February 19, 2013

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The Canyons v. Wolf Mountain Resorts

A Proposed Golf Course Leads to the Courtroom

February 19, 2013

Wolf Mountain Resorts, L.C., and The American Skiing Company Utah—now a subsidiary of Canyons owner Talisker Corp.—signed a ground lease agreement in 1997. The agreement leased 4,000 skiable acres of land, known as “The Canyons Ski Resort,” to ASCU from Wolf Mountain for a period of up to 200 years.

The ground lease originally signed required ASCU to make annual rent payments to Wolf Mountain, develop the property and pay Wolf Mountain a percentage of the costs of development. Over time and as the property developed, the ground lease gave ASCU the option to transfer title of the property from Wolf Mountain to ASCU.

At the time of the agreement, the land being leased to ASCU was considered a “green field opportunity.” Canyons attorney John Lund explains, “It’s one of the last places anybody could find in the world that there’d been no meaningful development, where there was a lot of prospect to do a lot of development and build, essentially, a ski village and four-season resort area from scratch.”

Some of the Canyons’ development plans included condominiums and a golf course. The golf course is what finally brought what Lund referred to as years of contention between the two parties to a courtroom. “This whole story unfolded over years… And from our perspective there were years and years of failure to cooperate on their part…they would always have another demand,” he says.

The Game Begins

While the Canyons sought to develop the area, Wolf Mountain attorney David Wahlquist, however, claims that the Canyons was in the wrong and ultimately in breach of the lease agreement. The agreement required the Canyons to obtain a Summit County permit for the golf course prior to receiving rights from Wolf Mountain for the land.

Requiring the Canyons to obtain the Summit County permit prevented Wolf Mountain from having to give the acreage up, unless there was a guarantee of the planned golf course.

“It’s been 10 years since [Canyons] promised to develop the golf course,” Wahlquist says. “They blamed Wolf Mountain for the first five years; they blamed the economy for the second five years.”

In relation to the golf course dispute, Lund says, “There was a day in April of 2006 when every other person that had to sign every other document had signed it, and Wolf wouldn’t.” He continues, “Instead…they said, ‘Oh you know what, actually, you’re in default under the leases. That 200-year-long lease—you’re in default. You have all these things you’ve done that are breaches of the lease and we’re going to terminate your lease. We’re going to try to get you off the land, and get the now vastly improved land back.’”

A notice of default was filed by Wolf Mountain on the Canyons’ lease in June 2006. The next month the Canyons sued Wolf Mountain for breach of contract.

The suit against Wolf Mountain stated that it had deliberately interfered with the resort’s ability to build a golf course by withholding land it had previously pledged. According to Lund, the golf course was key to developing the surrounding acreage (950,000 square feet of floor space) into lodges, townhouses, hotels and restaurants.

Going for the Green

After five years, including a seven-week trial in 2011, a verdict was reached. Ultimately the jury found that Wolf Mountain had breached two different contracts, had breached the implied covenants of good faith in both of those contracts, and had intentionally interfered with the Canyons’ economic relations with others.

The Canyons requested $54,437,000 for lost profits from the development of land planned around the golf course, and the lost potential business it would have received from those developments.

As an example of the damages lost, Lund says that in the 2005 – 2006 timeframe, condos were selling “like hot cakes.” Westgate, a project that was able to develop on parts of the land, sold out an entire building in a single day. “That’s how hot the market was, and that’s the point in which this thing should have come to market, would have come to market if Wolf Mountain had simply gone along the way we claimed they should have to finalize things.”

After the trial ended, the land owned by Wolf Mountain went up for sale, Wolf Mountain claimed bankruptcy, and it recently made an appeal to the Utah Supreme Court to have the case reversed.

On the Canyons’ side, it bought the land previously owned by Wolf Mountain at a sheriff’s sale. The golf course construction is underway and the parcels of land for development have now been created and defined.

The verdict reached is particularly good for the state’s economy and business community, says Lund. “In the end, we had citizens of this state fairly and responsibly decide a very significant contractual dispute. …That’s an important thing to remember here. And one of the reasons that it’s important is because people want to do business in a place where they know it’s a good court system and they know they can get a fair and objective determination of their case if they have to take something to court.”

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