Citations
- 865 F. Supp. 2d 1172
Full opinion text
ORDER
DONALD L. GRAHAM, District Judge.
THIS CAUSE comes before the Court upon Plaintiffs’ Verified Motion for Preliminary Injunctive Relief [D.E. 9],
THE MATTER was referred to the Honorable United States Magistrate Judge Jonathan Goodman [D.E. 14]. After an evidentiary-hearing, the Magistrate Judge issued a Report and Recommendations (the “Report”) [D.E. 51] recommending that Plaintiffs’ motion be denied. Plaintiffs filed objections to the Report, and Defendant filed a response to Plaintiffs’ objections. [See D.E. 54, 56.]
THE COURT has conducted an independent review of the record and is otherwise fully advised in the premises. Plaintiffs filed objections contending that the Report failed to consider the likelihood of success in arbitration, incorrectly applied agency principles, and generally disagreeing with the Report’s conclusions. The Court finds that Plaintiffs’ have not met their burden of persuasion on each of the four requirements for a preliminary injunction. Accordingly, it is hereby
ORDERED AND ADJUDGED that the Magistrate Judge’s Report and Recommendation [D.E. 51] is AFFIRMED, ADOPTED AND RATIFIED. It is further
ORDERED AND ADJUDGED that Plaintiffs’ Verified Motion for Preliminary Injunctive Relief [D.E. 9] is DENIED.
REPORT AND RECOMMENDATIONS ON PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION
JONATHAN GOODMAN, United States Magistrate Judge.
This Report and Recommendations concerns Plaintiffs’ Motion for Preliminary Injunctive Relief (DE# 9), which United States District Judge Donald L. Graham referred to me (DE# 14) after United States District Judge Marcia Cooke, acting in Judge Graham’s absence, denied (DE# 13) Plaintiffs request (DE# 10) for an emergency hearing. The Court has reviewed the motion, the Response, the Reply and supplemental memoranda. In addition, the Court held an all-day evidentiary hearing and reviewed post-hearing memoranda (in the form of proposed Reports and Recommendations). For the reasons described below, the Undersigned respectfully recommends that the District Court DENY Plaintiffs’ motion.
I. General Overview and Summary of the Factual Background
One of the Plaintiffs, FHR TB, LLC (“Fairmont”), manages hotels as the agent for the owners of the hotels. The other Plaintiff, Fairmont Hotels & Resorts (U.S.) Inc. (“FHRUSI”), owns Fairmont. Both Plaintiffs seek a preliminary injunction reinstating Fairmont as the manager of Defendant’s hotel in Aventura, Florida. Defendant, TB Isle Resort, LP (“Turnberry”) built and operated the hotel in the 1970s, later repurchasing it and contracting with Fairmont to manage it on a long-term basis, under a hotel management agreement (“HMA”).
Until August 28, 2011, Fairmont operated and managed the Fairmont Turnberry Isle Resort and Club in Aventura, Florida, pursuant to the HMA. Defendant Turnberry owns the hotel. Jeffrey Soffer and Jacquelyn Soffer are, for all practical purposes, the principals of the Defendant. The operating term of the HMA (entered into in 2006) is 25 years, with extensions for five additional consecutive 5-year terms if Fairmont is not in material default. Thus, Fairmont had, for all practical purposes, a 50-year HMA interest in operating and managing the luxury resort, consisting of a 392-room hotel, two golf courses, a spa and fitness center, a tennis facility, three swimming pools, several restaurants and other amenities.
Under the HMA’s termination provisions, the Owner cannot contractually terminate the HMA without providing at least 30 days advance written notice which specifies the material defaults and provides an opportunity to cure. The Owner may then terminate the HMA (under paragraphs 16.2 and 16.3) if Fairmont fails to cure the material defaults specified in the written notice.
On the early morning of Sunday, August 28, 2011, Defendant Turnberry effectively evicted (i.e., ousted) Fairmont from the resort. Without advance notice of material defaults or an opportunity to cure the purported defaults, Turnberry engaged in what can fairly be described as a bold, surprise takeover. It demanded that senior hotel management appear at the hotel on short notice on a Sunday morning, informed them once they arrived that Turn-berry was “debranding” the hotel and resort, and directed them to immediately leave the hotel property under the escort of an outside security team.
Shortly after Turnberry removed Fairmont’s senior on-site management, Fairmont received a letter from Turnberry, stating that Turnberry was unilaterally and immediately terminating the HMA. Turnberry further purported to notify Fairmont that it changed the branding of the hotel, from napkins to marquees, retained employees “loyal” to Turnberry, switched to a different room reservation system and website, and removed all references to the Fairmont name. Finally, the letter purported to bar Fairmont personnel from entering the Resort without prior permission.
Turnberry did not provided prior notice of a material default, did not advise Fairmont that Turnberry was considering termination of the HMA if material defaults were not cured and did not provide any specific grounds for termination other than a vague and conclusory reference, in the post-ouster letter, that Fairmont is “incapable of running the property to the standards we have expected, and in an efficient, profitable manner.” The purported termination letter also contended that the hotel and resort “sustained millions of dollars in operational losses due to Fairmont Hotel’s mismanagement and lack of marketing.”
The letter also advised Fairmont that Turnberry was relying on New York law (which, under the HMA, is the governing law) and that under New York law a hotel owner always has the unrestricted power to revoke the operator’s control. According to the letter, the HMA created only a revocable agency. In particular, the letter said, “we have terminated the HMA and have taken control of the hotel” and “we have exercised our absolute right and power to revoke the agency.”
Although the letter contends that the resort suffered from millions of dollars of operational losses, other evidence (which the Court learned about at the hearing and through post-hearing submissions required by the Court) suggests that Fairmont’s operations were not quite as unprofitable as Turnberry portrays. In fact, it turns out that Fairmont has earned significant incentive fees (which are a percentage of the gross operating profit) for the past several years. For example, Fairmont earned incentive fees (calculated as 7% of the Resort’s gross operating profit) of $571,774 in 2010 and $577,875 in incentive fees through July 31, 2011.
Having been ousted from the resort in an orchestrated plot to take over the hotel without compliance with the notice, cure and termination provisions of the HMA, Fairmont portrays Turnberry and the Soffers as hardball business partners who acted outrageously and in bad faith by intentionally scheming to engineer an unprecedented tactic in blatant violation of a comprehensive HMA which took months to negotiate. Fairmont contends that Turnberry perpetrated what was essentially a business coup d’état and argues that a preliminary injunction is required to restore the status quo and to protect hotel management companies from being victimized by similar tactics.
