Racine & Laramie, Ltd., Inc. v. Department Of Parks And Recreation

14 Cal. Rptr. 2d 335 (1992)


P is a concessionaire occupying and operating premises in Old Town San Diego State Historic Park under a contract, which bears many attributes of a long-term lease, with D. The contract was executed in 1974 for a term of 40 years, thus extending until the year 2014. In the 1980s P negotiated with D for modifications in the concession contract which would permit expanded operations of the premises. P contemplated operation of a restaurant and the on-premises sale of alcoholic beverages. Modification of a concession contract such as that here involved requires action by several state entities. P commenced doing this as early as 1980. An 'impact study' was presented by the D to the Commission in 1983 which reflected P's efforts to establish a restaurant and on-premises liquor sales. On March 31, 1983, the Commission passed a resolution authorizing D to permit the expansion of P's concession, provided the concession contract be amended to conform to other contracts which had been negotiated with other Old Town concessionaires and include 'such other terms as may be required.' Public Resources Code section 5080.20 requires that concession contracts involving certain floor figures of either investment or estimated gross sales, as included in this proposed contract modification, be submitted for review by the Legislature. On July 19, 1983, the Legislature authorized the renegotiation of the existing contract, directing that D 'attempt to renegotiate the existing rent for the sale of pipes and tobacco products.' The parties thereafter met at various times from 1983 through August 1985 and circulated various drafts of proposed amendments to the concession contract, but achieved no final agreement. After another 32 months, the parties renewed negotiations, resulting in a new written proposal from P, dated June 9, 1988. Instead of a 45- to 70-seat restaurant a 300-seat restaurant was proposed. P sought to close the tobacco store operation completely. D rejected the proposal on several grounds such as it wanted a quick food operation and also it would not accept full alcohol privileges. P sued D. P cited Paragraph 25 of the concession contract which provided: 'Notwithstanding any of the provisions of this contract, the parties may hereafter, by mutual consent, agree to modifications thereof or additions thereto in writing which are not forbidden by law. The State shall have the right to grant reasonable extensions of time to Concessionaire for any purpose or for the performance of any obligation of Concessionaire hereunder.' Pursuant to Paragraph 25, P takes the position that the bargaining had to be conducted in good faith. The jury found bad faith from D and awarded damages. D appealed.