Newark Motor Inn Corp. v. Holiday Inns, Inc.

• Decision Date: 27 June 1979
• Docket Number: Civ. A. No. 77-582.
• Citation: 472 F. Supp. 1143
• Parties: NEWARK MOTOR INN CORP. and Newark Motor Inn Company, Plaintiffs, v. HOLIDAY INNS, INC. and American Motor Inns, Inc., Defendants.
• Court: U.S. District Court — District of New Jersey

472 F. Supp. 1143

NEWARK MOTOR INN CORP. and Newark Motor Inn Company, Plaintiffs, v. HOLIDAY INNS, INC. and American Motor Inns, Inc., Defendants.

Civ. A. No. 77-582.

United States District Court, D. New Jersey.

June 27, 1979.

James M. La Rossa by Andrew B. Melnick, New York City, for plaintiffs.

Cadwalader, Wickersham & Taft by Claude P. Bordwine, New York City, and, Lowenstein, Sandler, Brochin, Kohl & Fisher, by Murray J. Laulicht, Newark, N. J., for defendant Holiday Inns, Inc.

Pitney, Hardin & Kipp by Richard F. Collier, Jr., Morristown, N. J., for defendant American Motor Inns, Inc.

OPINION

MEANOR, District Judge.

Presently before the court is defendant Holiday Inns' (HI) motion for summary judgment on the First Cause of Action alleged in plaintiffs' (NMIC) amended complaint. For the reasons stated hereafter, HI's motion will be granted.

This lawsuit arises out of a complex litigation initiated in this district in 1972. Briefly stated, in December 1967 NMIC entered into a franchise agreement with HI and constructed a motel at Newark Airport. NMIC owned and operated the motel under the franchise agreement. In 1971, defendant American Motor Inns (AMI), HI's single largest franchisee with approximately 48 Holiday Inn motels throughout the nation, applied to HI for a franchise to build a Holiday Inn on some property it had acquired in Elizabeth, New Jersey next to the airport and about a mile from the location of NMIC's motel. Implementing procedures established for consideration of new franchise applications, HI requested input from its existing franchisees nearest to AMI's proposed site. NMIC responded, asserting that the grant of a franchise to AMI at the Elizabeth location would substantially affect its business. AMI's application was denied. In 1972, AMI brought suit against HI in Civil No. 1623-72 alleging, inter alia, violation of section 1 of the Sherman Act, 15 U.S.C. § 1, and naming NMIC as co-conspirators with HI (although not as party defendants). After a lengthy non-jury trial before the Honorable Leonard I. Garth, U. S. C. J. (sitting by designation as district judge), HI was found to have conspired with NMIC to deny AMI the franchise for the Elizabeth property. Judge Garth made specific findings of fact and conclusions of law which are reported in American Motor Inns, Inc. v. Holiday Inns, Inc., 365 F.Supp. 1073 (D.N.J.1973). The Court of Appeals for the Third Circuit affirmed Judge Garth's findings of fact and that a conspiracy existed between HI and NMIC with respect to AMI's application for a franchise at the Elizabeth property. American Motor Inns, Inc. v. Holiday Inns, Inc., 521 F.2d 1230, 1242-44 (3d Cir. 1975).

Pertinent here is AMI's Prayer for Relief in the 1972 action which requested in part:

4. That the Court issue an injunction requiring Holiday to act on any future application by AMI for a Holiday Inn license agreement based solely on proper and appropriate business considerations.

See Exhibit A appended to HI's Answer and Counterclaim filed September 29, 1977. At the conclusion of his opinion, Judge Garth stated:

In addition, plaintiff AMI may move on such an interim basis for the relief sought in paragraph 4 (franchise operations), but only with regard to the Elizabeth property.

American Motor Inns, Inc. v. Holiday Inns, Inc., supra, 365 F.Supp. at 1099. On September 11, 1973, just six days after he filed his opinion, Judge Garth issued an Interim Order which ordered at ¶ 3:

3. With respect to any application which may hereafter be submitted by plaintiff AMI for a franchise to own or operate a Holiday Inn on its 10.2 acre tract of land in Elizabeth, New Jersey, defendant Holiday Inns, Inc. is hereby required to consider and act upon any such application based solely upon proper and appropriate business considerations consistent with the September 5, 1973 opinion of the Court.

See Exhibit M appended to affidavit of Peter M. Brown, Esq., counsel for HI, submitted in support of HI's motion for partial summary judgment (hereafter Brown Affidavit).

