Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Ramada franchisee sued for liquidated damages after closing hotel without consent, (Aug 10, 2016)

By Elizabeth C. Pope, J.D.

A limited liability company and its sole member breached the franchise agreement and separate guaranty entered into with Ramada Worldwide when they permanently closed the Branson, Missouri Ramada without paying liquidated damages and recurring fees, according to a complaint filed in the federal district court in Newark, New Jersey (Ramada Worldwide Inc. v. Morris Hospitality, LLC, August 9, 2016).

According to the complaint, Ramada Worldwide entered into a franchise agreement with Morris Hospitality LLC under which Morris Hospitality was obligated to operate the Branson, Missouri Ramada for a 15-year period. The sole member of the limited liability company provided Ramada with a written guaranty of Morris Hospitality’s obligations under the franchise agreement.

The complaint further states that Morris Hospitality unilaterally terminated the franchise agreement when it permanently closed the hotel. Although Ramada subsequently advised Morris Hospitality that it was required to pay liquidated damages and all outstanding recurring fees, neither Morris Hospitality nor its member made any payments to Ramada.

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

The case is No. 2:16-cv-04834-ES-MAH.

Attorneys: Bryan P. Couch (LeClairRyan) for Ramada Worldwide Inc.

Companies: Ramada Worldwide Inc.; Morris Hospitality, LLC

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