The dispute in a nutshell is simple: PCMR apparently failed to exercise a 50 year lease extension in writing by the contractual deadline of April 30, 2011. My initial reaction to that apparent oversight was shock. I would have expected that date to be circled in red, highlighted, and underlined on the calendars of dozens of PCMR executives and lawyers. How could PCMR have missed something so important?
But as I read the court papers, I became equally puzzled by the flip side of that same coin. Just as surely as it appears PCMR missed that date, it appears Talisker missed it as well. For eight months after the "default," Talisker continued to accept rent from PCMR and pursue business as usual. Talisker said nothing about it until the following December.
Just as surely as PCMR is filled with smart people, so is Talisker. And Talisker is not one to sleep on its rights. If it thinks it has a legal club, it tends to pick it up and swing it. So with the importance of the contract rights at stake, why did Talisker fail to declare the "default" immediately? How could it overlook such a critical event for so long? Having done deals and litigated cases here since 1992, only one explanation makes any sense: for much of that time, Talisker did not believe the lease to be in default any more than PCMR did.
Perhaps it's surprising to hear a lawyer conclude that two sophisticated parties both strolled past such a critical date without recognizing a default that would give one party enormous leverage over the other. But in my experience, parties in long-term business relationships tend to establish courses of conduct, have communications, and make representations on which they both rely over contract terms because they are more relevant to their daily activities than documents drafted 50 years earlier. Their documents seldom evolve, but their situations always do.
Intelligent lawyers and businesspeople can be led by statements and circumstances to believe that once critical dates or events have been superseded. Courses of conduct can lead (or mislead) parties to believe that their counterparts across the table are in tacit agreement. Businesses make major decisions and incur major expenditures accordingly everyday. Even the law recognizes that reality with doctrines like waiver and estoppel.
Neither PCMR nor Talisker was watching the clock (or fax machine) at 11:59 p.m. on April 30, 2011. Both of them were acting like it was just another Saturday night (yes, it was a weekend). Had PCMR thought otherwise, it would have delivered notice of renewal that Friday. Had Talisker thought otherwise, it would have delivered notice of default that Monday.
If that is true, why are the parties now spending millions in court? Again, having handled negotiations and disputes in this town for more than 20 years, only one answer makes sense: something changed between Talisker and PCMR in the 8 months between April and December of 2011. Something led Talisker to conclude it needed a legal club to swing. It went looking for one, and found it circled in red on a calendar that all sides had ignored until then. What convinced Talisker it needed that club? It looks like we'll learn that the hard way i.e., through years of litigation.
The $5 million litigation war chest referenced in Vail's recent SEC disclosures for just the next 12 months looks like doubling down rather than joint problem-solving. At that kind of burn rate on both sides, $10 million a year will go up in smoke rather than into amenities, improvements and marketing that could have attracted more skiers and snowboarders to both mountains - not to mention all of the restaurants, shops, hotels and other businesses here that depend on them.