Kemp et al v. The Lamar Company, LLC et al
Filing
34
ORDER denying 11 Motion for Summary Judgment; denying 21 Motion to Strike Signed by Honorable David C. Bramlette, III on 3/15/2012 (PL)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
HATTIESBURG DIVISION
Jerry L. Kemp, as Trustee of the JERRY L. KEMP
FAMILY TRUST (the successor in interest to any real property
Owned by R.L. Kemp, Jr.); Carol Lynn Kemp Simpson, as
Trustee of the KAILEY LAUREN KEMP TRUST,
CHELSEA EMERALD KEMP TRUST, ROBERT
LOGAN KEMP TRUST, and KEVIN LEE KEMP, JR. TRUST; and
The Trustees of the KEMP TRUST,
being a Trust created U/A dated January 15, 1990
PLAINTIFFS
V.
CIVIL ACTION NO. 2:11-cv-10-DCB-JMR
THE LAMAR COMPANY, LLC;
TLC PROPERTIES, INC;
& JOHN DOES 1, 2 and 3
DEFENDANTS
MEMORANDUM OPINION AND ORDER
This cause is before the Court on Defendants’ Motion for
Summary Judgment [docket entry no. 11] and Defendants’ Motion to
Strike portions of the Affidavits of Andrew Foxworth and Kevin Kemp
[docket entry no. 21]. Having carefully considered said Motions,
the Plaintiffs’ opposition thereto, applicable statutory and case
law, and being otherwise fully advised in the premises, the Court
finds and orders as follows:
Facts and Procedural History
The present controversy arises out of six contracts executed
by the Parties regarding options to repurchase outdoor advertising
signs. On July 24, 2000, the Parties entered into agreements
whereby the Plaintiffs sold six outdoor signs and accompanying
easements to the Defendants.1 Agreement to Repurchase, docket entry
no. 8-1 at 5-11, 16-21, 27-37, 42-47. Further, at that time, the
Parties executed six option contracts granting the Plaintiffs the
exclusive right to repurchase said signs and easements. Id. at 1-2,
12-13,
22-24,
38-40,
48-50,
and
52-54.
The
option
contracts
provide: “For a period of ten years from and after the dates
hereof,
Grantor,
exclusive
its
right and
successor
option
to
and
assigns,
purchase
shall
have
the
and
the
the Easement
Billboard, and all rights, privileges, and appurtenances related to
any of the same.” Id. at 1, 12, 23, 38, 49, 52. The price for
exercising each option is 72 times the current monthly revenue
being produced by the billboard plus a grantee purchase price. Id.
The grantee purchase price for each sign is $18,315.00, $13,051.50,
$13,777.50, $14,272.50, $12,870.00, and $18,975.00, respectively.
Id. at 1, 12, 23, 38, 49, 52.
On February 23, 2010, Andrew Foxworth, the Kemp’s attorney,
wrote a letter to Lamar expressing an interest in exercising the
options
and
requested
that
Kemp
provide
the
monthly
revenue
associated with each billboard. February 23, 2010, Letter, docket
entry no. 8-2. Accordingly, the Parties engaged in a series of
communications regarding the monthly revenues for each site but
1
The Plaintiffs’ Amended Complaint explains that TLC
Properties, Inc., is the grantee, and that The Lamar Company is the
successor in interest to Kemp-York Outdoor, Inc. (“KYO”), the
company with which the Plaintiffs executed their original
agreement.
2
ultimately the Plaintiffs were never satisfied that they received
accurate information from Lamar. See Mar. 8, 2010, Letter, docket
entry no. 8-3; April 1, 2010, Letter, docket entry no. 8-4; April
12, 2010, Letter, docket entry no. 8-5; April 30, 2010, Letter,
docket entry no. 8-6; May 12, 2010, Letter, docket entry no. 8-7;
July 23, 2010, E-mail, 8-8. Shortly before the time-period for
exercising the option had elapsed, Kevin Kemp, on behalf of the
Kemps, faxed the following notice to Lamar:
I write to advise that the Kemp trusts are electing
to exercise the option to repurchase certain of the
billboards and easements as further identified herein.
