In re President Casinos, Inc.
| Decision Date | 25 September 2009 |
| Docket Number | No. 4:08CV166 HEA.,4:08CV166 HEA. |
| Citation | 419 B.R. 394 |
| Parties | In re PRESIDENT CASINOS, INC., et al., Debtors. President Casinos, Inc., Individually and as Trustee of that certain President River Boat Casino-Missouri, Inc. Distribution Trust dated December 20, 2006, Plaintiff-Appellant/Cross-Appellee, v. Columbia Sussex Corporation and Wimar Tahoe Corporation, Defendants-Appellees/Cross-Appellants. |
| Court | U.S. District Court — Eastern District of Missouri |
James W. Erwin, Lawrence C. Friedman, Mark V. Bossi, Thompson Coburn, LLP, St. Louis, MO, John C. Balzano, Joseph D. Pizzurro, Nancy E. Delaney, Priya Swaminathan, Shannon McNulty, Timothy N. McCabe, Curtis and Mallet-Prevost, LLP, New York, NY, for Debtor.
This matter is before the Court on the appeal from the January 25, 2006 and February 16, 2006 orders of the Bankruptcy Court granting a temporary restraining order and a preliminary injunction, respectively, to President Casinos, Inc., ("PCI"). The Court heard oral argument on the appeal on April 22, 2009. Upon consideration of the briefs of the parties, oral argument and the evidence in the appellate record, this Court enters the following Findings of Fact and Conclusions of Law.
PCI is a public holding company that owns several subsidiaries, one of which is President Riverboat Casino Missouri Inc. ("PRC-MO"), a Missouri corporation. PRC-MO owned and operated a riverboat casino in downtown St. Louis called the President Casino on the Admiral ("President Casino"). On June 20, 2002, PCI and PRC-MO filed for voluntary bankruptcy under Chapter 11 of the United States Bankruptcy Code. By order of this Court, dated March 12, 2009, Henry Gusky, in his capacity as Trustee for President Casinos, Inc. Liquidation Trust and successor Trustee for the President Casino-Missouri Inc. Distribution Trust, was substituted for PCI as Plaintiff, Appellant and Cross-Appellee.
Defendant Columbia Sussex Corporation and its subsidiary, Defendant Wimar Tahoe Corporation (collectively "Columbia Sussex") are wholly owned by William Yung.
Between 1994 and December 16, 2005, President Casino patrons parked their vehicles at a parking facility (the "Cherrick Lot"), pursuant to a validation arrangement with the Cherrick Lot operator, St. Louis Parking ("STL Parking"). In 1994, STL Parking charged the President Casino $1.00 for each parking ticket validated by the President Casino. The parking validation rate was subsequently raised to $1.25 and, in August 2001, to $1.50 per ticket.
Since January 2001, President Casino patrons have parked approximately 40,753 vehicles per month at the Cherrick Lot, totaling over 2.4 million cars a year. Almost 77% of President Casino patrons who park their own vehicles used the Cherrick Lot.
On September 30, 2004, Columbia Sussex entered into an agreement to purchase the President Casino ("Purchase Agreement"). Columbia Sussex knew that the Cherrick Lot was critical for the survival of the President Casino. Therefore, in October 2004, in connection with its purchase of the President Casino, Columbia Sussex purchased the Cherrick Lot for $5 million.
In 2004, the Cherrick Lot earned approximately half a million dollars a year in rental income by parking validated cars at the rate of $1.50.
After Columbia Sussex's purchase of the Cherrick Lot, STL Parking continued to operate the Cherrick Lot, parking cars for President Casino patrons at $1.50 per validated ticket.
In October 2005, Columbia Sussex informed PCI that Columbia Sussex was terminating the contract to purchase the President Casino. On October 17, 2005, PCI informed Columbia Sussex that PCI intended to pursue an action for breach of contract if Columbia Sussex did not comply with its obligations under the Purchase Agreement. The parties subsequently entered into settlement negotiations. While the parties were in the midst of settlement negotiations, Columbia Sussex President William Yung, informed PCI's CEO, John Aylsworth that if PCI did not withdraw its threat to bring a breach of contract suit he would "just take that parking lot away and chain it up."
Aylsworth informed William Yung that taking the Cherrick Lot away would end all settlement negotiations.
At 4:35 p.m., on December 16, 2005, Columbia Sussex faxed a letter to President Casino stating that effective at midnight, the rate per validated vehicle would increase, 300 percent from $1.50 to $6.00. Columbia Sussex was unable to articulate the method used to calculate the amount of rate increase.
