Hotel Airport, Inc. v. Best W. Int'l Incorported (In re Hotel Airport, Inc.)
| Decision Date | 18 September 2014 |
| Docket Number | CASE NO. 11-06620 (ESL),ADV. PROC. NO. 13-00259 (ESL) |
| Court | U.S. Bankruptcy Court — District of Puerto Rico |
| Parties | IN RE: HOTEL AIRPORT, INC. Debtor HOTEL AIRPORT, INC., Plaintiff v. BEST WESTERN INTERNATIONAL INCORPORTED, ET AL. Defendants |
This case is before the court upon the Motion to Dismiss Pursuant to Rule 12(b)(6) (the "Helms Defendants' Motion to Dismiss", Docket No. 23) filed by Michael G. Helms and The Helms Law Firm, P.L.C. (the "Helms Defendants") and the Motion and Memorandum of Law to Dismiss Complaint Pursuant to Fed. R Bankr. P. 7012(b) ("Best Western's Motion to Dismiss", Docket No. 24) filed by co-defendant Best Western International, Inc. ("Best Western"), both alleging that the Complaint fails to state a claim upon which relief may be granted against them. Also before the court is the Plaintiff's Amended Opposition to Motion to Dismiss Filed by Best Western and Joinder by Helm's [sic] Defendants and Opposition to Helm's [sic] Defendants Motion to Dismiss (Docket Nos. 42 and 43). For the reasons stated herein, the Helms Defendants' Motion to Dismiss (Docket No. 23) and Best Western's Motion to Dismiss (Docket No. 24) are hereby granted in part and denied in part.
On March 7, 2008, Hotel Airport, Inc. (the "Plaintiff", "Hotel Airport" or "Debtor"), its voting member David A. Tirri ("Tirri") and Best Western entered into the Best Western International Membership Application and Agreement (the "Membership Agreement", DocketNo. 1-1, pp. 22-31). Pursuant to the Membership Agreement, the Plaintiff affiliated its hotel property known as the San Juan Airport Hotel located in Carolina (near San Juan), Puerto Rico (the "Hotel"), with the flag of Best Western. Upon Best Western's conditional approval of the Membership Agreement, Tirri became a Best Western member, the Plaintiff's Hotel became affiliated with Best Western, and the Membership Agreement became the contract controlling the relationship between the Plaintiff, Tirri and Best Western. Pursuant to paragraph 20 of the Membership Agreement, Best Western granted to the Plaintiff the Best Western license (the "License"), allowing the Plaintiff to use the Best Western trademarks, name, and logos (the "Best Western Marks" or "Best Western Symbols") in connection with the Hotel, subject to the terms of the Best Western License for the agreed term. Also pursuant to the Membership Agreement, the Plaintiff agreed that the License would terminate upon termination of the Membership Agreement. See Docket No. 1-1, p. 26, ¶ 22. In the event that the Membership Agreement was terminated, the Plaintiff agreed to "remove from public view and cease using" all Best Western Marks and all other references to Best Western, and to remove any device or design containing any part of any Best Western symbol, within fifteen (15) days of the date of termination. See paragraph 22 of the Membership Agreement, Docket No. 1-1, p. 26, and Docket Nos. 24, p. 3, ¶ 3, and 42, p. 4, ¶ 3. Paragraph 22 of the Membership Agreement also states that upon termination of the License, the Plaintiff would "actively take steps as may be necessary to cause the cessation of all advertising and distribution of promotional material containing any Best Western Symbol" (Docket No. 1-1, p. 26, ¶ 22). Also see Docket Nos. 24, p. 3, ¶ 4, and 42, p. 4, ¶ 4. Furthermore, upon termination of the Membership Agreement, the Plaintiff agreed "not to use anything consisting of or incorporating any one or more words, letters, designs or devices which contain any part of any Best Western Symbol or which singly or together are similar in spelling, sound, appearance or otherwise to any Best Western Symbol" (Docket No. 1-1, p. 26, ¶ 23). Remedies for non-compliance included as follows:
For each day during which any Best Western Symbol or any name, symbol or device described in paragraph 23 are used in connection with the Hotel, after fifteen (15) days following termination of this [Membership Agreement], BestWestern may elect to claim from [the Plaintiff] daily damages in an amount equal to fifteen percent (15%) of the mean of the Hotel's room rates per room per day multiplied by the total number of rooms. This amount is payable by [the Plaintiff] whether or not [the Plaintiff] continues to exercise control over the operations of the Hotel. It is understood and agreed that said amount is fixed as liquidated damages because of the difficulty of ascertaining the exact amount of damages that may be sustained because of such use. It is further understood and agreed that said amount fixed as liquidated damages is a reasonable amount, considering the damages that Best Western will sustain in the event of such use.
