Holiday Hospitality Franchising, LLC v. Holtsville Hospitality, LLC et al

Filing 43

ORDER GRANTING Plaintiff's 29 Motion for Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 7/12/2017. (btql)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
HOLIDAY HOSPITALITY
FRANCHISING, LLC,
Plaintiff,
v.

CIVIL ACTION FILE
NO. 1:16-CV-828-TWT

HOLTSVILLE HOSPITALITY, LLC,
et al.,
Defendants.

OPINION AND ORDER

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,

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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

1

Pl.’s Stat. of Mat. Facts ¶ 1. See also License Agreement, Compl., Ex. A.

2

Pl.’s Stat. of Mat. Facts ¶ 3.

3

License Agreement § 14.I [Doc. 1-1].

4

Id.

5

Id., Attachment B at 46.

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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

6

Id.

7

Defs.’ Stat. of Additional Mat. Facts ¶¶ 2-3.

8

Id. at ¶¶ 4-6.

9

Id. at ¶¶ 8-9.

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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.

10

Pl.’s Stat. of Mat. Facts ¶ 6.

11

Notice of Default and Termination [Doc. 1-1 at 102].

12

Pl.’s Stat. of Mat. Facts ¶ 7.

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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

13

FED. R. CIV. P. 56(a).

14

Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).

15

Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).

16

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).

17

Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).

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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.

18

See License Agreement § 14.B.

19

Norton v. Budget Rent A Car Sys., Inc., 307 Ga. App. 501, 502 (2010).

20

License Agreement, § 14.I.

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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’ theory, Holiday
Hospitality wanted Holtsville to fail so that all of the business could go to the
Plaintiff’s newly opened competitor.
But this counterclaim is unconvincing given the facts of this case. As a
contractual matter, Holiday Hospitality had wide latitude to judge whether the work
being done by the Defendants was satisfactory.21 In addition, the License Agreement
gave Holiday Hospitality the authority to make modifications to the work the
Defendants were required to do each time a deadline was extended.22 The Defendants
acknowledge that they did not complete the required work by the original deadlines,

21

See License Agreement § 4.D (“Licensor's judgment in such matters
[e.g., quality, cleanliness, appearance, and service] shall be controlling in all respects,
and it shall have wide latitude in making such judgments...”).
22

See License Agreement, Attachment B, at 46 (“As a condition to
approving a milestone extension, HHFI 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).”).
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and that the modifications to the PIP all came after this first deadline passed and was
extended.23 Thus, the changes Holiday Hospitality kept making as each deadline was
extended are not evidence of bad faith, but merely an exercise of its contractual rights
under the License Agreement.
Now, it is true that in cases where, as here, “the manner of performance is left
more or less to the discretion of one of the parties to the contract, [that party] is bound
to the exercise of good faith” in its requirements of the other party.24 In other words,
when one party is contractually empowered to determine whether the other party’s
performance is satisfactory or not, it must exercise that judgment reasonably and not
arbitrarily or capriciously. Nothing in this case, however, suggests that Holiday
Hospitality acted in any way other than reasonably. The Defendants have made no
allegation that the Plaintiff interfered with their ability to meet the original deadlines.
When the Defendants failed to meet those original deadlines, Holiday Hospitality
could have claimed a breach and been within its contractual rights to seek damages.
Instead, Holiday Hospitality gave the Defendants an additional three years to bring the
hotel up to par, demonstrating a patience it was under no contractual obligation to

23

See Defs.’ Resp. to Pl.’s Mot. for Summ. J., at 3 (“...some of the work
took longer than expected. At first, Plaintiff addressed this reality reasonably.”).
24

Maree v. ROMAR Joint Venture, 329 Ga. App. 282, 294 (2014).

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show. And contrary to the Defendants’ argument, the presence of the other hotel does
not suggest bad faith. Nothing in the License Agreement prevented Holiday
Hospitality from contracting with other hotels, and other than stating that it was
“nearby,” the Defendants have produced no evidence to show that the other hotel was
even a competitor.
In short, there is no question that the Defendants breached the License
Agreement by failing to complete the renovation work in the time required. And there
is no evidence to suggest that the Plaintiff acted in bad faith. Rather, the evidence
reveals just the opposite, as Holiday Hospitality showed significant patience in the
face of Holtsville’s continued failure to meet deadlines. Because Holtsville breached
the License Agreement, and because the Defendants Pancholi and Mehta agreed to
guarantee Holtsville’s liabilities under the License Agreement,25 all three Defendants
are jointly and severally liable for the damages contemplated under the contract.
Consequently, pursuant to the License Agreement,26 the Defendants are also liable for
attorney’s fees in an amount to be determined by the Court at a future date in relation

25

The Defendants Pancholi and Mehta do not dispute their liability under
the Guaranty, except to the extent that they argue there was no breach of the
underlying License Agreement. Because the Court has found that Holtsville did
breach the License Agreement, the Court finds the breach of the Guaranty to be
admitted.
26

See License Agreement § 14.J.

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to the Defendants’ Motion to Determine Reasonableness of Attorneys’ Fees [Doc.
34].27
IV. Conclusion
For the reasons stated above, the Plaintiff Holiday Hospitality Franchising,
LLC’s Motion for Summary Judgment [Doc. 29-1] is GRANTED.
SO ORDERED, this 12 day of July, 2017.

/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge

27

The Defendants did not substantively challenge their liability for
attorney’s fees. Their sole argument depended on escaping liability regarding the
underlying breach of contract. Having found that the Defendants did breach the
contract, the Court also finds that the Defendants admitted to liability for attorney’s
fees.
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