BRISCOE, Chief Judge.
Plaintiff Kansas Penn Gaming, LLC (KPG), a limited liability corporation formed by Penn National Gaming, Inc. (Penn National), entered into a real estate sale contract with HV Properties of Kansas, LLC (HV), pursuant to which KPG purchased from HV parcels of land in southeast Kansas for $2.5 million for the purpose of seeking to develop a lottery gaming facility on the land. KPG ultimately chose not to develop a lottery gaming facility on the land. HV thus did not receive $37.5 million of payments that it had hoped to receive from KPG under the contract.
KPG filed this diversity action seeking a declaratory judgment that it did not breach the terms of the contract. HV filed a counterclaim alleging that KPG breached the terms of the contract. HV also filed a separate action against Penn National alleging breach of Penn National's obligation as guarantor to make the payments due under the contract between KPG and HV. The district court consolidated the two cases and granted summary judgment in favor of KPG and Penn National. Following the entry of judgment, the district court awarded attorneys' fees and expenses to KPG and Penn National. HV now appeals from these rulings. Exercising jurisdiction pursuant to 28 U.S.C. § 1291, we affirm the judgment of the district court, as well as its post-judgment award of attorneys' fees and expenses.
In 2003, Steve Vogel and Gary Hall, natives of the southeastern Kansas town of Galena, began efforts to bring casino gaming to Kansas. In June 2004, Vogel and Hall formed Kansans for Economic Growth for the purpose of promoting passage of gaming legislation in Kansas. In early 2005, Vogel and Hall located and obtained the rights to several parcels of real property in Cherokee County, Kansas, which had immediate access to Interstate 44 and were close to gaming markets in Oklahoma, Arkansas and Missouri (the Subject Property). The Subject Property specifically included a fee interest in approximately 112.4 acres of land, as well as options to purchase two separate tracts of land totaling approximately 294.07 acres.
On or about February 2, 2005, Vogel and Hall formed HV, a Kansas limited liability company with its principal place of business in Joplin, Missouri, and transferred their rights in the Subject Property to HV. Effective January 1, 2006, HV's membership expanded to include Tim Shallenburger and Ross Vogel, both of whom were also residents of southeast Kansas.
In the summer of 2005, Shallenburger, who at the time was working for but was not yet a member of HV, first spoke to Richard Klemp, the Vice-President of Government Relations for Penn National, a Pennsylvania-based gaming company, about the prospect of gaming in Kansas
On January 11, 2006, Penn National and HV entered into a Letter of Intent that contemplated that Penn National would lease the Subject Property. Thereafter, Penn National and HV engaged in various efforts to secure the legalization of gaming in Kansas.
In April 2007, the Kansas legislature enacted the Kansas Expanded Lottery Act (KELA), Kan. Stat. Ann. § 74-8733 et seq. KELA, in pertinent part, authorized the establishment of one "lottery gaming facility" in each of four specified "gaming zones," including the "southeast gaming zone," which encompasses Cherokee and Crawford counties in the southeast corner of the State. Kan. Stat. Ann. §§ 74-8702(f), 74-8734(a) and (d). KELA anticipated that each lottery gaming facility would be owned and operated by the Kansas Lottery, an independent state agency, but managed by a "lottery gaming facility manager" whose management terms and conditions would be governed by a "lottery gaming facility management contract" (management contract). Id. §§ 74-8702(n) and (o), 74-8734(a) and (d).
KELA imposes certain requirements for management contracts in the southeast gaming zone, including that (a) the casino must consist of an investment in infrastructure of at least $225 million, (b) the applicant must pay a $25 million privilege fee, and (c) the compensation paid to the lottery gaming facility manager must not exceed 73% of gaming revenues (or, in other words, the "tax rate" on the casino must not be lower than 27%). Id. § 74-8734(g)(2), (h)(6), (h)(12), (h)(13) and (h)(16).
