Choice Hotels Intern., Inc. v. Madison Three, Inc.

• Decision Date: 07 February 2000
• Docket Number: Civil No. AMD 98-634.
• Citation: 83 F.Supp.2d 602
• Parties: CHOICE HOTELS INTERNATIONAL, INC., Plaintiff, v. MADISON THREE, INC., Herbert G. Ingram, R. Norman Peters and David G. Massad, Defendants.
• Court: U.S. District Court — District of Maryland

83 F.Supp.2d 602

CHOICE HOTELS INTERNATIONAL, INC., Plaintiff, v. MADISON THREE, INC., Herbert G. Ingram, R. Norman Peters and David G. Massad, Defendants.

Civil No. AMD 98-634.

United States District Court, D. Maryland.

February 7, 2000.

James G. Healy, Silver Springs, MD, for Plaintiff.

Steven M. Pavsner, Joseph, Greenwald & Laake, Greenbelt, MD, Roy A. Bourgeois, Bourgeois Dresser & White, Worcester, MA, for defendants.

MEMORANDUM

DAVIS, District Judge.

The plaintiff, Choice Hotels International, Inc., filed suit against defendants Madison Three, Inc., Herbert G. Ingram, R. Norman Peters and David G. Massad (together, "Madison") for damages arising out of the termination of a franchise agreement related to the operation of a hotel in Worcester, Massachusetts, under Choice's Clarion® trademark.¹ Jurisdiction is based on diversity of citizenship and the parties agree that Maryland law applies.

Discovery has been completed and Choice has filed a motion for summary judgment. The motion has been fully briefed and no hearing is needed. For the reasons stated below, the motion for summary judgment shall be granted in substantial part.

I

Choice alleges Madison breached the franchise agreement (the "Agreement") entered into by the parties on or about March 29, 1990, by failing to pay monthly service, marketing, and advance reservation fees as required by the Agreement. There is no dispute that Madison acted unilaterally and ceased making the payments required under the Agreement. Thus, Choice has established a prima facie case of breach of contract, and the burden is upon the defendants to show that, based upon the evidence they have amassed in the context of these summary judgment proceedings, a reasonable jury could conclude by a preponderance of the evidence that Choice is not entitled to recover. See Kruvant v. Dickerman, 18 Md.App. 1, 305 A.2d 227, 229 (1973)(noting that Maryland follows the general rule that "in either breach of contract or tort cases ..., the burden of proof is on the ... party who asserts the affirmative of an issue, and that burden never shifts"); and see id. ("An affirmative defense is one which directly or implicitly concedes the basic position of the opposing party, but which asserts that notwithstanding that concession the opponent is not entitled to prevail because he is precluded for some other reason.").

In this case, the "some other reason" relied upon by Madison is that Choice itself breached the Agreement, and thereby relieved Madison of its duty of performance. See Defs.' Opp. Mot. Summ. Judg. at 1 ("This case is about [Choice's] ... breach of contract and purposeful abandonment of the `Clarion Suites' franchise and, more particularly, the lone remaining Massachusetts franchise."). When viewed through the prism of Fed.R.Civ.P. 56, therefore, Madison is obliged at this stage of the case to project admissible evidence sufficient, if believed, to persuade a reasonable juror that its assertion that Choice committed one or more material breaches of the Agreement is more likely so than not so. Beard Plumbing & Heating, Inc. v. Thompson Plastics, Inc., 152 F.3d 313, 315 (4th Cir.1998)("[T]he moving party is entitled to summary judgment if the nonmoving party has failed to make a sufficient showing on an essential element of the case with respect to which the non moving party has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)."). For the reasons set forth below, Madison has failed to make the necessary showing. Accordingly, Choice is entitled to judgment as a matter of law.

II

A significant reason that Madison is unable to survive summary judgment lies in the deficient affidavit of its principal, Herbert G. Ingram. Rule 56 affidavits must contain factual matters and other information "`such ... as would be admissible in evidence.' Fed.R.Civ.P. 56(e)." Sakaria v. Trans World Airlines, 8 F.3d 164, 171 (4th Cir.1993), cert. denied, 511 U.S. 1083, 114 S.Ct. 1835, 128 L.Ed.2d 463 (1994). In blatant violation of this longstanding rule, the Ingram affidavit is an extraordinary mosaic of conclusory, impressionistic, argumentative suppositions, describing intuitive "divinations" about what Madison "perceived" and thus "concluded" about Choice and its intentions, many of such conclusions having been shown by competent evidence to be demonstrably incorrect. In short, the Ingram affidavit is a masterpiece of lawyerly craftsmanship wholly lacking, in most respects, the essential characteristics of a proper Rule 56 affidavit.

