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Holiday Hospitality Franchising, LLC v. Holtsville Hospitality, LLC

United States District Court, N.D. Georgia, Atlanta Division

July 12, 2017




         This is a breach of contract action. It is before the Court on the Plaintiff Holiday Hospitality Franchising, LLC's Motion for Summary Judgment [Doc. 29-1]. For the reasons stated below, the Plaintiff Holiday Hospitality's Motion for Summary Judgment [Doc. 29-1] is GRANTED.

         I. Background

         The Plaintiff Holiday Hospitality entered into a license agreement with the Defendant Holtsville Hospitality, LLC on August 20, 2008, that gave Holtsville the rights to renovate an old hotel and operate it under Holiday Hospitality's brand, Crowne Plaza.[1] On the same day, the Defendants Ashok Pancholi and Chintah Mehta (collectively, the “Guarantors”) executed a Guaranty, in which they agreed to be held personally liable under the License Agreement.[2] The License Agreement required Holtsville to conduct a number of renovations to prepare the building for opening and ensure that the hotel conformed to Holiday Hospitality's brand standards.[3] The renovation work was “an essential element of the consideration relied upon, ” and the parties agreed that any failure by Holtsville to “perform the [w]ork in accordance with [Holiday Hospitality's] requirements and specifications (including the progress, milestone, completion and other dates specified in Attachment “B”) shall constitute a material breach...”[4]

         The Property Improvement Plan (“PIP”), as Attachment B to the License Agreement, specifically listed the work that needed to be done, and required that the renovations in the guest rooms be completed by January 31, 2009, and the commercial and exterior areas of the hotel by July 31, 2009.[5] The PIP allowed for extensions to these deadlines to be granted by Holiday Hospitality, but also noted that “[a]s a condition to approving a milestone extension, [Holiday Hospitality] may require that the PIP be modified to include upgrading or renovation of additional areas or items (in addition to any charges that might be due).”[6]

         As the original deadlines came and went, Holiday Hospitality informed Holtsville of a number of items listed in the PIP that were not yet complete. Rather than immediately terminate the License Agreement, however, Holiday Hospitality granted Holtsville a number of extensions.[7] In addition to these extensions, Holiday Hospitality also added new requirements to the work listed in the PIP, including redoing the hotel's business center, providing a “professionally prepared signage/communications program, ” and removing the hotel gift shop.[8] Additionally, it took Holiday Hospitality six months to give formal written approval to proceed on planned exterior work, after which it eventually demanded that Holtsville replace its designer with a company suggested by Holiday Hospitality.[9]

         After these initial series of extensions and modifications to the PIP, Holiday Hospitality sent its first Notice of Default and Termination on March 22, 2011.[10] This first letter stated that unless the renovation work was completed prior to May 2, 2011, or the termination date was extended, the Lease Agreement would be terminated on May 9, 2011.[11] Holiday Hospitality agreed to extend these termination deadlines as well, but eventually Holiday Hospitality terminated the License Agreement on September 11, 2012.

         Upon termination, Holiday Hospitality sent a series of letters to the Defendants demanding payment of the liquidated damages due under the License Agreement for early termination.[12] The Defendants having denied payment, Holiday Hospitality filed this action in the State Court of DeKalb County, Georgia, alleging breach of the License Agreement and the Guaranty, and seeking damages as well as attorney's fees. The Defendants removed the case to this Court on the basis of diversity jurisdiction, and filed a counterclaim for bad faith. Holiday Hospitality now moves for summary judgment on its claims as well as the Defendants' counterclaim.

         II. Legal Standard

         Summary judgment is appropriate only when the pleadings, depositions, and affidavits submitted by the parties show no genuine issue of material fact exists and that the movant is entitled to judgment as a matter of law.[13] The court should view the evidence and any inferences that may be drawn in the light most favorable to the nonmovant.[14] The party seeking summary judgment must first identify grounds to show the absence of a genuine issue of material fact.[15] The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show that a genuine issue of material fact does exist.[16] “A mere ‘scintilla' of evidence supporting the opposing party's position will not suffice; there must be a sufficient showing that the jury could reasonably find for that party.”[17]

         III. Discussion

         This is a straightforward breach of contract case, governed by Georgia law.[18]In Georgia, the elements for a breach of contract claim are the “(1) breach and the (2) resultant damages (3) to the party who has the right to complaint about the contract being broken.”[19] The record is clear in this case that the Defendants breached the License Agreement and Guaranty by failing to meet their deadlines and refusing to pay the damages contemplated by the contract.

         The License Agreement required Holtsville to “perform the construction and renovation work...set forth on Attachment B, ”[20] known as the Property Improvement Plan. Attachment B also set out a timetable of deadlines for the renovation work, requiring that the work in the guest room areas be completed by January 31, 2009, and the work in the commercial and exterior areas be completed by July 31, 2009. The parties agreed that failure to meet these deadlines would constitute a material breach. While the deadlines could be extended, extensions were solely in the discretion of Holiday Hospitality. Holtsville failed to meet these deadlines not just once, but numerous times after being granted multiple extensions by Holiday Hospitality.

         The Defendants acknowledge this, but they counterclaim that the fault for the breach actually lies with Holiday Hospitality because of its alleged bad faith. The Defendants point to the changing work requirements that, they argue, made it impossible for Holtsville to comply with the License Agreement. The motivation for these increasingly onerous requirements, the Defendants allege, was the opening of another Holiday Hospitality hotel nearby. Under the Defendants' ...

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