However, as the current monthly income related to each
site cannot be determined or verified with certainty by
the Kemp Trusts until current account information is
submitted to them as required by the Agreements, the Kemp
trusts reserve the right to elect not to repurchase all
or any of the sites if the monthly revenue from a site or
sites is not what they currently believe it to be. At
such time as that information is determined and verified
by the parties the exact purchase price will then be
known. Assuming the purchase price for each site is
within the range of what the Kemp Trusts believe it to be
then the Kemp Trusts will repurchase. If, however, the
purchase price is not within that range then the Kemp
Trusts may elect not to repurchase.
July 23, 2010, e-mail, docket entry no. 8-8.2 Receiving no response
to this notice, Foxworth followed up with Lamar on September 18,
2010, stating his belief that the Plaintiffs had exercised their
option to repurchase and providing Lamar with what the Plaintiffs
2
For the record, Kemp faxed a copy of an e-mail to Conner B.
Eglin of the Lamar Company. Id.
3
believed the monthly rental incomes to be.3 See Letter, docket
entry no. 8-9; see also Sept. 17, 2010, Letter, docket entry no. 810; Sept. 23, 2010, Letter, docket entry no. 8-11. On September 24,
2010, counsel for the Defendants responded to Foxworth stating the
Defendants’
position
that
the
July
23,
2010, notice
did
not
unequivocally communicate that the Plaintiffs were exercising their
right to repurchase and that the deadline for doing so, July 24,
2010, had expired. See Letter, docket entry no. 8-12; see also,
Sept. 27, 2010, Letter, docket entry no. 8-14. Accordingly, the
Defendants informed the Plaintiffs that they could no longer
repurchase the billboards and attendant easements.
Plaintiffs filed suit in the Chancery Court of Forrest County,
Mississippi on December 10, 2010, seeking specific performance of
the option contracts (Count I) and alleging breach of contract
(Count II), breach of duty of good faith and fair dealing (Count
III), and tortious breach of contract (Count IV). See Am. Compl.,
docket entry no. 8. The Defendants removed the case to this Court
and not long thereafter moved for summary judgment. Additionally,
following the Plaintiffs’ response to the instant Motion, the
Defendants asked the Court to strike portions of two affidavits
submitted by the Plaintiffs.
3
It was in this letter that the Plaintiffs first clearly
communicated to Lamar their allegations that the monthly rental
amounts were based on double-billing and other questionable billing
practices designed to inflate the repurchase prices. See id.
4
Summary Judgment Standard
Summary judgment is apposite “if the movant shows that there
is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. Pro. 56(a).
“A fact is ‘material’ if its resolution in favor of one party might
affect the outcome of the lawsuit under governing law. An issue is
‘genuine’ if the evidence is sufficient for a reasonable jury to
return a verdict for the non-moving party.” Ginsberg 1985 Real
Estate P’ship v. Cadle Co., 39 F.3d 528, 531 (5th Cir. 1994)
(citations omitted). The party moving for summary judgment bears
the initial responsibility of apprising the district court of the
basis for its motion and the parts of the record which indicate the
absence of a genuine issue of material fact. Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986).
“Once the moving party presents the district court with a
properly supported summary judgment motion, the burden shifts to
the
non-moving
party
to
show
that
summary
judgment
is
inappropriate.” Morris v. Covan World Wide Moving, Inc., 144 F.3d
377, 380 (5th Cir. 1998). “The evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in his
favor.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
But the nonmovant must “do more than simply show that there is some
metaphysical doubt as to the material facts.” Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
5
Moreover, “[t]he mere existence of a scintilla of evidence is
insufficient to defeat a properly supported motion for summary
judgment.” Anderson, 477 U.S. at 252. The nonmovant must instead
come forward with “specific facts showing that there is a genuine
issue for trial.” Fed. R. Civ. P. 56(e). Summary judgment must be
rendered when the nonmovant “fails to make a showing sufficient to
establish the existence of an element essential to that party’s
case, and on which that party will bear the burden of proof at
trial.” Celotex Corp., 477 U.S. at 322.
