The opinion of the court was delivered by: Dubois, J.
Alaska claims that it had a right of election to purchase the
partnership interests of its partners MSI and One Reading in the Aramark
Tower upon receipt of a bona fide offer from a third party for the
building. Plaintiff City of Philadelphia, Trustee Under the Will of
Stephen Girard, Deceased, Acting by the Board of the Directors of City
Trust ("the Board," "Girard Estate" or "Purchaser") made such an offer by
entering into an agreement of sale with the Seller dated August 4, 2000.
In response, Alaska attempted to exercise its alleged right of election.
This action followed.
Plaintiff seeks a preliminary injunction ordering Seller to
specifically perform its obligations under the agreement of sale between
Seller and Purchaser discussed infra and proceed with the sale of the
building to plaintiff. Alaska argues that the Court should deny
plaintiff's motion in its entirety or, at this preliminary stage, enjoin
the sale to Alaska pending a full trial on the merits. For the following
reasons, plaintiff's Motion for Preliminary Injunctive Relief will be
granted in part and denied in part. The sale to Alaska will be enjoined;
the remaining relief sought in the Motion for Preliminary Injunctive
Relief will be denied without prejudice.
Plaintiff filed a Verified Complaint in the Philadelphia County Court
of Common Pleas on October 10, 2000 against MSI and One Reading. Those
defendants removed the action to this Court on October 11, 2000 pursuant
to 28 U.S.C. § 1441. Plaintiff filed a Motion for Temporary
Restraining Order and Preliminary Injunctive Relief in this Court on
October 12, 2000. By Order dated October 13, 2000, this Court granted
Alaska's oral motion to intervene as a party defendant, and, by agreement
of the parties, ordered settlement on the purchase of the building
postponed until the Court decided the Motion for Preliminary Injunctive
Relief. Plaintiff's Motion for a Temporary Restraining Order was denied
without prejudice in view of that agreement.
The parties filed a Joint Motion for Entry of Confidentiality Order
Pursuant to Federal Rule of Civil Procedure 26(c)(7) on November 13,
2000. On November 16, 2000, defendants One Reading and MSI and intervenor
defendant Alaska filed Motions for Summary Judgment; plaintiff filed a
Memorandum in Opposition to the Motions for Summary Judgment on November
22, 2000. The Court held a hearing on plaintiff's Motion for Preliminary
Injunctive Relief on November 30, 2000. Intervenor defendant Alaska then
filed a Motion for Leave to Amend Answer to Assert Additional Affirmative
Defense on December 8, 2000. On December 12, 2000, the Court held oral
argument on plaintiff's Motion for Preliminary Injunctive Relief, the
motion presently before the Court.
With respect to the contracts at issue in this case — an
Agreement and Consent ("Consent") and an Agreement of Purchase and Sale
("Sale Agreement") — the Court will give deference to the parties'
choices of law as embodied in those agreements. The Consent expressly
provides that it "shall be governed by the laws of the State of Illinois
without regard to conflicts of laws rules." Consent ¶ 8. The Sale
Agreement also contains a choice of law clause — it is to be
governed by the laws of the Commonwealth of Pennsylvania. Sale Agreement
"Both Pennsylvania law and the Restatement of Conflict of Laws provide
that the first question to be answered in addressing a potential conflict
of laws dispute is whether the parties explicitly or implicitly have
chosen the relevant law." Assicurazioni Generali, S.P.A. v. Clover,
195 F.3d 161, 164 (3d Cir. 1999). If the parties have agreed to the
applicable law, "[c]hoice of law provisions in contracts will generally be
given effect." Smith v. Commonwealth Nat'l Bank, 384 Pa. Super. 65, 68,
557 A.2d 775, 777 (Pa.Super.Ct. 1989). As the parties in this case have
offered no reason why their contractual choices should not be given
effect, this Court will respect the parties' choices and construe the
Consent in accordance with Illinois law and the Sale Agreement under
Pennsylvania law. In addition, the Court will evaluate agency issues
pertaining to the Sale Agreement under Pennsylvania law.
