American Multi-Cinema, Inc. v. Southroads, L.L.C., 99-2019-JWL.

• Decision Date: 28 July 2000
• Docket Number: No. 99-2019-JWL.,99-2019-JWL.
• Citation: 115 F.Supp.2d 1257
• Parties: AMERICAN MULTI-CINEMA, INC., Plaintiff, v. SOUTHROADS, L.L.C., Defendant.
• Court: U.S. District Court — District of Kansas

Page 1257

115 F.Supp.2d 1257

AMERICAN MULTI-CINEMA, INC., Plaintiff, v. SOUTHROADS, L.L.C., Defendant.

No. 99-2019-JWL.

United States District Court, D. Kansas.

July 28, 2000.

COPYRIGHT MATERIAL OMITTED

John L. Vratil, W. Joseph Hatley, Lathrop & Gage L.C., Overland Park, KS, for plaintiff.

Charles W. German, Rouse, Hendricks, German, May & Shank, Kansas City, MO, for defendant.

MEMORANDUM AND ORDER

LUNGSTRUM, District Judge.

This suit arises out of a retail lease agreement between plaintiff, as tenant, and defendant, as landlord.¹ Plaintiff alleges that defendant breached the lease, and certain amendments thereto, by failing to deliver timely physical possession of the leased premises to plaintiff and by failing to complete timely various tasks associated with the shopping center of which plaintiff was one tenant. Plaintiff seeks liquidated damages pursuant to a stipulated damages provision in the lease. Defendant, on the other hand, contends that the stipulated damages provision is an unenforceable penalty. This matter is presently before the court on defendant's motion for summary judgment (doc. # 95).

As set forth in more detail below, the choice of which state's law to apply to this case could very well determine which party ultimately prevails at trial. Nonetheless, because material factual disputes exist concerning the place of the contract's formation, the court does not decide the choice-of-law issue at this stage of the proceeding. Even assuming, however, that Oklahoma law applies to this case, as defendant suggests, the court concludes that the evidence, viewed in the light most favorable to plaintiff, requires a trial on plaintiff's claims. Put briefly, the court has no difficulty concluding that defendant has not met its burden on summary judgment to show that the uncontroverted facts demonstrate that plaintiff's potential damages from defendant's breach of the lease were not extremely difficult to ascertain at the time of contracting. Similarly, the court has little difficulty concluding that defendant falls short of meeting its summary judgment burden to show that the uncontroverted facts fail to demonstrate that the stipulated sum was reasonably proportionate to plaintiff's probable actual harm suffered prior to the time plaintiff opened for business. The more difficult decision is whether defendant has satisfied its summary judgment burden to demonstrate that the uncontroverted facts fail to show that the stipulated sum was reasonably proportionate to plaintiff's probable actual harm suffered for the period of time after plaintiff opened for business. Nonetheless, the court concludes that, while a closer call, defendant has failed to meet this burden. Thus, defendant's motion for summary judgment is denied.

I. Facts

The following facts are either uncontroverted or related in the light most favorable to plaintiff, the nonmoving party. In December 1995, plaintiff and Yale 41 Associates Limited Partnership executed a retail lease agreement whereby Yale 41 was the landlord and plaintiff was a tenant in a new shopping center located in Tulsa, Oklahoma. Yale 41's rights and responsibilities under the lease were subsequently assigned to defendant and the shopping center, at some point thereafter, was named the Southroads shopping center.

The lease agreement, including a September 1996 amendment thereto, required defendant to provide to plaintiff by November 15, 1996 a pad site with utilities on which plaintiff would construct a "megaplex" movie theater — the Southroads 20. This November 15, 1996 deadline is referred to in the lease and by the parties in their papers as the "turnover date." The lease agreement and the September 1996 amendment further provided that defendant was to complete by May 30, 1997 a variety of tasks associated with the Southroads shopping center, including the construction of all common facilities and access facilities. This May 30, 1997 deadline is referred to in the lease and by the parties in their papers as the "completion date." According to plaintiff's evidence, plaintiff intended to open its megaplex theater during the summer of 1997.

