Park City, UT – Officials at Utah’s Park City Mountain Resort (PCMR) last week took the rare step of suing the owner of a neighboring ski area, Canyons Resort, over a dispute involving the lease of the land upon which PCMR operates.

Through a convoluted series of land transactions over the past several decades, the leased land upon which PCMR built lifts and trails, along with snowmaking, restaurants and other facilities, is now owned by Toronto, Canada-based Talisker Corporation, which also owns and operates Canyons Resort. At the time of the lease’s last renewal Talisker had not yet purchased Canyons Resort, its first ski area acquisition, from the now defunct American Skiing Company. A review of court documents indicates that PCMR officials may have missed a deadline to submit written notice of their intention to extend their lease of that land.

“After extensive and, sadly, unsuccessful negotiations, we reluctantly took the initiative to file this lawsuit,” said Jenni Smith, president and general manager of PCMR. “We need to protect the future of the company and our more than 1,200 employees, who bear a tremendous burden of uncertainty in this matter, and the many local businesses and homeowners in the greater Park City area. We are seeking relief through the court, the only option left at our disposal.”

On Dec. 27, Talisker Land Holdings, LLC, a division of Talisker Corporation, advised PCMR that it deemed that the resort’s right to use the land expired, and that Park City Mountain Resort would need to vacate the premises unless they entered in to a new agreement for the use of the land. Principals of Park City Mountain Resort say that they met repeatedly with Talisker in 2009, 2010 and 2011 to discuss multiple property transactions, business opportunities and infrastructure investments, including  a  future  ski lift conncetion between the two ski areas. Last summer, PCMR paid its annual fee for the use of the land, which was accepted by Talisker,  and invested $7 million in infrastructure upgrades throughout the resort.

“The growth and success of Park City Mountain Resort  is 100 percent attributable to the investment,  the hard work and dedication of our management and entire staff of 1,200 employees and more than 400 volunteers,” continued Smith. “We’re going to fight as long as it takes to keep Park City Mountain Resort locally owned and locally operated.”

“In its complaint, Park City Mountain Resort seeks several forms of relief relating to two tracts of land it leases from Talisker and on which PCMR operates a large portion of the ski resort,” comments attorney David B. Cronheim, Chief Legal Correspondent for First Tracks!! Online. “The main thrust of PCMR’s argument is that although it did not enter into a formal lease extension for either tract, the parties’ actions demonstrate that PCMR exercised its right to extend the leases until 2051.”

According to a complaint filed in the Third Judicial District Court in Summit County, Utah, “plaintiffs sue the defendants to prevent them from interfering with the continued operation of the Resort and from attempting to shut the Resort down.”

Talisker officials, meanwhile, assert that the lease expired in 2011. They say that they have offered PCMR new lease terms, and the parties have been in discussions regarding such new lease terms, which are subject to a confidentiality agreement.

“We had hoped to reach terms on the new lease that would be fair to both parties,” Talisker said in a prepared statement.  “Unfortunately it appears that PCMR is attempting to use litigation to better its position, and avoid reaching a mutually fair outcome. At no time in these negotiations has Talisker contemplated or threatened to close Park City Mountain. We believed the negotiations were continuing and we are disappointed by PCMR’s action today,” the statement added with no further comment.

“The method by which PCMR is seeking to obtain a decision as to whether it extended the lease is a declaratory judgment,” Cronheim explains. “Declaratory judgments are intended to clarify the positions of adverse parties without forcing either party to expose itself to additional losses. In this case, PCMR argues that it is entitled to a declaratory judgment because: (1) it did provide adequate notice pursuant to the leases; (2) even if it did not provide adequate notice under the leases, Talisker either waived its right to object or should be estopped, of prevented, from objecting; or (3) that equity demands that the failure to provide written notice should be excused because PCMR made an ‘honest mistake’ that could cost it over $100 million. PCMR also asks the court for an injunction preventing Talisker from evicting PCMR from the land which is the subject of the two leases until the case is complete.”

Cronheim further explains that even if the court does not side with PCMR on its declaratory judgment, PCMR’s complaint still has a fallback position that Talisker either fraudulently or negligently failed to disclose its intention with regard to the leases, or that Talisker breached its duty of good faith and fair dealing.

“PCMR seeks damages of over $7 million – the cost of the infrastructure improvements made after the expiration of the leases. However, these claims are last resorts,” opined Cronheim. “In all likelihood, PCMR would much prefer the declaratory judgment that the lease was extended. The other claims are less likely to succeed.”

The complaint, which is available for review on the website www.supportpcmr.com created by PCMR, indicates that the lease had a provision that allowed for a 40-year renewal if PCMR provided a written notice of their intent to extend the agreement prior to March 1, 2011.

“Both Talisker and PCMR are sophisticated parties who obviously had copies of the leases. Both are chargeable with knowledge of the covenants contained therein,” Cronheim notes. “PCMR’s complaint all but concedes it failed to give the required formal written notice of its intention to extend the leases prior to their expiration. If this is the case, PCMR made a major and inexcusable mistake. Before commencing $7 million worth of infrastructure improvements, it should have been 100% certain that the Talisker tracts were still under lease. That said, PCMR has highlighted the inference that Talisker’s ownership of nearby Canyons Resort led it to deal underhandedly with PCMR in an effort to damage its major competitor.  The court might be sympathetic to the argument that Talisker strung PCMR along with the intention of pulling the rug out from underneath them or otherwise wreaking havoc on PCMR’s operations.

“Either way,” Cronheim concludes, “animosity between Talisker and PCMR is certainly not good for the Utah ski industry as a whole, particularly at a time when the state legislature is pushing a plan to link the seven Park City and Cottonwood Canyons resorts. Such an ambitious plan requires cooperation, not litigation.”