CITY OF SEYMOUR v. LAMAR ADVANTAGE GP COMPANY, LLC

Filing 53

ORDER ON MOTIONS TO DISMISS AND FOR PARTIAL SUMMARY JUDGMENT - 24 Motion to Dismiss is DENIED. 32 Motion for Partial Summary Judgment as to Count I of the complaint is GRANTED. A declaratory judgment will be entered by separate document at the time of final judgment in this matter. See Fed. R. Civ. P. 58(a). See order for details. Signed by Judge Sarah Evans Barker on 3/26/2019. (LBT)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
NEW ALBANY DIVISION
CITY OF SEYMOUR,

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Plaintiff,
v.
LAMAR ADVANTAGE GP COMPANY,
LLC,
Defendant.

No. 4:18-cv-00034-SEB-TAB

ORDER ON MOTIONS TO DISMISS AND FOR PARTIAL SUMMARY
JUDGMENT (DKTS. 24, 32)
By a motion for partial summary judgment, Dkt. 32, see Fed. R. Civ. P. 56(a), and
a motion to dismiss for failure to state a claim, Dkt. 24, see Fed. R. Civ. P. 12(b)(6),
Plaintiff and Defendant respectively seek judgment as a matter of law on a single
question of contract interpretation: Has their contract expired? We conclude that it has.
Background
Fourteen years ago, on July 7, 2005, Hoosier Outdoor Advertising Corporation
(“Hoosier Outdoor”) and The Elmore Family Limited Partnership (“the Elmores”)
entered into a contract (“the Lease”) for the lease of certain real property owned by the
Elmores in Seymour, Indiana (“the Property”), to be used for the display of three
billboards. The Lease was for a period of six years beginning August 15, 2005, at $4,000
annual rent, and contains the following evergreen clause (“which is to say, an automatic
rollover clause,” Office & Prof’l Emps. Int’l Union, Local 95 v. Wood Cty. Tel. Co., 408
F.3d 314, 315 (7th Cir. 2005)):
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Lessor agrees that this contract shall renew itself at each
expiration date unless (60) sixty days [sic] written notification
prior to each expiration date is provided to Lessee. No
cancellation of this contract is possible by any entity with
powers of eminent domain.
Dkt. 1 Ex. 1, at 7. The Lease is only nine paragraphs in length and the two above-quoted
sentences constitute the entirety of its sixth paragraph.
The words “cancel” or “cancellation” appear nowhere else in the one-page Lease.
Id. The Lease refers three times to its “termination”: twice in connection with Hoosier
Outdoor’s rights and obligations “upon the termination” of the Lease, and once in
connection with Hoosier Outdoor’s option “to terminate” the Lease “upon 30 days [sic]
notice” if the Lease becomes unprofitable for it for one of five listed reasons. Id. Thus,
the Lease contemplates its own end by one of only two ways: by expiration following the
Elmores’ nonrenewal or by termination at Hoosier Outdoor’s option under the
appropriate circumstances.
On August 15, 2011, the first six-year period ended and, absent notice of
nonrenewal from the Elmores, the Lease renewed itself automatically for an additional
six-year period. On June 15, 2017, sixty-one days before the end of the second six-year
period, the Elmores sold the Property to Plaintiff here, the City of Seymour (“the City”),
and assigned to it their rights under the Lease. Sometime earlier, Hoosier Outdoor had
merged with Defendant here, Lamar Advantage GP Company, LLC (“Lamar”), and
assigned its rights under the Lease to it. The terms of either assignment do not appear in
the record and have not been otherwise elaborated upon by the parties.

