Govt Guarantee Fund v. Hyatt Corporation , 95 F.3d 291 ( 1996 )

Opinions of the United
1996 Decisions States Court of Appeals
for the Third Circuit
9-12-1996
Govt Guarantee Fund v. Hyatt Corporation
Precedential or Non-Precedential:
Docket 96-7288
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 96-7288
GOVERNMENT GUARANTEE FUND OF THE REPUBLIC OF FINLAND;
SAASTOPANKKIEN KESKUS-OSAKE-PANKKI (SKOPBANK);
35 ACRES ASSOCIATES; 12 ACRES ASSOCIATES; BENEFORI OY
v.
HYATT CORPORATION,
Appellant
On Appeal from the District Court of the Virgin Islands
Division of St. Thomas and St. John
(D.C. Civil Action No. 95-cv-00049)
Argued August 16, 1996
BEFORE: GREENBERG and ALITO, Circuit Judges, and
DEBEVOISE, District Judge
(Filed: September 12, 1996)
Edward G. Biester, III
Michael M. Baylson (argued)
Cecelia L. Fanelli
Duane, Morris & Heckscher
4200 One Liberty Place
1650 Market Street
Philadelphia, PA 19103
Warren B. Cole
Hunter, Colianni, Cole & Turner
1138 King Street
Christiansted, St. Croix
U.S. Virgin Islands 00820
Attorneys for Appellees
John A. Zebedee
Office of James L. Hymes,
III
P.O. Box 990
Charlotte Amalie, Saint Thomas
U.S. Virgin Islands 00804
Mary A. McLaughlin
Michael F.R. Harris
Dechert, Price & Rhoads
1717 Arch Street
4000 Bell Atlantic Tower
Philadelphia, PA 19103
John A. Sopuch, III
Bickel & Brewer
35 West Wacker Drive
Suite 3650
Chicago, IL 60601
William A. Brewer, III
James S. Renard (argued)
John D. van Loben Sels
Michael L. Gaubert
Jamil N. Alibhai
Bickel & Brewer
1717 Main Street
Suite 4800
Dallas, TX 75201
Attorneys for Appellant
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. INTRODUCTION
Hyatt Corporation is the manager of a resort hotel on
St. John in the U.S. Virgin Islands. Hyatt's management powers
arise from agreements executed in March 1990 among Hyatt, Great
Cruz Bay Development Co., Inc. ("Great Cruz"), the owner of the
hotel, and Great Cruz's lender, Saastopankkien Keskus-Osake-
Pankki ("Skopbank"). After Skopbank foreclosed on the property
in 1991, 35 Acres Associates purchased the hotel pursuant to a
judicial sale. Immediately thereafter, 35 Acres purported to
terminate Hyatt's management of the hotel, propelling the parties
into this acrimonious litigation. The district court, on cross-
motions for summary judgment, entered an order granting 35 Acres'
motion for partial summary judgment on April 10, 1996, thus
terminating Hyatt's presence at the hotel, and ordering the
parties to "work together to effect a smooth transition in the
management and operation of the Hotel." The court certified its
order as a final judgment pursuant to Fed. R. Civ. P. 54(b) on
May 3, 1996.
Hyatt now appeals from the district court's grant of
partial summary judgment to 35 Acres. The parties agree that
this appeal focuses only on issues concerning 35 Acres' power to
terminate Hyatt's agency and 35 Acres' right of possession of the
hotel and related property together with issues relating to the
transition of the management of the hotel. The district court
had subject matter jurisdiction under either 28 U.S.C. §
1332(a)(2) (action between citizens of a state and citizens or
subjects of a foreign state) or 28 U.S.C. § 1332(a)(3) (action
between citizens of different states in which citizens or
subjects of a foreign state are additional parties). The amount
in controversy exceeds $50,000, exclusive of interest and costs.
We have jurisdiction over the appeal pursuant to 28 U.S.C. § 1291and exercise plenary review over the grant of partial summary
judgment and abuse of discretion review over the court's
transition order.
II. FACTUAL BACKGROUND AND PROCEDURAL HISTORY
A. Factual Background
In view of the procedural posture of the case we
present the facts in a light most favorable to Hyatt. From June
1988 through March 1990 Skopbank, a Finnish corporation, loaned
Great Cruz and St. John Virgin Grand Villas Associates
approximately $120 million for the construction and operation of
the property which became known as the "Hyatt Regency St. John at
the Virgin Grand Resort." In 1989 representatives of Great Cruz
approached Hyatt to enlist its assistance in addressing
operational and financial problems of the resort. Great Cruz
sought a professional, experienced, and financially able hotel
company with a strong global brand identity and a proven ability
in the Caribbean to attract business, so that the resort's value
and profitability could be maximized.
Specifically, Great Cruz proposed that the resort bear
the "Hyatt" and "Hyatt Regency" registered trademarks and trade
names; that the resort join the "Hyatt" chain and participate in
Hyatt's comprehensive and proprietary chain-wide programs and
services (including, without limitation, Hyatt's global
reservations system; worldwide marketing, public relations, and
advertising services; employee training programs; and home office
and regional sales office convention, business, and promotion
services); and that Hyatt manage the resort. Great Cruz
particularly sought the use of the prestigious "Hyatt" name and
Hyatt's commitment to use its expertise to ensure the success of
the resort. With the encouragement of Skopbank, Great Cruz was
looking for a company to maximize the economic potential of the
resort.
Hyatt was reticent to commit the "Hyatt" and "Hyatt
Regency" names to the resort because of the resort's historically
poor performance, its financial structure, and the fact that the
quality and consistency of service, facilities, and amenities
provided by Great Cruz fell far below Hyatt's quality standards.
Thus, Hyatt believed that there was substantial economic and
reputational risk in allowing the resort to be known as a "Hyatt
Regency."
During the negotiations leading to the execution of the
agreements, Hyatt informed Great Cruz that the "Hyatt" and "Hyatt
Regency" trademarks, service marks, and trade names were worth
billions of dollars to Hyatt's owners and represented decades of
time, effort, and financial risk. Hyatt's reputation as a
premier resort manager was nowhere higher than in the Caribbean,
where it had established itself as the predominant chain.
Moreover, Hyatt informed Great Cruz that, even with Hyatt's
special knowledge of resort-building and its established
relationships with customers and vendors, it would take three to
five years from the opening of the resort under the Hyatt name to
stabilize its operations and to begin to realize the full
potential of the location so that Hyatt could derive the level of
financial benefits justifying its participation. Hyatt informed
Great Cruz that it only would consider establishing the resort as
a "Hyatt Regency" if Great Cruz agreed to conditions that would
ensure Hyatt both the power to control the resort's business and
an adequate share in the resort's long-term profits that Hyatt
believed its contributions could generate.
Hyatt informed Great Cruz during these negotiations
that it would not permit the hotel to be known as a "Hyatt" or
"Hyatt Regency" or agree to the inclusion of the resort in its
worldwide chain unless it also was given powers to protect its
contributions to the resort. Hyatt decided that it was
absolutely necessary for it to have the power to control the
quality of the resort facility as well as the quality of services
provided by the hotel by assuming managerial and operational
responsibilities for the resort. Hyatt, Great Cruz, and Skopbank
therefore agreed to structure their contracts deliberately and
carefully to accomplish those objectives to protect Hyatt.
