Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: LaQuinta prevails on cross motions for summary judgment in unilateral franchise termination dispute, (Sep 30, 2025)

By Justin Marcus Smith, J.D.

LaQuinta’s acknowledgment of a franchisee’s unilateral termination of their franchise agreement did not make the termination bilateral.

LaQuinta Franchising LLC (LQF) prevailed on cross-motions for summary judgment in a dispute with an erstwhile Minnesota franchisee operating in Indiana, held the federal district court in Newark, New Jersey, in an unpublished opinion. The franchise agreement (FA) had a New Jersey choice of law provision, and although it stated New Jersey conflict principles did not apply, there was no reason to apply Minnesota law instead. The parties chose to litigate in the forum of New Jersey, and both states had an equal interest in the outcome of the dispute, especially where the franchise was based in a third state, Indiana. New Jersey law made the FA damages provisions enforceable despite the franchisee’s arguments that Minnesota law applied to make liquidated damages unenforceable. LQF presented enough evidence of its damages claim to show it had actual damages, but New Jersey law also permitted enforcement of liquidated damages in the alternative. LQF was entitled to summary judgment for the franchisee’s unilateral termination of the franchise agreement (FA), where LQF acknowledgment of the termination did not make it bilateral. The court reserved on the amount of LQF damages, to be determined at a proof hearing (La Quinta Franchising LLC v. Shin Hospitality, Inc., No. 2:22-cv-05183-JKS-MAH (D.N.J. Sept. 29, 2025)).

Background. LaQuinta Franchising LLC (LaQuinta), a Nevada limited liability company based in New Jersey, complained that franchisee Shin Hospitality, Inc., a Minnesota corporation based in Minnesota, and two associated natural persons (collectively, Shin) failed to comply with the terms of the franchise agreement for a hotel in Merillville, Indiana. LaQuinta alleged Shin was liable for contractual fees and liquidated damages. Shin asserted LaQuinta breached the franchise agreement by failing to provide certain FTC required disclosures.

After closing on the purchase of the Merillville hotel in early 2021 and entering into the FA, which included a personal guaranty, Shin began operating the Merillville facility as a La Quinta hotel. However, in June 2022, Shin’s representative sent a letter to the Wyndham Hotel Group (Wyndham) director of contract compliance demanding termination of the FA so the Merillville facility would have “some chance of surviving by opening its reservation system independently.” A few days later, Shin’s lawyer sent a letter to LQF noticing Shin’s claims against LQF, proposing resolution, and requesting FA termination.

In August 2022, LQF and Wyndham sent a letter to Shin’s counsel acknowledging FA termination, denying Shin’s allegations of misconduct, and demanding Shin fulfill certain post-termination obligations. LQF filed the instant complaint the same day invoking diversity jurisdiction and requesting FA enforcement by (1) enjoining a revenue accounting; (2) finding Shin liable for liquidated damages of just over $800 thousand; (3) awarding actual damages to be determined; (4) awarding recurring fees of about $124 thousand; and (5) allowing collection of prejudgment interest, fees, and costs.

Shin filed an answer with third-party complaints and counterclaims against Wyndham Hotel Group LLC, Wyndham Worldwide Corporation, and LQF. On amendment, Shin added third-party claims against Travel & Leisure LLC and LQ Management LLC (LQM). The parties engaged in discovery, attempted but failed to resolve their dispute in mediation, and ultimately filed cross motions for summary judgment.

Choice-of-law. The court held the FA’s choice of law provision was enforceable such that New Jersey law applied to the dispute. Shin argued that a conflicts of laws analysis mandated Minnesota law, but under the Minnesota Franchise Act, the LQF liquidated damages provisions were unenforceable. Shin also asked for summary judgment on the LQF actual damages claim to the extent the LQF calculations did not satisfy Minnesota law.