KELA imposes a multi-step approval process for management contracts. The Lottery Commission first approves or disapproves proposed management contracts with the entities who have submitted timely applications to be lottery gaming facility managers for a particular gaming zone. Id. § 74-8734(d). If the Lottery Commission approves a proposed management contract, the executive director of the Kansas Lottery and the prospective lottery gaming facility manager are required to "execute the contract...." Id. § 74-8736(a). "Upon execution of a ... management contract ..., the executive director [of the Lottery] ... submit[s] such contract ... to the [Review Board]," id. § 74-8736(b), which in turn must determine whether "the contract is the best possible such contract," id. § 74-8736(a). If the Review Board determines that the management contract "is the best possible such contract," id., it then "submit[s] the contract to the Kansas racing and gaming commission [KRGC] for approval," id. § 74-8736(e). The KRGC in turn must, after "conduct[ing] ... background investigations of prospective lottery gaming facility managers," "vote to approve in whole or reject in whole the recommendation of the [Review Board]." Id. The executed management contract must also be "endorse[d] by resolution of the city governing body or county commission as required in [Kan. Stat. Ann. § ]74-8734 and amendments thereto." Id. § 74-8736(a). Thus, in sum, an executed management contract becomes "binding ... only upon" approval by the Review Board and KRGC, and endorsement
In May 2007, shortly after the passage of KELA, Penn National formed Kansas Penn Gaming, LLC (KPG), a Delaware limited liability corporation, for the purpose of applying for a license to manage a gaming facility in Cherokee County, Kansas, within the southeast gaming zone. Penn National is the sole member of KPG.
On June 5, 2007, Cherokee County held a referendum election in which county residents could determine whether they wished to have a casino located within the county. The referendum, which Penn National and HV promoted, passed with a large majority. Subsequently, on July 23, 2007, the Cherokee County Commission passed a resolution giving KPG an exclusive endorsement to be the operator of a lottery gaming facility in Cherokee County.
In May 2007, the Quapaw Indian Tribe (Quapaw) of Oklahoma announced plans to develop a large-scale casino in northeastern Oklahoma, directly across the state line from the Subject Property. At that time, and for several months thereafter, KPG was uncertain about the Quapaw's ability to obtain financing for and develop the proposed casino. KPG nevertheless viewed the Quapaw's proposed casino as a potential threat to the economic viability of a gaming facility located on the Subject Property, and consequently engaged in efforts to stop the development of the proposed Quapaw casino. Those efforts included investigating whether the proposed casino development was in violation of applicable environmental regulations, and participating in and financing a federal lawsuit against the United States Department of Interior, in which it was alleged that the federal government had improperly acquired and conveyed portions of the Quapaw's Oklahoma land, such that the land could not legally be used for gaming purposes.
On August 31, 2007, KPG applied with Kansas gaming authorities to be the lottery gaming facility manager for the southeast gaming zone. KPG's application was the only application submitted for the southeast gaming zone prior to the expiration of the initial September 6, 2007 application deadline.
On September 6, 2007, HV and KPG entered into a real estate sale contract (the Sale Contract), pursuant to which KPG agreed to pay a total of $2.5 million to acquire HV's interest in the Subject Property. The Sale Contract also provided for two contingent payments from KPG to HV: (1) a $17.5 million payment ten days after the "Lottery Gaming Facility Management Contract Award Date" (Section 3.3 of the Sale Contract), the definition of which is discussed below; and (2) a $20 million payment on the earlier of (a) ten days after the date KPG commenced gaming operations on the Subject Property or (b) 30 months after the Lottery Gaming Facility Management Contract Award Date unless delayed due to any force majeure event (Section 3.4 of the Sale Contract).
Section 1.11 of the Sale Contract defined the phrase "Lottery Gaming Facility Management
Aplt.App., Vol. I at 178-79.
Section 13 of the Sale Contract, entitled "Buyer's Representations and Covenants," provided, in pertinent part, as follows:
Id. at 186-87.
Attached to the Sale Contract were a number of exhibits, including Exhibit E, which was a Repurchase Agreement entered into on the same date by KPG and HV. Id. at 217-18. The Repurchase Agreement, which cross-referenced certain provisions of the Sale Contract, afforded HV an option, "exercisable for a period of ninety (90) days following receipt ... of a Notice of Termination ... from KPG ...,... to purchase the Subject Property from KPG ... on the terms set forth in th[e] [Repurchase] Agreement." Id. at 218.
Exhibit D to the Sale Contract was a Guaranty signed by Penn National "unconditionally guarantee[ing] the payment and performance of all [KPG's] obligations under the provisions of the [Sale] Contract with respect to the Contingent Payments as provided therein." Id. at 214.
