Opinion
Civil Action No. 3:01CV-633-S
January 9, 2003
MEMORANDUM — OPINION
This matter is before the court on cross motions of the parties for summary judgment pursuant to Fed.R.Civ.P. 56. DN 14, 15.
This case involves a contract dispute between Republic/NFR C Parking of Louisville ("Republic") and the Regional Airport Authority of Louisville and Jefferson County ("Authority"), and the impact that the events of September 11, 2001 had on the parties' rights and obligations.
Background 1. The Concession Agreement
In 1999 following public bidding, Republic and the Authority entered into a five-year concession agreement ("agreement") whereby Republic was granted the "exclusive right and privilege" to operate the public and employee paid parking facilities at Louisville International Airport (the "Airport").
In exchange for these rights and privileges, Republic agreed to pay the Authority a concession fee. In ¶ 4.1 the contract provided that the fee would be the greater of (1) a "monthly minimum guarantee" or (2) a certain percentage of the monthly gross receipts from operation of the parking facilities. The dollar amounts of the monthly minimum guarantees for the first year of the agreement were set forth in the agreement. Following the first year, the monthly minimum guarantees were 85% of the gross receipts for the corresponding month of the previous year.
Under the terms of the agreement, Republic was to pay the monthly minimum on or before the first day of each calendar month. Agreement ¶ 4.2. Within the first fifteen days of the following calender month, Republic was required to pay the Authority any additional amounts due under the provisions of the contract.
2. The Events of September 11, 2001
On September 11, 2001, terrorists hijacked four commercial aircraft. Two were flown into the World Trade Center in New York City, one into the Pentagon in Washington, D.C. and one into a field in rural Pennsylvania, resulting in the loss of more than 3,000 lives. Following these tragedies, the Federal Aviation Administration ("FAA") ordered the complete shutdown of U.S. commercial airspace. This order remained in effect until September 13, 2001.
Between September 2001 and the end of January 2002, Passenger demand dropped by 21.1% compared with the same period from 2000-2001. It is undisputed by the terrorist attacks of September 11, 2001 and the subsequent general reduction in air travel in the United States led to a decrease in enplanements and deplanements at the Airport. It is further undisputed that because gross receipts for the operation of parking facilities at the Airport are primarily driven by the number of passengers using the Airport facilities, there was a corresponding decline in parking concessions at the Airport.
Additionally, after September 11, the FAA mandated that passenger vehicles could not park within 300 feet of any airport terminal. Following this order, 810 parking spaces were rendered unusable, representing approximately 14.4% of the pre-September 11 non-employee parking capacity at the Airport.
The Authority has argued that on October 19, 2001 it made a new determination regarding which spaces were within 300 feet of the terminal, resulting in the loss of only 651 parking spaces. However, the Authority admitted that 810 spaces were currently unavailable for parking in ¶ 19 of its Answer submitted on November 26, 2001. Such a statement constitutes a judicial admission of fact, which "precludes the introduction of contradictory evidence," Huges v. Vanderbilt University, 215 F.3d 543, 549 (6th Cir. 2000).
Additionally, on October 8, 2001, the FAA issued a press release containing a series of "tips" to assist air travelers which included a statement that air travelers should take public transportation to airports if possible because curbside access and parking might be controlled and limited.
Republic contends that all of these factors led to a substantial decline in parking concessions at the Airport.
3. Republic's Failure to Meet its Obligations
After September 11, Republic saw a 33% decline in gross receipts from the parking concessions at the Airport. In both October and November of 2001, Republic paid only a portion of the full amount of the monthly guarantees due under the contract.
Pursuant to a letter dated October 15, 2001, Republic informed the Authority that the minimum monthly guarantees exceeded total parking revenues and proposed a modification of the minimum guarantee provision.
On October 22, 2001, the Authority sent a letter acknowledging receipt of Republic's proposed changes and rejecting them. The letter declared a default on the agreement, claiming that Republic had wrongfully failed to make the minimum monthly guarantees owed under the agreement.
On November 2, 2001, Republic filed its complaint in this action seeking a declaratory judgment that "its failure to pay the monthly minimum guarantees . . . is not a breach of the agreement," that it could terminate the agreement, and that it was only obligated to pay the Authority an amount less than the monthly minimum. On the same day, Republic sent the authority a letter unilaterally terminating the agreement effective December 2, 2001.
Following Republic's termination, the Authority made alternative arrangement for the operation of the parking facilities at the Airport. The Authority took over operation of the parking facilities, and by March 29, 2002 was in the process of determining how it would operate the facilities for the remainder of the term of the agreement.
Legal Analysis
A party moving for summary judgment has the burden of showing that there are no genuine issues of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S.H. Kress Co., 398 U.S. 144, 151-60, 90 S.Ct. 1598, 16 L.Ed.2d 142 (1970); Felix v. Young, 536 F.2d 1126, 1134 (6th Cir. 1976). Not every factual dispute between the parties will prevent summary judgment. The disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986). The dispute must also be genuine. The facts must be such that if they were proven at trial, a reasonable jury could return a verdict for the non-moving party. Id. at 2510. The disputed issue does not have to be resolved conclusively in favor of the non-moving party, but that party is required to present some significant probative evidence which makes it necessary to resolve the parties' differing versions of the dispute at trial. First National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968). The evidence must be construed in a light most favorable to the party opposing the motion. Bohn Aluminum Brass Corp. v. Storm King Corp., 303 F.2d 425 (6th Cir. 1962).