During the negotiations among Hyatt, Great Cruz, and
Skopbank, Hyatt analyzed the resort's highly-leveraged financial
structure and other issues associated with the resort's financial
situation. With such considerations in mind, Hyatt informed
Great Cruz that it was willing to consider a financial structure
whereby Hyatt invested time and effort and not seek a substantial
portion of its normal management fees in exchange for an interest
in the enterprise affording it a return on its investment, to be
taken in the form of a long-term profit participation. Thus,
Hyatt explains that, in order "to protect the investments and
property it would contribute as part of its undertaking to build
the business of the Resort, [it] required an interest in the
profits of the `Hyatt Regency St. John.'" Br. at 15.
Accordingly, Hyatt demanded and Great Cruz consented to a formula
under which Hyatt potentially would receive a significant return
on its investment. Although, in Hyatt's assessment, the formula
contained a low front-end fixed management fee, it also included
a substantial back-end share of profits that the parties
specifically designed to reflect Hyatt's "capital investment in
the property," id., which included Hyatt's contribution of the
difference between its typical market rate front-end fees and the
fees applicable in this case.
Further, to protect its interests, Hyatt negotiated for
and obtained a 30-year term for the management agreement between
it and Great Cruz which the parties agreed could not be
terminated except in strict compliance with its express
termination provisions. Hyatt explains that, given its
substantial "capital investments" in the hotel and the time
required to reap a return on its investments, it was not willing
to assume the risk that Great Cruz (or a subsequent owner) could
revoke and terminate the agreement for reasons, or on grounds,
other than those set forth in the contracts. Id. Hyatt informed
Great Cruz that it deemed its participation in the enterprise as
the clear equivalent of a cash equity investment, and Great Cruz
assented to Hyatt's approach to, and view of, the transaction.
In order to protect the proprietary nature of its
management methods and to avoid confusion with respect to its
trademarks and trade names, Hyatt also insisted on the power to
restrict the owner's right to transfer the management agreement
to successors or assigns. Thus, to secure the performance of
duties owed to Hyatt, section 15.2 of the management agreement
gave it the right and power to block the owner's assignment to
any assignee "`engaged in the management or operation . . . of a
chain (that is, five [5] or more locations) of hotels or
resorts.'" Br. at 18. Further, Hyatt agreed to add the resort
to its worldwide hotel chain and agreed to provide its
comprehensive and proprietary chain services to the resort. Many
of the services that Hyatt thus committed to contribute involved
confidential, proprietary, and trade secret information.
The parties eventually reached an understanding and on
March 9, 1990, Great Cruz, Skopbank, and Hyatt executed a series
of agreements that allow Hyatt to manage and operate the hotel.
The documents included a management agreement signed by Hyatt and
Great Cruz giving Hyatt complete control over the operation of
the hotel for a term of 30 years, essentially limiting the
owner's right to terminate the agreement to poor performance by
Hyatt. (Management Agreement at §§ 2, 4.5; app. 1809, 1836). In
return for managing the hotel, Hyatt would receive a base fee of
1.5 percent of gross revenue, as well as an incentive fee
structured on positive cash flow. Id. at 1829. A letter
agreement signed by Great Cruz and Hyatt directed Hyatt to pay
Skopbank any sums due to Great Cruz under the management
agreement. Id. at 113.
Hyatt sets forth in its brief that in order "to secure
its property interests and investments in the business it was to
create as well as to secure the performance of certain duties
owed to [it]," br. at 21-22, Great Cruz warranted and guaranteed
Hyatt's continuous right to manage the resort for the duration of
the term of the management agreement. Specifically, Hyatt notes
that section 7.5 of the agreement provides that "this Agreement
shall not be subject to forfeiture or termination except in
accordance with the provisions hereof," id. at 22; see app. at
1795, and that "Hyatt shall be entitled to operate the Hotel for
the Term, and Owner shall, at no expense to Hyatt, undertake and
prosecute all appropriate actions, judicial or otherwise,
required to assure such right of operation to Hyatt." Br. at 22;
see app. at 1860-61.
In addition, a subordination, non-disturbance, and
attornment agreement set forth the rights of the parties should
Skopbank foreclose its mortgage to Great Cruz. This agreement
included a warrant by Skopbank that the management agreement
would remain undisturbed by any foreclosure or default and would
continue in full force and effect as long as Hyatt was not in
default. (Subordination Agreement at §§ 2, 3; app. at 548).
In 1991, Skopbank filed a foreclosure action in the
District Court of the Virgin Islands (Civ. No. 91-355) as a
result of Great Cruz's default on the mortgages. In 1992, during
the pendency of the foreclosure suit, the Government Guarantee
Fund of the Republic of Finland ("GGF") obtained a controlling
interest in Skopbank as part of the Finnish government's bailout
of the bank.
On February 21, 1995, the district court entered a
consent judgment and put the hotel up for judicial sale. On
March 20, 1995, 35 Acres Associates, a Virgin Islands general
partnership consisting of two Finnish corporations, purchased the
hotel. On March 21, 1995, counsel for 35 Acres wrote to Hyatt,
stating that "GGF, Skopbank and 35 Acres Associates consider the
Management Agreement between Hyatt Corporation ('Hyatt') and
Great Cruz Bay Development Company, Inc. as void, terminated
and/or expired." Br. at 23; app. at 1401-02. On June 8, 1995,
35 Acres wrote again, advising Hyatt that it was in wrongful
possession, and demanding that it surrender possession of the
hotel:
The Hotel belongs to 35 Acres, not
Hyatt. Hyatt is trespassing on the property.
35 Acres again demands that Hyatt immediately
surrender possession of the Hotel and all
associated real and personal property and
accounts and cooperate in an orderly transfer
to 35 Acres. We will have a transition team
available on short notice.
App. at 1407. Hyatt, however, did not surrender possession of
the hotel.
B. Procedural History
GGF and Skopbank filed suit against Hyatt (Civil No.
1995-49) on March 16, 1995, seeking a declaratory judgment
finding Hyatt in breach of the management agreements and alleging
various claims in tort and contract. GGF and Skopbank, of
course, sought, inter alia, a judgment declaring the management
agreement terminated and thus giving it possession of the hotel.
On November 8, 1995, GGF and Skopbank filed an amended complaint
adding additional entities as plaintiffs, including 35 Acres. On
April 25, 1995, Hyatt sued 35 Acres (Civil No. 1995-68), and
thereafter filed two amended complaints. The second amended
complaint, dated June 21, 1995, sought a judgment declaring the
rights of the various parties under the management agreements,
recovery for civil conspiracy, and punitive, compensatory, and
consequential damages. On June 21, 1995, the district court
consolidated the two cases for trial.
At a hearing on November 17, 1995, the court took under
advisement 35 Acres' motion to dismiss the second amended
complaint in the Hyatt suit (Civil No. 1995-68) and denied
without prejudice Hyatt's motion to strike and dismiss the GGF
parties' first amended complaint in the GGF suit (Civil No.