The parties agreed that New Jersey law controlled the contract except in instances of conflict, to be resolved according to the Restatement (Second) of Conflicts of Laws (Restatement). The FA stated New Jersey conflict principles did not apply. The Restatement provided that the law of the chosen state, New Jersey, would apply unless either it had no substantial relationship to the parties or transaction or if applying it would contradict the fundamental public policy of another state with a materially greater interest in the outcome.

Shin argued the FA did not intend the New Jersey Franchise Practices Act to apply to any facility outside New Jersey, and Minnesota conflicts of law principles would apply because the FA stated New Jersey’s principles would not apply. In Shin’s view, Minnesota conflict factors favored Minnesota law where LQF contacted the defendants, all Minnesota residents; filed its FDD with Minnesota; directed the FA to one of the Shin natural persons in Minnesota on behalf of his Minnesota company; and contractually subjected itself to Minnesota’s franchise laws.

LQF countered that the FA choice of law provision did not preclude the court from conducting a conflicts analysis because New Jersey law would apply unless Shin showed that New Jersey had no interest or that Minnesota had the greater interest for its public policy. LQF said Shin could not satisfy the first prong because LQF is based in New Jersey, a substantial relationship; it could not satisfy the second prong because New Jersey was just as interested in the outcome as Minnesota; and the contractual choice of law was effective.

The court held that New Jersey conflicts of law analysis applied because the parties chose New Jersey as the forum for litigating the FA dispute and the court had diversity jurisdiction. The court acknowledged LQF was correct that being based in New Jersey meant LQF had a “substantial relationship” to defeat the exception under the Restatement. The court said LQF was also correct in its New Jersey conflicts of law analysis. As to the latter, New Jersey and Minnesota had similar interests here. Neither state interest outweighed the other, and that was especially true where the franchise was in a third state, Indiana.

Actual damages. The court found LQF presented sufficient evidence of its claim for actual damages. Shin argued LQF did not have any claims for any damages, calling for dismissal of counts 2 and 3, because LQF did not rely on any damages calculation other than liquidated damages. LQF countered the parties agreed to a calculation in a specific section of the FA consisting of average monthly accrued recurring fees during the immediately preceding 12 full calendar months multiplied by 36. LQF said it also presented evidence for its claim, documents reflecting gross revenue and percentage recurring fees for the 12 month period before FA termination. Shin essentially brushed it all off, but the court found LQF showed enough evidence of actual damages to deny Shin summary judgment. The court also observed there was really no need to calculate actual damages because New Jersey law applied making the liquidated damages clause enforceable in lieu of, not in addition to, actual damages.

Breach. The court held LQF was entitled to summary judgment on all counts of its complaint. First, contrary to what Shin argued, the record showed Shin unilaterally terminated the FA with their June 2022 letter. The court cited and reasoned that one party’s acknowledgment of the counterparty’s unilateral termination of a FA does not make the termination bilateral. Second, LQF established that the deficiencies Shin noted in the FA were “not sufficiently articulated” to apprise the Court of a genuine dispute of material fact about how the FDD caused Shin to acquiesce to the Franchise Agreement. In the court’s view, the dispute Shin raised about the FDD was just not enough to defeat the LQF motion for summary judgment, and there was no other dispute about the FA.

The court held LQF was also entitled to summary judgment on damages. Again, New Jersey law made the liquidated damages clause enforceable, and LQF was also entitled to recurring fees under the FA. The court noted it has enforced similar contracts. The FA also stated the non-prevailing party would be responsible for attorney fees and costs of suit. However, the court reserved on fixing the amount of damages, fees, and costs, pending a full accounting.

The Case is No. 2:22-cv-05183-JKS-MAH.

Judge: Semper, J.

Attorneys: David S. Sager (DLA Piper LLP) for La Quinta Franchising LLC. Michael A. Orozco (Price, Meese, Shulman & D'Arminio PC) for Shin Hospitality, Inc.

Companies: La Quinta Franchising LLC; Shin Hospitality, Inc.

Cases: FranchisingDistribution NewJerseyNews