Accordingly, Choice having timely moved to strike the Ingram affidavit, that motion is granted in significant part.² Specifically, the following portions of the Ingram affidavit are stricken: (1) first sentence of ¶ 4; (2) all of ¶ 5; (3) last sentence of ¶ 6; (4) all of ¶ 8; (5) second sentence of ¶ 9; (6) all of ¶ 10; (7) first sentence of ¶ 11; (8) first two sentences of ¶ 12; (9) first sentence of ¶ 13; (10) third, fourth and fifth sentence of ¶ 14; (11) third sentence of ¶ 15; (12) last sentence of ¶ 16; (13) all of ¶ 17; (14) all of ¶ 18; (15) last sentence of ¶ 19. This ruling is embodied graphically in the "redlined" copy of the affidavit which is attached to this Memorandum.

III

Without the deletions from the Ingram affidavit identified above, Madison's version of the events leading up to its unilateral decision to cease its payments to Choice is incoherent. Set forth in this part III of the memorandum, therefore, is a recitation of facts using as little of the deleted portions of the Ingram affidavit as is possible, while giving a coherent account of the parties' dispute.³

Under the Agreement, Choice licensed the hotel owned by Madison in Worcester, Massachusetts (the "Hotel") to participate in and operate under the "Clarion" system. Accouterments of participation in the Clarion franchise system include, among other benefits, use of the Clarion Suites name, a proprietary mark owned by Choice, exposure resulting from Choice's promotion and advertising of the Clarion mark and the use and benefit of the advance registration system operated by Choice.

Pursuant to a "no cause" termination clause, either party could opt out of the Agreement on its fifth, 10th or 15th anniversary. See the Agreement, ¶ 3(b). The first opt-out date was June 17, 1995.

The Hotel is somewhat unique among hotel properties operating within the Choice system for two reasons. First, the Hotel consists of suites intended to be let for longer than one- or two-night stays. The "Clarion Suites" brand of hotel licensed by Choice is positioned for this type of market, targeting guests who require long-term accommodations. Second, in addition to units within the Hotel available for letting are privately owned condominium units.

In early 1995 Madison became concerned that Choice was not promoting the "Clarion Suites" brand as actively as it had promised under the terms of the Agreement. Under the terms of the Agreement, Madison was obligated to pay a monthly marketing fee, the proceeds of which Choice covenanted to use "for the purpose of national and international advertising, promotion, publicity, market research and other marketing programs and related activities for the Clarion name, reputation and System as [Choice] in its sole discretion may from time to time reasonably determine to be necessary and appropriate." Agreement, ¶ 4(b) (emphasis added). Implicit in Madison's view that Choice was obligated to specifically promote the Clarion Suites brand is Madison's belief that such advertising was "reasonably ... necessary and appropriate" under the Agreement.⁴

The concern described above led Madison to consider the exercise of its right to opt out of the Agreement under the no cause termination clause on the first available date, July 17, 1990. Madison's concern that Choice was not promoting the Clarion Suites brand was based on its having an unexplained "perception" that it was so. This perception was based in part on a belief (shown to be demonstrably false in the record) that Choice, by merger or other process of acquisition, had come into ownership of brands that were similar to and in competition with the Clarion Suites brand. As a result, Madison unilaterally concluded that Choice was abandoning the Clarion Suites brand in favor of competing brands acquired by Choice.

While these alleged concerns were under Madison's consideration, in addition, "a number of problems had arisen" with respect to the Hotel, Ingram Aff., ¶ 6, and Madison believed that Choice had "become increasingly insensitive to the [Hotel's] financial performance...." Id. Apparently, Madison was in arrears for $86,509.23 in franchise fees.

As a result of Madison's concerns with Choice's level of promotion of the Clarion Suites brand and its attendant contemplation of opting out of the Agreement on the one hand and Choice's problems with Madison's arrearage on the other, the parties entered into negotiations. Madison contends that Choice made specific public representations to the effect that Choice intended to mount a program to actively promote and advertise the Clarion Suites brand as part of the negotiations.

The negotiations concluded with the parties entering into a Settlement Agreement (the "Settlement") in January 1996, well after Madison's right to "opt out" of the Agreement in 1995 lapsed. Madison contends in this case that Choice "fraudulently induced" it to execute the Settlement. In any event, the express terms of the Settlement provided that Madison would immediately pay Choice $35,000 in satisfaction of its past due financial obligations and Choice would waive its claim for the remainder, in excess of $51,000. In addition, the percentage of gross room revenues Madison was obligated to pay in fees under the Agreement was reduced from 5.1% to 5.0%. The Settlement contains a broad release, pursuant to which Madison released as against Choice ...