DK Arena, Inc. v. EB ACQUISITIONS I, LLC

• Court: Florida District Court of Appeals
• Writing for the Court: GROSS, C.J
• Citation: DK Arena, Inc. v. EB Acquisitions I, LLC, 31 So.3d 313 (Fla. App. 2010)
• Decision Date: 07 April 2010
• Docket Number: No. 4D09-5.,4D09-5.
• Parties: DK ARENA, INC., a Delaware corporation, and Don King, an individual, Appellants, v. EB ACQUISITIONS I, LLC, a Florida limited liability company, Appellee.

31 So.3d 313

DK ARENA, INC., a Delaware corporation, and Don King, an individual, Appellants, v. EB ACQUISITIONS I, LLC, a Florida limited liability company, Appellee.

No. 4D09-5.

District Court of Appeal of Florida, Fourth District.

April 7, 2010.

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Alvin B. Davis, Tania Cruz, and Jeffrey Grossfeld of Squire, Sanders & Dempsey L.L.P., Miami, for appellants.

Daniel L. Wallach, Kevin Markow, Gary C. Rosen, and Lawrence S. Bassuk of Becker & Poliakoff, P.A., Fort Lauderdale, for appellee.

GROSS, C.J.

Appellant DK Arena, Inc., owned real property known as Mangonia Park Jai Alai Fronton ("arena property"). Appellee EB Acquisitions I, LLC, contracted with DK Arena to purchase the property for development. DK Arena sued EB for breach of contract, seeking to retain a $1,000,000 deposit. EB filed an answer and counterclaim attacking the real estate contract on various grounds and asserting the breach of an oral joint venture agreement that arose from the parties' dealings while the contract was pending. After a bench trial, the court found in favor of EB, ordering the return of its $1,000,000 deposit and awarding it $500,000 in damages on its counterclaim for breach of the oral joint venture agreement.

We affirm that portion of the judgment ruling that EB was entitled to the return of its deposit, rejecting DK Arena's arguments that rely on the statute of frauds. We reverse that portion of the judgment awarding $500,000 in damages, because the parties failed to create an enforceable joint venture agreement that would support a damage award.

We state the facts in the light most favorable to EB, the prevailing party below. See, e.g., Blue Paper, Inc. v. Provost, 914 So.2d 1048, 1049 (Fla. 4th DCA 2005).

The July 2004 Real Estate Contract

John Markey, who later formed EB, met with Mike Masanoff of the South Florida Regional Transit Authority about developing the arena property into a "transit oriented development." Masanoff arranged a meeting between himself, Markey, and Don King, the celebrity boxing promoter who owned DK Arena. King was in favor of a development, and indicated that he would be able to "deliver" the community and County Commissioner Addie Greene. Markey wrote a letter to King on July 14, 2004, expressing his intent to purchase the arena property.

Markey formed EB to acquire the property. Through EB, Markey wanted to turn the arena property into a mixed use development, with both residential and commercial elements, that would integrate the Tri-Rail station already there. The estimated budget for constructing the development was $250,000,000.

On July 20, 2004, EB and DK Arena entered into a written contract where EB agreed to purchase the arena property for $23,000,000, with an escrow deposit of $1,000,000. The agreement provided for a due diligence period of 60 days, which would begin to run on July 20, the effective date of the agreement, and terminate on September 20, 2004. The closing would take place 30 days after the expiration of the due diligence period. The failure of EB to "deliver written notice to DK Arena prior to the expiration of the Due Diligence period of EB's determination of whether or not the Property was acceptable" would constitute EB's "as is" acceptance of the contract.

Paragraph 9 of the contract further provided that the deposit would be returned "in the event any condition of this Contract was not met and Buyer ... timely gave any required notice regarding the condition having not been met." Either party could claim the deposit pursuant to paragraph 10:

10. DEFAULT:

(a) In the event the sale is not closed due to any default or failure on the part of Seller other than failure to make the title marketable after diligent effort, Buyer may either (1) receive a refund of Buyer's deposit(s) or (2) seek performance....

(b) In the event the sale is not closed due to any default or failure on the part of Buyer, Seller may either (1) retain all deposit(s) paid or agreed to be paid by Buyer as agreed upon liquidated damages, consideration for the execution of this Contract, and in full settlement of any claims, upon which this Contract will terminate or (2) seek specific performance....

Finally, paragraph 15 of the contract provided that modifications of the contract would "not be binding unless in writing, signed and delivered by the party to be bound."