The facts surrounding this case are undisputed. The only question this court must address is whether the actions of the parties were proper under the terms and provisions of the agreement. We must consider several provisions to make this determination.
Under Kentucky law, the construction and interpretation of a contract are questions of law. First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 835 (Ky.App. 2000). In this case, the terms of the agreement are clear and unambiguous. Here, the parties agree that the sole issue is whether the events of September 11, 2001 excused Republic from its obligations and allowed it to terminate the agreement. We find that as a matter of law, Republic acted properly and did not breach the terms of the agreement.
The agreement between Republic and the Authority contained a provision that allowed Republic to avoid its monthly minimum guarantee and to terminate the agreement if certain conditions occurred. See ¶ 19.1 (termination) and ¶ 19.2 (only fixed percentage of gross receipts due) of the Concession Agreement. The only circumstance relevant to this situation is found in ¶ 19.1D:
This Agreement shall be subject to termination by the Concessionaire (Republic) upon delivery of thirty (30) days prior written notice to the Authority with the happening of any one or more of the following events:
D. The damage or destruction of all or a material part of the Premises used or occupied by the Concessionaire hereunder that materially and adversely affects the ability of the Concessionaire to perform its obligations hereunder, or damage or destruction of all or a material part of the Airport or Airport facilities, including access to public roads, which is necessary to the operation of the Concessionaire's business, except to the extent and in the event such damage or destruction results from acts of negligence of the Concessionaire.
Further, ¶ 19.2 provides:
Upon the occurrence of any of the conditions described in paragraph 19.1 B, C, or D, the Concessionaire shall thereafter be obligated to pay to the Authority only the percentage of gross receipts stipulated in paragraph 4.1 of this agreement, from the first day of such condition until such condition is corrected, or this Agreement is terminated.
Under the standard rules of law regarding contract interpretation, in the absence of any clear intention of the parties, we must construe the language against the drafter, who is responsible for the lack of clarity. John Calamari, Joseph M. Perillo, The Law of Contracts § 3.13 (4th ed. 1988).
Further, under Kentucky law, words and phrases in the contract are given their ordinary meanings. Fay E. Sams Money Purchase Pensison Plan v. Jansen, 3 S.W.3d 753, 757 (Ky.Ct.App. 1999 ( citing O'Bryan v. Massey-Ferguson, Inc. 413 S.W.2d 891, 893 (Ky. 1966)). Kentucky courts often refer to dictionaries in order to determine the ordinary meaning of undefined contractual terms. See, Ayers v. CD General Contractors 2002 WL 31761235, *3 (W.D.Ky., 2002) ( citing Kentucky v. Whitworth, 74 S.W.3d 695, 700 (6th Cir. 2002); United States Fire Ins. Co. v. Kentucky Truck Sales, Inc., 786 F.2d 736, 739 (6th Cir. 1986); Weaver v. Nat'l Fidelity Insur. Co., 377 S.W.2d 73, 75 (Ky. 1963)).
Webster's II, New Riverside Dictionary (1994) defines damage as "impairment of the usefulness or value of person or property."
There is no way anyone could have foreseen what would unfold on September 11, 2001 and the dramatic consequences that followed. Such a series of events was certainly beyond the imagination of the parties to the Concession Agreement. Because gross receipts for the parking facilities are tied to the number of passengers using the Airport, Republic saw a 33% reduction in parking concessions. In September and October of 2001, the parking concessions collected by Republic fell well short of the monthly minimum guarantee. See Affidavit of Darin N. Lee ¶ 28, attached to Republic's Motion for Summary Judgment.
The dramatic decline in use of the parking facilities at the Airport as a consequence of September 11 resulted in a substantial loss of the value of the parking facilities. As a result of this loss of value, Republic was unable to perform its obligations under the agreement. It was not collecting enough in parking concessions to pay its minimum monthly guarantee. As such, the parking facility at the airport was damaged in such a way that Republic was unable to perform as required by the agreement.
The Authority has argued that the provision must be construed to mean only physical damage to the parking facilities, not loss in value. However, the term "damage" in its common and ordinary usage means more than physical damage. There are many intangibles that may be damaged including reputation, prospective business interests and good will. If the Authority intended for the contract to only cover physical damage, it could have defined the term in such a way when it drafted the contract.
We conclude that the parking facility was damaged in such a way as to prevent Republic from meeting its obligations under the agreement. Republic was therefore entitled by ¶ 19.1(D) to terminate the contract. Republic was also entitled by ¶ 19.2 to pay only a percentage of gross receipts to the Airport. Thus, Republic was not in breach of the contract.
The motion of Republic for summary judgment will be granted by separate order.