Park City, UT – After hearing attorneys’ oral arguments on Friday, a Utah judge ordered Powdr Corp. officials to turn over email communication between its executives and attorneys discussing the renewal of the lease for land upon which Park City Mountain Resort (PCMR) operates.
In a rare departure from attorney-client privilege, Utah Third District Court Judge Ryan Harris ordered that the crime-fraud exception to the Utah Rules of Evidence applies to the emails, which were exchanged over the final weekend of April 2011 when Powdr Corp. officials intentionally backdated a letter to Toronto, Canada-based Talisker Corp. The letter indicated Powdr’s intention to renew a long-term lease with a division of Talisker for 2,800 of PCMR’s 3,700 acres of ski terrain for another 20 years at rates negotiated decades earlier and well below the current market. Powdr attorney Alan Sullivan acknowledged late last month that the letter wasn’t actually sent to Talisker until May 2, 2011, two days past the deadline to renew the lease. Judge Harris ruled that this acknowledgement was in and of itself evidence of an intention to deceive, defined in legal terms as prima facie evidence.
As a result, Harris ordered Powdr attorneys to produce the 21 emails in dispute to the court by Monday, so that he could review the documents and determine which pieces of communication needed to be turned over to Talisker attorneys ahead of depositions in the case, currently scheduled for this Wednesday.
Should the present case ultimately be decided in Talisker’s favor, the outcome could result in what would essentially be a hostile takeover of PCMR by Broomfield, Colo.-based Vail Resorts. The tale of how the litigation has reached this point, however, is a convoluted and somewhat confusing one.
Talisker Land Resolution is a division of Talisker Corp., which purchased PCMR’s neighboring ski area, Canyons Resort, from the now-defunct American Skiing Co. in 2009. United Park City Mines owns the land upon which most of PCMR operates that is the subject of the lease in dispute, first executed in 1971 with a former owner of PCMR and which was up for renewal in 2011. Powdr acquired the lease when it bought PCMR in 1994. Similarly, in 2003 Talisker Land acquired the landlord side of the lease when it purchased United Park City Mines.
However, Talisker alleges that Powdr Corp. failed to provide timely notification of their intention to renew the lease in April 2011. Had they done so, the original lease would have been renewed for an additional 20 years at its original terms: $155,000 per year. Powdr maintains that between 2009 and mid-2011, they provided Talisker with repeated declarations of their intent to operate the resort through 2051. PCMR also claims that they advised Talisker of their intent to make major expenditures for ski terrain infrastructure improvements—expenditures totaling over $7 million during the summer of 2011 alone. Talisker didn’t advise Powdr that they considered the lease expired until December 2011.
After Talisker’s efforts to renegotiate the terms of the annual lease reached an impasse, Powdr filed suit in Utah District Court against Talisker in March of 2012 to enforce the lease renewal.
Meanwhile, as that lawsuit is still pending, Talisker Corp. reached an agreement in May of this year to allow Vail Resorts to operate Canyons Resort under a long-term lease, with annual payments reported at $25 million. One of the provisions of the lease between Talisker and Vail Resorts for Canyons allows Vail Resorts to include the lease between Talisker Land and Powdr for PCMR, without any additional consideration. That would allow Vail Resorts to take Talisker’s place in the pending litigation. In July of this year, PCMR filed a motion with the court for leave to amend its original complaint to include new claims that Talisker Land and United Park City Mines violated the terms of the PCMR lease by not allowing Powdr the right to first refusal to purchase the PCMR land, when it sold a controlling interest in that land to Vail Resorts.
A trial date has not yet been scheduled in the case, although Harris has set the deadline for completion of fact discovery for February 7, 2014.
On August 28 Talisker Land served Powdr Corp. with a five-day Notice to Quit — in essence, an eviction notice — with all fixed improvements on the property, including ski lifts, lodges and more reverting to landlord ownership. The Notice was signed by the former general counsel to Vail Resorts. The deadline for Powdr to vacate the premises came and went this past Monday, with Powdr continuing to occupy PCMR. Vail Resorts officials have since issued a statement indicating that despite the notice, they have no intention of interfering with Powdr Corp.’s operation of PCMR for the 2013-14 winter season.