1995-49). See Government Guarantee Fund v. Hyatt Corp., 166
F.R.D. 321, 323 (D.V.I. 1996). Hyatt renewed its motion to
strike and dismiss on December 22, 1995.
On January 8, 1996, the district court granted 35
Acres' motion to dismiss the second amended complaint in the
Hyatt suit. See Government Guarantee Fund v. Hyatt Corp., 1996
WL 165008, at *6 (D.V.I. Jan. 8, 1996). On January 3, 1996, 35
Acres moved for partial summary judgment against Hyatt in the GGF
suit, arguing that it was entitled to possession of the hotel as
a matter of law. On January 23, 1996, Hyatt moved to amend the
court's order of January 8, 1996, to permit the filing of a third
amended complaint in its suit.
On March 6, 1996, the district court held a hearing on
the consolidated cases. Ruling from the bench, the court granted
35 Acres' motion for partial summary judgment, in effect granting
it possession of the hotel. The court directed the parties to
work together on transferring management of the hotel. App. at
2157. The court denied without prejudice Hyatt's motion to
dismiss the first amended complaint in the GGF suit (Civil No.
1995-49). In the Hyatt suit (Civil No. 1995-68) the court denied
Hyatt's motion to amend the court's order of January 8, 1996, and
its motion to be permitted to file a third amended complaint.
The court issued a written order implementing its March 6, 1996
rulings on April 10, 1996. The order stated that "[b]oth parties
shall work together to effect a smooth transition in the
management and operation of the Hotel," app. at 2199, and allowed
Hyatt 10 days from the entry of the order to answer the first
amended complaint in the GGF suit (Civil No. 1995-49) and assert
any defenses and compulsory counterclaims thereto. Id. at 2199-
2200. The court further ordered the Hyatt case (Civil No. 1995-
68) closed and that all other pleadings filed thereafter should
contain only the caption of the GGF suit (Civil No. 1995-49).
Id. at 2200.
The court issued an opinion and order on April 10,
1996, explaining its rulings from the bench on March 6, 1996.
See Government Guarantee Fund v. Hyatt Corp., 166 F.R.D. 321. In
the opinion the district court noted first that "35 Acres seeks a
determination that its agency relationship with Hyatt has been
terminated as a matter of law, and Hyatt must leave the
premises," id., at 326, and then concluded that:
Applying the controlling law to the
undisputed facts of this case establishes
that the Management Agreement created a
revocable agency that ended once 35 Acres
gave notice of its termination. As
terminated agent, Hyatt must leave the
premises and surrender control of the Hotel
to 35 Acres, its rightful owner.
Id., at 327. Hyatt's challenge to this conclusion is at the
heart of its appeal.
On April 12, 1996, 35 Acres filed a motion for entry of
an order seeking the transition of management provided for in the
district court's grant of partial summary judgment. On May 3,
1996, the district court entered such an order and certified the
order of April 10, 1996, and the order of May 3, 1996,
effectuating the order of April 10, 1996, as final judgments
pursuant to Fed. R. Civ. P. 54(b). On May 6, 1996, Hyatt filed a
notice of appeal from the district court's May 3, 1996 Rule 54(b)
order which included an appeal from the April 10, 1996 order.
Hyatt also filed an emergency motion in the district court to
stay enforcement of the judgment without bond or, in the
alternative, for a hearing to set the amount of the supersedeas
bond pursuant to Fed. R. Civ. P. 62.
Following oral argument on May 9, 1996, the district
court denied Hyatt's emergency motion for a stay. See Government
Guarantee Fund v. Hyatt Corp., 1996 WL 308865, at *1 (D.V.I. May
15, 1996). The court thereafter entered a written order denying
the motion and providing that Hyatt must comply with the order of
May 3, 1996, by May 14, 1996.
On May 13, 1996, Hyatt filed an emergency motion in
this court to stay enforcement of the district court's judgment
pending appeal. A single judge of this court granted the motion
on a temporary basis until a panel could consider the matter. On
May 20, 1996, we granted Hyatt's motion to stay enforcement of
the judgment pending appeal and accelerated the parties' briefing
schedule. We also directed that following completion of the
briefing the case be listed before the earliest available panel.
Finally, we remanded the case to the district court to fix the
amount of the supersedeas bond pursuant to Fed. R. App. P. 8(a),
while retaining jurisdiction over the appeal.
On May 29, 1996, the district court held a hearing on
the remand and required Hyatt to post two bonds, one in the
amount of $2 million (to be posted by June 4, 1996), and the
other in the amount of $11 million (to be posted by July 30,
1996), for a total bond obligation of $13 million. The district
court also held that this court's stay "should not allow Hyatt to
reopen the Hotel over the objections of 35 Acres Associates."
On June 3, 1996, Hyatt filed a motion in this court to
set aside or modify the district court's order setting the amount
of the supersedeas bonds. On July 3, 1996, we granted Hyatt's
motion, but only "to the extent" that we vacated "so much of the
order of May 31, 1996, which precluded Hyatt from reopening the
hotel over the objection of 35 Acres Associates." We denied the
motion to modify the order with respect to the bonds. We
understand that Hyatt has posted the bonds. We, however, are
uncertain as to whether the hotel is open.
The parties agree that this appeal focuses only on 35
Acres' power to terminate the agency and its right to possession
of the hotel and related property, as well as transition matters,
irrespective of the ultimate result of the remaining litigation.
Thus, we do not consider whether 35 Acres wrongfully terminated
Hyatt's management rights. We now address the merits of Hyatt's
appeal.
III. DISCUSSION
A. Burdens of Proof
We dispose of Hyatt's first argument summarily. Hyatt
argues that 35 Acres had the burden of proving the revocability
of Hyatt's agency as a matter of law in the district court, as
well as the burden of proving that Hyatt did not have the right
to occupy or possess the resort. Hyatt asserts that the only
evidence 35 Acres offered with respect to these two issues
consisted of the following four allegations:
(1) 35 Acres is the owner of a hotel known as
the Virgin Grand Hotel on the island of St.
John, U.S. Virgin Islands; (2) Hyatt
Corporation purports to claim a right to act
as the managing agent of 35 Acres pursuant to
a Management Agreement dated March 9, 1990,
between Hyatt and Great Cruz Bay Development
Company, Inc.; (3) Skopbank, GGF, and 35
Acres sent a letter to Hyatt dated March 21,
1995, in which they stated that they
`consider' the Management Agreement `as void,
terminated and/or expired'; and (4) Hyatt
refuses to vacate the premises.
Br. at 28-29 (some internal quotations omitted).
Hyatt argues that 35 Acres' motion for partial summary
judgment thus attempted to "off-load its burden of proof upon
Hyatt." Br. at 29. Hyatt asserts that 35 Acres failed to meet
its burden of proving as a matter of law the following necessary
elements of its claim for relief: (1) the revocability of Hyatt's
agency; (2) the valid termination of that agency; and (3) the
absence of any right of Hyatt to manage or occupy the resort.
We decline to treat this case as involving merely the
burdens placed upon parties seeking summary judgment, and
therefore will address fully the merits of the appeal considering
the facts presented on the motion for partial summary judgment in
the district court. After all, the parties submitted extensive
materials in the district court and we see no reason why we
should not consider the record as developed.
