Radisson Hotels Intern., Inc. v. Majestic Towers

• Decision Date: 25 January 2007
• Docket Number: No. CV 06-4956 SVW (RCx).,CV 06-4956 SVW (RCx).
• Citation: 488 F.Supp.2d 953
• Parties: RADISSON HOTELS INTERNATIONAL, INC., a Delaware Corporation, Plaintiff, v. MAJESTIC TOWERS, INC., a California corporation, et al., Defendants.
• Court: U.S. District Court — Central District of California

488 F.Supp.2d 953

RADISSON HOTELS INTERNATIONAL, INC., a Delaware Corporation, Plaintiff, v. MAJESTIC TOWERS, INC., a California corporation, et al., Defendants.

No. CV 06-4956 SVW (RCx).

United States District Court, C.D. California.

January 25, 2007.

COPYRIGHT MATERIAL OMITTED

Barbara F. Stein, Nicholas Dewitt, Dewitt Denney and Painter, Los Angeles, CA, Kirk W. Reilly, Gray Plant Mooty, Minneapolis, MN, for Plaintiff.

Daniel C. Leib, Daniel C. Leib Law Offices, Beverly Hills, CA, for Defendants.

ORDER GRANTING IN PART PLAINTIFF'S MOTION FOR SUMMARY ADJUDICATION [16]

WILSON, District Judge.

I. INTRODUCTION

Plaintiff Radisson Hotels International, Inc. ("Plaintiff' or "Radisson") filed the instant lawsuit against Majestic Towers, Inc. ("Majestic"), The Lee 2003 Family Trust ("Lee Trust"), and Leo Y. Lee (collectively referred to as "Defendants"), on August 9, 2006. Plaintiff has raised six causes of action: (1) breach of contract — past due fees; (2) breach of contract — liquidated damages; (3) breach of contract — failure to discontinue use of marks; (4) trademark infringement under 15 U.S.C. § 1114; (5) federal unfair competition under 15 U.S.C. § 1125(a); and (6) federal trademark dilution under 15 U.S.C. § 1125(c). The case is before this Court pursuant to 28 U.S.C. §§ 1331, 1338, and 1367.

Radisson is a Delaware corporation, with its principal place of business in Minnesota, and is a well-known licensor of guest lodging systems. Majestic is a California corporation, with its principal place of business in Los Angeles, and it is in the business of owning, operating, and managing hotel properties. The Lee Trust is organized under California law, and has its principal place of business in Los Angeles, California. Defendant Lee (an individual) is a trustee of the Lee Trust, and he is a citizen of the state of California.

This dispute centers on a "License Agreement" between Radisson and Majestic, which granted the latter the right to use the former's trademarks and proprietary reservation system for a period of up to twenty years. Within a few months, Radisson began sending letters to Majestic claiming that the latter was in default. Eventually, Radisson terminated the License Agreement, less than one year after it went into effect.

Plaintiff has now moved for summary adjudication on its first two causes of action,¹ seeking the recovery of: (1) past due fees, (2) liquidated damages, and (3) attorneys' fees. The parties have now fully briefed the Court.

For the reasons discussed below, this Court GRANTS Plaintiff's motion for summary adjudication on the issue of past due fees and liquidated damages. The Court DEFERS ruling on Radisson's request for attorneys' fees because: (1) the parties superficially discussed the issue in their briefing papers, and (2) it will be necessary for the parties to fully brief the quantum of fees to which Plaintiff is entitled. Finally, the pretrial conference and trial dates are VACATED.

II. FACTUAL BACKGROUND

A. The License Agreement's Terms

Radisson entered into a written license agreement (the "License Agreement") with the Majestic on October 26, 2005, which was effective as of September 7, 2005.² (Blazina Decl. Ex. A at 1.) The Majestic was granted the right to operate the Radisson Plaza Wilshire Hotel, which was required to maintain at least 385 guestrooms available for rent to its guests. (Id.) The Majestic took over this property from a previous franchisee operating the hotel at the same location. (Traxler Supp. Decl. ¶ 5.) The License Agreement was designed to last for about twenty years, and was expire on December 31, 2025. (See Blazina Decl. Ex. A at 2.) However, each party had the option of terminating the License Agreement without cause for the 60-day period preceding the its five, ten, and fifteen year anniversary assuming certain conditions were met. (Id. at 17.) On the same day the License Agreement was signed, the Lee Trust entered into a "Guaranty of License Agreement" with Radisson, which was signed for by its trustee, defendant Lee. (Id. Ex. B.) There are numerous license provisions cited by Radisson that may be relevant to the resolution of the instant motion:

Article 5.2 — Royalty Fee: "During Agreement Years 1 and 2, Licensee [Majestic] will pay Radisson a Royalty Fee equal to the greater of 3.75% of daily Gross Room Revenues or $150,000 Minimum Royalty Fee per Agreement Year."

Article 5.3 — Marketing Contribution: "During Agreement Years 1 and 2, Licensee will pay Radisson a Marketing Contribution equal to 1.5% of Gross Room Revenues."

