Bear Development, LLC v. City of Kenosha

Citations: 822 F. Supp. 2d 865; 2011 U.S. Dist. LEXIS 112538; 2011 WL 4553126Docket: Case No. 10-CV-1141-JPS

Court: District Court, E.D. Wisconsin; September 29, 2011; Federal District Court

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On June 17, 2011, Bear Development, LLC filed a Motion for Partial Summary Judgment concerning a breach of contract claim against the City of Kenosha and its Redevelopment Authority. The contract required Bear to enter a separate Remediation Contract with Kenosha by September 1, 2010, or face nullification of the original agreement. Kenosha is accused of breaching this contract by declaring it void despite Bear’s acceptance of the terms or failing to act in good faith.

The background details that in March 2002, Kenosha and TRC Companies, Inc. negotiated an Exit Strategy Contract for the environmental remediation of a parcel of land. In January 2008, the Redevelopment Authority issued a Request for Proposal for further development, which Bear responded to and was subsequently selected as the developer. The final Land Contract, effective April 8, 2010, required Bear to pay $350,000, of which $35,000 was paid as earnest money. A crucial provision mandated Bear to enter into the Remediation Contract, with the responsibility for drafting resting with Kenosha.

Kenosha’s employee, Mr. Khaligian, indicated delays in preparing the draft contract, which was finally submitted on August 20, 2010, without Bear's prior input. Bear found the proposed terms excessively burdensome compared to past agreements and sought a thirty-day extension to negotiate further. On August 30, 2010, Bear was instructed to make the extension request through the City Administrator.

On August 31, 2010, Mr. Pacetti granted an eight-day extension for the Remediation Contract deadline, setting it to September 9, 2010, at 4:30 p.m. On September 2, Mr. Khaligian informed Bear that the City would be closed on September 3 for a furlough and that the earliest review of Bear's comments would be September 7, a day before the Finance Committee and Common Council meetings. Bear submitted its contract revisions on September 7 at 9:48 a.m. Bear communicated with Mr. Pacetti the same day, expressing a desire to resolve objections before the evening meetings and indicating willingness to accept the original contract terms proposed on August 20, 2010. Mr. Khaligian later opposed most of Bear's changes and recommended denial of the revisions in a memorandum to the committees. Despite Bear's presence and willingness to accept the original terms, the Finance Committee rejected the contract, followed by a similar decision from the Common Council that evening. On September 9, before the deadline, Bear delivered a signed copy of the original contract. However, Kenosha returned Bear's earnest money and declared the Land Contract null and void, citing a clause requiring Bear to enter a Remediation Contract under City and TRC terms. Bear has not cashed the returned check. 

The document also outlines the legal standard for summary judgment, stating that it is granted when there is no genuine dispute over material facts, referencing relevant case law and procedural rules. Material facts are those that could affect the lawsuit's outcome, and a genuine dispute exists if evidence could allow a reasonable jury to favor the non-moving party. The burden of proof lies with the party asserting a fact's absence or presence, requiring citation of specific evidence or demonstration that the other party cannot support its claims. Affidavits must be based on personal knowledge and admissible facts.

The resolution of the dispute hinges on the terms of the Land Contract, which mandated Bear to enter a Remediation Contract as required by the City and TRC Companies, Inc. The court finds that either Kenosha made a valid offer, which Bear accepted, or it failed to make any offer at all. If Kenosha made an offer and then repudiated the Land Contract, it violated the agreement, as Bear complied with the requirement to enter into the Remediation Contract. Conversely, if Kenosha did not make an offer, it breached its obligation of good faith and fair dealing by failing to provide Bear with terms for acceptance within the stipulated timeframe.

The critical question is whether a valid Remediation Contract was formed. Kenosha contends that there was no meeting of the minds necessary for a contract due to doubts about Bear’s financial capacity. It claims to have offered a proposed Remediation Contract, which Bear rejected, leading Kenosha to declare the Land Contract void. However, the court finds that both the original and Bear's revised contract proposals were sufficiently clear, indicating that Bear accepted the August 20, 2010, proposed contract before the deadline. 

Despite the counteroffer issue, the lack of a valid offer from Kenosha would constitute a breach of good faith. Wisconsin law stipulates that contracts impose a duty of good faith on parties, requiring them to act to fulfill the contract and not obstruct the other party’s ability to receive benefits from it. Consequently, the court grants summary judgment to Bear on its breach of contract claim but denies the request for specific performance.