B. Prima Facie Case
Hyatt's second argument, that 35 Acres failed to
establish a prima facie entitlement to relief, likewise lacks
substance. Hyatt first notes that in ruling upon 35 Acres'
motion for partial summary judgment, the district court applied
Virgin Islands law, which provides that the "rules of the common
law, as expressed in the restatements of the law . . . shall be
the rules of decision in the courts of the Virgin Islands . . .
in the absence of local laws to the contrary." V.I. Code Ann.
tit. 1, § 4 (1967). Thus, the district court held that, "The
Restatement (Second) of Agency (1958) is the governing law in
this area." Government Guarantee Fund v. Hyatt Corp., 166 F.R.D.
at 327.
Hyatt points out that the Restatement recognizes that
there are two separate and distinct types of agencies:
The first type, often called `revocable'
agencies, may be revoked by the principal at
any time and for any reason. See Restatement
(Second) of Agency, § 118 and Comment b. The
second type, often called `irrevocable'
agencies, agency powers `given as security,'
or agencies `coupled with an interest,' may
not be terminated at the whim of the
principal, but may be terminated only `in
accordance with the agreement by which the
power was created.' See Restatement (Second)
of Agency, § 139 and Comment a.
Br. at 31. Hyatt therefore argues that mere proof of the
existence of a power in the form of an agency does not establish
the absolute and unqualified right of the grantor to terminate
the power. Consequently mere evidence that there is an agency
neither establishes the revocability of that agency nor disproves
its irrevocability. Id. Hyatt thus claims that there was a
"fundamental flaw in 35 Acres' motion for partial summary
judgment" in the district court. Id. at 32.
Further, Hyatt asserts that 35 Acres did not negate
conclusively the continued existence of a principal-agent
relationship with Hyatt. Hyatt argues that a claim that an
agency is irrevocable or is coupled with an interest is not an
affirmative defense in an action to terminate an agency. Thus,
it contends that 35 Acres did not fulfill its burden on its
motion for summary judgment seeking to terminate the agency
merely by proving the existence of the agency. Hyatt asserts
that 35 Acres was required to demonstrate that Hyatt's agency was
revocable, and thereby preclude the possibility that Hyatt's
agency was irrevocable.
Along the same lines, Hyatt argues that 35 Acres failed
to demonstrate as a matter of law that it terminated Hyatt's
agency, as Hyatt claims that the letter of March 21, 1995 "does
not clearly purport to constitute an act of revocation or
termination, but suggests that the termination had already
occurred and that the letter was merely memorializing that
alleged historic fact." Br. at 33. Hyatt claims that the proof
of 35 Acres' alleged termination of Hyatt's agency is, at best,
ambiguous and inconclusive, and that courts frequently hold that
the intent and effect of purported termination notices raise
genuine issues of material fact precluding summary judgment.
Finally, Hyatt attacks the prima facie case presented by 35 Acres
as devoid of conclusive proof of a present right in 35 Acres to
exclusive possession of the resort.
We find this line of argument meritless, and are
satisfied that 35 Acres met its burden in its motion for partial
summary judgment of presenting a prima facie case that it was
entitled to possession of the hotel as a matter of law. SeeMatsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
585, n.10, 106 S.Ct. 1348, 1355, n.10 (1986). On the motion 35
Acres presented the management agreement which on its face merely
created an agency. We see no reason for 35 Acres to have proven
at that point in the litigation that the agency itself was not
irrevocable. As to Hyatt's claim that the March 21, 1995 letter
"[did] not clearly purport to constitute an act of revocation or
termination," the district court noted in its January 8, 1996
memorandum that:
Hyatt concedes that 35 Acres sent it letters
that 35 Acres 'considered Hyatt's management
agreement "void, terminated and/or expired"'
and demanding Hyatt `immediately surrender
possession' of the Hotel. (Second Amended
Complaint at 2.) Indisputably, such letters
manifested 35 Acres' dissent to the
continuance of the agency relationship with
Hyatt -- all that is required for an agency
to be terminated under the Restatement.
Restatement (Second) of Agency, § 118.
Government Guarantee Fund v. Hyatt Corp., 1996 WL 165008 at *3.
Surely, Hyatt cannot argue reasonably that it did not realize the
March 21, 1995 letter constituted notice of termination, when it
has referred to the letter as such in its own pleadings.
Furthermore, on June 9, 1995, Hyatt filed an amended complaint
referring to 35 Acres' June 8, 1995 letter to Hyatt that we
quoted in part above which set forth continued written demands
that Hyatt quit the property, provide an accounting, and cease
acting as agent for 35 Acres because its agency had been
terminated. App. at 1170, 1180, 1034. In addition, on June 21,
1995, Hyatt filed a Second Amended Complaint that referenced a
June 19, 1996 letter (app. at 1186, 1195) demanding that Hyatt
cease acting as agent for 35 Acres. App. at 1043.
Finally, Hyatt's argument that the prima facie case
presented by 35 Acres was devoid of conclusive proof of 35 Acres'
present right to exclusive possession of the resort is also
meritless. Hyatt has admitted that 35 Acres owns the hotel.
App. at 390. This argument deserves no further comment. We
proceed now to Hyatt's more substantial arguments.
C. The Agency Relationship
Hyatt's main argument is that the district court erred
in granting judgment in favor of 35 Acres because Hyatt raised
genuine issues of material fact precluding summary judgment.
First we will discuss the law applicable to the termination of
agency agreements, and then we will consider Hyatt's specific
arguments.
1. The Applicable Law
As the district court correctly noted, agency
principles as expressed in the Restatements govern this case.
Section 118 of the Restatement (Second) of Agency (1958) states
that an agent's "[a]uthority terminates if the principal or the
agent manifests to the other dissent to its continuance."
Comment (b) explains:
The principal has power to revoke . . .
although doing so is in violation of a
contract between the parties and although the
authority is expressed to be irrevocable. A
statement in a contract that the authority
cannot be terminated by either party is
effective only to create liability for its
wrongful termination.
The only exception to the rule that principals may
terminate an agency relationship at any time is when the
authority granted to the agent is a "power given as security."
Id. §§ 138, 139. Section 138 of the Restatement states:
A power given as security is a power to
affect the legal relations of another,
created in the form of an agency authority,
but held for the benefit of the power holder
or a third person and given to secure the
performance of a duty or to protect a title,
either legal or equitable, such power being
given when the duty or title is created or
given for consideration.
Comment (b) to section 138 of the Restatement explains
that "[a] power given as security is one held for the benefit of
a person other than the power giver [i.e. principal]." A
principal can terminate an agency power given as security "only
in accordance with the agreement by which the power was created."
Id. § 139 cmt. a. On the other hand, the power giver can revoke
the power if it was created only for the benefit of the power
giver, i.e., when there is a simple agency relationship. If the
agent has an interest in the exercise of the power only because
of the compensation to which it is entitled upon its exercise,
then the power is not given as security and is revocable.
A principal may grant an irrevocable agency power for
the purpose either of furnishing a security to protect a debt or
other duty, or facilitating the performance, effectuating the
objects, or securing the benefits of a contract. See id. § 138
cmt. c. For example, a power given as security arises when a
person manifests consent that the one to whom it is given
properly can act to protect a title already in the power holder.
