In re Premier Automotive Services, Inc.
| Decision Date | 08 June 2006 |
| Docket Number | Bankruptcy No. 05-20168-JS.,Adversary No. 05-1378-JS. |
| Citation | 343 B.R. 501 |
| Parties | In re PREMIER AUTOMOTIVE SERVICES, INC., Debtor. The Maryland Port Administration, Movant, v. Premier Automotive Services, Inc., Respondent. Premier Automotive Services, Inc., Plaintiff, v. Robert L. Flanagan, et al., Defendants. |
| Court | U.S. Bankruptcy Court — District of Maryland |
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Joel I. Sher, Shapiro Sher Guinot & Sandler, Baltimore, MD, for Debtor.
Charles S. Fax, Rifkin Livingston Levitan & Silver LLC, Greenbelt, MD, Special Counsel for Plaintiff.
Peter Wilson Taliaferro, Thaddeus Byron Smith, Assistant Attorneys General, Baltimore, MD, for Maryland Port Authority and Messrs. Flanigan and Royster.
Mark A. Neal, Assistant U.S. Trustee, Baltimore, MD, Office of the United States Trustee.
The Chapter 11 debtor is a tenant holding over land owned by the State of Maryland after the expiration and nonrenewal of a long-term lease. The instant Chapter 11 case was filed to prevent the State from evicting the debtor from the property. The debtor filed the instant complaint against the defendants in their official capacities as officers of the State to for damages and to compel the Maryland Port Administration1 to execute a new lease to the debtor on terms more favorable than those the State found acceptable. Because the defendants are entitled to judgment as a matter of law, their motion for summary judgment will be granted, as well as the motion of the Maryland Port Administration for relief from the automatic stay.
The debtor, Premier Automotive Services, Inc. ("Premier"), is a Baltimore-based import/export vehicle processing center located at the Dundalk Marine Terminal (the "Terminal"), a facility of the port of Baltimore that is owned and managed by the Maryland Port Administration ("MPA"), an agency of the State of Maryland, created in Title 6 of the Maryland Transportation Code.2
Premier, formerly known as "The Maryland Undercoating Co., Inc.," has occupied Lot 90 at the Terminal as a tenant of MPA continuously since 1964. Its business is the processing of motor vehicles, including automobile, trucks, military, agricultural and construction equipment through the port. Lot 90 is the location upon which the debtor constructed a 27,500 squarefoot building ("the Building") at the beginning of its occupancy. The Building contains a body shop, a paint shop, offices and a wash line. Premier also occupies Lot 401 at the Terminal pursuant to a separate sublease. Lot 401 is used for equipment assembly and as a storage facility.
On July 28, 1992, Premier and MPA entered into a written lease for Lot 90 and other parcels not relevant to this lawsuit. On July 1, 1997, Premier and MPA renewed the lease for ten years, continuing in effect the terms and conditions of the original lease. The renewed lease with a slightly different acreage terminated on June 30, 2002. Upon its expiration, the lease provided that Premier became a month-to-month tenant. The lease provided that at the conclusion of its tenancy, Premier was required to remove any buildings it had erected or, with the approval of MPA, to abandon the buildings to the MPA. Lease, Article 4, Sec. 2.3
As of June 30, 2002, the parties had not executed a new lease. Premier objected to certain proposed terms contained in a new five-year lease submitted by MPA. One such provision contained in Section 2.1(b)(the "vehicle guarantee," or "thruput"), required that Premier "receive, process and distribute a minimum of 1,700 vehicles per acre of useable vehicle storage area of the Premises" per lease year to avoid additional fees. A second provision Section 1.5 ("Relocation"), gave MPA "the right and option, at MPA's sole discretion, to relocate the Premises or any portion thereof, to a comparable facility" with 180 days' notice. During the years 2002 through 2004, MPA proposed leases to Premier similar to that proposed in 2002. Each time, Premier refused to accept the terms proposed by MPA.
On March 29, 2005, MPA requested that Premier vacate Lot 90 on or before May 1, 2005. On April 29, 2005, Premier filed the instant Chapter 11 bankruptcy case. The schedules and statements filed by the debtor [P. 28] indicate that it was solvent on the date of filing4 MPA is listed as a creditor holding a claim in the amount of $17, 045.08, that is not included in the schedules. MPA did not file a proof of claim. The schedules indicate that Premier had no secured creditors. On Schedule G, Premier listed the real property lease with MPA "dated July 28, 1992 as amended from time to time" as an executory contract or unexpired lease.5
On May 6, 2005, Premier filed the first of three complaints for declaratory judgment, preliminary and permanent injunction and ancillary damages against the defendants, Robert L. Flanigan, in his official capacity as Secretary of the Maryland Department of Transportation, M. Kathleen Broadwater, in her official capacity as Acting Executive Director of MPA, and MPA itself. The complaint was based on MPA's alleged failure to negotiate in good faith the terms of a new long term lease of Lot 90, and was brought pursuant to 42 U.S.C. § 1983 for an alleged denial of substantive due process and equal protection and unlawful taking. In addition to injunctive and declaratory relief, the complaint sought an award of damages and attorneys fees.
