may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (1996).
STATE OF MINNESOTA
IN COURT OF APPEALS
Larken Airport Hotel Limited Partnership, et al.,
Larken Minnesota, Inc.,
Filed September 9, 1997
Hennepin County District Court
File No. 95-004299
Howard O. Boltz, Jr., Bryan Cave, L.L.P., 777 South Figueroa Street, Suite 2700, Los Angeles, CA 90017, Michael J. Wahoske, Edward B. Magarian, Dorsey & Whitney, L.L.P., 220 South Sixth Street, Minneapolis, MN 55402 (for appellants)
Considered and decided by Amundson, Presiding Judge, Parker, Judge, and Peterson, Judge.
Appellants challenge the district court's determination that they did not terminate their management agreement with respondent. We affirm.
The agreement requires a 30-day notice and opportunity to remedy any default in order to terminate the agreement. Pine Hill argues that no notice or opportunity to cure was required because the removal was incurable. Pine Hill also argues that there is no notice to remedy requirement because the agreement also states that the notice to remedy "shall not be deemed to preclude or impair the right of any party to exercise any right or remedy * * * upon any breach of any terms of this Agreement." However, the breach must be material. Materiality is determined by considering several factors:
(a) the extent to which the injured party will be deprived of the benefit which he reasonably expected;
(b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived;
(c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture;
(d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances;
(e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing.
Restatement (Second) of Contracts § 241 (1981). The district court determined that the breach was not material, if it was a breach at all, and that if it was a breach, it was cured. The district court did not clearly err.
Larken's principal, Larry Cahill, is the majority owner of LDDP, a long-distance telephone carrier; in June 1993, Larken entered into a 10-year contract with LDDP for ongoing maintenance of the telephone service (primarily pay telephones) at the hotel without the approval of Pine Hill. While it does appear that entering into such a contract without Pine Hill's approval is a violation of the agreement, the agreement bars Pine Hill from terminating the agreement for any alleged default unless and until Larken fails to remedy such default within 30 days after Larken receives a notice. Pine Hill's October 31, 1995, letter requested reimbursement of LDDP long distance charges exceeding AT&T rates and did not demand that the maintenance contract be submitted for approval.
Pine Hill argues, as it did as to the removal of furnishings, that no notice to remedy was required because the agreement also stated that the notice to remedy "shall not be deemed to preclude or impair the right of any party to exercise any right or remedy * * * upon any breach of any terms of this Agreement." However, as with the previous issue, the district court found that there was no material breach. The district court determined that "[t]he primary benefit that Pine Hill could reasonably expect to flow from the Management Agreement was that the Hotel would be profitable on a continuing basis." Larken has performed under the agreement, as the hotel is extremely profitable for Pine Hill. For example, in 1995 the hotel had a gross operating profit per occupied room night of $66.98, compared with $48.65 for comparable competitors in the Twin Cities area.
The district court's finding that entering into the telephone contract without approval did not represent a material breach is not clearly erroneous.
[ ]1 Appellants will be referred to collectively as Pine Hill.
[ ]2 The district court did not find that the LDDP rates were higher than AT&T's.