Analysis
In their motion for summary judgment, the Defendants suggest
that the Court’s analysis should turn on a simple legal question:
“Did the Plaintiffs validly exercise their options to repurchase
six signs and attendant easements before the options expired.”
Defs.’ Mot. for Summ. J. at 1, docket entry no. 12. Under this
analysis,
the
Defendants
argue
that
the
Plaintiffs’
notice
exercising but reserving the right not to repurchase does not
constitute unequivocal acceptance. In response, Plaintiffs dispute
this legal conclusion. Relatedly, the Plaintiffs contend that they
were not required to accept until the Defendants provided them the
information needed to renew. Finally, the Plaintiffs argue that the
present suit entails more than the issue of whether or not they
exercised their right to repurchase; instead, they argue that the
Defendants’
failure
to
provide
6
accurate
information
(1)
was
calculated to cause delay in their exercising their option and (2)
breached the implied covenant of good faith and fair dealing.
I.
Whether the
repurchase
Plaintiffs
exercised
their
options to
As an initial matter, the Court agrees with the Defendants
that under Mississippi contract law, the Plaintiffs’ faxed e-mail
did not unequivocally provide notice that they were exercising
their option to repurchase the billboards, and therefore the
Plaintiffs did not exercise, and have not exercised, the right to
repurchase. See, e.g., Richmond v. EBI, Inc., 53 So. 3d 859, 864
(Miss. App. 2011). In an analogous situation, the Mississippi Court
of
Appeals
recently
examined
whether
a
plaintiff
clearly
communicated his intention to exercise his right of first refusal
to buy a certain piece of property before the deadline for doing so
expired. The court stated that “[a]cceptance of an option to buy
real property must be absolute and unconditional without modifying
the initial terms or imposing new terms.” Id. at 854 (citing Am.
Jur. 2d, Vendor and Purchaser § 43 (2007)). Further, the Court
adopted the view:
If the optionee attaches conditions to his . . .
acceptance or notice of his . . . election to buy which
are not warranted by the terms of the option, such a
response amounts to a rejection of the option unless the
acceptance is in the first instance unconditional, and
the additional term is a mere request for a departure
from the terms of the option as to the time and place of
completing the transaction. . . .
Id. (quoting Am. Jur. 2d, Vendor and Purchaser § 43 (2007)).
7
Accordingly, the Court reads Richmond to establish the rule that an
optionee’s conditional notice of his or her election to exercise an
option to repurchase is tantamount to a rejection.
The first option contract between the Parties, which is
identical in language to all the option contracts,4 states that the
repurchase price for each billboard is “(i) 72 times the then
current monthly revenue being produced by the Billboard (the ‘KYO
Purchase
Price’),
plus
(ii)
18,315.00
(the
‘Grantee
Purchase
Price’) (collectively the ‘Purchase Price’).” Repurchase Agreements
at 1, docket entry no. 8-1. Further, the contract specifies that
“Grantor may exercise this right by written notice to Grantee and
KYO of its election to do so. Within ten (10) days of Grantee’s
receipt of such notice, Grantee or KYO shall furnish written
documentation of the then current monthly revenue being produced by
the advertising structure.” Under the contract, the Plaintiffs’
written notice to the Defendants is a condition precedent to
triggering the Defendants’ duty to provide information.
After
examining
the
record,
and
in
particular
the
communications between the Parties, the Court finds no evidence
before it to suggest that the Plaintiffs have ever unequivocally
elected to repurchase the billboards. The Court understands the
Plaintiffs’ position to be that they are unwilling to agree to
4
In other words, the “grantee purchase price” differs for
each individual billboard, but in all other respects the contracts
are identical.