Id. cmt. a. Moreover, if an agent has an interest in the subject
matter of the agency, as where it engages in a joint enterprise
or invests in a business in which another supplies the subject
matter, a power given it by the other to protect such interest is
a power given as a security. See id. cmt. b.; see also Bowling
v. National Convoy & Trucking Co., 135 So. 541, 543-44 (Fla.
1931); Haft v. Haft, 671 A.2d 413, 422-23 (Del. Ch. 1995). In
any of these circumstances, a power given as a security cannot be
terminated at the whim of the power giver. See Restatement
(Second) of Agency § 14H cmt. a.
The Restatement provides illustrations of a power given
to protect the property interest of the power holder (i.e., the
agent) in the subject matter of the agency, as well as a power
given to secure a duty or obligation owed to the agent. While
the illustrations focus on the protected interest as held by the
agent or power holder, it is clear that the agency is also
irrevocable if made for the benefit of a third person, although
the agency can be terminated with the consent of the third-party
beneficiary. Moreover, agency powers granted both for the
benefit of the principal and the agent are irrevocable. SeeRestatement
(Second) of Agency § 138 cmt. d ("A person authorized
to act as agent may also hold a power for his own benefit.").
An indispensable feature of a power given as security
is that the agent have a proprietary interest in the res or
subject matter of the agency independent of the agency
relationship itself. As the district court noted, Professor
Williston's comments on this subject are instructive:
In order that a power may be irrevocable
because it is coupled with an interest, it is
necessary that the interest be in the subject
matter of the power and not in the proceeds
which will arise from the exercise of the
power . . . .
. . . [T]he person clothed with the authority
must derive a present or future interest in
the subject itself on which the power is to
be exercised . . . . In short, the test is:
Does the agent have an interest or
estate in the subject matter of the agency
independent of the power conferred, or does
the interest or estate accrue by or after the
exercise of the power conferred?
If the former, it is an agency coupled
with an interest . . . if the latter, it is
not.
Government Guarantee Fund v. Hyatt Corp., 166 F.R.D. at 327-28,
(quoting 2 Samuel Williston, A Treatise on the Law of Contracts §
280, at 300-02 (3d ed. 1959)). Thus, in the words of the
district court, "the agency relationship itself does not create
the interest; the agency merely serves to protect the separately
granted or created interest when the two are coupled." Id. at
328.
2. The District Court's Disposition
In its memorandum of January 8, 1996, granting 35
Acres' motion to dismiss Hyatt's complaint in Civil No. 1995-68,
the district court indicated that, "[f]or Hyatt to claim that its
agency authority is . . . a power given as security, it must have
alleged that the agreements were entered into for [its] benefit .
. . either to protect a property interest of Hyatt's in the hotel
or to secure the performance of some duty or obligation owed to
Hyatt." Government Guarantee Fund v. Hyatt Corp., 1996 WL
165008, at *3. Because Hyatt failed to allege such an interest,
the district court dismissed count one of Hyatt's second amended
complaint at that time. Id. The court thereafter held that any
agency under the management agreement was revocable and had been
terminated. Id.In its January 8, 1996 memorandum the district court
first noted that Hyatt's own pleadings established that 35 Acres
had terminated the agency:
Hyatt concedes that 35 Acres sent it letters
that 35 Acres 'considered Hyatt's management
agreement "void, terminated and/or expired"'
and demanding Hyatt `immediately surrender
possession' of the Hotel. (Second Amended
Complaint at 2.) Indisputably, such letters
manifested 35 Acres' dissent to the
continuance of the agency relationship with
Hyatt -- all that is required for an agency
to be terminated under the Restatement.
Restatement (Second) of Agency, § 118.
Id.. The court held that Hyatt could not continue to manage the
hotel:
Thus, assuming all the facts alleged in the
complaint are true, the relationship between
Hyatt and 35 Acres is a simple agency; and
Hyatt has not demonstrated any legal basis
for a declaration that the agency has not
been terminated or that Hyatt may continue as
manager of the hotel.
Id..
The district court noted that it had considered Hyatt's
contentions that the management agreement created an irrevocable
agency coupled with an interest: "Hyatt wants to argue that the
management agreements constitute an agency coupled with an
interest which cannot be summarily revoked." Id. The court
held, however, that Hyatt failed to present any basis for such a
conclusion:
In its second amended complaint, Hyatt has
alleged no property interest in the hotel;
nor has Hyatt alleged that the authority was
granted to secure the performance of any duty
owed to it. Hyatt's only asserted interest
is in the compensation due it as manager of
the hotel, the benefit to its reputation, and
an enhanced presence in the Caribbean. Such
interests are ordinary incidents of an agency
relationship and standing alone do not
support an inference that the agreements were
entered into for the benefit of Hyatt as
opposed to the benefit of the owner. In sum,
Hyatt simply does not allege any interest in
the hotel aside from its interest in reaping
the benefits from acting as 35 Acres' agent.
Id.
Moreover, the district court noted that the management
agreement did not even recite that it created an agency coupled
with an interest. Id. at *3 n.7. The court concluded that:
"Whether or not Hyatt breached the agreements does not change the
reality that under the facts alleged by Hyatt, the agency
relationship has terminated and Hyatt cannot continue acting as
manager of the Hotel." Id. at *4.
Later, at the hearing on March 6, 1996, the district
court addressed 35 Acres' motion for partial summary judgment,
the grant of which led to this appeal. At the conclusion of that
hearing the court stated as follows:
I do not see any basis for changing the
Court's previous ruling. I haven't heard
anything and I don't, haven't seen anything
in Hyatt's proposed amended complaint that
when it's read together with the management
agreement and the other facts that are
undisputed in this case -- and those are
basically as 35 Acres has stated, that they
own the property, that Hyatt has no title
ownership, no right of possession as a result
of any ownership. It is an agent of 35 Acres
only. The management agreement was the only
instrument which gives them the right to be
there and I don't see any reason to go
outside the four corners of the management
agreement. It's whatever the negotiations,
whatever the intentions were, whatever the
desires were, whoever came up first to me is
not, does not help to explain anything in the
management agreement.
. . . .
So, I will, say, reduce that to a written
order as soon as possible. I would suggest
that counsel get together and you work out
whatever is necessary to be able to have
Hyatt leave the premises in terms of any
items that Mr. Cole mentioned, so that order
won't be imposed on Hyatt; it will simply be
an agreed-upon to the extent they can agree
upon it and maybe if you can get together
with Judge Barnard. And if you can't resolve
it, I'll resolve it.
. . . And it should be done within good --
from Hyatt. If you don't want to do that,
then you will have to do it the hard way.
But I certainly think it would be in your
interest to do it cooperatively. So, that is
the Court's ruling.
App. at 2155-57.
In its April 10, 1996 opinion the district court issued
a written confirmation of its March 6, 1996 rulings. The court
referenced decisions that have held as a matter of law that chain
hotel management contracts create a typical revocable agency, not
an irrevocable agency coupled with an interest. Government
Guarantee Fund v. Hyatt Corp., 166 F.R.D. at 329-30 (citing
Pacific Landmark Hotel, Ltd. v. Marriott Hotels, Inc., 23 Cal.