On September 28, 2007, KPG, in accordance with the terms of the Sale Contract,
In August 2007, at approximately the same time that KPG was working on the project in the southeast gaming zone, Penn National began exploring the possibility of applying for a management contract to be the lottery gaming facility manager for the south central gaming zone (specifically in the town of Wellington, located within Sumner County, Kansas). In November 2007, Penn Sumner, LLC (Penn Sumner), a newly created subsidiary of Penn National, applied for a management contract in the south central zone. Three other gaming companies also submitted applications to be the lottery gaming facility manager for the south central gaming zone.
On December 6, 2007, the extended application deadline for the southeast gaming zone expired with no applications other than KPG's having been received. Consequently, the Lottery Commission and KPG began negotiating a management contract for the southeast gaming zone. At the time of those negotiations, KPG's efforts to stop the development of the Quapaw casino had been unsuccessful, and KPG was concerned that a $225 million casino facility (the minimum infrastructure investment required by KELA for the southeast gaming zone) would not be viable on the Subject Property in the face of competition from a Quapaw-operated casino. To attempt to mitigate that concern, KPG requested, and the Lottery Commission agreed, after obtaining an approving opinion from the Kansas Attorney General, that KPG be allowed to satisfy the $225 million infrastructure investment requirement over a period of time, starting with an initial $125 million investment, to be followed by additional spending of $100 million in specified intervals.
The Lottery Commission and KPG ultimately agreed upon the terms of a management contract for the southeast gaming zone (the Management Contract). On May 5, 2008, the Kansas Lottery and KPG signed, and thus effectively executed under the terms of KELA, that Management Contract. The Management Contract, consistent with the provisions of KELA, defined the term "Effective Date" as "the date this Agreement is signed by all the parties and all required approvals for the Agreement are obtained in accordance with the Kansas Expanded Lottery Act and rules and regulations promulgated pursuant thereto." Id. at 321-22 (Section 1(e)). The Management Contract in turn stated, again consistent with the provisions of KELA, "This Agreement will become effective and binding on the Effective Date." Id. at 324 (Section 2). The Management Contract further provided, "This Agreement will not become effective until it is approved, as required by the Kansas Expanded Lottery Act, by all three of the following public entities: (a) the Commission; (b) the Lottery Gaming Facility Review Board; and (c) the Kansas Racing and Gaming Commission." Id. at 329-30 (Section 9).
The Management Contract contained a provision addressing KPG's ability to withdraw
Id. at 353 (Section 66).
On June 4, 2008, KPG, as required by KELA, deposited a refundable $25 million privilege fee with the Kansas State Treasurer. Under the terms of KELA, that privilege fee could be withdrawn by KPG at any time before the management contract became final and binding.
On July 5, 2008, the Quapaw opened its $300 million Downstream Casino (Downstream) for business. Downstream operated under a lower tax rate than the 27 percent rate that would have applied to any casino operated in the southeast gaming zone. After Downstream opened, KPG's analysts concluded that, even with a phased capital investment, a casino on the Subject Property would not, under the terms of the executed-but-not-yet-binding Management Contract, generate a sufficient return on investment to meet KPG's internal investment thresholds. Penn National and KPG did, however, believe that a casino on the Subject Property, combined with a casino in the south central gaming zone, presented a viable overall investment for the company. Consequently, Penn National and KPG made efforts to promote this "southern strategy," i.e., the operation of two commonly owned and similarly themed casinos in southern Kansas, with the Review Board.
On August 21 and 22, 2008, the Review Board conducted hearings regarding KPG's Management Contract for the southeast gaming zone, and Penn Sumner's management contract for the south central gaming zone. On August 22, 2008, the Review Board voted to approve KPG's Management Contract for the southeast gaming zone. On that same date, the Review Board also voted to approve the management contract of an applicant other than Penn Sumner for the south central
Prior to the Management Contract being approved by the KRGC and becoming final and binding, KPG made a final determination that the proposed project on the Subject Property was not "commercially viable," id. at 127, and thus would not be a reasonable investment. According to Snyder, the opening of the Downstream Casino facility "was the single most critical factor" in this determination. Id. Snyder also cited certain of KELA's requirements, including "the capital expenditure requirement of $225 million and the $25 million license fee, as well as the statutory minimum payments that the State of Kansas [would] collect from the operations of the casino facility." Id. at 128.