According to Turnberry’s own witnesses at the evidentiary hearing, Turnberry (i.e., the Soffers) had been planning this ouster for at least four months. At bottom, Turn-berry’s position appears to be one which recognizes its purposeful breach of the HMA’s notice/cure/termination provisions but which relies on what it contends is its overriding legal power to terminate the HMA, subject to a claim for damages. Boiled down to a basic business philosophy, the business strategy of Turnberry and the Soffers in this case can fairly be described as follows: “Yes, we’re violating the notice and cure provisions of HMA, but we have the power to do this whenever we want because the agency is revocable, so go ahead and sue us if you don’t like it.”
Given this scenario, Fairmont presents a compelling and sympathetic narrative about a wronged company which has been victimized by the resort owner and its principals.
But the Court’s current task is not to determine whether Fairmont would prevail at an arbitration hearing and obtain a significant damages award. Likewise, the Court’s present duties under the referral of the preliminary injunction motion do not include a declaratory judgment about whether Turnberry breached the HMA’s notice/cure/termination provisions. Instead, the Court’s limited, current agenda is to determine whether to recommend the entry of a preliminary injunction which would oust Turnberry from its own property and reinstate Fairmont as the resort manager pending resolution of the arbitration.
Despite the business practices pursued by Turnberry and the Soffers in connection with the planned ouster in violation of the HMA, the Court is compelled to recommend denial of Fairmont’s request for a preliminary injunction. The following reasons (which the Court will outline in greater detail later in this Report) generate the grounds for this recommendation:
First, it is far from clear that Fairmont is likely to prevail on the merits. The issue here is not whether Fairmont is likely to prevail on a breach of contract claim. Instead, the issue here is whether Fairmont is likely to prevail on its argument that its agency relationship with Turn-berry is irrevocable and capable of a specific performance order.
Fairmont concedes that the general rule under New York law is that a principal always has the power to revoke an agency, subject to a damages claim. If this general rule of law applies, then Fairmont would not have the right to demand reinstatement of the agency. Instead, it would have the right to pursue a claim for damages. Fairmont argues that two exceptions to the general rule render the agency irrevocable. But the facts do not clearly fit into the established exceptions. Fairmont conceivably might prevail on its agency argument under New York law, but this is insufficient to meet the requisite “likely to prevail” standard. The Court is not prepared on this limited record (with its accelerated briefing) to conclude that Fairmont is, in fact, likely to prevail on the revocable-irrevocable issue.
Second, Fairmont might be deemed to be seeking a mandatory injunction, which creates an even greater hurdle for the party seeking the extraordinary remedy of injunctive relief. Basically, Fairmont wants this Court to require Turnberry, the owner of the hotel/spa/resort, to be saddled with an entity it no longer wants as a business partner reinstated as manager and operator of the resort. The notion of requiring a property owner to be forcibly partnered with an operator it does not want to manage its property is inherently problematic and provides support for the general rule that a principal usually has the unrestricted power to revoke an agency. Fairmont classifies its requested injunction as a prohibitory one, while Turnberry describes it as a mandatory injunction. The answer is far from clear and the Court believes that a logical conclusion (on whether the requested injunction is mandatory or prohibitory) could be reached either way.
Third, and perhaps most importantly, Fairmont has not adequately demonstrated the requisite irreparable injury necessary for obtaining a preliminary injunction. Fairmont’s fees (both the basic fee and the incentive fee) are objective amounts and Fairmont should be able to calculate lost profits in its breach of contract claim. Its arguments about being irrevocably damaged are not persuasive. The Turnberry resort is only one of 67 luxury resorts which Fairmont operates internationally. The loss of one hotel does not appear to be the type of damage which would be irreparable. Likewise, the claim that Fairmont would suffer incalculable loss of goodwill and damage to its reputation is speculative and vague. And Fairmont’s argument that the entire luxury hotel industry would be turned on its head — with hotel owners “ripping up their HMAs” whenever they felt it was in their personal best interest— also seems to be a speculative and hyperbolic stretch. Therefore, Fairmont has not cleared the hurdle of demonstrating irreparable injury even if the agency were deemed irrevocable.
Fourth (and this relates to the “likely to prevail” issue), Fairmont’s request for a preliminary injunction runs afoul of the legal principle (applicable in Florida, as well as in New York) that personal service contracts (which include agreements to provide business management services) are not enforceable by specific performance or injunction.
By way of an introductory summary, Fairmont may well be in a sympathetic position and Turnberry may well be wearing the hat of a business brawler who cares little for contractual obligations — but this scenario, while perhaps ammunition for Fairmont’s damages claim, is inadequate to support a preliminary injunction reinstating a resort manager to run a property owned by a party who no longer wishes the manager to operate its property-
II. Detailed Factual Background
A. Events Leading Up to Turnberry’s Purchase of the Resort
Fairmont is a Delaware limited liability company, having an office and place of business at 155 Wellington Street West, Suite 3300, Toronto, Ontario M5V 0C3, Canada. The sole member of Fairmont is Fairmont Hotels & Resorts (U.S.) Inc., a Delaware corporation with its principal place of business in California.
FHRUSI, a privately held company, is a leading hotel management company, specializing in luxury hotel and resort properties for over 100 years with 67 properties worldwide. Since December 2005, FHRUSI’s wholly-owned subsidiary, FHR TB LLC, has been the exclusive operator and manager of the Resort pursuant to an HMA with Turnberry, the owner of the Resort. FHRUSI is the guarantor of all FHR TB LLC’s obligations under the HMA, executing an instrument incorporated into the HMA as such, and was bound by the HMA’s noncompetition clause, Section 20.20. (HMA at p. 67). At the hearing, Turnberry emphasized that Fairmont and FHRUSI are separate entities and should be treated as such.
Turnberry is a Delaware Limited Partnership, with a principal place of business of c/o Turnberry Associates, 19501 Biscayne Boulevard, Suite 400, Aventura, Florida 33180. The general partner of Turnberry is TB Isle Resort GP, LLC, a Delaware LLC. When the HMA closed, the membership interests of the TB Isle Resort GP, LLC were assigned to TB Isle, LLC, a Florida LLC. The members of TB Isle, LLC, are Jeffrey Soffer and Jacquelyn Soffer.
The Resort consists of a 392-room hotel, two golf courses, a spa and fitness center, tennis facility, three swimming pools, several restaurants and additional amenities located in Aventura, Florida.