According to plaintiff, defendant breached the lease agreement and the September 1996 amendment thereto by failing to provide a certified pad site in a timely fashion and by failing to complete the various tasks associated with the completion of the Southroads shopping center. Plaintiff's evidence indicates that the pad site was not provided until March 11, 1997 and that, as a result, the Southroads 20 did not open for business until November 21, 1997. Plaintiff's evidence further indicates that defendant did not complete the tasks related to the completion date until July 31, 1998 and that, as a result, the Southroads 20 continued to suffer in a variety of ways and, in fact, may continue to suffer today.

Specifically, plaintiff asserts that, as a result of defendant's breach of the turnover date, it was not able to open its theater during the summer of 1997 as scheduled and, thus, it lost income. Plaintiff further asserts that, as a result of defendant's breach of the completion date, it was forced to build its theater in the midst of major ongoing construction, thereby increasing its construction costs due to work coordination problems; that it lost customers who, had they been able to shop at a completed center, would have learned about the anticipated opening of the Southroads 20; and that, once the theater opened, it lost customers who either had negative experiences at the Southroads 20 in large part because of the unfinished nature of the center or who simply elected not to go to the Southroads 20 because they could not combine a trip to the movies with a shopping trip.

Pursuant to article 5 of the lease, if defendant failed to meet either the turnover date or the completion date, then plaintiff was entitled to "receive an amount equal to four days of free Annual Fixed Rent for each day of delay" between the completion date or the turnover date and the date on which defendant fully performed its obligations (i.e., providing a certified pad site and/or completing the tasks associated with the Southroads shopping center). This provision for stipulated damages is referred to by the parties as the 4 to 1 provision. Pursuant to the stipulated damages provision, plaintiff seeks stipulated damages relating to the turnover date for the period from November 15, 1996 through March 11, 1997.² With respect to the completion date, plaintiff seeks stipulated damages from May 30, 1997 through July 31, 1998.³

II. Summary Judgment Standard

Summary judgment is appropriate if the moving party demonstrates that there is "no genuine issue as to any material fact" and that it is "entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In applying this standard, the court views the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). A fact is "material" if, under the applicable substantive law, it is "essential to the proper disposition of the claim." Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). An issue of fact is "genuine" if "there is sufficient evidence on each side so that a rational trier of fact could resolve the issue either way." Id. (citing Anderson, 477 U.S. at 248, 106 S.Ct. 2505).

The moving party bears the initial burden of demonstrating an absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Id. at 670-71. In attempting to meet that standard, a movant that does not bear the ultimate burden of persuasion at trial need not negate the other party's claim; rather, the movant need simply point out to the court a lack of evidence for the other party on an essential element of that party's claim. Id. at 671 (citing Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)).

Once the movant has met this initial burden, the burden shifts to the nonmoving party to "set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 256, 106 S.Ct. 2505; see Adler, 144 F.3d at 671 n. 1 (concerning shifting burdens on summary judgment). The nonmoving party may not simply rest upon its pleadings to satisfy its burden. Anderson, 477 U.S. at 256, 106 S.Ct. 2505. Rather, the nonmoving party must "set forth specific facts that would be admissible in evidence in the event of trial from which a rational trier of fact could find for the nonmovant." Adler, 144 F.3d at 671. "To accomplish this, the facts must be identified by reference to affidavits, deposition transcripts, or specific exhibits incorporated therein." Id.

Finally, the court notes that summary judgment is not a "disfavored procedural shortcut;" rather, it is an important procedure "designed to secure the just, speedy and inexpensive determination of every action." Celotex, 477 U.S. at 327, 106 S.Ct. 2548 (quoting Fed.R.Civ.P. 1).

III. Choice-of-Law Issues

The threshold issue in this case is which state's law to apply. In determining the applicable law, a federal court sitting in diversity must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Bancoklahoma Mortgage Corp. v. Capital Title Co., 194 F.3d 1089, 1103 (10th Cir.1999). Kansas courts apply the doctrine of lex loci contractus, which requires that the court interpret the contract according to the law of the state in which the parties performed the last act necessary to form the contract. See Missouri Pac. R.R. Co. v. Kansas Gas and Elec. Co., 862 F.2d 796, 798 n. 1 (10th Cir.1988) (citin...