October 2014, Salt Lake City and Keystone negotiated an agreement that required Keystone to terminate its Hangar 16 lease before the lease term expired. In exchange, Salt Lake City agreed to extend the lease terms on other properties that Keystone leased at the airport. The parties referred to this as "the Lease Swap Agreement" or "the Lease Swap."

¶14 In February 2015, Salt Lake City and Keystone executed Amendment 7 to the 1992 FBO Agreement. This was done to facilitate the Lease Swap Agreement, and, in this amendment, they agreed that the 1992 FBO Agreement would "continue through March 31, 2016," and then terminate. This meant that the 1992 FBO Agreement would now end on March 31, 2016, rather than on May 31, 2021, as the parties had previously contracted.³

Communications Between Keystone and Airstar

¶15 Sometime in the summer of 2015, Airstar's chief pilot requested Keystone's permission for Airstar to resurface Hangar 16's floor.⁴ Keystone gave its approval, and in June 2015, Airstar asked Keystone for permission to place a temporary storage container near the hangar while it resurfaced the floor. Keystone, in turn, asked Salt Lake City for permission, and Salt Lake City approved the request.

¶16 That same month, the Airport Business Development Manager for Salt Lake City emailed Keystone about the floor work, saying that it "seems like a rather large investment for [Airstar] to make given the remaining term of the agreement (9 months)." The Business Development Manager continued, "[We're] sure [Keystone is] doing everything [it] can to accommodate [Airstar] and their future needs, but given the investment they appear to be making, [we] want to make sure [Airstar is] aware of the limited amount of time they have in the building as [we're] sure they would like to have enough time to recover their costs."⁵

¶17 Keystone forwarded this email to Airstar's chief pilot, saying that it was "unsolicited" and that the airport was "just concerned with the limited Lease Term." The pilot responded,

I am very concerned! This e-mail trail that [Airstar] started two weeks ago requesting permission to place a temp storage unit on the property to help facilitate the mentioned work, becomes the first document (after the work has started) that implies [Keystone] and or the SLC Airport do not intend to honor our signed lease contract that is valid for the next 7 years.

¶18 On February 8, 2016, Keystone sent a letter to Airstar's headquarters. That letter said,

Pursuant to paragraph 18.2 of the referenced Lease, notice is hereby given that Keystone Aviation's FBO Agreement, as defined in the Lease, for [Hangar 16] will terminate on March 31, 2016 per Amendment #7 (attached). As further provided in paragraph 18.2, Airstar and Keystone have agreed that in the event the FBO Agreement is terminated for any reason, then the Lease will also terminate.

The letter concluded by requesting that Airstar "surrender possession of the Premises on or before March 31, 2016."

¶19 In an emailed response, Airstar invoked the provision in the Termination Clause that required Keystone to give Airstar "as much notice as possible of any situation which may result in termination of the FBO Agreement ..., including copies of all notices, communications and information available to Keystone...