Rptr. 2d 555 (Cal. Ct. App. 1993); Woolley v. Embassy Suites,
Inc., 278 Cal. Rptr. 719 (Cal. Ct. App. 1991)). Further, the
court addressed Hyatt's argument that the management agreement
created some sort of "joint enterprise" between itself and the
prior owner of the hotel:
Hyatt's claim of some sort of joint
ventureship or enterprise is foreclosed by
the unambiguous language of that document.
Section 3.8 of the Management Agreement
provides:
Nothing in this Agreement contained
shall constitute, or be construed
to create, a partnership, joint
venture or lease between Owner and
Hyatt with respect to the Hotel.
166 F.R.D. at 328.
The court noted that the management agreement could not
be construed as creating a new business entity because, even if
Hyatt's management fee was construed as a share of the profits,
Hyatt never undertook to share in the losses of any such
enterprise: "In fact, the Management Agreement was structured so
that Hyatt would receive a management fee even when the Hotel
suffered a loss." Id.
The court also considered Hyatt's argument that the
management agreement created a power given as security to protect
its intellectual property, which was to be used by Hyatt in
carrying out its duties on behalf of the owner. The court held
that Hyatt's contentions regarding protecting its reputation and
its trade name did not warrant a result any different from that
in prior cases concerning chain hotel management contracts that
created revocable agencies. Id. at 329 & n.21 (citing Pacific
Landmark Hotel, 23 Cal. Rptr. 2d 555; Woolley v. Embassy Suites,
278 Cal. Rptr. 719). Thus, the court held that:
The plain language of the Management
Agreement shows, and the undisputed facts of
this case definitively establish, that the
agency was created for the benefit of the
owner, not Hyatt, and that Hyatt's sole
interest in the Management Agreement is its
right to compensation. As such, the
Management Agreement was a personal services
contract which cannot be specifically
enforced. Restatement of the Law (Second)
Contracts, § 367(1) (1981).
166 F.R.D. at 329.
In explaining why it would be inappropriate to order
specific performance of the management agreement, the district
court found the rationale stated in Woolley v. Embassy Suitesconvincing:
There are a variety of reasons why
courts are loathe to order specific
performance of personal services contracts.
Such an order would impose upon the court the
prodigious if not impossible task of passing
judgment on the quality of performance. It
would also run contrary to the Thirteenth
Amendment's prohibition against involuntary
servitude. Courts wish to avoid the friction
and social costs which result when the
parties are reunited in a relationship that
has already failed, especially where the
services involve mutual confidence and the
exercise of discretionary authority.
Finally, it is impractical to require
judicial oversight of a contract which calls
for special knowledge, skill, or ability.
Id. at 329-30 (quoting Woolley v. Embassy Suites, 278 Cal. Rptr.
at 727).
3. Hyatt's Arguments on Appeal
For the most part, Hyatt's arguments on appeal are the
same as those it made in the district court. As we agree both
with that court's decision and its reasoning, we only need
discuss the specifics of arguments not addressed by the district
court.
Hyatt argues that it presented competent evidence to
the district court that demonstrated the irrevocability of its
agency agreement with Great Cruz. Specifically, Hyatt asserts
that its agency "exceeds the mere management of physical property
and extends to the operation of a comprehensive and complex
business" that is reflected in the scope of its rights under the
management agreement. Br. at 36. Thus, the subject matter of
Hyatt's agency is "not limited to the real and personal property
of the Resort, but includes the operation of the business of the
Resort." Id. at 37.
Hyatt relies on decisions of courts that have held that
an irrevocable agency is created where "an agent makes a
substantial contribution to or capital investment in a business
enterprise while assuming significant managerial responsibilities
over that business." Br. at 38 (citing Bowling v. National
Convoy & Trucking Co., 135 So. at 543; Haft v. Haft, 671 A.2d at
423); Montgomery v. Foreman, 410 So.2d 1160, 1167-68 (La. Ct.
App. 1982); MacDonald v. Rosenfeld, 188 P.2d 519, 521, 528 (Cal.
Ct. App. 1948); Jones v. Williams, 39 S.W. 486, 493-94 (Mo.
1897)). Hyatt claims that it submitted overwhelming evidence in
the district court of its agreement with Great Cruz to use the
real property and improvements thereon to create a new business
enterprise, the "Hyatt Regency St. John." Hyatt claims that it
was the catalyst in establishing that business, and that:
Its capital contributions and investments to
the business included lending the use of its
registered trademarks and service marks;
providing proprietary and confidential
information, programs, and systems with
respect to sales, marketing, and operations;
and making the resort an integral member of
the `Hyatt' worldwide chain of hotels and
resorts.
Br. at 38. Hyatt also claims that "to protect and secure its
economic interests in the new business, Hyatt assumed control of
the management of that business as well as the day-to-day
operations, and thereby was invested with certain powers of
agency." Id. at 39. According to Hyatt, those powers were
granted for its benefit and, thus, are irrevocable.
Like the district court, we decline to accept Hyatt's
theory that it has "proven the creation of a resort business and
its contributions to and investments in that business, its
profits interests therein, and its insistence upon and receipt of
managerial powers to protect those contributions, investments,
and interests," br. at 38 n.9, in the face of the clear language
in the management agreement that:
Nothing in this Agreement contained
shall constitute, or be construed to be or to
create, a partnership, joint venture or lease
between Owner and Hyatt with respect to the
Hotel.
Management agreement, § 3.8; app. at 1828. Moreover, none of the
cases Hyatt cites to support its argument are aligned factually
with this case. See, e.g., MacDonald v. Rosenfeld, 188 P.2d at
528 ("The evidence supports the view that defendant was granted
`a power coupled with an interest' in that he was given the
management of the business as security for the loans he had
made."); Jones v. Williams, 39 S.W. at 493 ("Under the contract,
plaintiff purchased 1,667 shares of stock in the corporation, for
which he paid $80,000; and, in consideration thereof, he was to
have the `control and management' of the Post Dispatch for five
years, at an annual salary of $10,000."); Bowling v. National
Convoy & Trucking Co., 135 So. at 543 (affirming holding that
agency was coupled with interest in business founded by agent);
Montgomery v. Foreman, 410 So.2d at 1167 ("Thus it was
contemplated that [the agent] would recoup the monies he spent in
improving the property[.]"); Haft v. Haft, 671 A.2d at 423(irrevocable stock voting proxy given as security for note and
other interests retained in corporation as well as security for
payment of purchase price of transfer of stock at issue). Thus,
we reject as a matter of law Hyatt's argument that it possessed
an irrevocable agency due to its part in the creation of a new
business enterprise. Hyatt has raised no genuine issue of
material fact that alters our conclusion.
Hyatt next argues that its contribution of its
trademarks and trade names, chain services, and management
expertise was and is "an integral and valuable part of the
business known as the `Hyatt Regency St. John.'" Br. at 41.
Hyatt claims that the combination of those contributions created
and continue to add value to the goodwill of the business, and
that the goodwill in turn is a major factor in the ability and
capacity of the hotel to generate profits. Hyatt claims that to
secure and protect those investments, it negotiated and acquired
rights to manage the business. Therefore, Hyatt asserts that the
relationship created by the agreements among the parties was an
irrevocable agency which 35 Acres could not terminate except in
accordance with the express termination provisions set forth in
the parties' agreements.
