Cardinal Consulting Co. v. Circo Resorts
| Decision Date | 30 October 1980 |
| Docket Number | No. 49493.,49493. |
| Citation | 297 NW 2d 260 |
| Parties | CARDINAL CONSULTING COMPANY, Respondent, v. CIRCO RESORTS, INC., Appellant. |
| Court | Minnesota Supreme Court |
Gray, Plant, Mooty, Mooty & Bennett and Susan L. Lentz, Minneapolis, for appellant.
Mahoney, Dougherty & Mahoney and James M. Mahoney, Minneapolis, for respondent.
Heard before SHERAN, C. J., KELLY and SCOTT, JJ., and considered and decided by the court en banc.
Circo Resorts, Inc., a Nevada corporation which operates the Circus Circus Hotel in Las Vegas, appeals from an order denying its post-trial motions1 after a jury awarded Cardinal Consulting Company, a Minnesota corporation, $71,500 in damages, all but $1,095 of which consisted of lost profits resulting from Circo's breach of contract. Because there is sufficient evidence to support the jury verdict, we affirm.
Viewing the facts in the light most favorable to the prevailing party, as we must on appeal, Blasing v. P. R. L. Hardenbergh Co., 303 Minn. 41, 47, 226 N.W.2d 110, 114 (1975), they can be stated as follows: Cardinal Consulting Company was established by William O'Neill and Wayne Haas in August, 1974, to operate one-stop charter tours (OTCs) to Las Vegas and other holiday areas. Prior to this time both were extensively involved in the travel industry. O'Neill began in travel in 1951 as an employee of North Central Airlines. He later spent time with Swissair and Irish Airlines before owning and managing a number of travel agencies in the Minneapolis area. His previous positions had given him wide experience with charters and familiarized him with the Las Vegas market. From 1971 through 1973 O'Neill also wrote a twice-weekly travel column for the Green Bay Press Gazette and produced a weekly program for WCCO-TV, both of which were entitled "Let's Go Travelling." Haas entered the travel industry in 1970 when he and his relatives bought a retail travel agency. From the beginning they were deeply involved in the Las Vegas group travel market, reserving blocks of seats on regular flights between the Twin Cities and Las Vegas during the winter months.
Cardinal was formed to take advantage of the OTC market, a new travel concept that had just been approved by the Civil Aeronautics Board (CAB) in May, 1975. OTCs permitted the organization of charter tours for persons unaffiliated with any organization at prices well below standard fares. To be approved by the CAB, an OTC program had to provide round-trip air transportation between the departure and destination points along with ground transportation and hotel accommodations in the destination city. Participants paid in advance into an escrow account from which the tour operator paid the airline, hotel and ground suppliers prior to the arrival of the guests. The regulations required that at least 20 percent of the amount in escrow remain there until two days after the return of the participants, at which time the tour operator received his portion. The entire package of a tour operator had to be submitted to and approved by the CAB before an operator could begin advertising its packages to the public. What made OTCs profitable was that the rented airplane was used back-to-back, i. e., it transported a group to the destination city and picked up the previous group for return to the departure city.
O'Neill and Haas set up their Cardinal Consulting Company in a room in Haas' house, a location that is not at all unusual for this type of business. For capital they took out an $8,000 loan and each put up some of his own money. They initially investigated the possibility of arranging tours to the Caribbean, and to Hawaii, but they decided to concentrate their efforts on the Las Vegas market which appeared to have much greater potential for earning profits. Their idea was to set up an OTC program of consecutive back-to-back flights that would operate from January to April and that would tap the market in smaller cities of the Upper Midwest. Most of these three or four day tours (Thursday-Sunday, Sunday-Thursday) would be distributed to retail travel agencies in such cities and to clubs which would advertise the tour and sign up participants.
In June, 1975, Jay Valentine, the national sales manager of the Circus Circus Hotel came to Minneapolis to solicit OTC business. He contacted Donald Lyons, the regional traffic and sales manager of North Central Airlines. Lyons directed him to Cardinal which had already been in contact with North Central Airlines about arranging charter planes for OTCs between the Upper Midwest and Las Vegas.