In 2005, Turnberry’s principals, the Soffer family, wanted to purchase the Resort from its then owner (which is not involved in this litigation), but that prior owner, due to an acrimonious history with the Soffers, refused to negotiate with them. The Soffer family then approached Fairmont to facilitate the Soffers’ re-purchase. At the Soffers’ urging, Fairmont exercised its option and purchased the property, and then transferred the property to Turnberry in exchange for a long-term HMA and other valuable rights in the Resort. The transaction was negotiated over a period of six months, and through a complex series of transactions set forth in a December 2005 Purchase Agreement, FHRUSI entered into a purchase agreement with TCC, and then transferred its rights under the purchase agreement to entities that would ultimately be controlled by the Soffer family, which then acquired the Resort through Turnberry.
On December 23, 2005, the sale transaction closed, effectuating Turnberry’s acquisition of the Resort. As an express and essential condition of the closing, Turnberry executed the HMA and gave Fairmont other rights in the Resort pursuant to a separate Strategic Alliance Agreement (“SAA”). Both the SAA and the HMA are exhibits to the Purchase Agreement between FHRUSI and Turnberry, by which FHRUSI transferred to Turnberry its rights to purchase the Resort. (See PI. Ex. 2, p. 2.) Fairmont emphasizes that the HMA and the SAA were entered into on the same day and contends that both agreements are part of the same transaction between the parties. Fairmont argues further that both were essential conditions of closing the Purchase Agreement.
Fairmont contends that it would not have acquired and transferred the Resort to Turnberry without receiving as consideration the long-term HMA and related agreements. As a result, it argues, Turn-berry could not have acquired the Resort without executing the HMA and making the promises and agreements contained in that agreement. The bargain, according to Fairmont, was simple: Turnberry reacquired the Resort; in consideration, Fairmont received an exclusive right to operate and manage the Resort for up to 50 years, and other interests in the Resort itself — all in an effort to secure its continued presence in the strategically important South Florida luxury hotel market.
Fairmont contends that the parties understood that, although FHR TB LLC was the operator under the HMA, FHRUSI was in some practical respects the hotel manager because all notices under the HMA are to go to FHRUSI (Section 20.19, HMA) and because, as the HMA contemplates, the parent supplied the reservations systems, employee hiring software, proprietary information, and many other tools Fairmont used to perform the HMA. See e.g., HMA § 8.2.
Fairmont’s View: The HMA Contains
Interests in the Resort Independent of the Right to Manage
Fairmont argues that it has interests in the Resort that are independent of its right to operate the Resort, and independent of its role as agent of Turnberry in the operation of the Resort.
First, Fairmont notes that it has a right of quiet enjoyment. HMA § 12.1. The right of quiet enjoyment, according to Fairmont, is not a mere license to use the Resort; rather, it ensures Fairmont the right to “peaceful and quiet possession and enjoyment” of the Resort for the entire term of the HMA.
Second, Fairmont further stresses the fact that it negotiated for and obtained a right of first refusal to purchase the Resort. Id. at § 17.4(b). Fairmont says it considered this an important right because it secured Fairmont’s rights to manage and remain in possession of the Resort in the future.
And, third, Fairmont points out that it negotiated for and obtained a similar, but independent right — the right of first offer for the Resort — being the right to acquire the Resort at an agreed price in the event Turnberry decides to sell the property. Id. at § 17.4(a). Rights of first offer and first refusal are not standard provisions in hotel management agreements.
In addition to the above interests identified in the HMA, Fairmont notes that it also bargained for and received equity rights in and approval rights over any future projects at the Resort pursuant to the SAA. First, any development that was to take place on the lands or to be associated with the Resort would be subject to Fairmont’s approval. Second, to the extent that there was development on these lands, and the development was deemed by Fairmont to be consistent with Fairmont’s operations and policies, Fairmont was offered the right to manage and brand such development as a part of the overall Resort. Third, Fairmont had the right to invest in any development project. The SAA was intended to ensure that Fairmont would brand and manage the entire Resort as it developed and grew. SAA, Sec. 2.2(a), 2.6.
The HMA’s Termination Provisions
Under the HMA, Fairmont was engaged “as the sole and exclusive operator of [the Resort] during the Operating Term” with “sole and exclusive control, discretion and authority with respect to” the operation of the Resort. HMA § 3.1. The “Operating Term” is 25 years with five 5-year extensions as long as Fairmont is not in “Material Default,” as defined in Section 16.2. See Id. at §§ 2.1, 2.2. Therefore, Fairmont was engaged to operate and manage the Resort for 50 years in total unless it was in Material Default.
The HMA, which is governed by New York law, specifies that the agreement may be terminated only in the event of a “Material Default” that is not cured, generally, within 30 days of notice of an alleged Material Default, as defined in Section 16.2. The parties negotiated several specific provisions barring termination of the HMA except in strict compliance with its terms:
• Owner knowingly and as a material element of the bargain waives any right or power otherwise available to terminate [the HMA] other than in strict accordance with its terms (Section 16.9(e)(3));
• The HMA shall be enforceable between the parties until the expiration of the operating term (including any extension terms that are exercised) subject only to the rights of early termination that are specifically provided in [the HMA] (Section 16.9(f)(4)).
And the parties agreed to other provisions concerning Turnberry’s attempt to terminate the HMA:
• Any Court having jurisdiction over the parties to, or the subject matter of, [the HMA] may order the remedy of specific performance for the anticipatory or actual breach or the attempted or actual termination of [the HMA], notwithstanding any existence of an agency relationship between the Owner and Operator (Section 16.9(f)(2));
• The Owner specifically grants the Operator the right to seek and secure injunctive relief without bond and specific performance of [the HMA], if the Owner should attempt a [sic] such a termination in breach (Section 16.9(e)(4));
• The Owner acknowledges that Operator would suffer damages to its brand and reputation in the event of a termination of [the HMA] by Owner in breach of [the HMA] and that damages on account of such harm would not be an adequate remedy (Section 16.9(e)(1)).
The parties also negotiated terms that concern the very argument Turnberry now makes, that the common law of agency permits it to unilaterally terminate the HMA despite conflicting contract terms:
• The character of Operator’s interest in the Hotel (in terms of Operator’s financial investments and interest in prospective financial achievement of the Hotel) is and shall be deemed to be coupled with an interest (Section 16.9(e)(2));
• If a conflict exists between the express terms and conditions of the HMA and the terms and conditions implied by the applicable law governing the relationship between a principal and agent, the express terms and conditions of [the HMA] shall govern and control (Section 16.9(f)(1));
Turnberry’s representative separately initialed these provisions in Section 16.9, and all of the quoted provisions appear in all capital letters. See HMA, p. 51-52. The Turnberry representative initialing these provisions was Mario Romine, a lawyer.
