WOODLAND, Calif. (CN) – U.S. Bank used a protest at the University of California, Davis, campus to renege on its promise to keep a bank branch open there, the school claims in court.
After large protests over its presence on campus in January and February 2012, U.S. Bank sent the Regents of the University of California a letter on March 1, providing notice of termination of their 10-year lease agreement.
“The letter contended that because the student protesters were occupying the hallway immediately outside the bank branch on the branch (sic), the bank had been constructively evicted,” according to the complaint in Yolo County Superior Court. “The bank alleged that it was the regents’ responsibility to remove the protesters from the hallway.”
But in the May 2010 lease, “the bank agreed that it would be exclusively responsible for security at the branch, and that the regents would have no responsibility for providing security.”
“The bank did not request – and the regents did not agree – that the regents would exercise governmental power (such as police power) at the behest of the bank,” the lawsuit states. “The bank agreed that the regents has ‘no obligation whatsoever to provide’ security measures. The bank ‘assumes all responsibility for the protection of the bank, its agents and invitees from acts of third parties.’ The lease does not obligate the regents to indemnify the bank for the costs of providing security.”
One provision of the lease allegedly requires the bank to provide 30 days’ written notice of any alleged, so that the regents have an opportunity to conform.
Despite this agreement, the bank sent the regents a letter on Jan. 13, 2012, contending “that the regents committed a ‘severe breach’ of the lease when a group of protesters including a UC Davis faculty member, conducted a ‘sit-down’ in the lobby of the branch,” according to the suit.
Students began protesting the bank in the wake of a demonstration against tuition hikes that culminated in a widely criticized pepper-spraying of students on Nov. 18. A group recently nicknamed as the banker’s dozen were ultimately arrested on misdemeanor charges for the January sit-in.
“The bank alleged that the regents were in some fashion responsible for the actions of the protesters from the branch and that the bank was ‘forced to employ its own security guard,'” according to the regents.
To invoke the 30-day cure period, the bank said that the sit-down violated the lease’s covenant of quiet possession.
“The regents does not have the power to control the behavior of individuals who are not its agents or who are not acting within the course and scope of their employment with the regents,” according to the complaint. “Students are not employees or agents of the regents and conducting a “sit-down” at a bank is not within the course and scope of any faculty member’s employment at UC Davis.
“Although the police tried to dissuade the protesters from continuing their ‘sit-down’ at the bank, the protesters refused to comply. After the police confrontations with protesters at UC Davis in November 2011, the police were especially careful to avoid escalating conflict. Based on experience, the police formed the opinion that trying to physically remove protesters posed an unacceptable risk of emboldening the protesters and others to act violently, or to cause the situation to deteriorate in other ways that would be more difficult for the police to manage.
“The bank asked the regents to ignore the professional judgment of the police and to order the physical removal of the protesters, no matter the consequences although the regents is a government entity, it entered into the lease with the bank solely in a normal proprietary capacity. The regents cannot exercise its governmental authority contrary to the professional judgment of the police just to serve its commercial interest with the bank.
While the bank claimed quiet possession, the regents say that the sit-in actually amounted “to trespass on the leased premises by persons other than the landlord.”
“The covenant of quiet possession is not a warranty against acts of trespass by third parties,” the lawsuit states. “To the extent the protesters interfered with the bank’s business, the bank could have suspended its obligation to perform under the lease for a period of time. The actions of third parties do not affect the regents’ obligations under the lease or cause a breach of the covenant of quiet possession.
The regents say it fulfilled its duty under the notice of cure because “there were no more ‘sit-down’ protests inside the branch” after receipt of the Jan. 13 letter.
“After the bank’s letter of January 13, 2012, student protesters began to occupy the hallway immediately outside the branch to protest the bank’s presence on the UC Davis campus,” according to the complaint.
“As a public employer, the regents has no ability to curtail the exercise of First Amendment rights by students, faculty, or staff,” the regents added. “However, the regents asked for the bank’s assistance and collaboration in addressing the problems created by the protesters. The bank refused to cooperate. For example, in an effort to gather evidence to prosecute the protesters, the police asked to interview bank employees, but the bank employees were instructed by their superiors to not cooperate with the police. The bank has also failed to follow through on the regents’ request for a coordinated public relations initiative; refused the regents’ request to engage in mediation with student protesters; and has refused to exercise any civil remedies against the offending protesters, such as restraining orders or injunctions, that were available to the bank, which had accepted responsibility under the lease for security measures at the premises.”
Since the subsequent protests did not amount to trespassing, the regents says the bank should have provided it with a new alleged notice of default.
“The student protests outside the branch are acts of force majeure, similar to a strike or other civil disturbance,” according to the complaint. “The lease does not contain a clause that would relieve the bank of its contractual obligations during the occurrence of force majeure events, as do some of the other financial services agreements.”
Claiming that the bank has repudiated its obligations under the lease and financial services agreements, the regents says it deserves compensation for damages and should be “excused from further performance of further obligations under the agreements.”
It is represented by J. Daniel Sharp of Crowell & Moring in San Francisco.