Valentine met with O'Neill and Haas to discuss the possible use of the Circus Circus Hotel by Cardinal's tours. O'Neill and Haas explained that they would need 50 rooms from January 11, 1976, through April 22, 1976, to which Valentine agreed. Valentine quoted them a price of $18 per night but promised to investigate whether he could drop the price to $16 during week nights. They also verbally agreed that, because the CAB required all the funds to be in escrow, Cardinal would fully prepay two weeks before arrival when it submitted its rooming list, rather than giving a deposit.
On June 18, 1975, Haas wrote to Valentine confirming Cardinal's request for the 50 rooms at Circus Circus. Valentine responded on July 29, 1975, that Circus Circus was setting aside 50 rooms for the duration of Cardinal's program, and he initiated a "definite booking sheet" which indicated the hotel's definite commitment to provide Cardinal with rooms.
After arranging hotel space, Cardinal contracted with North Central Airlines for aircraft to operate its tours to Las Vegas and with a ground operator in Las Vegas to provide ground transportation to and from the hotel, as required by the CAB for OTC approval. Cardinal's contract with North Central provided that it would pay North Central in full out of the escrow account at least 30 days before the departure date and that only after this could it pay the hotel or other expenses. Cardinal then submitted its proposed tour package to the CAB for approval.
During the period following their meeting with Valentine, O'Neill and Haas also contacted travel agents in smaller cities throughout the Upper Midwest where their reception was very positive. Even though federal regulations did not permit them to advertise to the general public until after they received CAB approval, which only occurred on November 13, 1975, they had been promoting Cardinal tours all year. What made these tours so popular was that they were scheduled to leave from the local community airports, obviating the need to bus participants to Minneapolis for departure. Of the 28 tours planned, O'Neill estimated that 2/3 had been picked up by travel agents, clubs or other organizations, and only a few were to be advertised and filled by individuals in the Twin Cities area.
Early in October, Valentine passed through the Twin Cities and met with O'Neill and Haas to find out how their promotion was going. He also told them that he had received permission from his superior to offer them a rate of $16 per night from Sunday through Thursday. At this time they informed him that they were having trouble with the first three tours in January which might have to be cancelled. Valentine told them that cancellation would pose no problem because that period was traditionally slow in Las Vegas. They also discussed the possibility of additional rooms and the use of Circus Circus for Cardinal's 1977 tour program. On October 13, 1975, Haas sent Valentine a letter requesting rooms for 1977 and asking to lengthen the period of the 1976 program, but no mention was made of the possible cancellation of the first three tours.
In November, 1975, the management of Circus Circus was reorganized under the leadership of Mel Larson who took the position previously held by Valentine's superior. In an attempt to make the operation of the hotel more efficient and to ensure that all rooms were full, Larson decided to draft formal contracts to govern Circus Circus' relations with all tour operators using its facilities. Valentine was not consulted about the contract Cardinal was asked to sign, which was contrary to the agreement they had negotiated and would make Cardinal's performance impossible.
On December 10, 1975, Valentine called Cardinal from Las Vegas to set up a meeting in Minneapolis for December 13. Haas told Valentine then and on December 13 that Cardinal was cancelling the first three tours. Valentine then told him to put it in writing, which he did in his letter of December 16.
At their meeting Valentine presented Haas with the proposed written contract between Cardinal and Circo, which Haas refused to sign because it did not represent their agreement. Although Valentine agreed to take it back and get it redrafted, Larson refused to alter the contract and took the position that, without the signature of O'Neill and Haas, there was no agreement.
On January 5, 1976, Cardinal received a letter from Circus Circus cancelling the rooms that had been reserved by Cardinal for the entire 1976 season. O'Neill and Haas immediately called Las Vegas, and Larson told them that, since they had refused to sign the agreement, they had no rooms. After notifying all the agents and participants that Cardinal would have to cancel its program because it had lost its hotel booking, they tried again to work something out with Circus Circus. Larson, however, would only let them have the rooms subject to the terms of the contract letter, an offer they refused.
When Cardinal learned of the cancellation on January 5, 1976, the flights scheduled to leave for Las Vegas were not all full. The first departure from Mason City, for which participants had only two remaining days to subscribe, was about 60 percent full, the next flight from Mankato was 40 percent full, and the third flight from Eau Claire was sold out. O'Neill...
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