The HMA also requires that any dispute, termination notice or other event entitling a party to terminate the HMA shall be submitted to arbitration. HMA §§ 16.4 and 19. In addition, Section 16.4 mandates that no attempted termination of the HMA will be effective until an arbitrator concludes that the termination is effective under the HMA, and either party may seek an injunction pending arbitration. Id. at §§ 16.4,19.2(e)(i)(A).
B. The Sunday, August 28, 2011 Expulsion
Early in the morning of Sunday, August 28, 2011, with no advance warning, notice, or opportunity to cure, Turnberry informed the Fairmont-trained senior hotel management personnel that they were terminated and must immediately leave the Resort. ,
Alex Pratt, Fairmont’s regional director of human resources, testified that on that morning he saw an unfamiliar security guard with a gun in his holster. After going to his office he closed the door and began speaking on the phone with the hotel’s general manager, David Feder, who had also been summoned to the hotel for an emergency meeting on short notice. At that point, Turnberry representatives, including Doug Hustad, knocked on his door. Hustad told Pratt that he was included in the senior executive-level changes and that he would be receiving two weeks of severance. Pratt then phoned Carolyn Clark, Fairmont’s senior vice president of human resources.
After he told Ms. Clark that the owner announced it was debranding the hotel and was firing him, Hustad said, “we can do this the easy way or the hard way.” Hus-tad then reached across the desk, put his hand on the phone Pratt was using and severed the phone connection. Pratt testified that he was angry, upset and “a little scared” because, in part, he had earlier seen a security guard with a gun. Turn-berry denies that any guard it used that day had a gun and suggests that Pratt either mistook a radio or handcuffs on the guard’s hip as a weapon. Pratt, on the other hand, testified that “[I] saw a pistol and I said, ‘whoa.’ ” (Hr’g Tr., p. 203).
Later that morning, Fairmont was notified by letter from Turnberry that Turnberry was terminating the HMA. According to Fairmont, the letter failed to provide any proper basis under the HMA for Turnberry’s attempted termination and ignored the fact that none of Turnberry’s limited rights to terminate the HMA were triggered. HMA §§ 16.2, et seq. As outlined earlier in this Report, the letter also ignored Fairmont’s 30-day period to cure .any alleged material defaults provided for under the HMA. At the evidentiary hearing, Turnberry conceded that it never provided any formal, written notice of “mismanagement” or “lack of marketing” to Fairmont before .the surprise ouster on the morning of Sunday, August 28, 2011. .(Hr’g Tr., p. 33).
Turnberry’s notification letter further indicated that Turnberry had disabled the existing hotel reservation system and website and removed all references to Fairmont, including the changing of all branding. Turnberry also informed Fairmont that it was prohibited from entering the Resort without Turnberry’s prior express written permission. Later that day, a Miami Herald article noted that Fairmont was no longer managing the Resort. The article quoted Turnberry executive C. Scott Rohm, who stated that Fairmont would no longer be managing the Resort and that Turnberry would manage the Resort itself. The article repeated a quote from a Turnberry press release, as Rohm did not actually speak with any newspaper reporter.
The following morning at 4:34 a.m., Fairmont personnel who had arrived at the Resort post-ouster to investigate, including the chief operating officer of Fairmont’s parent (who is also president of Fairmont Hotels and Resorts), were notified by letter that they were not welcome on the Resort grounds and would be removed by 8 am. In this second letter, which was delivered to Fairmont’s president by both email and hand delivery to his Turnberry hotel room, Turnberry advised that he and the other Fairmont representatives would be deemed “trespassers” as of 8:00 a.m. and that they would be “escorted away” if they remained on the property past the morning deadline. The Fairmont executives left the hotel shortly after 8:00 a.m.
Following the ouster of Fairmont, Turn-berry returned 11 boxes of documents to Fairmont and represented that it did not make copies of any documents in the 11 boxes and did not review any document for substance. Turnberry also advised the Court that it had not reviewed any of the information on the hard drive of Mr. Pratt’s computer (which was left in his office). In addition, Turnberry advised that it packed up the hard drive and was prepared to immediately deliver it the day of the hearing because it was in the trunk of a car, ready to be turned over. Turn-berry explained that it did not review Fairmont’s proprietary information, and does not want to review this material, because Turnberry already has its own procedures it uses to manage several of its own hotels and that its other non-self managed hotel properties are managed by other companies, such as Marriott and Hyatt. (Hr’g Tr., p. 37).
C. The Present Litigation
The day after being ousted, Fairmont filed this lawsuit. It filed its emergency verified motion for preliminary injunctive relief the day after that, along with its First Amended Complaint and a request for an emergency hearing. The district court denied the request for an emergency hearing, finding “there to be no emergency in the matter.” (DE# 13). The district then court referred the motion for a preliminary injunction to the Undersigned, who scheduled an evidentiary hearing. The parties then submitted legal memoranda, followed by the evidentiary hearing.
Plaintiffs allege that Fairmont’s contract to act as Turnberry’s agent is irrevocable because the agency is coupled with an interest. (Am. Compl., ¶ 52(a), DE# 11, p. 10) (“... Fairmont has an agency coupled with an interest which prohibits Turnberry from revoking the agency at will ... ”). Thus, Plaintiffs seek a preliminary injunction reinstating Fairmont as manager of Turnberry’s hotel.
Fairmont contends that it has an interest in the Resort because, under the HMA, it has a right of first offer and a right of first refusal to purchase the Resort under the same terms and provisions as set forth in the offering notice to any other potential purchaser. HMA § 17.4. ■ Therefore, Fairmont contends that, as a result of the transaction wherein Turnberry purchased the Resort and contracted with Fairmont, Fairmont has an agency coupled with an interest in the Resort and the HMA.
Turnberry admits that the relationship with Fairmont is one of agency, but denies that it is coupled with an interest. (Defs Answer, ¶ 52, DE# 17, p. 9). Turnberry contends that it had the right (i.e., the power) to revoke the agency at will, subject to Fairmont’s claims against Turnberry for damages for breach of the HMA. (Id.)
Turnberry filed a declaratory judgment action against Fairmont in New York state court on August 29, 2011 but advised at the evidentiary hearing that it has withdrawn that lawsuit.
Plaintiffs’ Motion for Preliminary Injunctive Relief
Plaintiffs argue that Fairmont’s agency was coupled with an interest for four reasons.