A promise made by one party typically implies a counter-promise from the other party to prevent arbitrary conduct. If the proposed contract from August 20, 2010, was not an actual offer, Kenosha did not provide Bear with any terms to agree upon, thereby failing to fulfill its obligations under the Land Contract. This absence of terms or conditions prevents Bear from meeting its contractual obligations. If the August 20 proposal was an offer that lapsed following Bear's counteroffer, Kenosha again failed to present any terms, thus breaching its duty of good faith and fair dealing. The premise that Bear's counteroffer nullified the original offer does not hold if Kenosha did not engage in further negotiations or recognize Bear’s later acceptance. Consequently, whether the August 20 proposal was an offer or not, Kenosha breached its duty under the Land Contract by obstructing Bear’s ability to enter into a Remediation Contract. Kenosha's arguments against this breach, including claims that the contract terms were not finalized and that City staff lacked authority to bind the City, are unconvincing. They do not demonstrate a mutual understanding that formal execution was necessary or provide evidence supporting their claims about staff authority. Even if staff acted in good faith, this does not negate Kenosha's overall actions, which failed to meet the duty of good faith and fair dealing.

Kenosha's arguments do not effectively counter the court's finding that it breached its duty by not offering a Remediation Contract to Bear. Kenosha contends that Bear did not promptly investigate remediation issues; however, Bear clearly attempted to accept the proposed contract from August 20, 2010. The court maintains that Bear's understanding of the remediation issues is irrelevant to whether Kenosha failed to offer acceptable terms. Additionally, Kenosha claims that Bear's delays in negotiations indicate a breach, but the court did not rely on this assertion. 

Kenosha also presents three defenses related to its declaration of the Land Contract as null and void: (1) Bear breached its duty of good faith by not performing timely due diligence; (2) Bear repudiated the Land Contract; and (3) Bear misrepresented its expertise. The first defense is unfounded, as the Land Contract required Bear to enter an agreement with terms set by the City and TRC, which Bear attempted to do, thus negating any breach on Bear's part. 

Kenosha's argument concerning repudiation hinges on Bear's supposed unwillingness to manage remediation. However, the requirements for repudiation were not met, as Bear expressed willingness to enter into a Remediation Contract. Lastly, regarding misrepresentation, Kenosha's claim that Bear misrepresented its ability to complete remediation is irrelevant because the Land Contract only required Bear to enter a Remediation Contract under suitable terms. Bear did not misrepresent its willingness to engage in remediation, confirming this by attempting to accept the proposed contract. Therefore, the court's conclusion stands firm, and Bear's motion will be granted.

Bear requests the court to order specific performance of the Land Contract, which is permissible under Wisconsin law for real property interests. However, the court has discretion in granting such a remedy, and specific performance is typically awarded unless it would be unfair, unreasonable, or impossible. Previous cases indicate that contracts requiring third-party approvals may not be suitable for specific performance, particularly if they include multiple conditions that depend on third parties' actions. 

In this instance, the Land Contract mandates Bear to enter into a Remediation Contract acceptable to both Kenosha and TRC Companies, Inc., a non-party to the contract, and also requires Bear to provide a Material Management Plan approved by the Wisconsin Department of Natural Resources. Given these conditions and the potential for future allegations of bad faith due to incomplete obligations, the court finds it impractical to order specific performance at this time. 

Despite this, Bear's lack of thorough briefing on the issue and Kenosha's failure to address it allow the court to consider an expedited motion for reconsideration before the scheduled trial date. The court grants Bear's Motion for Partial Summary Judgment while noting that Kenosha's subsequent motion for summary judgment on all claims will be addressed later, as its arguments regarding the breach of contract claim remain unchanged.

If the terms were not agreeable, there would be no offer for Bear to reject, reinforcing the court's initial finding on good faith. Kenosha references a case indicating that a city attorney requires prior authority to validly contract, but this case pertains to settlement approvals rather than contract drafting by a city staff member. Kenosha also cites a precedent stating that if a statute dictates how a municipality should enter contracts, any informal agreement must be ratified according to that statute for liability to ensue. However, no such statute was identified that imposed additional formality requirements in this case. Furthermore, Kenosha mentions a Wisconsin statute that prohibits incurring debts against a city without a city council majority vote, but this is irrelevant since the contract involved Bear assuming the city's remediation obligations. Another cited case illustrates a city engineer's lack of authority to modify an existing contract, but this does not apply as there was no modification of an already established contract here. Finally, while Kenosha presents a public policy argument against binding municipalities to every staff representation to avoid litigation, Mr. Khaligian was specifically tasked with drafting the contract, distinguishing him from a random employee. Bear contends that Kenosha's three arguments are affirmative defenses not raised in its Answer, though they can be readily dismissed by the court for completeness.