Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Hotel franchisee allegedly failed to pay liquidated damages for premature termination of franchise, (Aug 12, 2015)

By Linda O’Brien, J.D., LL.M.

A former franchisee of hotel chain Super 8 failed to pay liquidated damages and outstanding recurring fees as required under the franchise agreement for its premature unilateral termination of the franchise agreement, according to a complaint filed in the federal district court in Newark, New Jersey (Super 8 Worldwide, Inc. v. Omkar Partnership, August 11, 2015).

Super 8 Worldwide, Inc. (SWI) is one of the largest budget hotel chains, with hotels in the United States and Canada.

The complaint states that, in October 1998, SWI entered into a franchise agreement with Omkar Partnership for the operation of a Super 8 guest lodging facility in Sacramento, California. Pursuant to the agreement, Omkar was obligated to operate the facility for a 20-year term. Omkar was also required to make certain periodic royalty payments and submit monthly reports disclosing the amount of gross room revenue earned at the facility. In the event of the termination of the agreement, Omkar agreed to pay liquidated damages to the franchisor in accordance with a specified formula. Effective as of the date of the agreement, Dinesh Patel and Ramesh Patel provided SWI with a guaranty of Omkar’s obligations under the franchise agreement.

According to the complaint, in January 2011, Omkar notified SWI in an email of its intent to terminate the license agreement, effective March 2011. SWI acknowledged Omkar’s intent to unilaterally terminate the franchise agreement and advised Omkar that it was required to pay SWI the sum of $29,000 as liquidated damages for premature termination of the agreement. In March 2011, Omkar unilaterally terminated the franchise agreement by ceasing to operate the facility as a Super 8 motel.

The complaint also alleges that, upon termination of the franchise agreement, Omkar became obligated to pay SWI liquidated damages of $29,000 as calculated under the agreement, as well as the outstanding recurring fees through the date of termination of over $67,000. Notwithstanding SWI’s demand for payment, Omkar failed to pay SWI the amounts due under the franchise agreement.

The plaintiff asserts claims for breach of contract and seeks liquidated and actual damages, an accounting, interest, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:15-cv-06110.

Attorneys: Bryan P. Couch (LeClairRyan) for Super 8 Worldwide, Inc.

Companies: Super 8 Worldwide, Inc.; Omkar Partnership

News: FranchisingDistribution NewJerseyNews