Pavone v. Kirke
| Decision Date | 23 August 2011 |
| Docket Number | No. 08–0180.,08–0180. |
| Citation | 801 N.W.2d 477 |
| Parties | John PAVONE and Signature Management Group, L.L.C., Appellees,v.Gerald M. KIRKE and Wild Rose Entertainment, L.L.C., Appellants. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Mark McCormick, David Swinton, and David W. Nelmark of Belin McCormick, P.C. (trial and appellate counsel), Des Moines, Brent B. Green and Mariclare Thinnes Culver of Duncan, Green, Brown & Langeness (appellate counsel), Des Moines, and Thomas D. Waterman (until withdrawal) of Lane & Waterman LLP (appellate counsel), Davenport, for appellants.Maurice B. Nieland of Rawlings, Nieland, Killinger, Ellwanger, Jacobs, Mohrhauser & Nelson, L.L.P., Sioux City, Stanley E. Munger and Jay E. Denne of Munger, Reinschmidt & Denne, L.L.P., Sioux City, and Glenn L. Norris of Hawkins & Norris, P.C., Des Moines, for appellees.WIGGINS, Justice.
A district court jury determined the owners and operators of a casino breached a management agreement and awarded damages to the prospective management team. The owners and operators appealed the verdict. We transferred the case to the court of appeals. The court of appeals reversed the judgment of the district court. On further review, we find the district court did not commit any error in the trial of the matter. Accordingly, we vacate the decision of the court of appeals and affirm the judgment of the district court.
In 2003 John Pavone returned to Iowa with the intent to manage casinos through his company, Signature Management Group, L.L.C. (SMG). Pavone had extensive experience in the gaming and hospitality/hotel industries. At about the same time, Gerald Kirke and Dr. Michael Richards formed Wild Rose Entertainment, L.L.C. (Wild Rose), with the intent to obtain gaming licenses, and subsequently, develop and own new casinos throughout Iowa. Prior to forming Wild Rose, Kirke and Richards had no experience in the gaming industry.
On April 29, 2004, Pavone entered into a consulting agreement with Wild Rose to assist Wild Rose in obtaining gaming licenses in the counties surrounding the Des Moines area. The consulting agreement also provided, if Wild Rose obtained a gaming license, Wild Rose would engage in good faith negotiations with SMG for SMG to manage the newly developed casino. Thus, with Pavone's assistance, Wild Rose turned its focus to obtaining gaming licenses in the state of Iowa.
One city that was interested in providing gaming was the city of Ottumwa. On July 15, Pavone sent an email to Kirke asking to meet with him and discuss their future business relationship should the Ottumwa nonprofit organization seeking the license choose to collaborate with Wild Rose. Subsequently, on July 19, Pavone met with Kirke and Richards at a restaurant Kirke owned, and they discussed SMG's future business relationship with Wild Rose. Pavone claims that at this meeting the parties generally agreed SMG would manage all casinos Wild Rose operated. Kirke admits the parties discussed an eventual partnership but claims the specific terms of an agreement were not discussed.
After this meeting, Pavone met with his attorney, Ryan Ross, and instructed him to contact Wild Rose's attorney, Jim Krambeck, about memorializing the parties' agreement. Subsequently, on July 28, Ross sent Krambeck a number of “discussion points” which he believed were the terms the parties had agreed to and asked Krambeck to confirm the generally agreed upon terms so he could begin to memorialize the agreement. One of the discussion points included a right of first refusal in favor of SMG with regard to managing the Ottumwa casino or any other casino for which Wild Rose obtained a gaming license.
On August 3, Wild Rose Ottumwa (a subsidiary of Wild Rose) and the Ottumwa nonprofit organization executed three agreements-a memorandum of intent, a gaming development agreement, and an operator's contract. Within the “scope of work” portion of the memorandum of intent it states, “Wild Rose shall manage the facility for a fee equal to 2% of revenue plus 10% of operating income, not to exceed 4% of revenue pursuant to a management agreement.” In early August, Pavone learned of these agreements and was concerned that Wild Rose had named itself manager of the Ottumwa casino rather than SMG. Pavone discussed his concerns with Kirke and Richards and was told not to worry because the parties would execute an agreement ensuring SMG would manage the Ottumwa casino.