First, Plaintiffs argue that because “[t]he HMA unequivocally provides that the agency is coupled with an interest,” that the relationship should be so- classified. (Pltfs’ Mot., ¶ 36, DE# 9, p. 10). Turnberry responds that to-be irrevocable, an agency must actually be coupled with an interest, not merely be described as irrevocable in the agency contract. (Defs Resp., DE# 20, p. 13).
Second, Plaintiffs argue that “[i]n addition Fairmont has an interest in the Resort because” in the event Turnberry decides to put it up for sale, Fairmont has a right of first offer and first refusal, rendering the agency irrevocable. (Pltfs’ Mot., ¶ 37, DE# 9, p. 10). Turnberry responds that such rights are contingent on Turn-berry deciding to sell the hotel — and are therefore not the vested property rights needed to render the agency irrevocable. (Défs Resp., DE# 20, p. 15).
Third, Plaintiffs argue that Fairmont’s agency is coupled with an interest because execution of the HMA was a condition of a separate contract through which an affiliate of Fairmont — -which is not a party to this case — sold the hotel to Turnberry. (Pltfs’ Mot., ¶ 37, DE# 9, p. 10) (“... but for the agency and the authority Fairmont contracted for under the HMA, Turnberry would not have been able to buy the Resort from the seller”). Turnberry responds that neither Fairmont nor the non-party seller or the other Plaintiff, FHRUSI, have any property interest in the hotel; therefore, as a matter of law, the agency is not coupled with an interest and Turnberry had the right to revoke the agency at will subject only to Fairmont’s claim for breach of contract claims. (Defs Resp., DE# 20, pp. 15-16).
Fourth, Plaintiffs argue that “Fairmont also has interests directly in the Resort— both a license to use the facilities and quiet enjoyment of the facilities of the Resort for the entire term of the HMA.” (Pltfs’ Mot., p. 10, ¶ 37, DE# 9, p. 10). Turnberry responds that these contract rights do not constitute interests in the property necessary to render the agency irrevocable, and that licenses are in any event also revocable at will. (Defs Resp., DE#20, pp. 10-11).
In their reply memorandum in support of their motion, Plaintiffs raise an additional ground for their position that Fairmont’s agency is irrevocable. Plaintiffs argue that in addition to being coupled with an interest, Fairmont’s agency is supported by consideration: “First, there was consideration for this HMA ... Fairmont Gave Valuable Consideration for the HMA Making It Irrevocable.” Plaintiffs argue that such consideration alone is sufficient to render the agency irrevocable. (Pltfs’ Reply, pp. 1-2, DE# 24, p. 8-9). Turnberry responds that while an agency coupled with an interest must be given for consideration to be irrevocable, consideration alone is insufficient. In other words, Turnberry contends that Fairmont still must have an agency coupled with an interest in order to render the agency irrevocable.
The “Operating Term” of the HMA is 25 years. HMA § 2.1. In addition, the Operating Term is extended for “five (5) additional consecutive 5-year Extension Terms” upon the condition that Fairmont is not in “Material Default.” Id. at 2.2. Therefore, Fairmont was engaged to operate and manage the Resort for 50 years unless Fairmont was in Material Default.
As described above, Section 16.12 provides certain conditions under which the HMA may be terminated. According to Fairmont, none of the HMA’s termination provisions have been triggered. In fact, Turnberry does not allege any material breaches by Fairmont and has, for all practical purposes, not tried to claim that it complied with the termination provisions. Rather, Turnberry argues that it has the “power” to oust Fairmont even thought it might be exposed to liability and a damages award for breaching the HMA contract.
PRIOR ARBITRATION
As outlined in Fairmont’s Complaint, for more than three years after the signing of the HMA, Turnberry failed to make mandatory payments under the provisions of the HMA, the failure of which constituted a Material Default under Section 16.2 of the Agreement. Fairmont contends that Turnberry’s failure to provide the necessary working capital funds, so that suppliers could be paid, significantly damaged the Resort and Fairmont’s ability to manage it.
On February 15, 2008, having not received mandatory payments since early 2006, Fairmont requested in writing immediate payment of outstanding invoices issued to date. At Turnberry’s subsequent request, Fairmont provided and continued to provide information, clarification, backup and support to each of Fairmont’s fees and charges as invoiced under the HMA, and even met with Turnberry on several occasions to provide the requested information.
After an unsuccessful mediation proceeding, Fairmont demanded arbitration against Turnberry on or about March 12, 2009, pursuant to Article XIX of the HMA. In the arbitration, Fairmont sought to recover unpaid Incentive Fees, Centralized Service Fees (sales and marketing and technology and accounting) and Reimbursables due under the HMA in the total approximate amount of $6,069,173, calculated as of August 31, 2009, plus interest.
Turnberry answered and asserted counterclaims in excess of $30 million and sought declaratory relief, as amended, claiming Fairmont mismanaged and inadequately marketed the Resort.
The arbitration was scheduled to take place over a three-week period, starting on Monday, September 14, 2009.
The parties engaged in discovery, with the arbitrator resolving disputes that arose, designated and exchanged voluminous exhibits for the hearing and expert reports and provided such exhibits and reports to the arbitrator. At approximately 4:00 pm on Friday, September 11, 2009, the last business day before the start of the scheduled three-week arbitral hearings, Turnberry advised by email and letter from its counsel that it did not intend to contest Fairmont’s claim in the amount of $6,069,173 in the arbitration, that it sought to withdraw its counterclaims on a without prejudice basis and that it did not intend to appear and present witnesses at the final hearings scheduled to start on September 14, 2009.
Turnberry subsequently confirmed by email from its counsel that it would not appear at the scheduled final hearings and present witnesses. Based upon Turnberry’s representations, including its representation that it would not contest Fairmont’s claims and its acknowledgement that an award would be entered on these claims, Fairmont also agreed to cancel the scheduled hearings.
On October 16, 2009, the arbitrator made and entered a binding final award in writing (the “Award”). The Award required Turnberry to: (1) pay unpaid Centralized Services Fees and Reimbursable expenses totaling $5,352,837.00, due as of August 31, 2009; (2) pay the interest on the Centralized Services Fees and Reimbursable expenses, which as of October 8, 2009, was $505,499.00; (3) pay as of October 8, 2009, the total amount of money that Turnberry owes Fairmont which is $5,858,336.00 ($5,352,837.00 plus interest of $505,499.00); (4) pay interest on the outstanding balance of $5,858,336.00 from October 8, 2009, which is accruing at $765.00 per day; and (5) pay Incentive Fees in the amount of $716,336.00 which are owed and shall be paid in the future by Turnberry to Fairmont, with interest, in accordance with the parties’ agreements, including the HMA.