Although Columbia Sussex's own expert Joseph Mollish opined that a comparative study of validated parking rates in the area is a common method to determine whether rates are undermarket and how much to increase rates, Columbia Sussex did not conduct any research or studies to determine whether the price of $1.50 per validated ticket was under market. At that time, other garages in the Cherrick Lot vicinity charged between $1.33 and $2.00 per validated ticket. In fact, STL Parking advised Columbia Sussex not to raise rates as high as $6.00. The rate increase ended all settlement negotiations between the parties.
The President Casino paid the increased rate of $6.00 because it was difficult to find alternative parking arrangements on such short notice. Between December 16, 2005 and December 22, 2005, the President Casino paid $106,766 more in validation fees due to the increased rates.
On December 22, 2005, five days after raising rates from $1.50 to $6.00, Columbia Sussex faxed another letter to President Casino stating that effective midnight, the rate per validated vehicle would increase another 260 percent, from $6.00 to $10.00. Once again, Columbia Sussex conducted no research on the market rates for validated parking in the Cherrick Lot area. As in the case of the first rate increase, Columbia Sussex was unable to articulate the basis for its decision to raise validation rates 260 percent in five days. Columbia Sussex's expert, Mr. Mollish opined that before determining whether a rate increase has been successful, a parking lot operator must wait at least 30 to 60 days. However, Columbia Sussex waited a mere five days before raising rates again from $6.00 to $10.00.
After the second rate increase, the President Casino continued to validate cars at the Cherrick Lot but refused to pay its weekly invoices at the increased rates. On December 30, 2005, Columbia Sussex posted a sign outside the Cherrick Lot stating that it would no longer accept validations from the President Casino.
During the month of January 2006, when the President Casino was no longer validating cars at the Cherrick Lot, the number of vehicles using the Cherrick Lot dropped from 40,000 to 645.
Between December 31, 2005 and February 8, 2005, the President Casino paid $276,118 in valet and shuttle services for its patrons who were unable to use the Cherrick Lot and were forced to park further away. President Casino patrons were also forced to park at inconvenient and dangerous locations, such as the levee on the Mississippi River. Parking on the levee, with its cobblestones and steep grade, is unpleasant and potentially unsafe, especially for older patrons. In addition, the levee parking can become instantly unusable in inclement weather when the cobblestones become slick. As river levels rise in the early spring, the space available for levee parking can decrease significantly and may disappear entirely.
On January 12, 2006, PCI filed an adversary action in the Bankruptcy Court for the Eastern District of Missouri, alleging three causes of action: (1) breach of contract based on Columbia Sussex's failure to purchase the President Casino; (2) prima facie tort claim based on Columbia Sussex's raising of the validated parking rates for the Cherrick Lot; and (3) injunctive relief pursuant to 11 U.S.C. § 105, enjoining Columbia Sussex from blocking access to the Cherrick Lot by casino patrons and from raising the validation parking fee over $1.50. On January 25, 2006, the Bankruptcy Court entered a temporary restraining order granting the requested injunctive relief to PCI.
On January 26, 2006, Columbia Sussex applied to this Court for a Writ of Prohibition, seeking a determination that the Bankruptcy Court did not have subject matter jurisdiction to grant injunctive relief that prohibited Columbia Sussex from using its property, prior to a judgment on the merits on an action for money damages. Pending a decision on the Writ of Prohibition, PCI did not resume parking at the Cherrick Lot because it was unsure when the TRO would be implemented.
On February 8, 2006, this Court denied the Writ of Prohibition, holding that pursuant to 11 U.S.C. § 157, the Bankruptcy Court did have subject matter jurisdiction to grant injunctive relief because Columbia Sussex's actions in raising rates could have a conceivable effect on the administration of the bankruptcy estate. In re Columbia Sussex Corp. Inc., No. 4:06CV118SNL, 2006 WL 305959 (E.D.Mo. Feb. 8, 2006).
On February 10, 2006, the TRO went into effect. On the same day PCI resumed parking at the Cherrick Lot.
On February 16, 2006, the Bankruptcy Court converted the TRO into a preliminary injunction, enjoining Columbia Sussex from charging more than $1.50 per vehicle for validated parking tickets for casino patrons. In granting preliminary injunctive relief the Bankruptcy Court found that: (1) PCI was likely to succeed on the merits of its prima facie tort claim; (2) PCI would suffer irreparable harm by loss of use of the Cherrick Lot which would have a detrimental effect on Debtors' operations and reorganization; (3) the harm to PCI outweighed any loss to Columbia Sussex, "particularly in light of the fact that Defendants are operating the lot at a loss"; and (4) public safety was promoted if casino...
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...justification or an insufficient justification for defendant's act; and (4) injury to plaintiff." In re President Casinos, Inc. v. Columbia Sussex Corp., 419 B.R. 394, 401 (E.D. Mo. 2009). The Court need not reach a decision about whether or not Plaintiffs can bring a prima facie tort claim......