Article 5.4 — Reservation Fee: "During Agreement Years 1 and 2, Licensee will pay Radisson a Reservation fee equal to 1.75% of Gross Room Revenues."³

Article 17.2(a) — Default — Opportunity to Cure: "Failure to pay any past due fees or other amounts owed to Radisson or its Affiliates. The cure period for such a default is ten days after Licensee's receipt of the notice."

Article 17.4 — Liquidated Damages: "If Radisson terminates this Agreement for Licensee's fault, the actual damages that Radisson would suffer for the loss of prospective fees and other amounts payable to Radisson under Article 5 would be difficult if not impossible to ascertain ... [Liquidated damages] is calculated as the lesser of two times the amount payable to Radisson under Section 5.2 for the immediately preceding 12 months, or the number of months remaining until the commencement date of a Termination Window provided herein or expiration of the Term, whichever is sooner, times the average monthly Royalty Fees payable to Radisson under Section 5.2 for the immediately preceding 12 months. Licensee must also pay taxes on such payment in accordance with Section 5.9".⁴

Article 25.13 — Attorneys' Fees: "All reasonable and necessary costs and expenses, including attorneys' fees, incurred by Radisson or Licensee in enforcing any provisions of this Agreement, ... whether through injunctive relief or otherwise, will be paid to the prevailing party in such action by the other party."

Article 5.8 — Interest and Late Payment Fees: "Licensee will pay Radisson interest on any amounts owed to Radisson that are past due at the lesser of one and one-half percent (1.5%) per month or the maximum rate of interest permitted by applicable law."

B. Dissolution of the License Agreement⁵

On March 20, 2006, Radisson issued a Notice of Default letter to Majestic, informing the latter that it was overdue in the amount of $266,970.62, for fees assessed between November 15, 2005, and March 15, 2006. (Id. Ex. C.) Majestic was given ten days from receipt of the notice to cure the default. (Id.) As admitted by Defendants, the amounts owed had still not been paid as of April 27, 2006. Radisson issued and faxed a second letter at 4:34 p.m. that same day to Majestic. (Id. Ex. D.) Radisson extended the opportunity to cure the $266,970.62 deficit until April 28, 2006, at 3:00 p.m., or else Majestic would be suspended from using Radisson's reservation system. (Id.)

On May 1, 2006, Majestic made a $75,000 payment. On May 4, 2006, Radisson provided a further opportunity to cure the remaining default amount of $191,970.62, although the letter noted that Radisson had also earned $60,448.72 more in fees for March and April 2006. This meant that the total amount owed to Radisson as of this date was $252,419.34. (Id. Ex. E.) Radisson was given the choice to either cure its monetary default by May 15, 2006, or to sign a promissory note for $191,970.62 that would have extended the cure deadline to June 16, 2006.

Majestic failed to either sign the promissory note, or to pay the $191,970.62 in default by the May 15 deadline. Instead, Majestic paid an additional $75,000 on June 2, 2006. (Id. Ex. F.) On June 6, 2006, Radisson sent yet another letter to Majestic, in which it provided the opportunity to cure the $116,970.62 remaining on the original default by June 13, 2006. (Id.) Radisson additionally explained that Majestic was now in default for a second amount of $110,842.35 for unpaid monies from March, April, 2 and May 2006, which Majestic was told to pay by June 16, 2006. Failure to abide by either deadline would lead to the immediate suspension of the Majestic from using the Radisson's reservation system.

Radisson sent two more letters to the Majestic on June 16 and June 19, 2006, explaining that the failure to pay these two defaults by June 21, 2006, would result in the termination of the License Agreement. (Id. Exs. G, H.) The License Agreement was terminated by written notice on June 26, 2006, as a result of Majestic's inability to cure its defaults. (Id. Ex. I.) On June 28, 2006, Radisson sent Majestic a bill for $1,015,824.64, which included the following breakdown: (1) $293,370.73 for past due fees, (2) $54,272.00 estimate for fees through termination of the License Agreement, and (3) $668,181.91 in liquidated damages. (Id. Exs. J, K, L.) The Defendants concede that none of these amounts have been paid to date. (Def. State. Gen. Issues ¶ 29.) Radisson has since revised its original estimate of $54,272 to an actual figure of $45,151.91, meaning that the total past fees owed by Majestic is actually $338,522.64. (Blazina Decl. Ex. M.) This amount is not disputed by the Defendants. (Def. State. Gen. Issues ¶ 31.)

Radisson has been unable to locate a new franchisee to replace the Majestic since the License Agreement was terminated more than six months ago. (Payne Supp. Decl. ¶ 14.)

III. ANALYSIS

A. Legal Standard for Summary Judgment/Adjudication

Rule 56(c) requires the Court to grant summary judgment for the moving party when the evidence, viewed in the light most,; favorable to the nonmoving party, shows that there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c); Tarin v. County of Los Angeles, 123 F.3d 1259, 1263 (9th Cir.1997).

The moving party bears the initial...