8
repurchase until they are satisfied that the purchase prices
provided by Lamar are accurate. Despite the Plaintiffs’ contentions
to the contrary, Kemp’s notice did not bind the Plaintiffs to the
repurchase agreement because it gave them an easy out should they
be dissatisfied with the purchase price. In other words, if the
Plaintiffs later discover that the purchase price for each site “is
not what they believe it to be,” then, per the plain language of
the e-mail, they are not bound to repurchase the property.5 July
23, 2010, E-mail, docket entry no. 8-2.
II. Whether the Plaintiffs have any remedy at law
The Court, however, finds that the Defendants’ attempt to
characterize the dispositive issue in the present case as a simple
question
of
acceptance
overlooks
the
Plaintiffs’
fundamental
argument. The Court finds that the essential question in this case
is not whether the Plaintiffs failed to accept within the time
provided by the contract but, as the Plaintiffs allege in the
Amended Complaint, see Am. Compl. ¶ 20, 30, 31, whether the monthly
rental amounts provided by Lamar caused the Plaintiffs to condition
their acceptance thereby (1) excusing their failure to exercise the
5
The Court’s analysis might be different had Kemp stated that
the Plaintiffs agreed to repurchase the billboards at the correct
price, which was essentially what the agreements provided. But not
only did Kemp condition the Plaintiffs’ acceptance upon their
subjective belief regarding each billboard’s price, he also failed
to give any indication to the Defendants as to what that price was.
The Court rejects the Plaintiffs’ contention that Kemp communicated
a “determination to accept.” See Pls.’ Resp. Memo. at 4, docket
entry no. 17.
9
option to repurchase within the required time or (2) giving rise to
damages for their ultimate failure to consummate the contract.
There
is
authority
in
both
in
Mississippi
and
in other
jurisdictions to support the Plaintiffs’ position that, under
certain limited circumstances, the optionor’s delay in exercising
the option under the contract, if induced by the optionee, is
excusable. The Mississippi Supreme Court has stated:
If one party to a contract prevents another party from
carrying out his part of the agreement, he becomes liable
in damages for the breach of the contract. The foregoing
rule has been expressed as to options in the following
language: “It is a general rule that an optionor who has
given the right to purchase property within a specified
time may not do any act or omit to perform any duty
calculated to cause the optionee to delay in exercising
the right.”
Callicott v. Gresham, 161 So. 2d 183, 186 (Miss. 1964)(quoting 55
Am. Jur., Vendor and Purchaser, § 40 at p. 510). Similarly, in
Steele v. Northup, the Iowa Supreme Court, also relying on legal
encyclopedias, stated:
if the optionee is prevented from performing by
obstructive and delaying tactics on the part of the
optionor, or if the act to be performed or the price to
be paid is determinable only by the optionor and not made
known to the optionee so as to permit timely performance,
payment or tender, then the delay is excused . . . .
143 N.W.2d 302, 305 (citing both C.J.S. and Am. Jur.).6 Finally,
6
The Steele Court goes on to note that where payment is
required, notice of the intention to make said payment extends the
deadline to exercise the option. Id. The Court notes that the
present case is distinguishable from Steele in that notice, not
payment, is required to exercise the option.
10
the California Supreme Court similarly excused the optionee’s delay
in exercising his option after finding that the optionor sought to
gain an unconscionable advantage over the optionee with fraudulent
representations. Citron v. Franklin, 142 P.2d 16, 22 (1943).
Moreover,
aside
from
the
issue
of
acceptance,
as
the
Plaintiffs point out in their response to the Defendants’ Motion,
the present case also involves a claim for breach of the implied
covenant of good faith and fair dealing. Mississippi has long
recognized that “[a]ll contracts contain an implied covenant of
good faith and fair dealing in performance and enforcement.” Cenac
v. Murry, 609 So. 2d 1257, 1272 (Miss. 1992) (citations omitted).
In
Cenac,
the
Mississippi
Supreme
Court
indicated
that
misrepresenting material facts would violate the implied covenant
of good faith and fair dealing. Id. Morever, in certain situations,
a party may have an affirmative duty to cooperate with the other
party in achieving the goals of the contract.7 Id.