A week after the Interim Order was issued, September 18, 1973, AMI made application to HI for a franchise at the Elizabeth location. See Exhibit N appended to Brown Affidavit. On September 26, 1973, Charles Collins, HI's General Counsel, sent a memorandum to Donelson Lake, HI's Director of Franchise Sales, along with AMI's application for reconsideration of the franchise involved in the lawsuit. The memorandum directed Lake:

Please start this out as an application and investigate it in the regular way except there will be no proximity letters sent out and there will be no contact with any other franchise holders about this matter. The Franchise Department will just have to work with other Holiday Inn departments internally to get all the necessary data. Some of the factors which should be investigated and considered are listed below:

1. The financial stability of the applicant.

2. The previous relevant business experience of the applicant.

3. The exposure and accessibility of the site.

4. Whether or not there is sufficient potential to support the proposed facility requested by the applicant.

5. The expansion or condition of adjacent business concerns.

6. The population trend.

7. The proposed expansion of transportation facilities nearby.

8. The location of other existing hotels and motels.

9. The degree of their modernization.

10. Their average occupancy.

11. Their revenues.

12. Primary source of business.

13. Any and all other factors which would have any bearing or relationship upon the application being considered.

See Exhibit C appended to affidavit of James M. La Rossa, Esq., counsel for NMIC submitted in opposition to HI's motion for partial summary judgment (hereafter La Rossa Affidavit).

After the filing of the Interim Order on September 11, 1973, the parties, pursuant to the direction of the Court, were required to settle the form of the decree so that all aspects of the litigation might be concluded. On January 30, 1974, Judge Garth signed a second Order which dealt with all substantive relief other than damages and incorporated the provisions of the Interim Order relating to the Elizabeth property. This January 30th Order was consented to by both parties. See Amended Memorandum Order and Opinion of Judge Garth filed September 9, 1974 and appended as Exhibit P to the Brown Affidavit.

The Order of January 30, 1974 contains the following provisions:

5. Defendant HI is hereby directed to grant plaintiff's AMI's application with respect to its 10.2 acre tract of land in Elizabeth, New Jersey . . and to issue a "Commitment Agreement to Issue A License Agreement" to plaintiff or a subsidiary thereof for a Holiday Inn on said property.

6. The provisions of this Order shall apply to the defendant, Holiday Inns, Inc., its officers, directors, employees and agents and to its successors and assigns and to all persons in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise.

See Exhibit F appended to La Rossa Affidavit.

The present action by NMIC is predicated upon the alleged wrongful conduct of HI and others surrounding the grant of the franchise at Elizabeth, New Jersey to AMI. NMIC alleges that HI's actions were taken in bad faith without weighing any proper and appropriate business considerations, and was in derogation of the duties that HI, as franchisor, allegedly owed to its franchisee, NMIC. As a result of this alleged wrongful conduct, NMIC contends that it has suffered major financial losses culminating in the foreclosure of its property. NMIC seeks $20,000,000 in damages from HI and AMI.

This suit arrived in this court with a history established subsequent to the culmination of the 1972 litigation before Judge Garth. It was commenced in the Supreme Court of New York, Kings County, by service of a Summons with Notice without a Complaint. NMIC thereafter served a motion for an order pursuant to CPLR 3102(c) to depose HI in order to frame a complaint. NMIC's affidavit in support of that motion set forth allegations identical to those set forth in the amended complaint in this action. Compare Affirmation of Charles Beller dated July 26, 1976 and made part of the record annexed to HI's Petition for Removal filed with the Clerk of the U.S. District Court for the Eastern District of New York on January 4, 1977 with the Amended Complaint in the within action. Justice Arthur S. Hirsch of the Supreme Court of New York denied NMIC's motion on the basis that NMIC had failed to demonstrate a valid cause of action against HI. See Order of Justice Hirsch dated August 26, 1976 and made part of Exhibit A appended to HI's Petition for Removal to the U.S. District Court for the Eastern District of New York filed December 13, 1976. After NMIC finally served the complaint in the Supreme Court of New York, HI removed the action to the U.S. District Court for the Eastern District of New York where it was assigned to the Honorable Jack B. Weinstein. HI then moved to dismiss the suit for failure to state a claim upon which relief can be granted. HI's moving papers and memoranda submitted in support of that motion are essentially identical to those submitted on the instant motion for partial summary judgment. See Notice of Motion and Affidavit of Peter M. Brown filed December 22, 1976 in 76 Civ. 2241 (E.D.N.Y.) and made part of the file transmitted to this district. In a Memorandum and Order filed March 9, 1977, Judge Weinstein denied HI's Rule 12(b)(6) motion but suggested that "in view of the factual issues raised at the hearing, a motion for summary judgment following further discovery might well be in order." On his own initiative, Judge Weinstein ordered the action transferred to this district on the ground that the District of New Jersey is the more appropriate forum since interpretation of Orders issued by this court might be necessary for a determination...