Consequently, on September 11, 2008, KPG notified the Kansas Lottery that it was withdrawing its application for the southeast gaming zone. Because the KRGC had not yet approved the Management Contract, the Kansas Lottery permitted KPG to withdraw its application and obtain a refund of the $25 million privilege fee it had deposited.
On September 11, 2008, KPG gave notice to HV, pursuant to Section 2 of the Repurchase Agreement, of KPG's intent to terminate the Sale Contract. HV chose not to exercise its repurchase option under the Repurchase Agreement.
On September 12, 2008, HV served a written notice of default on KPG pursuant to Section 14 of the Sale Contract and made a demand for cure in the amount of $37.5 million.
On September 23, 2008, KPG filed this action against HV seeking a declaration that it had no further liability to HV under the Sale Contract. HV filed an answer and counterclaim alleging that KPG breached the Sale Contract by failing to pursue final approval of its casino management contract and disclaiming any obligation to make the contingent payments due to HV under the Sale Contract. HV also filed a separate action against Penn National alleging breach of Penn National's failure as guarantor to make the payments due under the Sale Contract between KPG and HV. The district court subsequently consolidated the two cases.
On January 7, 2010, the parties filed cross-motions for summary judgment. On July 23, 2010, the district court granted Penn National's motion for summary judgment and denied HV's motion for summary judgment. The district court entered judgment in favor of Penn National that same day. HV filed a timely notice of appeal from that judgment, resulting in Appeal No. 10-3209.
KPG and Penn National moved for attorneys' fees and expenses under the terms of the Sale Contract. On May 18, 2011, the district court granted that motion in part and awarded KPG and Penn National attorneys' fees in the amount of $765,058.50 and expenses in the amount of $207,652.27. HV filed a timely notice of appeal from that decision, resulting in Appeal No. 11-3173.
In Appeal No. 10-3209, HV argues that it was entitled to summary judgment on its
As we shall discuss in greater detail below, we conclude that the district court properly granted summary judgment in favor of KPG and Penn National. Consequently, we find it unnecessary to address the remand-related arguments asserted by HV.
In this diversity case, the substantive law of the forum state, Kansas, governs our analysis of the underlying claims.
HV contends that it is entitled to summary judgment on its claim that KPG breached the Sale Contract because, although the Sale Contract allowed KPG to withdraw under certain conditions, those conditions were not met and the terms of the Management Contract between KPG and the Lottery Commission were, as a matter of law, reasonably acceptable to KPG.
Before examining the relevant provisions of the Sale Contract, we first review the principles of Kansas substantive law that apply to this dispute. "The interpretation and legal effect of written instruments are matters of law ...." Carrothers Constr. Co. v. City of South Hutchinson, 288 Kan. 743, 207 P.3d 231, 239 (2009). "The primary rule for interpreting written contracts is to ascertain the parties' intent." Id. "If the terms of the contract are clear, the intent of the parties is to be determined from the contract language without applying rules of construction." Id. "Ambiguity in a contract does not appear until two or more meanings can be construed from the contract provisions." Id.
Turning to the Sale Contract, the key provision, for purposes of this case, is Section 13.1. As we have previously noted,
Aplt.App. at 186-87.
All five sentences of Section 13.1 are relevant to this dispute. The first sentence of Section 13.1, by its express terms, imposed upon KPG the duty of acting in good faith and exercising commercially reasonable efforts in (a) seeking designation as the lottery gaming facility manager for the southeast zone, and (b) entering into a management contract with the Lottery Commission.
The second and third sentences of Section 13.1 discuss in more detail two of the specific steps KPG was required to take in achieving the goals outlined in the first sentence. The second sentence (the meaning of which is not disputed by the parties) required KPG to make a complete and timely application to be designated as the lottery gaming facility manager for the southeast gaming zone (a step that KPG undisputedly accomplished). The third sentence of Section 13.1 required KPG, upon designation as the lottery gaming facility manager for the southeast gaming zone, "to negotiate and execute a ... [m]anagement [c]ontract [with the Lottery Commission] with respect to the Subject Property" (something that, again, KPG undisputedly accomplished).