7
In other words, the implied covenant of good faith and fair
dealing can sometimes impose on the contracting parties duties
which are not explicit in the contract. The Plaintiffs’ argument in
response to the Defendants’ Motion can easily be read to state that
the Defendants had an implied duty to provide them with accurate
monthly rental information prior to the expiration of the deadline.
As stated above, this duty is not explicitly established in the
contract, and the Court need not address whether the Defendants had
such a duty because, under the present facts, such a finding would
not alter the Plaintiffs’ remedies. For instance, if the factfinder concludes that the Defendants did provide the Plaintiffs
with accurate information, then the Defendants fulfilled their duty
and the Plaintiffs would not be excused from failing to exercise
their option. If the fact-finder concludes that the information is
inaccurate, the Plaintiffs will have a remedy under the contract,
11
The facts as stated in the Amended Complaint still give rise
to a claim for damages under the Plaintiffs’ breach of the implied
covenant of good faith and fair dealing claim. Assuming, arguendo,
the Plaintiffs’ claims are true, it would be unreasonable to allow
Lamar to either negligently or intentionally provide inaccurate
repurchase prices, thereby causing the Plaintiffs not to exercise
the options, and then to offer no recourse under the contract after
the Plaintiffs discover the amounts were indeed inaccurate. See
Restatement (Second) of Contracts § 205 (Comment d).
Accordingly, even though the Plaintiffs have not exercised the
option to repurchase, the Court finds that their failure to do so
does not automatically entitle the Defendants to summary judgment
as
a
matter
of
law.
First,
under
Gresham
and
the
other
aforementioned authority, if there is evidence to show that Lamar
“prevent[ed] the [Plaintiffs] from carrying out his part of the
agreement” then Lamar will be liable for breach of contract.
Gresham, 161 So. 2d at 186. Secondly, the issue of whether the
Defendants breached their duty of good faith and fair dealing is a
separate and distinct from the issue of acceptance. Thus, absent
evidence showing there is no genuine dispute as to a material fact
regarding either of these claims, the Plaintiffs may proceed to
trial.
regardless of whether or not the Defendants had an implied duty to
provide them with information before the deadline had expired.
12
III. Whether the Defendants have met their burden of showing
that there is no genuine dispute as to any material fact
In their rebuttal brief, the Defendants address some of the
Plaintiffs’ above contentions with the argument that the Plaintiffs
have
produced
no
admissible
evidence
to
suggest
that
the
information Lamar provided was inaccurate. See Defs.’ Rebuttal
Memo. at 5, docket entry no. 20. Related to this contention, the
Defendants moved to strike portions of the affidavits of Andrew
Foxworth and Kevin Kemp that were attached to the Plaintiffs’
response to the present Motion. In their motion to strike, the
Defendants argue that Federal Rules of Evidence 8019(c) and 802
preclude the Affiants’ averments that John Buys, a representative
of
the
Kemp
trust,
spoke
with
vendors
who
confirmed
their
suspicions that Lamar was double-billing and provided inflated
monthly rental amounts. The Plaintiffs respond that the affidavits
contain evidence of their state of mind during the time they were
negotiating with the Defendants.
As an initial matter, the Court agrees with the Plaintiffs.
The portions of Andrew Foxworth’s and Kevin Kemp’s affidavits
regarding the information provided by John Buys pertain to their
state of mind, i.e., they questioned the validity of the monthly
rental amounts, and are not offered to prove the truth of the
matter asserted, i.e., that the Defendants produced inaccurate
13
information. See Fed. R. Evid. 801.8 Therefore, the Court will not
strike
these
portions
of
their
affidavits.
Allowing
these
statements to stand in the record, however, does not aid the
Plaintiffs’ central contention that Lamar provided inflated prices,
because, by their own admission, such statements are only evidence
of their state of mind and are not evidence that the Defendants
provided inaccurate information. Moreover, Andrew Foxworth’s and
Kevin Kemp’s subjective belief that they were provided inaccurate
billing information does not constitute evidence. Morris, 144 F.3d
at 380.