On December 22, 2009, another district court judge in this district entered the Order Granting Petitioner’s Motion to Confirm Arbitration Award and the Final Judgment. Turnberry eventually paid, other than certain deferred fees, the monies due pursuant to the Award.
At the evidentiary hearing, Fairmont advised that it had already filed its arbitration demand but took the position that the arbitration could only move forward if Fairmont were still operating the hotel. Fairmont also argues that an injunction reinstating its management team to operate the resort is necessary to preserve the arbitrator’s ability to provide any meaningful relief.
In this lawsuit, Fairmont alleges that Turnberry acted in bad faith and breached the HMA in many ways:
a. Ignoring that the HMA provides that Fairmont has an agency coupled with an interest, which prohibits Turnberry from revoking the agency at will, Section 16.9(e) of the HMA;
b. Ignoring that any termination cannot be done on a non-business day, Section 20.7 of the HMA;
c. Failing to recognize that Fairmont is the sole and exclusive operator of the Resort and constantly and consistently interfering with Fairmont’s operations and management, Section 3.1 of the HMA;
d. Failing to grant Fairmont the final decision on termination regarding executive positions at the Resort, Section 5.3 of the HMA;
e. Failing to respect Fairmont’s right to possession of the real estate (Resort) and quiet enjoyment, Section 12.1 of the HMA,
f. Failing to abide by prohibitions on Turnberry interference with the Resort staff, Section 12.5 of the HMA;
g. Changing the Resort’s name, Section 15.1 and 15.4 of the HMA;
h. Attempting to remove Fairmont without notice, thereby undermining Fairmont’s ability to notify guests, vendors, tour operators, meeting planners, corporate clients, travel agencies and media in a manner to avoid or abate serious damage to the reputation, brand, and business opportunities of Fairmont, Section 15.10 of the HMA;
i. Failing to meet the minimum 30 days notice in the event of a Material Default and an opportunity to cure, Section 16.2 of the HMA; and
j. Failing to abide by the prohibition concerning only Material Defaults and the Performance Test providing a basis for termination, Section 16.12 of the HMA.
D. The Evidentiary Hearing
The Court held an all-day evidentiary hearing on the preliminary injunction motion on September 9, 2011. Six witnesses testified, including two expert witnesses.
Fairmont’s executive vice-president of business strategy, Thomas Storey, testified about Fairmont’s business: it is a global luxury hotel company with 67 properties in more than 20 countries, approximately 30,-000 employees and approximately 25,000 rooms. Story explained that Fairmont’s business model is to enter into management contracts under which it manages luxury properties owned by third party owners. Only eighteen of the luxury hotels managed by Fairmont are in the United States, however.
In 2005, the Soffers approached Fairmont, which was already managing the resort and held an option to buy it, and expressed an interest in buying the property. Fairmont contacted the owner’s ad-visors and learned that the owner refused to entertain a direct transaction with the Softer entities because of prior, acrimonious dealings. Advised of this business roadblock, the Softer entities proposed a structure where Fairmont would exercise its option, sell the property to a Softer entity and then enter into a long-term HMA with a Softer entity to manage the property. Storey explained that it took between three to six months to negotiate the purchase agreement and related transactions.
Storey testified that Fairmont would not have entered the purchase agreement with the Turnberry entities if Fairmont had not been awarded a long-term HMA, as well as the rights of quiet enjoyment and first-refusal discussed above
The Fairmont entity which had the option to purchase the property is not the same entity which entered into the HMA with Turnberry, however. Likewise, the Fairmont entity which sold the resort to Turnberry is not the same entity which entered into the HMA with Turnberry.
In addition to entering into an HMA, Fairmont also entered into a Strategic Alliance Agreement. The Strategic Alliance Agreement contained three significant rights, according to Storey’s testimony: (1) the right to approve any redevelopment which was going to take place on property or associated with the resort, (2) the right to collect fees flowing from any redevelopment it approved, and (3) the right to invest almost 20% in the redevelopment. In the end, none of the opportunities contemplated by the Strategic Alliance Agreement ever came to pass.
Storey testified that Fairmont has been in business for approximately the past 100 years and the August 28, 2011 ouster at the Turnberry Hotel is the first time a resort owner has ousted Fairmont as the manager.
Fairmont’s chief operating officer, Chris Cahill, also testified. Before August 28, 2011, Cahill explained, Fairmont had a workable and cooperative relationship with Turnberry. Cahill explained that Fairmont had managed the property without any confrontations and without any notice of concerns.
Cahill testified that Fairmont had booked more than 30,000 group rooms into the Turnberry resort property over the next 18 months. Cahill specifically mentioned MassMutual insurance company, which, according to Cahill, booked rooms because the property is (or was) a Fairmont property, not because it is Turnberry. Cahill said that MassMutual is upset because Fairmont left the property without first providing notice to MassMutual. He also testified that MassMutual is seeking compensation or help from Fairmont.
In addition to explaining about the MassMutual reaction, Cahill testified that Turnberry “hijacked” Fairmont’s business and that he is losing the ability to control damage to the Fairmont brand.
Cahill explained that Fairmont has a team of 35 people ready to return to the resort and restore the property.
On cross-examination, Cahill testified that the HMA and the Fairmont brand are carried on the asset side of Fairmont’s balance sheets. In addition, he also testified that values are assigned to the HMAs and to goodwill on the balance sheets.
Cahill also testified that Fairmont has, in large part, now notified guests and groups with reservations at the Turnberry Isle Hotel that Fairmont is no longer managing the property and is in a dispute with the owner.
Nevertheless, Cahill testified that he does not know how many group meeting planners, travel arrangers and intermediaries will not book at a Fairmont because of the uncertainty caused by the ouster. By way of summary, he testified that Fairmont has “a cloud over out head until we can get this thing straightened out.”
Fairmont also relied upon the expert witness testimony of Scott Berman, a partner and industry leader of the hospitality advisory practice at PriceWaterhouseCoopers in Miami. Before joining, PWC, Berman was responsible for developing the Hilton brand in Latin America, the Caribbean, Mexico and Canada. While with Hilton, Berman negotiated HMAs. As a consultant for PriceWaterhouseCoopers, Berman provides advice to hotel industry clients, including advice concerning HMAs.
Berman explained that HMAs are the backbone of the luxury hotel business, providing reliability and certainty to the business relationship between hotel owners and the hotel operators they contract with for managing the properties.