The third sentence did not require KPG to obtain a final, binding management contract with the Lottery Commission. Both the Sale Contract and KELA make clear that an "executed" management contract is not the same as a final, binding management contract. An "executed" management contract is simply one that has been finally negotiated and signed by the Lottery Commission and the prospective lottery gaming facility manager. A final, binding management contract is one that has both been executed and subsequently approved by all three of the requisite Kansas gaming agencies. The third and fourth sentences of Section 13.1 distinguish between these two forms of the management contract: the third sentence refers simply to "a Lottery Gaming Facility Management Contract," while the fourth sentence refers to "a fully executed final, unappealed and unappealable Lottery Gaming Facility Management Contract."
Importantly, for purposes of the dispute now before us, the fourth sentence of Section 13.1 expressly afforded KPG the opportunity to withdraw its application for the southeast gaming zone, prior to the management contract becoming final and binding by way of approval from all three lottery agencies, if the terms of the executed management contract were not "reasonably acceptable" to KPG. In other words, the fourth sentence, through its use of the phrase "reasonably acceptable to Buyer," indicated that KPG was not unconditionally bound to proceed under the management contract that it negotiated and executed with the Lottery Commission. The absence of that same phrase in the third sentence indicates that KPG was not unconditionally bound by the terms of any such executed management contract.
The fifth and final sentence of Section 13.1 provided that if KPG's obligations ceased for the reasons outlined in the fourth sentence of Section 13.1, KPG would own the Subject Property, subject to HV's right to repurchase it, and would "have no further obligation to [HV] whatsoever under" the Sale Contract.
Our interpretation of Section 13.1, particularly our conclusion that KPG retained the right to withdraw if the executed-but-not-yet-final management contract was not reasonably acceptable to it, is bolstered by a key provision of the Repurchase Agreement, which was attached as an exhibit to the Sale Contract. Specifically, the Repurchase Agreement defined the phrase "Notice of Termination" as follows:
Aplt.App. at 218. This language confirms that KPG retained the right, prior to being awarded a final, binding management contract with the Lottery Commission (i.e., one approved by all three gaming agencies), to "determine[] not to proceed with developing a ... lottery gaming facility on the Subject Property ...."
Although HV concedes that the Sale Contract afforded KPG the right to determine if the terms of its casino management contract with the Lottery Commission were "reasonably acceptable," HV contends that the Sale Contract required this determination by KPG to occur before KPG and the Lottery Commission executed the casino management contract. In turn, HV argues that KPG "received a reasonably acceptable management contract" (evidenced, HV argues, by KPG's execution of the management contract), "the threat and even existence of competition were known [to KPG] at the time of contracting," and KPG "should not be excused because its management contract included terms mandated by KELA." Aplt. Br. at 31.
HV's assertion that KPG was required to make its "reasonably acceptable" determination prior to executing a management contract with the Lottery Commission is contradicted by the plain language of Section 13.1. As we have explained, the language of Section 13.1 afforded KPG the right to decide whether the negotiated and executed management contract was "reasonably acceptable," and in turn to withdraw if necessary, prior to final approval by all three gaming agencies.
That leaves only HV's arguments that KPG, in making a determination whether the management contract was "reasonably acceptable" to it, was precluded from considering either (a) any contract terms mandated by KELA, or (b) competition from other casinos (or proposed casinos) near the southeast gaming zone. The phrase "reasonably acceptable" is not defined in the Sale Contract. Consequently, it must be accorded its "ordinary meaning." Shutts v. Phillips Petroleum Co., 222 Kan. 527, 567 P.2d 1292, 1317 (1977). The term "reasonably" is commonly defined as "[a]ccording
HV asserts, however, that the phrase "reasonably acceptable" could only have referred to the terms of the management contract that were negotiable, i.e., those terms that were not otherwise mandated by KELA. In support, HV argues that KPG "was fully aware of the statutory requirements when it signed the [Sale] Contract...." Aplt. Br. at 40. For the reasons already discussed, however, the phrase "reasonably acceptable" has a broad meaning, and thus cannot be narrowly construed to have excluded KPG's consideration of KELA-mandated terms.
