LaSociete Generale Immobiliere v. Minneapolis Community Development Agency

• Decision Date: 17 February 1995
• Docket Number: 93-2920,No. 93-3123,93-3123
• Citation: 44 F.3d 629
• Parties: LaSOCIETE GENERALE IMMOBILIERE, a French corporation; LSGI, Inc., a Delaware corporation, Appellees/Cross-appellants, v. MINNEAPOLIS COMMUNITY DEVELOPMENT AGENCY; City of Minneapolis, Appellants/Cross-appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 629

44 F.3d 629

LaSOCIETE GENERALE IMMOBILIERE, a French corporation; LSGI Inc., a Delaware corporation, Appellees/Cross-appellants, v. MINNEAPOLIS COMMUNITY DEVELOPMENT AGENCY; City of Minneapolis, Appellants/Cross-appellees.

No. 93-3123, 93-2920.

United States Court of Appeals,

Eighth Circuit.

Submitted May 11, 1994.

Decided Dec. 22, 1994.

Rehearing and Suggestion for Rehearing En Banc Denied Feb.

17, 1995. ^*

Robert Reinhart, Minneapolis, MN, argued (Edward Wahl, Michael Keyes, Charles Quaintance, Jr., David Herr, Richard Wilson, Justin Perl, Robert Alfton and Larry Warren, on the brief), for appellants.

Carter Phillips, Washington, DC, argued (Mark Hopson, Paul Kalb and Nathan Sheers, Washington, DC, Michael Mahoney, Mark Peery, and Douglas Kelley, Minneapolis, MN, on the brief), for appellees.

Before McMILLIAN, Circuit Judge, LIVELY, ^** Senior Circuit Judge, and WOLLMAN, Circuit Judge.

McMILLIAN, Circuit Judge.

The Minneapolis Community Development Agency and the City of Minneapolis appeal from a final judgment entered in the United States District Court for the District of Minnesota upon a jury verdict finding them liable to La Societe Generale Immobiliere and LSGI, Inc., for the breach of a development contract and for injury to the developer's reputation in violation of the Due Process Clause of the Fourteenth Amendment. La Societe Generale Immobiliere v. Minneapolis Community Dev. Agency, 827 F.Supp. 1431 (D.Minn.1993) (Order). For reversal, appellants argue that the district court erred in holding that: (1) the development contract at issue was ambiguous, (2) the City or the Mayor breached the contract, and (3) the claims brought under 42 U.S.C. Sec. 1983 were cognizable as a matter of law. Appellants have also raised a number of issues with regard to damage calculation. La Societe Generale Immobiliere and LSGI, Inc., filed a cross-appeal on the issue of damages. For the reasons discussed below, we reverse the judgment of the district court.

I. BACKGROUND

In mid-1985, the Minneapolis Community Development Agency (MCDA) ¹ and the City of Minneapolis (jointly, the "City") granted La Societe Generale Immobiliere (LSGI), a French real estate company, exclusive rights to negotiate the development of a new shopping center on Nicollet Mall in downtown Minneapolis. The project contemplated 900,000 square feet of retail shops and stores, a 400,000 square foot office building, and an underground parking garage. The development rights extended over three and one-half blocks with the project's center on the City's north-south axis street, Nicollet Mall.

LSGI's plans envisioned a dome over the Nicollet Mall and the depression of the street into a tunnel (the so-called "dome and tunnel" design). This proposed design was immediately the subject of controversy, and a number of city officials and local business-persons expressed reservations about the concept. As part of this debate, on July 25, 1986, the City Council commissioned a Committee on the Future of the Nicollet Mall (Mall Committee). The overall design of the project was among the issues that the Mall Committee was to consider. John Cairns, an attorney for LSGI, served on the Mall Committee as an LSGI representative. On the same day the City Council created the Mall Committee, it also approved the sale of seventy-three million dollars of tax increment bonds for the project "subject to final design approval of the project's treatment of the Nicollet Mall by the City Council." Minneapolis Mayor Donald M. Fraser did not approve of this City Council action because, among other things, he had concerns about the project's design. However, the City Council's action became effective on July 31, 1986, because of the Mayor's inaction.