Conversely, however, the sole basis for the Defendants’ Motion
for Summary Judgment is that the Plaintiffs failed to unequivocally
communicate their intention to repurchase the billboards before the
deadline expired. See Defs.’ Mot. for Sum. J., docket entry no. 11
(attaching Kemp’s email as their only exhibit). The Defendants
chose not to address the Plaintiffs’ basic contention that Lamar
did not provide accurate information regarding the monthly rental
income for each billboard. The record indicates that Lamar did
indeed provide the Kemps with the monthly rental amounts, but it
does not indicate whether the amounts were accurate, which–despite
8
The Plaintiffs cite Federal Rule of Evidence 803(3) in
support of their argument, but this rule is inapplicable because it
pertains to the declarant’s state of mind. To be clear, the Court
does not consider as evidence the substance of what the Affiants
said John Buys said. There is no merit to an argument that the
statements made by John Buys pertain to his then-existing state of
mind.
14
the Defendants’ attempts to avoid this dispute–is at issue in the
case.
Based on the record before the Court, there is testimony and
circumstantial evidence to suggest that the Plaintiffs intended to
exercise
their
option
to
repurchase,
and
their
hesitancy
to
repurchase was predicated on their belief that Lamar had provided
inflated monthly rental amounts associated with each billboard.9
Kemp’s equivocation in his July 23 correspondence, although not
explicitly stated therein, can be read to question whether Lamar
had provided the proper pricing. On September 16, 2010, believing
the
Kemps
to
have
validly
exercised
their
option,
Foxworth
explained with some specificity the reasons the Kemps believed the
monthly rental amounts provided by Lamar were inaccurate.10 Sep. 16,
2010 Letter, docket entry no. 8-9. Rather than responding directly
to the Plaintiffs’ allegations, the Defendants, through the their
attorney, communicated to the Plaintiffs that they had not validly
9
The Court recognizes that the Plaintiffs’ self-serving
affidavits are typically afforded little credence under Fifth
Circuit law. See, e.g., Sanchez v. Dallas/Fort Worth Intern.
Airport Bd., 438 Fed. Appx. 343, 346-47 (5th Cir. 2011)
(unpublished). Given, however, the absence of testimony or other
evidence to contradict the Affiants’ claims, whatever weight the
Court affords the testimony therein will outweigh the evidence
produced by the Defendants.
10
The record indicates that the Plaintiffs, based on their
belief that the pricing information was inaccurate, began to
contact the advertisers themselves to inquire how much they were
paying per month for each of the requisite billboards. See id.;
Sept. 17, 2010, Letter, docket entry no. 8-10; Sep. 24, 2010,
Letter at 3, docket entry no. 8-12.
15
exercised their option. To date, the Defendants have not affirmed
or denied the accuracy of the monthly rental information provided
to the Plaintiffs before the expiration of the option deadline.
Had
the
Defendants
included
testimony
or
other
evidence
showing that there could be no genuine dispute as to the accuracy
of the monthly rental prices provided to the Plaintiffs before the
deadline for exercising their option to repurchase had passed, this
evidence would have established a material fact that the Plaintiffs
would then have been required to dispute. Demonstrating the absence
of the Plaintiffs’ evidence showing the inaccuracy of the rental
amounts does not absolve the Defendants of their initial duty to
produce evidence to the contrary. Celotex Corp., 477 U.S. at 323.
In short, at present, the Defendants, as the movants, have not
carried their initial burden of showing that there is no genuine
dispute and thus are not entitled to judgment as a matter of law.
Fed. R. Civ. Pro. 56(a).
Accordingly,
IT IS, THEREFORE, HEREBY ORDERED that the Defendants’ Summary
Judgment Motion [docket entry no. 11] is DENIED.
IT IS FURTHER ORDERED that the Defendants’ Motion to Strike
[docket entry no. 21] is DENIED.
SO ORDERED this the 15th day of March 2012.
/s/ David Bramlette
UNITED STATES DISTRICT JUDGE
16
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