Lastly, and relatedly, HV argues that if KPG "could reject the [executed] management contract due to th[e] terms [of KELA]," that would "remove[] all meaning from the first, third and fourth sentences of [S]ection 13.1 because under the circumstances it would have been impossible for [KPG] to negotiate and receive a reasonably acceptable management contract." Id. at 41. But that is quite clearly not the case. According to the uncontroverted evidence in the record, it was the combination of certain KELA-mandated terms, plus the significant threat of competition (and, in turn, the reduced revenues that would flow from a casino on the Subject Property), that ultimately led KPG to reject the terms of the executed management contract and withdraw from the project.
Thus, in sum, we conclude that the language of the Sale Contract did not, as a matter of law, mandate the entry of summary judgment in HV's favor or preclude the entry of summary judgment in KPG's and Penn National's favor.
HV argues, in the alternative, that even "[i]f the record does not require summary judgment for [it], there are genuine issues of material fact which preclude summary judgment for [KPG and] Penn [National]." Aplt. Br. at 32. More specifically, HV argues that genuine issues of material fact existed concerning (a) whether a casino on the Subject Property was economically viable, and (b) whether KPG acted in good faith and with commercially reasonable efforts in seeking to obtain a final, binding management contract. We disagree.
The fourth sentence of Section 13.1 of the Sale Contract expressly afforded KPG the right to withdraw its application for the southeast gaming zone, prior to the executed management contract with the Lottery Commission becoming final, if the terms of that executed management contract were not "reasonably acceptable" to
To be sure, HV does complain that the district court "relied on conclusory statements in Snyder's affidavit as undisputed facts," particularly "recitations that [KPG] determined the ... casino was not a viable investment as a result of the opening of the Downstream casino." Aplt. Br. at 50. According to HV, "[t]his assertion was contrary to [the] deposition testimony" of Snyder and Timothy Wilmott, the chief operating officer of Penn National. Id. However, HV fails to cite to any specific portions of either deposition. Further, an independent review of the portions of those deposition transcripts that were included in the appendix reveals that Snyder was doubtful as to the viability of the proposed casino even prior to the opening of the Downstream casino. HV fails to explain precisely how that would undercut the statements in Snyder's affidavit. Indeed, as we read it, that deposition testimony supports the assertions in Snyder's affidavit that he did not believe, because of the combination of the Downstream casino and KELA-mandated terms in the executed management contract, that the proposed casino would be sufficiently viable to justify KPG's investment.
HV also argues that KPG's decision to withdraw was inconsistent with the representations that KPG and Penn National made to "Kansas gaming authorities and others on numerous occasions," id. at 51, particularly KPG's letter "urging the Attorney General [of Kansas] to approve the [proposed] phase-in [of KELA's capital investment requirement] because [KPG's] business plan `will succeed,'" id. (quoting Aplt.App. at 746). A review of those representations, however, establishes that KPG and Penn National merely represented to Kansas gaming authorities and others that they were hopeful that the proposed casino would be viable. For example, in the letter specifically cited by HV, KPG did not conclusively assert that its business plan would succeed, but rather asserted to the Attorney General that it had attempted to develop the best possible business plan it could think of in light of the market conditions and KELA-mandated terms: "Against all of the market data and competitive conditions (as highlighted by the Review Board's own consultants) [KPG] has made its best business judgment how to structure a business plan that will succeed taking into consideration all relevant factors." Aplt. App. at 746. Thus, neither this statement, nor any of KPG's other representations, were inconsistent with KPG's ultimate determination that the terms of the executed management contract were not reasonably acceptable to it.
HV also argues that genuine issues of material fact existed as to whether KPG acted in good faith and with commercially
"The duty of good faith has been defined" under Kansas law "as honesty in fact." Gillenwater v. Mid-Am. Bank & Trust Co., 19 Kan.App.2d 420, 870 P.2d 700, 704 (1994). Although the Kansas courts have not defined the phrase "commercially reasonable efforts," they have held that the "reasonable efforts" standard often used in contracts is one "`that has diligence as its essence," but "falls short of the standard required of a fiduciary." T.S.I. Holdings, Inc. v. Jenkins, 260 Kan. 703, 924 P.2d 1239, 1250 (1996) (quoting Restatement (Second) of Agency § 13, cmt. a (1957)). Good faith and reasonableness are "usually questions of fact," Estate of Draper v. Bank of Am., N.A., 288 Kan. 510, 205 P.3d 698, 712 (2009), but "may be decided as a matter of law under proper circumstances," Gillenwater, 870 P.2d at 704; see Draper, 205 P.3d at 712 (same).