On August 5, 2011, the Plaintiff filed a voluntary Chapter 11 bankruptcy petition along with the corresponding schedules (Lead Case Docket No. 1).
On September 5, 2011, Best Western filed a Notice of Appearance through local counsel, to wit, Goldman, Antonetti & Cordova, P.S.C. See Lead Case Docket No. 18.
On October 3, 2011, Best Western filed a Motion for Order Limiting Time Within Which Debtor Must Assume or Reject Executory Contract (Lead Case Docket No. 41) requesting an order to limit the time within which the Plaintiff could assume the Membership Agreement. The court granted the Plaintiff 30 days to assume or reject the Membership Agreement on October 12, 2011 (Lead Case Docket No. 46).
On October 5, 2011, the Helms Defendants filed an Application and Order for Admission Pro Hac Vice (Lead Case Docket No. 43), which the court granted on October 14, 2011 (Lead Case Docket No. 47).
On November 11, 2011, the Plaintiff filed a Motion Assuming Executory Contract with Best Western (Lead Case Docket No. 54), that is, assuming the Membership Agreement, and stating that it would cure all pre-petition debts within 10 days of court approval. The court granted the Motion on December 14, 2011 (Lead Case Docket No. 66).
On July 2, 2012, Best Western issued a letter1 (the "Termination Letter") terminating the Plaintiff's Best Western membership and license as follows:
On December 9, 2011, the Plaintiff filed its Plan of Reorganization and Disclosure Statement (Lead Case Docket Nos. 63 and 64), which were subsequently amended on November 9, 2012 (Lead Case Docket Nos. 189 and 190). The amended Plan of Reorganization does not include Best Western as a creditor.
On January 4, 2013, the court approved the Plaintiff's Disclosure Statement, as amended. See Lead Case Docket No. 224.
On February 7, 2013, the court scheduled a confirmation hearing for March 21, 2013. See Lead Case Docket No. 237.
On February 11, 2013, Best Western filed an Objection [] to Confirmation of Plan of Reorganization sustaining that the Amended Plan of Reorganization and the Amended Disclosure Statement proposed by the Plaintiff "are misleading in that they appear to represent that [the Plaintiff] has the ability to further assume a Best Western Membership Agreement, and to obtain the benefits of Best Western membership, when in fact the Membership Agreement ha[d] previously been terminated and [the Plaintiff] is no longer a Best Western member" (Lead Case Docket No. 239, p. 2, ¶ 8). Accordingly, Best Western sustained that the "Amended Plan of Reorganization fail[ed] to comply with 11 U.S.C. § 1129(a)(1) and (2) in that the [Plaintiff]ha[d] not complied with applicable provisions of the Bankruptcy Code by failing to adequately disclose the termination of the Best Western membership, or to provide adequate information as required by [Section] 1125 of the Bankruptcy Code" (Lead Case Docket No. 239, p. 2, ¶ 9). The Objection was filed through the Helms Defendants.
On February 13, 2013, the Plaintiff filed an Answer to Best Western's Objection to Confirmation (Lead Case Docket No. 240) asserting that it did not need to "re-assume" the Membership Agreement because it had already assumed it, although it had subsequently been terminated by Best Western. The Plaintiff acknowledged that the termination of the Membership Agreement "was due to certain interpretations by Best Western of the contract requirements with which [the Plaintiff] did not agree", that in "the exercise of its business judgment, [the Plaintiff] decided to negotiate its differences with Best Western, rather than litigate them" and that "[a]fter recently exhausting said negotiation efforts, [it] ha[d] decided that the franchise benefits are not worth the cost and requirements that Best Western insists upon" (Lead Case Docket No. 240, p. 2, ¶¶ 8, 9 and 10). Hence, the Plaintiff decided to "continue operating its hotel business (and effect its reorganization) without being under the Best Western membership, as it ha[d] done since July 2012" (Lead Case Docket No. 240, p. 2, ¶ 10).
On February 22, 2013, Best Western filed a Motion to Withdraw...
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