IV. STANDARD FOR INJUNCTIVE RELIEF
Preliminary injunctive relief is appropriate where "(1) the plaintiff
is likely to succeed on the merits; (2) denial will result in irreparable
harm to the plaintiff; (3) granting the injunction will not result in
irreparable harm to the defendant; and (4) granting the injunction is in
the public interest." Maldonado v. Houstoun, 157 F.3d 179, 184 (3d Cir.
1998) (citing Merchant & Evans, Inc. v. Roosevelt Bldg. Prods. Co.,
Inc., 963 F.2d 628, 632-33 (3d Cir. 1992)). See also Wright v. Columbia
University, 520 F. Supp. 789, 792-93 (E.D.Pa. 1981) ("To prevail on its
motion for a temporary restraining order and a preliminary injunction,
plaintiff must demonstrate that irreparable injury will occur if the
relief is not granted until a final adjudication on the merits can be
made, that there is a reasonable probability of success on the merits,
and that the possibility of harm to the non-moving party will be minimal
and that harm to the public, when relevant, will not be likely.").
Under Federal Rule of Civil Procedure 65, "the court may order the
trial of the action on the merits to be advanced and consolidated with
the hearing of the application" for a preliminary injunction.
Fed.R.Civ.P. 65(a)(2). In this case, the parties could not reach
agreement on this issue and advised the Court that some discovery would
be required before scheduling a trial on the merits. Accordingly, in this
Memorandum, the Court only analyzes issues pertinent to plaintiff's
Motion for Preliminary Injunctive Relief. In addressing those issues, the
Court will analyze the applicable law and determine whether plaintiff
established the elements necessary for the issuance of a preliminary
injunction, focusing on likelihood of success on the merits and
On November 17, 1999, the Telephone Real Estate Equity Trust
("TREET"), Heitman Real Estate Fund II ("HREF")
and Alaska,*fn1 entered
into the Consent relating to the marketing and potential sale of the
Aramark Tower, a building owned and maintained by the partnerships they
had previously created — MSI and One Reading. The Consent granted
Alaska an election to purchase the partnership interests*fn2 of the
remaining partners of Seller — TREET and HREF — upon receipt
of a bona fide third-party offer for the purchase of the Aramark Tower.
The Consent further provided that the partners would cause their
partnerships, MSI and One Reading, to market the property according to the
terms of the Consent and that Heitman Capital Management LLC ("Heitman")
would prepare a form purchase agreement to be used by prospective
purchasers. Under the terms of the Consent, Heitman was required to give
written notice to Alaska
of the existence of a Qualified Third-Party Offer that
TREET and HREF, have approved, which notice (the
"Offer Notice") must include a copy of the Qualified
Third Party Offer and clearly state that each of TREET
and HREF has approved the Qualified Third-Party
Offer. . . . For purposes of this Agreement,
"Qualified Third-Party Offer" means an offer to
purchase the Property that is in a form satisfactory
to Heitman . . . that is sufficient to constitute a
"Bona Fide Offer" within the meanings of section 6 of
the Partnership Agreements. . . .
Consent ¶ 3(a) (Ex. P-16). The Consent does not contain a
provision specifying the time by which Heitman must notify Alaska of the
existence of an offer. It provides, however, that Alaska has an election
to purchase interests in the partnerships as follows: "Alaska may elect
by written notice to Heitman at any time within ten (10) business days
following its receipt of such Offer Notice, to purchase all Partnership
Interests of TREET and HREF . . . except that in calculating the purchase
price there shall be a 1% reduction from the purchase price" as stated in
the offer. Consent ¶ 4(a) (Ex. P-16).
After marketing the property, MSI and One Reading, through their agent
Heitman, entered into a Sale Agreement dated August 4, 2000 with
plaintiff, Girard Estate. In describing Alaska's right of first refusal,
the Sale Agreement recited that a partner of Seller "has the right to
match the offer to purchase the Property and Leasehold made by Purchaser
to Seller as contemplated herein . . . ." Sale Agreement ¶ 3.5, at
9 (Ex. P-5).
