Kansas Penn Gaming, LLC v. HV Properties of Kansas, LLC
662 F.3d 1275
10th Cir.2011Background
- HV and KPG entered into a sale contract for $2.5 million with contingent payments tied to a Southeast Kansas gaming contract; repurchase option and guaranty were attached as exhibits.
- Section 13.1 of the Sale Contract required KPG to use good faith, commercially reasonable efforts to obtain designation as the Southeast zone manager and to negotiate a final management contract; a withdrawal right existed if the final contract was not reasonably acceptable.
- A Repurchase Agreement defined a termination notice allowing KPG to stop proceeding if the management contract terms became not reasonably acceptable before final approval.
- KPG deposited a $25 million privilege fee and negotiated a management contract with the Kansas Lottery, but withheld final approval pending economic viability and competitive conditions.
- Downstream Casino opened in 2008, impacting KPG’s economics and leading KPG to withdraw its southeast zone application on September 11, 2008; HV then defaulted under the Sale Contract.
- The district court granted summary judgment in favor of KPG and Penn National; HV appeals arguing (i) entitlement to summary judgment on breach, (ii) issues of fact on viability and good faith, and (iii) remedies; the appellate court affirms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Section 13.1 allows withdrawal if terms are not reasonably acceptable | HV | KPG/Penn National | Yes; contract allowed withdrawal before final approval if terms were not reasonably acceptable. |
| Whether the Management Contract’s terms were reasonably acceptable as a matter of law | HV | KPG/Penn National | No; genuine issues of material fact did not preclude summary judgment in favor of KPG/Penn National. |
| Whether there were genuine issues of material fact on economic viability and good faith | HV | KPG acted in good faith and with commercially reasonable efforts | No; the record did not raise a triable issue on viability or good faith. |
Key Cases Cited
- Shutts v. Phillips Petroleum Co., 222 Kan. 527, 567 P.2d 1292 (1977) (Kan. 1977) (definition of reasonableness/interpretation applicable here)
- Gillenwater v. Mid-American Bank & Trust Co., 870 P.2d 700 (Kan. App. 1994) (good faith/advertent trust standard in contract terms)
- Estate of Draper v. Bank of America, N.A., 205 P.3d 698 (Kan. 2009) (good faith/ reasonableness questions often fact-intensive)
- T.S.I. Holdings, Inc. v. Jenkins, 924 P.2d 1239 (Kan. 1996) (commercially reasonable efforts standard in contract)
- Carrothers Constr. Co. v. City of South Hutchinson, 207 P.3d 231 (Kan. 2009) (contract interpretation: ascertainment of intent; unambiguous terms control)