Disney Loses Attempt To Dismiss Florida Lawsuit Challenging Reedy Creek Covenants Giving Disney Perpetual Control
Florida can continue to seek a declaration that the restrictive covenants put in place by then Disney-controlled Board of the Reedy Creek Improvement District allowing Disney control in perpetuity were void ab initio, potentially mooting much or all of Disney’s federal lawsuit.
We’ve been following the federal court lawsuit brought by Disney challenging actions of the DeSantis administration and Florida legislature over restrictive covenants put in place by the then Disney-controlled Board of the Reedy Creek Improvement District seeking to tie the state’s hands and maintain Disney control in perpetuity.
The state responded by dissolving the Reedy Creek district and installing its own Board under the Central Florida Tourism
Oversight District (CFTOD). This chart explains the confusing procedural history:
Disney claimed the state’s actions violated Disney’s First Amendment and other rights, and were retaliation for Disney’s public positions opposing state legislation regarding LGBTQ instruction in elementary schools.
The last we checked in on that federal lawsuit was on June 4, 2023, Judge In Disney v. DeSantis Case Disqualifies Himself.
Since then, the state defendants and CFTOD defendants filed motions to dismiss, to which Disney responded yesterday. Among other things, the defendants argue that the federal court should await determination in a lawsuit brought in state court seeking to declare the restrictive covenant agreements void.
In the waning days of its corporate kingdom, Disney rushed through a series of collusive agreements between itself and its puppet RCID board. The agreements purported to bequeath to Disney much of the power that the State itself had given RCID. The newly appointed CFTOD Board announced that it would not comply with Disney’s contracts because they were void under Florida law For good measure, the State also enacted a law barring CFTOD from complying with the agreements in any event.
Its last-ditch power grab having been foiled under state law, Disney now turns to federal constitutional law to sue the Governor, the Secretary of the Florida Department of Economic Opportunity, the CFTOD Board, and CFTOD’s Administrator. Its claims are meritless for many reasons, not least of which is that a special district cannot bind the State to transfer a portion of its sovereign authority to a private entity.
We haven’t previously covered that state lawsuit brought by CFTOD seeking to declare the Reedy Creek Districts’ restrictive covenants void ab initio, meaning a declaration that they were void at the time made, rendering irrelevant what happened later:
The DeSantis board’s lawsuit was filed Monday afternoon in Orange County and claims the agreements with Disney “reek of a backroom deal.” The previous board members failed to give proper notice about the agreements, lacked the authority to make them, unlawfully delegated governmental authority to a private entity and the agreements are unenforceable under Florida law, according to the suit.
“We will seek justice in our own backyard,” Martin Garcia, chair of the Central Florida Tourism Oversight District, said at Monday morning’s special meeting approving the lawsuit.
Late yesterday the state court judge denied the motion to dismiss or to stay:
A state judge on Friday denied Disney’s request to throw out a lawsuit seeking to nullify a loophole the entertainment giant used to wrestle back authority over its sprawling central Florida theme park….
The Central Florida Tourism Oversight District state lawsuit against Disney argues that the company’s February agreement giving it back authority “reek[s] of a back room deal,” violated state law and is null and void.
Ninth Circuit Court Judge Margaret Schreiber’s ruling represents a win for the Central Florida Tourism Oversight District, the board backed by Gov. Ron DeSantis that sued Disney in May.
The state lawsuit, however, is separate from the federal suit brought by Disney in April asserting that DeSantis and his hand-picked board violated the company’s First Amendment rights and retaliated against the company for speaking out against Florida’s Parental Rights in Education law, better known as “Don’t Say Gay,” which bans teachers of young students from leading instructions on gender identity and sexual orientation.
“Today’s decision has no bearing on our lawsuit in federal court to vindicate Disney’s constitutional rights, and we are fully confident Disney will prevail in both the federal and state cases,” Disney said in a statement Friday after the ruling.
The Court Order recited the history of the Disney deal and the nature of Disney’s federal court lawsuit, which was important to the decision because the Disney lawsuit:
Days before the Florida Legislature passed HB 9B, reforming RCID and its governance structure (and changing its name to the District’s), RCID and Disney entered into two agreements that are the crux of this case: (1) the 30-year “Walt Disney World Chapter 163 Development Agreement” (the “Development Agreement”); and (2) the related “Declaration of Restrictive Covenants” (the “Restrictive Covenants”) (collectively, the “Agreements”). The District alleges that Disney controlled RCID; that Disney itself drafted the Agreements and caused them to be adopted; and that the Agreements would assure Disney’s control of future land use and development within the District, including the District’s own lands, consistent with Disney’s corporate plans for future expansion.
The Restrictive Covenants contain a forum selection clause that expressly provides that any action seeking “any declaration with respect to any rights, remedies, or responsibilities” shall be submitted “exclusively” to the Circuit Court for Orange County, Florida or, failing that, “any other Court sitting in Orange County, Florida.” See Restrictive Covenants at p. 8, § 8.10.
At its public meetings on April 19 and April 26, 2023, the District considered the Agreements and the circumstances surrounding their adoption and concluded that they were void from inception, or void ab initio, for a number of legal reasons outlined in legislative findings that the Board adopted on April 26, 2023….
In its federal suit, Disney takes the position that the Agreements were valid at inception — demonstrating a bona fide dispute between the parties as to that legal issue….
Disney does not, however, (i) seek a declaration that the Agreements were valid at their inception or (ii) allege that the Agreements are void ab initio…. Disney seeks that declaration based solely upon allegations that the challenged laws violate provisions of the federal Constitution in various ways. Disney does not allege any state law claims in the federal lawsuit.
The Court went on to find that because the issue in the state case differed from the issue in the federal case, there was no need to decide which case took priority as first filed.
In the instant state court action, the District seeks a binding declaration that the Agreements were void ab initio when adopted on February 8, 2023, irrespective of the passage of SB 1604. The District seeks a ruling on the validity of the Agreements, regardless of the ability of Disney to currently enforce the Agreements.
The Court denied that the dispute was “moot” or that a stay was required in light of the different claims in the state and federal cases:
The federal court thus lacks “concurrent jurisdiction” over the District’s state court claims, so it would be an abuse of discretion for this Court to grant a stay….
This court need not address the principle of priority issue where it has determined the federal court lacks concurrent jurisdiction over the District’s state law claims….
In federal court, Disney’s five-count complaint contends that various public officials violated several provisions of the United States Constitution. Four of Disney’s counts depend upon the Agreements being valid, but Disney has pleaded no cause of action for the federal court to declare them so. Rather, Disney’s complaint assumes and asks the federal court
to accept that the Agreements are valid. In contrast, in this state court action, the District claims that the Agreements are invalid from their inception as a matter of Florida law….
In an ironic twist, the Court noted that the underlying restrictive covenants had a forum selection clause requiring any litigation in Orange County, Florida. Since Disney sought to enforce those covenants, it couldn’t deprive the District home-venue:
…. delaying the resolution of this case pending the federal litigation would deny to the District its home-venue privilege. See Carlile v. Game & Fresh Water Fish Comm’n, 354 So. 2d 362, 363-64 (Fla. 1977). Ironically, such a ruling would allow Disney to escape the plain terms of the forum selection clause contained in one of the Agreements that Disney contends is valid under Florida law.
This was only denial of a motion to dismiss, not a ruling on the merits. But even allowing the lawsuit to proceed is an initial win for Florida. If the state wins the state court lawsuit on the merits, it would mean that much or all of Disney’s federal lawsuit goes away.
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