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Louisa Lodging, LLC v. Falls Creek, Inc.

United States District Court, E.D. Kentucky, Northern Division

November 14, 2018




         This matter is before the Court upon Plaintiff Louisa Lodging, LLC's Motion for Partial Summary Judgment [Docket No. 44] and Defendant Falls Creek, Inc.'s Motion for Summary Judgment [Docket No. 54]. The motions have been fully briefed by the parties [Docket Nos. 44-1, 54-1, 55, 56, 59 and 65]. For the reasons set forth herein, the Court finds that Defendant is entitled to judgment as a matter of law.


         This cases arises from an almost twenty year lease of property in Louisa, Kentucky.

         A. The Lease

         Falls Creek, Inc. is a Kentucky entity that develops land at the intersection of U.S. Route 2');">23 and Kentucky Route 3 in Louisa, Kentucky. Louisa Lodging is a South Dakota Limited Liability Company. In early 1997, the parties entered into a lease. [Lease, Docket 1-3]. By the terms of the Lease, Louisa Lodging agreed to lease a portion of Falls Creek's property for a term of forty years for the purpose of constructing and operating a Super 8 Motel. Id. at p.l. According to Falls Creek, this relationship continued amicably for two decades.

         On June 2');">2, 2');">2016, Joel W. Albrecht, Treasurer of Louisa Lodging, LLC, sent a letter to Mark Clevenger of Falls Creek advising him that Louisa Lodging had entered into a Purchase and Sales Agreement with three individuals prospective purchasers for the Super 8 Motel. [Docket No. 61-9]. Those individuals were identified as Pramod Kumar Patel, Nilesh Patel and Vipul Parmar.

         The potential sale of the motel implicated several provisions of the Lease. First, the Lease states that Louisa Lodging "covenants and agrees that it will not sell, assign, sublease, mortgage, pledge or otherwise transfer or encumber.. .this Lease.. .without having first obtained the written consent of Falls Creek. [Docket No. 1-3, at p. 4].

         The Lease also provides that Falls Creek has the discretion to approve or disapprove any potential assignment of Louisa Lodging's interest. Id.

         The Lease requires Louisa Lodging to provide Falls Creek with any requested information to assist it with its evaluation of any potential assignee:

[Falls Creek] shall thereafter have at least sixty (60) days time to conduct an examination of the purchaser's credit standing, financial condition, business suitability to function as a lessee of [Falls Creek] and to evaluate the proposed sale of [Louisa Lodging's] business. In this respect, [Louisa Lodging] and purchaser(s) shall provide [Falls Creek] with all information as [Falls Creek] requests for purposes of making its examination of purchaser's credit standing.

[Docket No. l-3](emphasis added).

         The Lease also provides that if it is Falls Creek's "opinion, based upon objective and accepted business practices, such person does not have sufficient credit standing or business experience to function as a tenant in the manner required by this Agreement, then [Falls Creek] shall notify [Louisa Lodging] in writing of its opinion and may refuse to permit the contemplated sale". Id. at p. 6 (emphasis added).

         Further, per the express terms of the Lease, "[Falls Creek] shall not be held liable for any losses caused [Louisa Lodging] by such disapproval or conditioned approval." Id. at p. 6. (emphasis added).

         Finally, under the Lease, Louisa Lodging agreed to remain as a guarantor under the Lease. The Lease specifies that Louisa Lodging "shall remain fully liable for all of it's [sic] obligations hereunder, notwithstanding any such assignment or sublease." Id. at p. 5.

         B. The potential sale and assignment.

         Shortly after being notified of the potential sale, by letter dated June 16, 2');">2016, Clevenger sought clarification of the proposed transaction and certain financial information regarding the potential buyers, including certified financial statements of the purchasers, credit check and possible background check on each potential owner, detailed information concerning the experience of the proposed purchasers in operating motel properties and federal tax returns of the proposed purchasers for the past three years.. [Docket No. 61-10].

         Louisa Lodging sent several documents to Clevenger. Clevenger, however, felt that information provided was incomplete or otherwise inadequate. [Docket No. 61-12');">2]. Moreover, despite Louisa Lodging agreeing to guaranty the assignees, it informed Falls Creek that all of its assets would be liquidated after assignment, thus, according to ...

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