In this case, the initial, and ultimately fatal, problem with HV's arguments is that Penn National was not a party to the Sale Contract with HV. Thus, Penn National's actions in seeking to have a separate subsidiary appointed as the lottery gaming facility manager for the south central gaming zone are at best only marginally relevant to the critical question of whether KPG, which was a party to the Sale Contract, fulfilled its obligations of acting in good faith and employing commercially reasonable efforts in seeking a final, binding management contract for the southeast gaming zone.
Even assuming, for purposes of argument, that Penn National's actions were relevant, the evidence that HV cites in support of its assertions is, at best, meager. HV first asserts that, although Penn National originally "had no intention of applying in the south central zone because it believed the Review Board would not award two contracts to the same manager," Penn National later changed its mind after learning that "the Quapaw were attempting to finance the [then-proposed] Downstream Casino." Id. HV argues that "[t]he only logical reason Penn [National] would change its mind about its chances to obtain two management contracts is that it thought its apparent willingness to develop the Cherokee casino would persuade the Review board to award it both." Id. at 56-57. Assuming this to be true, it is unclear precisely how this would allow the jury to find that KPG failed to act in good faith in seeking a final, binding management contract for the southeast gaming zone.
HV next asserts that when KPG entered into the Sale Contract in September 2007, "it knew that Quapaw had been successful in financing its casino and Snyder, who was in charge of Penn[] [National's] efforts in Kansas, testified that he then believed that [the proposed] Cherokee [casino] was no longer economically viable." Id. at 57 (citing Aplt.App. at 106-108).
HV also contends that KPG "abandoned talks with Hall directed toward Hall providing part of the required capital investment and declined to seek any changes in the management contract—such as further back-loading of the investment—when given the opportunity before the Review Board to do so." Id. "Thus," HV argues, "it failed to use `every effort' a reasonable business entity would make under the circumstances." Id. (quoting Castle Props. v. Lowe's Home Ctrs., Inc., No. 98 CA 185, 2000 WL 309395, at *3 (Ohio Ct.App. Mar. 20, 2000)). HV fails, however, to point to any evidence that would reasonably establish that a contribution by Hall toward the required capital investment, or further back-loading of that investment, would have significantly improved the potential return on KPG's investment or, in turn, altered KPG's determination that the proposed casino was not economically viable. Thus, a jury could not reasonably have found that KPG was required to take either of these steps in fulfilling its contractual duties under the Sale Contract.
Finally, HV contends that all of this evidence "supports an inference that Penn[] [National's] plan was to block other southeast zone applicants and then to hold HV['s] ... property and the Cherokee Casino hostage to its plan to obtain the Sumner County contract." Aplt. Br. at 58. In other words, HV argues, "Penn [National] hoped Cherokee would be its ticket with the Review Board to get the south central contract over its three rivals in that zone," and in doing so it failed to act in good faith towards HV. Id. at 59. We agree, however, with the rationale offered by the district court in rejecting this same contention:
Addendum to Aplt. Br. at 23-24.
In sum, the evidence in the record points in only one direction: that Penn National acted in good faith in proposing the "southern strategy" of having its subsidiaries manage casinos in both Cherokee and Sumner counties, and that this was indeed the only viable way of profitably operating a casino in Cherokee County, given the significant competition that such
HV asserts two additional issues in its appeal: first, that in the event this court concludes HV was entitled to summary judgment, it should "remand for the calculation of damages and interest" due to HV, Aplt. Br. at 60; and second, that in the event the case is remanded to the district court for further proceedings, this court should reassign the case to a different district court judge. Because we have concluded that the district court properly granted summary judgment in favor of KPG and Penn National, it is unnecessary for us to address these remaining issues.
In Appeal No. 11-3173, HV argues that if the district court's grant of summary judgment in favor of KPG and Penn National is reversed and the case remanded, the district court's order awarding attorneys' fees and expenses to KPG and Penn National must also be reversed. This argument is now clearly moot, given our affirmance of the district court's grant of summary judgment in favor of KPG and Penn National.
The judgment of the district court, and the district court's order awarding attorneys' fees and expenses to KPG and Penn National, are AFFIRMED. Appellant HV Properties of Kansas LLC's motion for leave to file its brief under seal is GRANTED.