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The same day as the City acquired the Property and stepped into Hoosier
Outdoor’s shoes as the lessor under the Lease, the City’s mayor sent Lamar a letter which
reads in relevant part as follows:
Please consider this letter to be our written notice of
cancellation for the billboard lease executed by and between
Hoosier Outdoor Advertising and The Elmore Family Limited
Partnership . . . . As of this day, the City of Seymour has
acquired the land from The Elmore Family Limited
Partnership and is hereby cancelling the lease. We understand
that the lease does not officially expire until 8/15/17. Further,
we understand that you are granted 90 days from the time the
lease is terminated to remove the sign . . . . You may continue
to operate the sign up to and through that date[.]
Dkt. 1 Ex. 1, at 11. Despite receipt of this notice, Lamar refused and continues to refuse
to vacate the Property, giving rise to this lawsuit by the City for trespass, ejectment, and a
declaratory judgment declaring the Lease expired.
Analysis
The City seeks summary judgment on its declaratory judgment claim. Lamar seeks
dismissal with prejudice of the entire lawsuit. Both parties agree that the dispositive
question is whether the Lease expired on August 15, 2017. Either party’s motion will be
granted only if the contract and other attachments to the complaint unambiguously
support its position (the City has eschewed reliance on extrinsic evidence in support of its
motion). See Hotel 71 Mezz Lender LLC v. Nat’l Ret. Fund, 778 F.3d 593, 601–02 (7th
Cir. 2015) (plaintiff’s motion for summary judgment); Centers v. Centennial Mortg., Inc.,
398 F.3d 930, 933 (7th Cir. 2005) (defendant’s motion to dismiss on basis of complaint
attachments). Under Erie Railroad Company v. Thompkins, 304 U.S. 64 (1938), we apply