Given the importance of HMAs to the industry, Berman explained, Turnberry’s surprise ouster of Fairmont, which he described as “unprecedented,” would “send an incredible ripple effect across the entire hotel industry” if Fairmont were not reinstated through a mandatory preliminary injunction. (Hr’g Tr., pg. 158, DE#37). Phrased differently, Berman said that the ouster, if not corrected quickly through reinstatement of Fairmont as the operator, would create a scenario were “we could have all sorts of owners trying to — particularly in a difficult economy — try to remove their operators.” (Id.)
On cross-examination, Berman agreed that the parties are sophisticated and engaged in drawn-out negotiations before entering into the HMA. He also admitted he could not think of a luxury hotel operator which went out of business because it lost a single hotel.
Turnberry had its own expert witness, Tom Lattin, a Houston-based hospitality consultant who is also a visiting professor at the Conrad N. Hilton College at the University of Houston. Lattin has been in the hospitality industry for more than 40 years.
Lattin explained that hotel management companies like Fairmont typically do not own or lease the actual hotel properties because they prefer to take their revenues off the top line, without the risk and exposure of owning the hotel or resort. By not taking an ownership interest in the hotels they manage, hotel operators avoid the liability risk and the risk of future cash calls for additional money to keep a distressed property afloat.
On the flip side, as explained by Lattin, hotel management companies would obtain the benefit of having their HMAs irrevocable if they acquired an ownership interest in the hotels.
Lattin opined that Fairmont would not suffer irreparable damage if it was not quickly reinstated as manager of the Turn-berry Isle Hotel. Other than loss in profit associated with the fees earned under the HMA, Fairmont would not sustain any other harm, according to Lattin.
In reaching this opinion of no irreparable damage, Lattin emphasized the fact that the Turnberry Isle Hotel represents only 1.5% of the hotels and resorts which Fairmont manages globally. Moreover, Lattin opined that the damages would be quantifiable based on a measurable amount of lost fees. He also noted that hotel brands regularly lose hotels and still survive. For example, Lattin explained, Fairmont managed five hotels in the United States in 1988 and increased its portfolio to 18 hotels as of 2010. During that interval, Fairmont lost four flag hotels, all in 2005 and 2006. In 2006, after the loss of the four hotels, Fairmont went from 16 to 13 hotels but then increased to 18 hotels, a 38% increase.
Lattin also opined that a Fairmont guest would stay at other Fairmont hotels in the United States even though Fairmont lost its management at the Turnberry Isle Hotel. He said he finds no support for the contrary suggestion, which he said makes no sense.
Moreover, Lattin noted that Fairmont did not manage a luxury hotel or resort in Florida for 92 years (until 1993) yet it still managed to do well and increase its presence in the United States.
On cross-examination, Lattin said he had not reviewed the HMA involved in this case and has not analyzed the potential effect of a weekend or midnight takeover of a hotel by an owner and the effect on the industry.
He also acknowledged that he is not familiar with many other ouster-type scenarios.
Lattin opined that the Turnberry Isle Hotel ouster is unique. He explained that luxury hotel owners are usually not in the hotel business and therefore do not have the experience necessary to run a hotel. Turnberry, however, is a hotel operator and formerly operated the Resort itself as the Turnberry Isle Hotel. He also disagreed with Berman’s opinion that the Turnberry Isle Hotel ouster would cause other luxury hotel owners to rip up their HMAs because they would likely be exposed to millions of dollars in damages and because they would need to find another operator to manage the hotel, or that other operators would be reluctant to enter into an HMA with a hotel owner which just ousted the prior manager under a similar HMA.
Turnberry also elicited testimony from Scott Rohm, president of Turnberry Hotel Group. Rohm testified that that the owners lost more than $80 million in connection with the Turnberry Isle Hotel since 2006, under the Fairmont operation, and described the losses as “pretty devastating.” (Hr’g Tr., p. 210). As it turns out, however, the majority of those losses flow from the owner’s debt service, which exists regardless of the hotel’s profitability. Moreover, Fairmont earned incentive fees for most of the years it has been operating the hotel under an HMA with Turnberry. The incentive fees are based on 7% of gross operating profit.
Rohm testified about myriad performance issues and claimed that there was “conflict” between Turnberry and Fairmont before he joined the company in February 2011. Rohm testified that the owner was concerned about lack of profitability, service delivery, basic general repair and maintenance, corporate billings and the comparatively poor performance under REVPAR (an index used in the industry to compare relative hotel financial results). He also explained that the owner found ways to improve the bottom line in the two weeks since the ouster.
Concerning the press release about the ouster, Rohm testified that the owner decided to not say anything derogative about Fairmont and has followed that policy.
Although Rohm testified that he and his staff arranged to collect and deliver Fairmont’s proprietary materials, he explained that the customer lists and guest list belong to the owner.
Of the 125 conventions which were booked from the ouster until 2013, Rohm testified that only one group canceled after learning that the Turnberry Isle Hotel was no longer a Fairmont-managed property.
On cross-examination, Rohm testified that Turnberry first started to plan the August 28, 2011 weekend ouster of Fairmont in mid-April 2011. In response to a question from the Court, Rohm testified that Fairmont might have been able to cure the alleged grievances had Turnberry followed the contract terms and provided notice of material defaults and an opportunity to remedy the issues. (Hr’g Tr., p. 274).
III. Legal Analysis
A. General Principles
The parties agree that the HMA and all matters arising under or relating to the HMA shall be governed and construed in accordance with the internal laws of the State of New York. (HMA, p. 59, § 20.3, Pltfs’ Ex. 1; DE# 9-1, p. 15). While New York law applies to the terms of the HMA, federal procedural law governs the Court’s interpretation and application of the injunction standards. Ferrero v. Assoc. Materials Inc., 923 F.2d 1441, 1448 (11th Cir.1991).
Injunctive relief is an extraordinary remedy. Café 207, Inc. v. St. Johns Cnty., 989 F.2d 1136, 1137 (11th Cir.1993). To succeed on its Motion, Fairmont must demonstrate by a preponderance of the evidence that it is likely to succeed on the merits of its claims; it will suffer irreparable harm in the absence of injunctive relief; the threatened injury outweighs any potential harm to Turnberry as a result of the injunction; and, the injunction will not be adverse to the public interest. See Schiavo v. Schiavo, 403 F.3d 1223, 1225-26 (11th Cir.2005). If Fairmont fails to carry its burden as to any one of the elements, the Court must deny the Motion. Café 207, Inc., 989 F.2d at 1137. The decision to grant an injunction rests within the sound discretion of the district court and will not be disturbed absent abuse of discretion. Haitian Refugee Ctr., Inc. v. Christopher, 43 F.3d 1431, 1432 (11th Cir.1995).
