In re Valley Forge Plaza Associates
| Decision Date | 11 May 1990 |
| Docket Number | Bankruptcy No. 89-11136S,Adv. No. 89-0700S. |
| Citation | 113 BR 892 |
| Parties | In re VALLEY FORGE PLAZA ASSOCIATES (A Pennsylvania Limited Partnership), Debtor. VALLEY FORGE PLAZA ASSOCIATES and Official Committee of Unsecured Creditors, Plaintiffs, v. The ROSEN AGENCY, INC. and Wendy Rosen, Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
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Gary D. Bressler, Mark J. Packel, Adelman Lavine Gold & Levin, Philadelphia, Pa., for debtor/plaintiff.
Stuart Brown, Robert Eyre, Mesirov, Gelman, Jaffe, Cramer & Jamieson, Philadelphia, Pa., for plaintiff/Committee of Unsecured Creditors.
Virginia Miller, Steven Roth, Dilworth, Paxson, Kalish & Kauffman, Philadelphia, Pa., for The Rosen Agency, Inc. and Wendy Rosen/defendants.
The instant adversary proceeding was initiated by a Complaint filed by the Plaintiff, VALLEY FORGE PLAZA ASSOCIATES (A Pennsylvania Limited Partnership) ("the Debtor"), against THE ROSEN AGENCY, INC. ("the Agency") and the Agency's President, WENDY ROSEN ("Rosen") the Agency and Rosen are collectively referred to as "the Defendants"), alleging breach of contract, defamation, interference with business contracts, disparagement, and communication of fraudulent misrepresentations.
On December 22, 1989, the Defendants filed a Motion for Partial Summary Judgment seeking to strike Counts II and VI of the Complaint. By Order and Memorandum dated January 17, 1990, the Motion was denied and a trial date was set for February 14, 1990.
Count II requests damages for the Defendants' breach of the parties' Lease Agreement and Rider and Multiple Property Booking Report, all dated on or about October 2, 1986. Contrary to the Defendants' assertions in their Motion, we concluded, without deciding whether the Lease was ambiguous, that the interpretation of the Lease posited by the Debtor was more likely to be found to be legally correct than that offered by the Defendants, and we refused to strike Count II of the Complaint.
Count VI asserts a claim against the Defendants for "failure to communicate information accurately." The Defendants argued that there is no cause of action under state or federal law for negligent or fraudulent misrepresentation of facts and that, even if there were, the Debtor did not rely upon any alleged misrepresentations of the Defendants. Finding that Count VI could state a claim for either defamation or interference with existing or future contractual performance, we refused to strike Count VI.
After a careful review of the testimony from the trial held on February 14 and 15, 1990, relevant documents, and case law, we conclude that the Defendants are liable to the Debtor for the full $290,718.55 in damages claimed; $7,345.97 in unpaid charges from the 1989 Event; $3,000.00 in punitive damages; and attorneys' fees and costs as provided for in paragraph 24J of the Lease. Our verdict, however, is a conditional one and the Defendants may mitigate these damages by committing themselves, on or before July 2, 1990, to hold, in good faith, either their 1991, 1992 or 1993 crafts show at the Debtor's facilities and paying the Debtor only $45,360.00 in liquidated damages for the cancellation of the 1990 Event instead of $290,718.55, as well as the other elements of damages awarded.
The Debtor is a Pennsylvania limited partnership that owns a wholly-integrated complex consisting of, among other things, the Valley Forge Convention and Exhibit Center, a convention center ("the Center"), two luxury hotels, the Radisson and the Sheraton ("the Hotels"), restaurants, entertainment facilities, and an office building (the entire complex is collectively referred to as "the Facilities"). The Debtor filed a voluntary petition under Chapter 11 of the Bankruptcy Code on March 28, 1989. A detailed history of the main bankruptcy case is contained in our earlier Opinion, In re Valley Forge Plaza Associates, 109 B.R. 669, 671-74 (Bankr.E.D.Pa.1990).
J. Leon Altemose ("Altemose") is the President of First Avenue Realty Corp., the general partner of the Debtor, and is also a limited partner of the Debtor. Louis Paul ("Paul") is the Treasurer of First Avenue Realty Corp. and a limited partner of the Debtor.1
The Agency is a corporation engaged in the business of producing trade shows and meetings for American crafts artists. Rosen is President as well as a stockholder and director of the Agency.