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Indiana law to this removed diversity action, see Dkt. 1, because that is our default
choice, Jean v. Dugan, 20 F.3d 255, 260 (7th Cir. 1994), and because neither party
disputes its applicability. Wood v. Mid-Valley, Inc., 942 F.2d 425, 427 (7th Cir. 1991).
The parties’ dispute chiefly revolves around three points. We begin, as do the
parties, with the plain language of the Lease. Citimortg., Inc. v. Barabas, 975 N.E.2d 805,
813 (Ind. 2012). First, it is undisputed that the City is an “entity with powers of eminent
domain.” See Ind. Code ch. 32-24-2 (“[Eminent Domain] Procedures for Cities and
Towns”). And the Lease provides that “[n]o cancellation” of it “is possible by any entity
with powers of eminent domain.” Dkt. 1 Ex. 1, at 7. Therefore, argues Lamar, the City’s
“written notice of cancellation” purports to do precisely what the Lease prohibits it from
doing and is thus of no force or effect. Not so, counters the City: the mayor’s unlawyerly
choice of words notwithstanding, the City did not cancel the Lease; it declined to renew
it, as provided by its terms. A distinction without a difference, scoffs Lamar.
The issue, no surprise, is not quite so straightforward as either side represents it to
be. In the abstract, the City’s distinction between cancellation and expiration by
nonrenewal is persuasive. “The cancellation of a contract means that portion of the
contract remaining unperformed is abrogated.” Horine v. Greencastle Prod. Credit Ass’n,
505 N.E.2d 802, 805 (Ind. Ct. App. 1987) (distinguishing cancellation and rescission). By
contrast, “[a]n expiration does not halt performance that would otherwise be owed, but
marks the point in time when no more performance is required.” Pl.’s Br. Supp. & Opp. 5
(citing Expiration, Black’s Law Dictionary (10th ed. 2014)). What has expired has not
been canceled; what has been canceled has not expired. The distinction is often of great
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moment in insurance contracts, for example, if the law requires notice to the insured upon
“cancellation” of the policy. See, e.g., King v. Guardian Life Ins. Co. of Am., 686 F.2d
894, 898 (11th Cir. 1982); Estate of Nicholson v. Farmers Ins. Co., 555 F. Supp. 2d 671,
675 (E.D. La. 2008); Unruh v. Prudential Prop. & Cas. Ins. Co., 3 F. Supp. 2d 1204,
1206 (D. Kan. 1998).
The City’s distinction becomes less cogent, however, when considered not in the
abstract but in the context of the Lease’s evergreen clause. See Barabas, 975 N.E.2d at
813 (contractual language read in context). The City fails to account for the fact that the
cancellation provision immediately follows the evergreen clause, together constituting the
entirety of the Lease’s sixth paragraph, and that “cancellation” is nowhere else mentioned
in the Lease. This raises a reasonable inference that “cancellation” in fact refers to
nonrenewal. And in the context of evergreen clauses specifically, which contemplate
affirmative acts of nonrenewal as opposed to affirmative acts of renewal, contract drafters
and their judicial expositors often refer to nonrenewal of the contract as a “cancellation”
of the contract. See, e.g., Utica Mut. Ins. Co. v. Great Lakes Coal. Co., No. 89-1517,
1990 WL 146573, at *1 (7th Cir. Oct. 5, 1990) (mem.); Johnson v. Aleut Corp., 307 P.3d
942, 944 (Alaska 2013); Cook v. Adams Cty. Plan Comm’n, 871 N.E.2d 1003, 1008 (Ind.
Ct. App. 2007).
On the other hand, the cancellation provision is immediately followed by
provisions that permit the lessee to terminate the Lease in a manner that is far closer to
cancellation in the strict sense (by abrogating its remaining performance in the midst of a
