Source: https://openjurist.org/95/f3d/291
Timestamp: 2020-04-09 13:54:27
Document Index: 103108588

Matched Legal Cases: ['§ 1332', '§ 1332', '§ 1291', '§ 139', '§ 3', '§ 118']

95 F3d 291 Government Guarantee Fund of Republic of Finland v. Hyatt Corporation | OpenJurist
95 F. 3d 291 - Government Guarantee Fund of Republic of Finland v. Hyatt Corporation
95 F3d 291 Government Guarantee Fund of Republic of Finland v. Hyatt Corporation
95 F.3d 291
GOVERNMENT GUARANTEE FUND OF the REPUBLIC OF FINLAND;
Saastopankkien Keskus-Osake-Pankki (Skopbank); 35
Acres Associates; 12 Acres Associates;
Benefori Oy
HYATT CORPORATION, Appellant.
No. 96-7288.
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").1 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.2 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. § 1291 and exercise plenary review over the grant of partial summary judgment and abuse of discretion review over the court's transition order.
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.
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.
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. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585, n. 10, 106 S.Ct. 1348, 1355, n. 10, 89 L.Ed.2d 538 (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:
C. The Agency Relationship
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:
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.6
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.9 The court thereafter held that any agency under the management agreement was revocable and had been terminated. Id.
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., 19 Cal.App.4th 615, 23 Cal.Rptr.2d 555 (1993); Woolley v. Embassy Suites, Inc., 227 Cal.App.3d 1520, 278 Cal.Rptr. 719 (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:
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:
3. Hyatt's Arguments on Appeal
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, 83 Cal.App.2d 221, 188 P.2d 519, 521, 528 (1948); Jones v. Williams, 139 Mo. 1, 39 S.W. 486, 493-94 (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:
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 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. See Woolley, 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.").
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, 560-63.10
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 Suites involved 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., 227 Cal.App.3d 1520, 278 Cal.Rptr. 719 (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.
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).
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).
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.
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.12IV. CONCLUSION
Hyatt alludes to the possibility that Ohio law should govern the disposition of this case, since the management agreement provides that it " 'shall be governed in all respects by the internal laws of the State of Ohio.' " Br. at 31. Hyatt, however, does not argue that Ohio law would produce a different outcome in the case; indeed, it states just the opposite: "Accordingly, under Ohio law (as under the Restatement ), mere proof of an agency power does not establish the principal's ability to terminate that power at will or without cause." Id. at 32 (emphasis added). Therefore, we see no reason to address the issues in any other manner than according to the district court's choice of law, i.e., under Virgin Island's law. Hyatt's counsel agreed with our assessment of this issue at oral argument
We note that the attorney's fee issue could not be certified as final under Fed.R.Civ.P. 54(b) because it is not inherently final as the district court has not set the amount of the fees. See Gerardi v. Pelullo, 16 F.3d 1363, 1368 (3d Cir.1994). Thus, we could predicate the dismissal of the appeal on the attorney's fee issue on a conclusion that the district court either did not intend to certify that issue as final or could not do so. Of course, that conclusion would be consistent with the result we reach