Regal Cinemas, Inc. v. W & M Properties

90 F. App'x 824
Court of Appeals for the Sixth Circuit·Decided January 27, 2004·No. Nos. 02-3450, 02-3514·Published·Cited by 7 cases

Opinion

OPINION

COLE, Circuit Judge.

Defendants W & M Properties, Developers Diversified, and John R. McGill (collectively, defendants) appeal the district court’s denial of their motion for judgment as a matter of law at the close of a jury trial. Defendants argue that they were entitled to judgment as a matter of law because plaintiff Regal Cinemas, Inc. failed to establish two elements of fraud under Ohio law: justifiable reliance and resulting damages. Further, defendants argue that the issue of punitive damages should not have been submitted to the jury. Regal Cinemas, Inc. cross-appeals the. district court’s denial of attorney fees and costs. For the following reasons, the judgment of the district court is AFFIRMED in part. With respect to attor[827] ney fees and costs, the judgment is VACATED and REMANDED to the district court.

I. Background

This lawsuit arose out of a real estate transaction under which defendants1 were to build a theater for Regal Cinemas, Inc. (“Regal”) at Macedonia Commons, a shopping center developed and owned by the defendants in Macedonia, Ohio. The district court granted the defendants’ motion for summary judgment, and a panel of this Court reversed that decision and remanded the case to the district court for trial. At the conclusion of the trial, the jury found for Regal on Regal’s fraud claim, awarding actual damages in the amount of $5,000,000.00, punitive damages in the amount of $1,000,000.00 against each of the defendants, and attorney fees and costs.

At trial, Regal alleged a series of misrepresentations by defendants. The initial agreement between Regal and W & M Properties (“W & M”) provided for a theater to be built on the west side of a road that ran through the complex. Defendants were to obtain the necessary government approvals, and a contingency clause was included in the agreement allowing either party to terminate if defendants had not obtained the approvals by a specified date. That date was never filled in on the agreement, nor did the parties agree to a date.

According to Regal, W & M never sought the necessary governmental approvals for the theater. Regal presented evidence at trial that W & M was negotiating with Kohl’s Department Store for the use of Regal’s site on the west side of the road by April 1994, and by June 1994 defendants had reached an agreement with Kohl’s to lease that site to it. Regal also presented evidence at trial that, at this same time, the defendants were providing false and misleading information to Regal regarding the cause of the delays. For example. Keith R. Thompson, Senior Vice President at Regal, testified that in May of 1994, McGill informed him that the delays were being caused by “unsuitable soils” on the west site and told him that construction would start in mid-summer. In June 1994, another employee of the defendants told Thompson that the “unsuitable soils” would be removed by July 4, 1994, and that approval of the final theater site was on the Macedonia Planning Commission’s August 1994 agenda.

Regal threatened to cancel the agreement as a result of the delays. In response, McGill met with Regal’s Thompson. McGill proposed an alternate site on the east side of the road. McGill touted the virtues of the east site — better access and freeway visibility — but did not inform Thompson about any differences in the permitting requirements for that site. Thompson testified at trial that McGill told him that the east site collected storm water run-off from 1-271 but that it was not a true wetland. In fact, W & M had previously developed the east site as a wetland so that the Army Corps of Engineers would grant them a permit in 1991 to fill in the wetlands that then existed on the west side of the road. Later, having decided that they wished to develop the wetlands they had created on the east side as well, [828] defendants hired HzW Environmental Services in June 1994 to obtain the necessary wetland permit from the Army Corps of Engineers.2

Regal, unaware of these issues, agreed to the move, and McGill proposed to follow up with a site plan and a time line for construction. On November 10, 1994, McGill sent a revised site plan that showed the theater and a Target store on the east side of the boulevard; the Kohl’s store appeared on the west site. On December 14, 1994, McGill sent Thompson a proposed First Amended Lease, which reflected the change in location, a change in size, and added the date June 30, 1995, to the contingency clause. A letter accompanied the proposed amendment containing a plan of action:

As a followup to our phone conversations of last week, please find enclosed a Lease Amendment pertinent to this location which modifies the building size and location. Furthermore, our current schedule for this development is as follows:
— On or about 1/15/95 we will have a meeting with the Corps of Engineers and Ohio EPA to finalize our wetland mitigation plan and permit.
— We expect the wetland permit to be in hand by 4/15/95, or before.
— We will commence architectural drawings no later than 2/1/95 with completion by 3/15/95.
— We will put the project out to bid on 3/15/95 for a 4/15/95 bid date.
— The project will be let on 5/1/95 with a 10/1/95 turnover date.
Keith, we will be commencing, during the month of December, our site plan approval process with the city and expect that to be completed no later than 2/1/95. I will do everything in my power to make certain these dates are adhered to so that we can put this behind us. J.A. 571.

Thompson testified that the letter allayed Regal’s scheduling concerns at that time. But Regal argued at trial, and defendants do not challenge here, that this schedule was impossible to meet and that defendants knew it was impossible to meet. Regal executed the First Amended Lease on February 27, 1995; W & M executed it on March 17, 1995. All necessary government approvals were not obtained by June 30,1995, and W & M sent a letter on July 3, 1995, stating that W & M was exercising its right to terminate under the lease’s contingency clause.

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Regal Cinemas, Inc. v. W & M Properties, 90 F. App'x 824 (6th Cir. 2004).

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