In early 1986, Rosen toured the Facilities with Altemose to explore the possibility of holding the Agency's annual craft show ("an Event") at the Facilities. Each Event features the goods of approximately 800 exhibitors and draws thousands of attendees who purchase these goods at wholesale prices to sell to the public. Rosen was obviously impressed with the Facilities because the Agency held its first Event at the Facilities just a few weeks later in February, 1986.
On or about October 2, 1986, the Debtor and the Agency executed a long term Lease Agreement and Rider ("the Lease"). Pursuant to the Lease, the Agency agreed to lease the Center for the purpose of presenting the Event over the course of the next twenty (20) years. The annual rental payment was set at $75,600.00 for the first year and increased each year thereafter based upon the consumer price index.
Testimony established that the rental payments required by the Lease for the Center were very favorable to the Defendants. The Debtor offered the Defendants such favorable terms because of the Defendants' representation that the Event would generate substantial business for the Debtor's main sources of income: the Hotels, restaurants, and other entities at the Facilities other than the Center.
As is discussed in detail at pages 898-99 infra, the Lease contained several provisions pursuant to which the Agency could terminate either a single Event or the Lease in its entirety. The interpretation of these provisions is the key to the resolution of the breach of contract claims asserted by the Plaintiffs.
After or about the same time, the Debtor and the Agency, by Commerce Travel, acting on behalf of the Agency, executed a Multiple Property Booking Report ("the Booking Report"). Pursuant to the Booking Report, certain large blocks of rooms were reserved at the Debtor's Hotels for each Event's exhibitors and attendees.
The Agency held Events at the Facilities in 1986, 1987, 1988, and 1989. Each Event featured approximately 800 exhibitors and their work and drew more than 3,000 attendees to the Facilities.
The Agency does not dispute that the exhibitors and attendees used all of the Debtor's Facilities, not merely the Center. The Agency itself sponsored and/or participated in parties, functions, and meetings at the Facilities. Exhibitors often rented space at the Facilities to hold meetings with their customers. In fact, the Event, due to its size, required virtually all of the Debtor's resources to accommodate it, and the Debtor was unable to book other space at the Center during the time that an Event was taking place there.
The bulk of the Debtor's revenue from the Events is through the sale of food, beverages and entertainment, and the rental of rooms at the Hotels to the exhibitors and attendees. Based upon the Debtor's experience from the 1987-89 Events, the Booking Reports are accurate estimates of the rooms rented in connection with each Event.
The Debtor filed its Chapter 11 bankruptcy petition in this court on March 28, 1989. Following the Debtor's bankruptcy filing, neither Rosen nor the Agency contacted the Debtor to determine the status of the bankruptcy case or to inquire how the filing would affect the Debtor's ability, if at all, to comply with the Lease.
On or about May 2, 1989, a Motion of Debtor Authorizing Assumption of Executory Contracts with the Rosen Agency, Inc. pursuant to Bankruptcy Code § 365(a), 11 U.S.C. § 365(a), was filed with this court. After the withdrawal of certain objections raised by the Agency, we found, by Order dated June 7, 1989, that the Lease and Booking Report were executory contracts which could be, and thereby were, assumed by the Debtor.
Some time in early spring of 1989, but before May 11, 1989, Rosen prepared and mailed a letter and "Exhibitor Survey" ("the Survey") to approximately 800 of the Event's exhibitors. Rosen prepared the letter and the Survey after consultation with her personal "board of advisors," which included several attorneys. The letter contained numerous incorrect statements regarding the Debtor's bankruptcy case, its impact on the Events, and the Debtor's ability to perform under the Lease. See pages 904-05 infra. Rosen admits that the letter and survey were "slanted" and contained nothing positive about the Debtor. Seventy-six (76%) percent of the approximately 500 responding exhibitors expressed a desire not to return to the Facilities.
On or about May 11, 1989, Rosen telephoned Paul and requested, or, more accurately, demanded, to be released from the Lease. Rosen claimed that she could hold the Events more profitably at larger facilities in Atlantic City and, therefore, wanted to be released from any obligations under the Lease. When Paul did not agree to so release Rosen, she became upset and threatened to damage the Debtor's business and reputation. Rosen also threatened to contact the press and belittle the Debtor and to bring the press to any court proceedings should the Debtor litigate this matter.2 By letter dated May 18, 1989, the Agency, through Rosen, notified the Debtor, in a single communication, that it decided not only not to conduct the 1990 Event at the Facilities, but also to cancel the Lease and the Booking Report.
In the survey to the exhibitors; the May 11, 1989, phone call to Paul; and the May 18, 1989, letter to Paul terminating the Lease and cancelling the 1990 Event, Rosen stated the reason for wanting to cancel...
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