Upon execution of the Sale Agreement with plaintiff, Heitman provided
Alaska with notice of the Board's offer and a copy of the Sale Agreement
as required by paragraph 3(a) of the Consent by letter sent via United
Parcel Service ("UPS") on August 4, 2000. Stipulated Facts ¶ 23. UPS
delivered the Sale Agreement to Alaska on August 9, 2000. Stipulated
Facts ¶ 24. Thereafter, by facsimile sent August 22, 2000, Alaska
purported to exercise its right of election to purchase its partners'
partnership interests as set forth in paragraph 4(a) of the Consent. See
Ex. P-6 (facsimile letter from Peter M. Naoroz to Thomas D. McCarthy and
Howard J. Edelman). Heitman then informed Girard Estate, by letter dated
August 23, 2000, that "Seller has received a notice from the Right of
First Refusal Party timely exercising the Right of First Refusal." Ex.
P-6 (letter from Howard J. Edelman to the Girard Estate).
Plaintiff contends that defendants MSI and One Reading breached the
Sale Agreement by accepting an offer from Alaska that does not match the
offer for the Aramark Tower submitted by the Board. Specifically,
plaintiff contends that Alaska's offer is materially different in that it
does not match plaintiff's offer and that because Alaska's offer did not
match the offer made by the Board, the right of first refusal was not
timely exercised. Due to this alleged breach, plaintiff argues that the
Court should order defendants to sell the Aramark Tower to plaintiff in
accordance with the Sale Agreement.
In response, Alaska contends that its offer does match plaintiff's
offer and that its rights in the property established by the Consent, a
prior contract, are superior to the Board's claim under the Sale Agreement
for the Aramark Tower. Alaska also argues that if the right of first
refusal as described in the Sale Agreement and the right of election
clause set forth in the Consent are inconsistent, the inconsistent
provisions in the Sale Agreement are invalid — that Heitman had no
authority to enter into an agreement that modified Alaska's rights and
that any unwritten modifications to the Consent are void under the
statute of frauds. Alaska further contends that the Court should not
order the sale to plaintiff at this preliminary stage.
The Court first addresses the question whether the offer to purchase
the Aramark Tower made by Alaska matches the offer made by the Board.
Second, the Court turns to the question whether the partnerships are
bound by the Sale Agreement that was executed by their agent, Heitman.
Third, the Court analyzes plaintiff's argument that defendants and Alaska
should be equitably estopped from denying the representations contained
in the Sale Agreement. Fourth, the Court will evaluate whether Alaska, by
approving the Sale Agreement, modified the Consent. Finally, the Court
discusses defendants' argument that Girard Estate did not timely notify
the partnerships of its intention to seek specific performance as
required by the Sale Agreement.
B. Did Alaska's offer match that of the Purchaser?
The Court first turns to the question of whether Alaska's offer matched
the offer to purchase the Aramark Tower made by the Board. At the
preliminary injunction hearing, plaintiff presented evidence that the
representations in the Sale Agreement regarding the right of first
refusal and the right of election set forth in the Consent and subsequent
offer by Alaska do not match.
The Sale Agreement with Girard Estate provides as follows:
Right of First Refusal. Seller represents to Purchaser
(i) that a partner of Seller (the "Right of First
Refusal Party") has the right to match the offer to
purchase the Property and Leasehold made by Purchaser
to Seller as contemplated herein ("Right of First
Refusal"), and (ii) that said Right of First Refusal
may be exercised by the Right of First Refusal Party
at any time within ten (10) business days after it
receives a copy of this Agreement. Seller will deliver
a copy of this Agreement to the Right of First Refusal
Party within two (2) business days after this
Agreement has been fully executed by both parties. As
a condition to Seller's obligation to consummate the
transaction contemplated under this Agreement, either
(x) the period during which the Right of First Refusal
may be exercised by the Right of First Refusal Party
shall have expired, with no such exercise having taken
place, or (y) the Right of First Refusal period shall
have been effectively waived, or, pursuant to the
terms of the Right of First Refusal, is deemed
waived, by the Right of First Refusal Party. If the
Right of First Refusal is exercised by the Right of
First Refusal Party within the period during which the
Right of First Refusal may be exercised, ...