By September 1986, negotiators for MCDA and LSGI had largely completed the drafting of a Development Agreement as well as a lease and related documents. Attached to the Development Agreement were various exhibits, including a set of LSGI's preliminary plans for the dome and tunnel design. Before the Development Agreement could be executed, the MCDA Board and the Mayor were required to approve it. This approval would have authorized the Executive Director of the MCDA to sign the Development Agreement. On September 26, the Board gave its authorization, but on October 2, the Mayor vetoed this resolution and expressed his concern that LSGI would market the proposed project using the dome and tunnel design concept. The Mayor specifically stated:

If we sign this contract [the Development Agreement] we will be telling [LSGI] that we are prepared to go ahead with the basic design which [they have] proposed for the south end of the mall. It is true that we have final design approval over the treatment of the mall, but clearly LSGI will be marketing their project based on their current design.

The Mayor requested a six-week delay in the execution of the Development Agreement to enable the Mall Committee to finish its work. He also expressed the view that the Development Agreement should clearly recognize the City's prerogative to take into account the conclusions of the Mall Committee before making a final decision about the dome and tunnel design concept. Public debate over the dome and tunnel design concept continued throughout this period.

Before the Mall Committee's process had run its course, LSGI responded to the Mayor's concern by proposing the addition of language to the Development Agreement that clarified the City Council's continuing control over the project's design. This language was to be added to Section 2.02 of the Development Agreement. Section 2.02 was titled "MCDA Approval" and was included under Article II of the Development Agreement which was titled "Plan Approval." The original version of Section 2.02 stated in relevant part:

It is understood by the Developer and the MCDA that no action of the Minneapolis City Council shall be necessary to approve the form or content of any of the proposed Project Plans or Specifications except for final design approval of the Project's treatment of the Nicollet Mall by the City Council.

The revision added the following language to the end of the above-quoted sentence:

and further except that any such proposed Project Plans or Specifications shall be modified by the Developer to comply with any and all design guidelines or any and all other requirements related to the treatment of the Nicollet Mall adopted by the Minneapolis City Council prior to the final approval by the MCDA of the Proposed Project Plans and Specifications....

The Mayor was satisfied with this additional specific recognition of the City's continuing control over the dome and tunnel design concept. He therefore invited the MCDA Board to override his veto and to authorize execution of the Development Agreement. The Development Agreement was executed and became effective on November 3, 1986. In the Development Agreement, LSGI promised to obtain the commitments of two major department stores, or "anchor" tenants. LSGI also promised to secure financing, present detailed final project plans, produce a number of other agreements, and resolve certain issues related to the project. During the year following execution of the Development Agreement, LSGI's design continued to create public controversy. In December 1986, the Mall Committee issued a report which recommended that transportation on the Nicollet Mall should remain at grade. The Mall Committee also recommended that the historical environmental feeling of openness of the Mall should be retained. Meanwhile, LSGI showed preliminary plans for the project, which included the dome and tunnel design concept, to numerous department stores throughout the country.

On November 3, 1987, the anniversary of the execution date of the Development Agreement and the date set for closing, LSGI had delivered the commitment of only one anchor tenant, Nordstrom's. LSGI produced only a letter of possible interest from the Neiman-Marcus chain. LSGI also failed to comply with a number of the other contractual obligations that were to be accomplished by November 3, 1987. LSGI, therefore, sought an extension of the Development Agreement in the form of a Post-Closing Agreement. The Post-Closing Agreement included a Post-Closing Schedule that gave LSGI a thirty-day extension to secure a second anchor tenant. LSGI, however, was unable to secure a second anchor.

Prior to the execution of the Post-Closing Agreement, the MCDA Board adopted a resolution referred to as the "Cramer Resolution," directing City officials working in consultation with the Nicollet Mall Implementation Staff (successor to the Mall Committee), the MCDA, and LSGI, to develop design guidelines for the project within thirty days that did not include a dome or a tunnel. The Cramer Resolution, which effectively rejected the dome and tunnel design concept, was debated and enacted at a public meeting of the MCDA Board of Commissioners on November 3, 1987. Two LSGI lawyers were present at the meeting. LSGI principal Bala Safyurtlu was also present. During the course of the meeting, the MCDA's attorney told the Board that the Development Agreement permitted the Cramer Resolution. No LSGI representative attempted to contradict this representation. Moreover, an LSGI attorney, John Cairns, made the following statement to the Board:

On this question of design let me just tell you that we have said for months if not twelve months since we were here with you a year ago that we will reach a consensus on that design with you and you get the final shot at it. That's still in the contract, that's always been there....

Neither the other LSGI attorney present nor LSGI principal Safyurtlu challenged this assertion. Five hours after the Cramer Resolution was enacted, LSGI and the City executed the Post-Closing Agreement which postponed many of LSGI's deadlines and contained language regarding the City Council's right to...