Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS—D.N.J.: Wingate Inns alleges franchise assignee failed to comply with post-termination obligations, (Aug 8, 2016)

By Michael Menzhuber, J.D., LL.M.

A company and its constituent members breached the franchise and note agreements that they assumed from a former Wingate Inns franchisee by failing to pay recurring fees and to comply with a post-termination requirement to pay liquidated damages and the balance on a development incentive note, according to a complaint filed in the federal district court in Newark, New Jersey (Wingate Inns International, Inc. v. Vistacon Management Co., August 5, 2016).

According to the complaint, Wingate Inns International (WII) entered into an assignment and assumption agreement with Lakulish, LLC and Vistacon Management Company in which Vistacon assumed Lakulish’s rights and obligations under a franchisee agreement to operate a Wingate guest lodging facility and a development incentive note. Pursuant to the franchise agreement, Vistacon was required to, among other things, pay various recurring fees and, in the event the agreement was terminated, liquidated damages and the principal balance of the note. A guaranty of Vistacon’s obligations was provided by Narendra R. Patel and Vistacon’s other constituent members.

The complaint further states that Vistacon unilaterally terminated the franchise agreement when it ceased operating its lodging facility as a Wingate guest lodging facility. Although WII subsequently advised Vistacon that it was required to pay liquidated damages, all outstanding recurring fees, and the outstanding balance of the note, neither Vistacon nor its constituent members made any payments to WII.

WII asserts claims for breach of the franchise agreement and note, as well as unjust enrichment. The action seeks: (1) an accounting relating to gross revenue earned; (2) liquidated damages or, in the alternative, actual damages; (3) unpaid recurring fees; and (4) the outstanding principal balance on the note.

The case is No: 2:16-cv-04773-WJM-MF.

Attorneys: Bryan P. Couch (LeClairRyan) for Wingate Inns International, Inc.

Companies: Wingate Inns International, Inc.

News: FranchisingDistribution NewJerseyNews