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Wyndham Hotel Group Int'l, Inc. v. Silver Entm't LLC

United States District Court for the Southern District of New York

March 28, 2018, Decided; March 28, 2018, Filed

15-CV-7996 (JPO)

Opinion

OPINION AND ORDER

J. PAUL OETKEN, District Judge:

In 2015, the Veneto Hotel & Casino, a Wyndham franchise hotel, was seized by the Panamanian government for failure to pay gaming taxes, leading Wyndham to terminate its franchise agreement. Wyndham then sued for damages arising out of the termination, and the defendants counterclaimed for Wyndham's alleged breach of its obligations as franchisor. Wyndham now moves for summary judgment on both sets of claims. For the reasons that follow, the motion is granted in part and denied in part.

I. Background

The following facts are taken from parties' respective statements of material facts and are not subject to a genuine dispute unless otherwise noted.1

A. The 2007 Franchise Agreement

The Veneto Hotel & Casino is located in Panama City, Panama. [*3]  (Dkt. No. 118 ¶ 7.) Brothers Alexander and Andrew Silverman bought the hotel through one of their corporate entities for $85 million in 2006. (Dkt. No. 118 ¶ 12.) In March 2007, Silver Entertainment LLC ("Silver"), jointly owned by the Silverman brothers, entered into a franchise agreement with Plaintiff Wyndham Hotel Group International, Inc. (the "Franchise Agreement"). (Dkt. No. 118 ¶¶ 1-4, 19.) The Veneto hotel reopened as the "Veneto — A Wyndham Grand Hotel" five months later. (Dkt. No. 118 ¶¶ 19, 46.)

As relevant to this case, the Franchise Agreement imposed two financial obligations on Silver. First, it required Silver to pay Wyndham various recurring fees during the ten-year term of the franchise, including royalties, a marketing fee, reservation system fees, and an international sales fee. (Ex. 7 §§ 3, 28; Dkt. No. 118 ¶¶ 20-24, 16-27.) Second, it allowed Wyndham to terminate the agreement for a variety of reasons—including an uncured default on past-due fees or the franchisee's loss of "ownership or possession" of the hotel—and gave Wyndham the right to collect a lump-sum payment as liquidated damages in the event of premature termination. (Ex. 7 §§ 17(B)(1), 17(C), 18(E); Dkt. No. 118 ¶¶ 31-33.) In [*4]  a standalone guaranty attached to the Franchise Agreement, Silver "absolutely, unconditionally and irrevocably" guaranteed that all of its "obligations under the [Franchise] Agreement" would be "punctually paid and performed." (Ex. 7 at SE0060019; Dkt. No. 118 ¶ 41.)

Shortly after acquiring the Veneto hotel, Silver transferred ownership of the property to its subsidiary corporation, Veneto Hotel & Casino, S.A. ("Veneto"). (Dkt. No. 118 ¶¶ 5-7, 43.) Veneto subsequently took out a $60 million loan from the German American Capital Corporation ("GACC") (Dkt. No. 118 ¶ 45), and separately entered into an Assignment and Assumption Agreement ("Assignment") with Wyndham and Silver. (Dkt. No. 118 ¶ 43.) Under the Assignment, Veneto assumed all of Silver's "rights, benefits and obligations" under the Franchise Agreement. (Ex. 8 ¶ 2; Dkt. No. 118 ¶ 43.) The Assignment did not modify the guaranty, which "remain[ed] in place[] without any further conditions or alterations." (Ex. 8 ¶ 2; Dkt. No. 118 ¶ 44.)

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2018 U.S. Dist. LEXIS 52144 *

WYNDHAM HOTEL GROUP INTERNATIONAL, INC., Plaintiff, -v- SILVER ENTERTAINMENT LLC, et al., Defendants.

CORE TERMS

franchise agreement, hotel, sales, summary judgment, reservations, termination, damages, counterclaims, genuine dispute, recurring, breached, franchise, allegations, franchisor, training, default, obligations, reservation system, material fact, website, Marketing, calculated, franchisee, credits, parties, Gaming, liquidated damages, outstanding, terms, grant summary judgment