As a matter of law, we agree with the district court
that Hyatt's contribution of its trademarks and trade names,
chain services, and management expertise to the hotel was merely
a normal incident of an agency relationship, and did not create
an irrevocable agency. Again, Hyatt has raised no genuine issue
of material fact to alter our conclusion.
Hyatt next attempts to distinguish the two decisions of
the California Court of Appeals on which the district court
relied in ruling that Hyatt's agency is revocable. First, Hyatt
explains that, in Woolley v. Embassy Suites, "Embassy Suites had
a license agreement which was separate from and independent of
its management agreement and, therefore, it could not
successfully argue that the managerial powers were given to it in
order to protect and secure its intellectual property, which was
the subject of the separate license agreement." Br. at 42. SeeWoolley,
278 Cal. Rptr. at 726 ("Embassy says that this agency is
different because the hotels are franchised with the Embassy name
and that it therefore has its own interest in their success. But
the franchise agreements are severable and independent from the
management contracts[.]").
Next, Hyatt attempts to distinguish Pacific Landmark
Hotel by stating that in that case an irrevocable agency would
have existed had there been a legal identity between the Marriott
entity that managed the hotel and the Marriott entity that held
an interest in the hotel business. Since that was not the case,
Hyatt states that the legal separateness between the two was the
sole factor in the court's refusal to find an irrevocable agency.
Br. at 42; see Pacific Landmark Hotel, 23 Cal. Rptr. 2d at 563("[T]he trial court was disregarding the separate corporate
entities . . . when it found MHI had an interest in the subject
of the agency. . . . [T]he trial court erred in failing to treat
MHI as separate from its parent corporation Marriott.").
Hyatt argues that the facts in this case are materially
different from those in Woolley v. Embassy Suites and in Pacific
Landmark Hotel. Hyatt asserts that it permitted its intellectual
property (including its registered trademarks and trade names) to
be used in connection with the hotel only because it insisted
upon and received agency powers to manage the resort. Moreover,
the entity that owns the "Hyatt" and "Hyatt Regency" trademarks
and trade names and that holds an interest in the resort business
known as the "Hyatt Regency St. John" is the same entity that
obtained for its benefit the right to manage the resort --
namely, Hyatt Corporation. Hyatt thus claims that the two
California cases are distinguishable.
We do not agree with Hyatt's reading of the two
California cases. While it is true that the specific facts of
the cases differ from the case before us, their legal holdings
are instructive here. In Pacific Landmark Hotel even though a
Marriott affiliate had invested loans of $15 million and $8
million in capital contributions, pursuant to which the affiliate
received a five percent ownership interest in the limited
partnerships that owned the real estate and 95-99% of the tax
benefits of those partnerships, the court held as a matter of law
that the management agreements did not create an agency with an
interest in favor of Marriott Hotels, Inc., which was the
manager. 23 Cal. Rptr. 2d at 557, 560-63.
Moreover, even though Marriott's management contracts
provided for Marriott Hotels, Inc. to receive 30% of available
cash flow for 60 years as part of its management fee and
presumably Marriott, like Hyatt, contracted to use its trade name
and trademarks in providing its management services, the court
held as a matter of law that the relationship was not an
irrevocable agency. 23 Cal. Rptr. 2d at 557, 562-63. Given
provisions that unambiguously provided that the agreements were
between principal and agent and did not create a lease,
partnership or joint venture, as a matter of law the agency could
be terminated. Id. at 560-63. The court held that the absence
of a specific present property interest was dispositive.
In addition, the dispute in Woolley v. Embassy Suitesinvolved
termination of Embassy Suites' management of nine hotels
that were under management contract, not termination of a
franchise or license agreement. 278 Cal. Rptr. at 721 & n.1.
Like Hyatt, Embassy Suites argued that the court should ignore
the express contractual provisions negating any partnership or
joint venture, but the court found those provisions dispositive.
Id. at 724-26. Embassy Suites, like Hyatt, argued that the use
of its trade name turned the management agreements into an agency
with an interest, and the court rejected those contentions for
the lack of any specific present property interest. Id. at 726.
The district court accurately analyzed the effect of the case:
Like Hyatt, the defendant in Woolley v.
Embassy Suites, Inc., 278 Cal. Rptr. 719(Cal. App. 1991), argued that its interest in
the success and prestige of its trade name
was sufficient to create an irrevocable
agency. The Court squarely rejected that
claim, noting that `the "interest" Embassy
has in seeing the hotels succeed so as to
enhance its reputation and prestige is not
the type of . . . interest necessary to
constitute an agency coupled with an
interest.' Id. at 726. Hyatt attempts to
distinguish Woolley by pointing to the fact
that the use of the Embassy Suites trade name
in that case was secured by a separate
franchise agreement. In our view, this fact
militates against the presence of an
irrevocable agency here. If the use of
Hyatt's intellectual property were protected
by a franchise agreement then the Owner
potentially could use Hyatt's trademarks and
trade names even after the agency ended.
Arguably, a separate clause linking the
franchise agreement to the agency
relationship might be needed to protect the
agent's interest. Here, termination of the
Management Agreement cancels the owner's
right to use Hyatt's intellectual property.
Government Guarantee Fund v. Hyatt Corp., 166 F.R.D. at 329 n.21.
In short, we agree with the district court that the two
California cases are instructive in this case and that, as a
matter of law, Hyatt's interest in protecting its trademarks and
service specialties is not sufficient to form an irrevocable
agency. Hyatt has raised no genuine issue of material fact to
alter our decision.
Hyatt next claims that it has raised genuine issues of
disputed fact with regard to the "effectiveness of 35 Acres'
purported termination letter of March 21, 1995." Br. at 43. As
we already have indicated the district court noted that:
Hyatt concedes that 35 Acres sent it letters
that 35 Acres `considered Hyatt's management
agreement "void, terminated and/or expired"'
and demanding Hyatt `immediately surrender
possession' of the Hotel. (Second Amended
Complaint at 2.) Indisputably, such letters
manifested 35 Acres' dissent to the
continuance of the agency relationship with
Hyatt -- all that is required for an agency
to be terminated under the Restatement.
Restatement (Second) of Agency, § 118.
Government Guarantee Fund v. Hyatt Corp., 1996 WL 165008, at *3.
We find here no genuine issue of material fact to alter our
decision.
Hyatt finally claims that 35 Acres materially breached
and wrongfully repudiated the management agreement by purporting
to terminate Hyatt. "The only proof in the summary judgment
record showed that Hyatt complied fully with its obligations."
Br. at 45. Hyatt claims that it therefore has submitted
competent evidence supporting affirmative defenses. In light of
our decision that Hyatt's agency was revocable, we find this
argument meritless.