six-year period) than is nonrenewal, even nonrenewal of an automatically renewing
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contract. The cancellation provision could thus plausibly refer to what follows it and not
to what precedes it. We note, too, the missed opportunity for clarity in the notice
provision. “Written notification”—of what? Either “of nonrenewal” or “of cancellation”
likely would have been determinative of the parties’ interpretative dispute.
Finally, because at the time it was drafted neither party was “an entity with powers
of eminent domain,” and because neither the cancellation provision in particular nor the
Lease as a whole unambiguously contemplates a future assignment, and it may be just as
sensible to read the cancellation provision as referring to third-party governmental action
(i.e., “The Lease may not be terminated because of the act of an entity with powers of
eminent domain.”) as to first-party governmental action (i.e., “If rights under this Lease
are ever assigned to an entity with powers of eminent domain, the right to terminate the
Lease is excluded from the assignment.”). Indeed, “‘[a] valid assignment gives the
assignee neither greater nor lesser rights than those held by the assignor. Unless a
contrary intent is shown, the assignee stands in the shoes of the assignor.’” IndianapolisMarion Cty. Pub. Library v. Charlier Clark & Linard, PC, 929 N.E.2d 838, 848 (Ind. Ct.
App. 2010) (quoting Pettit v. Pettit, 626 N.E.2d 444, 447 (Ind. 1993)). If the Elmores’
assignment of their rights under the Lease to the City was “‘valid and unqualified,’” id.
(quoting Rasp v. Hidden Valley Lake, Inc., 519 N.E.2d 153, 158 (Ind. Ct. App. 1988)), it
may be preferable to give full effect to that assignment rather than drastically restricting
its scope by eliminating the assignee’s right to terminate on the basis of an ambiguous
provision that nowhere refers to assignment.

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Because reasonable people could thus disagree on whether “cancellation” in the
Lease refers to its nonrenewal, Barabas, 975 N.E.2d at 813 (ambiguity standard), it
appears that a jury is required to choose between the two possible meanings. Byrd v. Blue
Ridge Rural Elec. Coop., 356 U.S. 525, 537–38 (1958) (federal juries decide disputes of
fact); First Fed. Sav. Bank of Ind. v. Key Mkts., Inc., 559 N.E.2d 600, 604 (Ind. 1990)
(contractual ambiguity is dispute of fact). Again the City says, Not so, for two rules of
construction dictate that Lamar’s construction cannot be sustained as a matter of law—
the second and third of the three points chiefly disputed by the parties. See First Fed.,
559 N.E.2d at 604 (ambiguous contracts may be construed).
The first is that
[t]he law does not favor perpetual leases. A lease will not be
construed as conferring a right to perpetual renewals unless it
clearly so provides, in language so plain and unequivocal as to
leave no doubt that such was the intention and purpose of the
parties. A lease will, if possible, be so construed as to avoid a
perpetuity by renewal.
Smyrniotis v. Marshall, 744 N.E.2d 532, 534–35 (Ind. Ct. App. 2001) (quoting Geyer v.
Lietzan, 103 N.E.2d 199, 200 (Ind. 1952)).
The lease in Geyer provided that
the lessee shall, at his option, be entitled to the right . . . of
renewing this lease . . . providing that said lessee shall, at
least thirty . . . days before the expiration of any two year
period of this lease, or any successive renewals thereof, give
written notice of his intention so to renew to the lessors[.]
103 N.E.2d at 201. Conceding that “the foregoing language, in isolation, would be
strongly indicative of an intention to confer upon the lessee the right to renew the lease