Throughout August, September, and October, Ross and Krambeck regularly conversed and exchanged numerous drafts of a proposed agreement between SMG and Wild Rose. Ross's first draft of the agreement was entitled “Letter of Intent.” The draft detailed both Pavone's provision of future consulting services to Wild Rose as well as Pavone's management of the Ottumwa casino, should Wild Rose obtain a gaming license. On September 20, Krambeck suggested the parties execute a straightforward consulting agreement as well as a separate letter of intent or option agreement pertaining to the future ownership and management arrangements, should Wild Rose receive any gaming licenses. Krambeck also provided another draft of the agreement with his corrections simply entitled “Agreement.” The parties never executed two separate agreements, and on October 22, 2004, the parties executed a document, entitled “Agreement,” that is the subject of this lawsuit. The parties to the agreement were SMG, Wild Rose, Pavone, and Kirke.
The October 22 agreement states the material terms and conditions by which Pavone will provide consulting services to Wild Rose through the opening of a casino in Ottumwa, as well as the ownership and management relationship between the parties upon the opening of the Ottumwa casino and other casino projects within the state of Iowa. The first two paragraphs of the agreement concern the consulting services Pavone is to provide Wild Rose prior to a license award for the Ottumwa casino and through the opening of the Ottumwa casino. Paragraph three of the October agreement states in pertinent part:
3. Ownership in Ottumwa Project and Management Entity. If Wild Rose is awarded a license to operate a casino in Ottumwa, Iowa, then upon completion of the development of the Ottumwa Project, the parties shall grant and convey an interest to each other as follows:
A. Management Agreement. Upon completion of the Ottumwa Project, Wild Rose shall enter into an exclusive management agreement with an entity to be solely owned by Pavone (subject to rights of Wild Rose under paragraph C below) for the management of the Ottumwa Project. This Management Agreement shall provide for an annual management fee equal to four percent (4%) of the Adjusted Gross Revenue of the Ottumwa Project. The terms of the Management Agreement shall be similar to the terms of the gaming development agreement between Wild Rose and the City of Ottumwa, Iowa.
Paragraph five of the October agreement provides:
5. Future Casino Development Opportunities.
A. First Look and Good Faith Negotiation as to Future Casino Development and Management Opportunities.
i. If Wild Rose has the opportunity to develop or operate any other casino in Iowa, Wild Rose will use good faith best efforts to involve SMG when the opportunity is first known, and to negotiate in good faith a Management Agreement consistent with the terms outlined in Wild Rose's gaming development agreement with the City of Ottumwa, Iowa. It being understood that the award of any management agreement must also be satisfactory to third party community and non-profit organizations. And it being further understood that any casino in the Central Iowa area will likely require the involvement of a management company, other than SMG.
Ross testified the October agreement established a binding consulting and management relationship and established a good-faith relationship between the parties for future projects within Iowa. Conversely, Krambeck testified the October agreement established a binding consulting agreement and a nonbinding letter of intent concerning the parties' relationship in connection with any future gaming opportunities. Whatever the parties' true intent, Wild Rose placed the October 22 agreement within its application to the Iowa Racing and Gaming Commission (IRGC) for a gaming license in Ottumwa.
On November 2, 2004, the referendum to allow gaming in the counties surrounding Des Moines failed. The next morning, Pavone met with Kirke, Richards, and others to discuss their business strategy going forward. They collectively decided to attempt to obtain a gaming license in Emmetsburg in addition to Ottumwa. Moreover, Kirke and Richards told Pavone that the October agreement, which originally only covered the Ottumwa casino, would also apply to the Emmetsburg casino. Accordingly, Wild Rose placed the October 22 agreement in its application to the IRGC for a gaming license in Emmetsburg. Kirke claims Wild Rose placed the October agreement in the Emmetsburg application merely to demonstrate to the IRGC that it had a consulting agreement with SMG and intended to enter into a management agreement with SMG for the Emmetsburg casino at a later time.
Subsequently, on November 10, Pavone and Wild Rose submitted its Ottumwa and Emmetsburg applications to the IRGC. Both of the applications represented under oath that SMG would be managing the Ottumwa and Emmetsburg casinos by stating:
The facility operations will be managed by Signature Management Group, L.L.C. (SMG). John Pavone, founder and president of SMG, has been a proactive leader in the Iowa gaming industry since 1989. He was co-founder and former president of the Iowa Riverboat Association and served as Iowa's representative for the American Gaming Association. Pavone will be responsible for ensuring that the resort is built and managed with adherence to the highest standards in the industry for quality and operations.
On December 8, an accountant for the ...
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