One final issue with respect to termination of Hyatt's
management agreement deserves our attention. It is true that a
subordination, non-disturbance, and attornment agreement set
forth the rights of the parties should Skopbank foreclose its
mortgage from Great Cruz, including a warrant by Skopbank that
the management agreement would remain undisturbed by any
foreclosure or default and would continue in full force and
effect as long as Hyatt was not in default. (Subordination
Agreement at §§ 2, 3; app. at 548). Hyatt's seeking of this
subordination agreement indicates impressive foresight on its
part; indeed, the subordination agreement even could be construed
to indicate intent among the parties that the management
agreement itself be irrevocable.
However, as noted by the district court, "management
agreements between the owner of a hotel and a managing
corporation do not create an agency coupled with an interest,
even if the agreements state that they do." Government Guarantee
Fund v. Hyatt Corp., 1996 WL 165008 at *3 n.7 (citing Woolley v.
Embassy Suites, 278 Cal. Rptr. 719; Pacific Landmark Hotel, 23
Cal. Rptr. 2d 555. Surely, if agreements that by their terms are
irrevocable, thus manifesting the parties' intent that they be
so, are not necessarily irrevocable, intent manifested by the
separate creation of a subordination agreement does not create a
power coupled with an interest. Thus, while the subordination
agreement may be very significant in a determination of whether
35 Acres wrongfully terminated Hyatt's management agreement, it
does not affect our result here. Whether or not an agency
agreement is revocable is a matter of law. See Pacific Landmark
Hotel, 23 Cal. Rptr. 2d at 561 ("[E]ven if the parties intended
to create an irrevocable agency, one coupled with an interest,
unless they do so and such an interest does in fact exist, the
statutory power to revoke may be exercised. If the exercise of
the statutory revocation power is contractually unjustified,
damages may be in order."); Woolley v. Embassy Suites, 278 Cal.
Rptr. at 725 ("Even if the contract did attempt to restrict the
power of the owner to terminate the manager, such provision would
be ineffective. The principal's power of revocation is absolute
and applies even if doing so is a violation of the contract or
the agency is characterized as `irrevocable.'") (citing
Restatement (Second) of Agency § 118 cmt. b).
Accordingly, we will affirm the district court's grant
of 35 Acres' motion for partial summary judgment, since Hyatt has
raised no genuine issue of material fact and 35 Acres is entitled
to judgment as a matter of law on the issue of the management
agreement's revocability.
D. Remedies Granted by the District Court
Hyatt's next argument is that the district court erred
in granting 35 Acres relief and imposing obligations on Hyatt
that neither were requested by 35 Acres nor supported in the
summary judgment record. We review issues regarding the relief
fashioned by the district court for abuse of discretion only.
See United States v. Triple A Mach. Shop, Inc., 857 F.2d 579, 583
(9th Cir. 1988) (affirming district court's grant of partial
summary judgment and permanent injunction enjoining former
lessees from remaining on property); see generally McLendon v.
Continental Can Co., 908 F.2d 1171, 1177 (3d Cir. 1990).
Hyatt notes that paragraph 3 of the district court's
order of May 3, 1996, requires it, among other things, to turn
over to 35 Acres: keys, alarm access codes, key cards, other
means of access and egress thereto, books, records,
correspondence, documents, computer and electronically-maintained
records, reservations information, furniture, fixtures,
equipment, vehicles, documents of title and receipts, cash,
coupons, instruments for the payment of money, certificates of
deposit, accounts receivable, contract rights, intangible
personal property, and all other personal property relating to
the operation of the resort. Br. at 45. Hyatt argues that 35
Acres did not satisfy the burden imposed upon parties seeking
mandatory injunctive relief, and that this portion of the
district court's judgment should be reversed.
Further, Hyatt notes that in paragraph 5 of the May 3,
1996 order, the district court ordered that:
Pursuant to Fed. R. Civ. P. 70, 35 Acres
Associates shall be entitled to All Writs
which may be necessary to effectuate the
foregoing, whether by Ejectment, Abatement,
Assistance, Sequestration, Execution,
Garnishment, or otherwise, and the Clerk
shall issue the same, as necessary, without
further order of this Court.
Hyatt argues that Rule 70 does not authorize the plethora of
extraordinary personal property remedies that the district court
granted to 35 Acres, and that we therefore should reverse this
portion of the judgment.
Finally, Hyatt notes that paragraph 3(h) of the May
3, 1996 order provides that "Hyatt Corporation may not remove any
personal property from the Hotel Property other than items of
personal property belonging to individual employees of Hyatt
Corporation." Br. at 46 (citing app. at 2340). Noting that, in
paragraph 4, the district court did permit Hyatt to segregate,
seal, and/or designate its privileged documents, proprietary
commercial materials, and personal property located on the resort
premises, but effectively prohibited Hyatt from removing its
property except "in accordance with further Order of this Court,"
app. at 2341-42, Hyatt argues that nothing in the summary
judgment record justifies a court order interfering with or
depriving Hyatt of its rights of use, enjoyment, and possession
of its own property. Hyatt therefore argues that this portion of
the district court's judgment should be reversed.
After a thorough review of the record, we see nothing
in the relief fashioned by the district court that we could term
an abuse of that court's discretion. Obviously the termination
of Hyatt's presence in the hotel raised fairly complex practical
problems, and we will not fault the district court for
effectuating the transition in a common sense way. Therefore, we
will affirm in its entirety the judgment of the district court.
E. Attorney's Fees
Hyatt's final issue is a challenge to the district
court's statement in the memorandum accompanying its May 3, 1996
order, that, because of "Hyatt's stubborn refusal to vacate the
premises," Hyatt would "bear any costs and attorney's fees
incurred by 35 Acres related to its efforts in securing [the May
3, 1996 order]." Government Guarantee Fund v. Hyatt Corp., No.
1995-49, slip op. at 3 (D.V.I. May 3, 1996). Hyatt argues that
the district court imposed these "sanctions" for the first time
in its memorandum without any notice or hearing, implicating
fundamental notions of due process. Moreover, Hyatt argues that
because the district court did not identify the rule or statute
under which it imposed these "sanctions," it is impossible for an
appellate court to determine if the court applied the correct
standard. Accordingly, Hyatt argues that we should reverse the
district court's award of "sanctions" against Hyatt.
The law is clear that awards of costs and attorneys'
fees are not appealable until the court determines their amount.
See, e.g., Apex Fountain Sales, Inc. v. Kleinfeld, 27 F.3d 931,
935 (3d Cir. 1994); Commonwealth of Pennsylvania v. Flaherty, 983
F.2d 1267, 1276-77 (3d Cir. 1993). Consequently inasmuch as the
district court has not quantified the fees and costs there is no
order with respect to them that is final for the purpose of
appellate review. Therefore, Hyatt's challenge to the district
court's statement in its memorandum regarding the bearing of
costs and attorneys' fees is premature. Accordingly, we will
dismiss this part of the appeal for lack of appellate
jurisdiction.
IV. CONCLUSION
For all the foregoing reasons, we will affirm the
district court's order of April 10, 1996, granting 35 Acres'
motion for partial summary judgment in its entirety and the order
of May 3, 1996, providing for the transition of management and
will dismiss for lack of appellate jurisdiction the part of
Hyatt's appeal relating to attorneys' fees and costs. We vacate
the stay in our order of May 20, 1996. Finally, we will remand
the case to the district court for further proceedings on the
remaing aspect of the case.