At the same time, DK Arena and EB also entered into an addendum that was incorporated into the above contract. Paragraph 4 of the addendum allowed EB to terminate the agreement at any time during the due diligence period. The addendum also provided additional terms concerning the deposit:

10. DEPOSIT. At the end of the Due Diligence Period, assuming that EB has not given notice to DK Arena that it intends to terminate the Contract, the parties shall take the following actions:

(a) The Deposit shall be released to DK Arena....

A point of contention at trial was paragraph 14 of the addendum:

14. LAND USE APPLICATION. EB may in its discretion, at its sole cost and expense, apply for land use and any other governmental and quasi-governmental approvals relating to its proposed development of the Property. DK Arena and its principal, Mr. Don King, shall cooperate in the foregoing applications and processes. DK Arena and its principal, Mr. Don King, shall also reasonably cooperate in the marketing and promotion of the redevelopment of the Property. In consideration of DK Arena and Mr. King's efforts, EB shall convey title to DK Arena of 2(two) of the highest price residential units offered to the general public upon completion of construction of the first phase of development.... This clause shall survive the Closing. DK Arena's and Mr. King's agreement to cooperate with EB in connection with the obtaining of governmental approvals, marketing and promotion is a material inducement of EB entering into this Contract.

King understood paragraph 14 to mean that he was required to lobby for government approval of the project and speak at public meetings on its behalf. Charles Lomax, DK Arena's general counsel, understood that King was obligated to attend the meetings of the Mangonia Town Council. Believing that paragraph 14 was "extremely significant," Markey saw it as insuring that King would bring "his celebrity clout, his oratory, his ability, and his connections to the community" to support the project.

Finally, addendum paragraph 15 provided that "this transaction did not create a joint venture or partnership relationship among the Parties."

The Due Diligence Period Through October 4

On September 13, 2004, DK Arena and EB amended the July 20 contract to extend the due diligence period by 14 days, until October 4, 2004. Consistent with paragraph 15 of the contract, this amendment was in writing and signed by both DK Arena and EB.

At a meeting at King's office, Markey and King orally agreed to convert their agreement into a joint venture, whereby DK Arena would leave some equity in the project and receive a portion of ownership. After several meetings, Markey and King hammered out important terms of the joint venture and shook hands on a "rock solid" agreement where DK Arena was to receive equity in the project and provide a mortgage to EB. Markey testified that the goal of the proposed project was 1500 residential units and about 350,000 square feet of commercial space. King told Markey to "write up" a formal proposal and give it to his lawyers.

On September 27, 2004, Markey sent King, through attorney Lomax, the formal proposal "outlining the terms of their joint venture," "per their previous negotiations":

1. A new single purpose entity ("the L.L.C.") will be formed to develop the property with Don King as 25% member.

2. The L.L.C. will purchase the property from DK Arena for $23,000,000.

3. Closing will take place approximately 6 weeks after formation of the new L.L.C. Don King will receive $15,000,000 cash and a second mortgage, subordinate to the primary lender, in the amount of $8,000,000 at the closing.

4. Payment of the $8,000,000 second mortgage will be contingent upon the granting of all approvals to build the project.

5. EB Developers will fund all costs for approvals and Don King will have no obligation to provide additional funding.

6. Don King will assist with obtaining approvals, public relations and marketing.

. . . .

• Additional equity from JKM & EB on proportionate basis.

• DK will be permitted to invest equity in shop illegible.

If King approved the above terms, Markey testified that he would have reduced the joint venture agreement to writing.

After the September 27, 2004 letter, the parties negotiated "back and forth" and their attorneys exchanged various versions of the agreement. On September 29, EB sent DK Arena a proposed amendment to the agreement, which would have converted the purchase contract into a joint venture agreement where EB would pay DK Arena $15,000,000 in cash and DK Arena would take back an $8,000,000 mortgage and receive a 25% equity interest in EB. The September 29 amendment proposed to extend the due diligence period and eliminate paragraph 15 from the addendum to the purchase contract, which paragraph disclaimed the formation of a partnership or joint venture between DK Arena and EB.

Several attorneys working for DK Arena analyzed the September 29 amendment and pointed out areas of concern. From King's perspective, his attorneys "never really presented" the proposal to him "with the stamp of approval," so that no deal was ever made. However, Markey believed that he and King had already "agreed to the deal before. It was just a matter of how do you memorialize it in writing, and get the legalese correct ."

On October 4, 2004, the day the due diligence period was to expire, King and Markey met at King's office. Each man had two lawyers with him. King and Markey agreed to hold the due diligence period "in abeyance" unt...