Count I alleged that MPA infringed the debtor's property interests, including the Building, fixtures and improvements, contracts with customers, goodwill and the business as a "going concern," that are subject to protection by the Fourteenth Amendment.6
Count II claimed that MPA intends to take Premier's private property, namely the Lot 90 leasehold, together with the Building, fixtures and its business, for governmental use without just compensation.
Count III alleges a denial of equal protection by MPA having targeted the debtor for discrimination out of a group of similarly situated tenants. Premier argued that MPA refused to negotiate a commercially-fair and reasonable lease with Premier while it offered a leasehold interest to The Pasha Group ("Pasha"), a competitor of Premier on more favorable terms.
Count IV alleged a violation of the State law requirement of "fair dealing." On June 13, 2005, the defendants filed a motion to dismiss [P. 6], to which the debtor responded by filing an amended complaint [P.13], on June 22, 2005. The amended complaint substituted F. Brooks Royster, III, in his official capacity as Executive Director of MPA, in place of M. Kathleen Broadwater, and deleted Count IV (fair dealing). On October 28, 2005, the MPA filed its motion for relief from stay, to evict Premier from Lot 90.
Meanwhile, MPA, through M. Catherine Orleman, Esquire, as its "Principal Counsel," sent the following letter on letterhead of the Attorney General of the State of Maryland, dated October 3, 2005, to Charles S. Fax, Esquire, counsel to Premier:
As you know, I met with Jim Robinson,7 Janet West8 and Helen Bentley9 recently. During that meeting, Mr. Robinson expressed the opinion that the MPA was delaying approval of a proposed sublease from APS North Terminal, Inc. ("Amports") to Premier Automotive Services, Inc. ("Premier") for a portion of Lot 401 because of a dispute between Premier and MPA regarding Lot 90. I have investigated Mr. Robinson's concerns and can inform Premier that Mr. Robinson is mistaken. While it is true that MPA has decided not to authorize the proposed sublease, MPA's reasons stem from Premier's financial condition rather than from the current dispute between MPA and Premier over Lot 90.
Premier filed for bankruptcy on April 29, 2005. It has not yet filed a plan of reorganization. In the bankruptcy action, Premier has alleged it must have a long-term lease at Lot 90 in order for its business to survive. However, Premier has no lease at Lot 90 and MPA has already made arrangements to lease Lot 90 to Pasha Automotive Services. Based on the information presented in the bankruptcy action, it is not clear to MPA that Premier will be able to reorganize and function as a viable port tenant.
MPA had discussions with Premier for approximately three years over a long-term lease at Lot 90. Premier refused to do more than stay there on a month-to-month basis. It is MPA's understanding that Premier is not financially in a position to make a long-term commitment to MPA. The bankruptcy filing confirms MPA's concerns that Premier is not a credit-worthy tenant.
Letter from Orleman to Fax, dated October 3, 2005.
On December 7,. 2005, Premier filed a second amended complaint [P. 51], that restated the provisions of the amended complaint, but added a new Count IV, based upon 11 U.S.C. § 52510 which is intended to protect a Title 11 debtor from discrimination. Premier claims that that MPA has refused to consent to a proposed sublease between Amports as sublandlord and Premier as subtenant for Lot 401, because Premier is in bankruptcy.11
The defendants did not renew their motion to dismiss but filed a motion for summary judgment [P. 52] against the second amended complaint on December 27, 2005.
MPA asserts as a complete defense to the complaint the Eleventh Amendment bar that protects the State from being sued in Federal court without its consent.12
MPA takes the position that the debtor has no Fifth or Fourteenth Amendment claims to Lot 90 because any rights to property that the debtor enjoyed were subject to the terms of the written lease that has since expired. Therefore, any rights to which the debtor may be entitled are entirely contractual and must be litigated in the State court.
Premier claims that it is entitled to seek injunctive relief from the bankruptcy court to prevent a violation by the State of its rights under the Fifth and ...
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