In the Eleventh Circuit, a preliminary injunction is an “extraordinary and drastic remedy, not to be granted unless the movant clearly established the ‘burden of persuasion’ ” as to each of the four prerequisites. Siegel v. LePore, 234 F.3d 1163, 1176 (11th Cir.2000).
Moreover, “the burden of persuasion in all of the four requirements is at all times upon the plaintiff.” Northeastern Florida Chapter v. City of Jacksonville, 896 F.2d 1283, 1285 (11th Cir.1990) (reversing preliminary injunction because the plaintiff failed to carry its burden on one of the four prerequisites).
B. Is the Requested Injunction Mandatory or Prohibitive?
When the moving party is seeking a mandatory injunction, it faces “a particularly heavy burden of persuasion....” OM Group, Inc. v. Mooney, No. 2:05CV546FTM33SPC, 2006 WL 68791, *8 (M.D.Fla. Jan. 11, 2006) (citing Miami Beach Fed. Sav. & Loan Ass’n v. Callander, 256 F.2d 410, 415 (5th Cir.1958) (emphasis added)).
Under New York law, a mandatory injunction providing the ultimate relief sought in the case will ordinarily be denied. Tenzer v. Tucker, 154 Misc.2d 468, 584 N.Y.S.2d 1006, 1008 (N.Y.1992):
A mandatory temporary injunction may not ordinarily be granted where the effect thereof is to grant the plaintiff the same relief which may ultimately be obtained after a trial on the merits.
Moreover, if the requested injunction is mandatory, then Fairmont’s burden is elevated to making a “clear” showing on each of the four elements (instead of proceeding under a preponderance of the evidence standard). In re WorldCom, Inc. Sec. Litig., 354 F.Supp.2d 455, 463 (S.D.N.Y.2005).
Because Turnberry already ousted Fairmont from the Resort and because Fairmont’s requested relief would authorize Fairmont to return to the hotel property and would direct Turnberry to permit this reinstatement, the proposed preliminary injunction may be of the mandatory type, thereby triggering a heavier burden.
As expected, Turnberry argues for the heavier burden for a mandatory injunction, while Fairmont urges the traditional preponderance standard, based on its description of the requested injunction as merely prohibitive.
A preliminary injunction is typically prohibitive in nature if it seeks to maintain the status quo by prohibiting a party from taking certain action pending resolution of the case. Haddad v. Arnold, 784 F.Supp.2d 1284, 1295-96 (M.D.Fla.2010). But when the injunction would force a party to act, and not simply maintain the status quo, it becomes mandatory. Id.
Turnberry contends that Fairmont is seeking a mandatory injunction requiring that Turnberry take affirmative action to re-instate Fairmont as manager of the Resort. Fairmont seeks to be reinstated as the manager of the Resort, which would facially appear to require affirmative conduct and thus be mandatory in nature.
But Fairmont argues that the “present status of the parties ... is not always determinative of what the status quo is that should be maintained pending trial on the merits.” Salt Lake Tribune Publ’g Co., L.L.C. v. AT & T Corp., No. 2:00cv936C, 2001 WL 670928, at *3 (D.Utah Feb. 21, 2001), rev’d on other grounds, 320 F.3d 1081 (2003). Rather, the status quo ante to be achieved by injunctive relief is the position the parties held at the time of the last uncontested act between the parties. See id.; see also Asa v. Pictometry Int’l. Corp., 757 F.Supp.2d 238, 243 (W.D.N.Y.2010) (“[T]he court’s task when granting a preliminary injunction is generally to restore, and preserve, the status quo ante, i.e., the situation that existed between the parties immediately prior to the events that precipitated the dispute.”) (citations omitted).
As argued by Fairmont, the realities of the parties’ relationship establish that the requested relief cannot realistically be categorized as a mandatory injunction because issuing the injunction will only preserve the status quo ante and merely prohibit Turnberry’s unilateral termination of the HMA pending arbitration. See also Salt Lake Tribune, 2001 WL 670928, at *3 (concluding that allegedly breaching party’s disputed action altered the status quo and reinstating the status quo in that situation did not constitute a mandatory injunction despite the fact that it would require affirmative action).
As a practical matter, however, the differing burdens are only academic issues here because, as outlined below, Fairmont would not be entitled to a preliminary injunction even under the non-heightened burden requiring proof of all four elements by a preponderance of the evidence.
C. Substantial Likelihood of Success on the Merits
Before analyzing this important issue, the Court believes it makes sense to highlight the issues which are not applicable to this factor:
a. Whether Turnberry breached the notiee/eure/termination provisions of the HMA (as the evidence overwhelmingly established and as Turn-berry virtually conceded at the evidentiary hearing);
b. Whether Turnberry (and its principals) failed to act in good faith or affirmatively acted in bad faith;
c. Whether Turnberry and its counsel plotted for months to oust Fairmont from the Resort, regardless of Fairmont’s level of performance, regardless of whether Fairmont was earning incentive fees based on gross operating profit and regardless of whether Fairmont could have cured any purported material defects;
d. Whether Turnberry’s post-termination allegation of mismanagement against Fairmont is a manufactured, incorrect claim designed to provide purported support for a long-planned plot to evict Fairmont as the Resort’s manager;
e. Whether Fairmont is estopped from challenging Turnberry’s actions because it knew that the prior Resort owner had acrimonious relations with Turnberry’s principals, the Soffers, yet knowingly decided to sell the property to a Softer entity and enter into an HMA with an entity they control;
$ ;K % % :¡í ❖ ■
Instead, the issues are whether Fairmont’s agency is coupled with an interest, whether consideration alone (in the absence of an interest) is sufficient to render the agency irrevocable and whether the requested injunction would be an impermissible order incorrectly seeking to enforce a personal services contract.
Among other theories, Fairmont focuses on the fact that the HMA specifically provides that the agency is one coupled with an interest and that a no-bond injunction may be sought. Fairmont also emphasizes myriad other interests it has in the property, underscores the fact that Turnberry’s counsel specifically initialed the paragraph containing the “coupled with an interest” language and relies upon contractual language providing that the HMA supersedes any inconsistent rules in the common law of agency.
These arguments, while interesting and not facially illogical, are insufficient to establish that Fairmont’s agency under the HMA is irrevocable.
1. General Rule on the Revocability of an Agency
“Ordinarily,