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indefinitely[,]” id., the court turned to features of the lease which it regarded as “totally
inconsistent with the idea that the parties had in mind a term which might last several
centuries[,]” id. including the lack of perpetual language such as “forever,” “for all time,”
or “in perpetuity,” id.; providing that the property was to be yielded up to the lessors “in
as good condition” as when leased; limiting of the use of the property to “conducting a
general merchandising business,” id.; rent terms which if applied in perpetuity would
operate either to cap rent forever after six years or else permit it to increase forever into
infinity, id.; and impliedly limiting the right of renewal to the original lessee personally
by not expressly permitting its exercise by the original lessee’s privities, such as his
assigns. Id. at 201–202. Concluding that the lease did not “so clearly provide for
perpetual renewals as to leave no doubt that such was the purpose and intention of the
parties[,]” the court held it was not a perpetual lease. Id. at 202.
The court held further that, since the lease did not provide for infinite renewals
(because it was not perpetual), if the lease were construed to provide for more than one
renewal without expressly stating how many, it would be indefinite in its material terms
and void. Id. at 202 (citations omitted). Unwilling to construe the lease so as to render it
unenforceable, the court construed it to provide for precisely one renewal. Id.
Relying on Geyer, the Indiana Court of Appeals has held that lease language
giving the lessee “the right to renew lease [sic] on a month to month basis” did not create
a perpetual lease in the lessee’s favor but a month-to-month tenancy, by statute
terminable with one month’s notice by the lessor. Smyrniotis, 744 N.E.2d at 533. The
Indiana Court of Appeals applied Geyer to an evergreen clause in Cook v. Adams County
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Planning Commission, 871 N.E.2d 1003 (2007), in the course of answering whether an
automatically renewing one-year lease was a “long-term lease” within the meaning of a
certain county ordinance. The lead opinion held that, because the lease neither was
unequivocally perpetual nor specified a determinate number of renewals, Geyer required
a court to construe the lease as providing for precisely one renewal. Id. at 1009. The lease
so construed was thus for two years and therefore not “long term.” Id.
Here, the City argues that, because it is possible to construe the Lease so as not to
prohibit the City from terminating it by nonrenewal, under Geyer it should be so
construed. If not so construed as between the City and Lamar, the right to terminate the
Lease would be even narrower than in Geyer. On Lamar’s construction, the Lease would
never be terminable by the City and only terminable by Lamar for one of five causes
largely or completely outside its control (for example, an inability to obtain a required
permit from a public authority, or a regulatory elimination of the Property’s suitability for
advertising). But, adopting Lamar’s construction for the sake of argument, would it truly
be impossible to construe the Lease as anything other than a perpetual lease, as the City
argues? No, it would not—and the City must prevail for that reason.
Geyer considered the lease as a whole. We assume the Lease expressly provided,
“If rights under this Lease are ever assigned to an entity with powers of eminent domain,
the right to terminate the Lease is excluded from the assignment.” The Lease would still,
as in Geyer, lack perpetual language such as “forever,” “for all time,” or “in perpetuity.”
103 N.E.2d at 201. It would still, as in Geyer, make provision for restoring the Property
to its pre-Lease condition by permitting the lessee to remove its signs upon termination.
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Id. It would still, as in Geyer, make specific provision for “one particular and narrow use”
of the Property, id., by its references to, for example, “three illuminated outdoor
billboards” and the lessee’s rights to “ingress and egress to the site(s) for the purpose of
working on signs and controlling weed, brush, and tree growth affecting sign
structure(s).” Dkt. 1 Ex. 1, at 7. And it would still, as in Geyer, prove economically
irrational if extended into perpetuity, for it makes no provision at all for rent increases.
103 N.E.2d at 201; Smyrniotis, 744 N.E.2d at 535.
In short, the Lease would still contain most of the same features that Geyer
regarded as “totally inconsistent with the idea that the parties had in mind a term which
might last several centuries.” 103 N.E.2d at 201. The inclusion of a limitation on a future
potential assignee’s termination rights does not materially change this balance. The Lease
might never be assigned to an entity with powers of eminent domain, or might just as
soon be assigned again to an entity without powers of eminent domain. Read as a whole,
it cannot be said that the Lease provides for a perpetual term “in language so plain and
unequivocal as to leave no doubt that such was the intention and purpose of the parties.”
Id. at 200. Thus, even on Lamar’s construction of the cancellation provision, the Lease is
not perpetual. Lamar agrees. Def.’s Reply Br. & Br. Opp. 17. The presumption against
perpetual leases therefore does not preclude Lamar’s construction of the cancellation
provision.
Geyer now compels us to part company with Lamar. For, also like the Geyer lease,
the Lease here provides for renewals generally without providing for a determinate
number of them. Geyer, 103 N.E.2d at 202; Cook, 871 N.E.2d at 1009. Because (as we
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have just established) the Lease does not provide for infinite renewals, if the Lease is
construed to provide for more than one, it is materially indefinite and void. Geyer, 103
N.E.2d at 202 (citations omitted); Cook, 871 N.E.2d at 1009 (citing Geyer). It appears to
us that the Lease must therefore be construed to provide for precisely one renewal, given
that a court should avoid construing a contract so as to render it unenforceable. Geyer,
103 N.E.2d at 202 (citations omitted); Cook, 871 N.E.2d at 1009 (citing Geyer). If that is
so, then the Lease expired on August 15, 2017, and the City is entitled to judgment.
The City’s opening brief in support of its motion and in opposition to the City’s
comes upon this argument by a somewhat muddled approach (having just argued that to
give the Lease’s cancellation provision Lamar’s construction would render it a perpetual
lease), but the argument is nonetheless raised quite clearly and succinctly. Pl.’s Br. Supp.
& Opp. 10. Lamar to its detriment has not responded to it and indeed concedes its
premise (i.e., that the Lease as a whole does not unambiguously intend a perpetual term).
Def.’s Reply Br. & Br. Opp. 17. We lay no traps for the unwary by granting relief on the
basis of an argument fairly, albeit briefly, raised.
The final area of disagreement between the parties is the effect of Indiana’s
statutory prohibition on municipal leases longer than three years without legislative
approval. See Ind. Code § 36-1-11-10(f). Finding that the City is entitled to judgment on
the grounds above stated, we need not consider this statute.
Conclusion and Order
For the reasons given above:
Defendant’s motion to dismiss for failure to state a claim, Dkt. 24, is DENIED.
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Plaintiff’s motion for partial summary judgment as to Count I of the complaint,
Dkt. 32, is GRANTED.
A declaratory judgment will be entered by separate document at the time of final
judgment in this matter. See Fed. R. Civ. P. 58(a).
IT IS SO ORDERED.

Date:

3/26/2019

_______________________________
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana

Distribution:
Mark Jason Crandley
BARNES & THORNBURG, LLP (Indianapolis)
[e-mail]
Bradley M. Dick
BOSE MCKINNEY & EVANS, LLP (Indianapolis)
[e-mail]
Alan S. Townsend
BOSE MCKINNEY & EVANS, LLP (Indianapolis)
[e-mail]

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