WYNDHAM HOTELS AND RESORTS, LLC v. FIRST CAPITAL REAL ESTATE, LLC et al
Filing
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OPINION. Signed by Judge Madeline Cox Arleo on 4/2/2020. (ams, )
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
WYNDHAM HOTEL AND RESORT LLC,
Plaintiff,
Civil Action No. 18-9334
v.
FIRST
CAPITAL
REAL
ESTATE
INVESTMENTS LLC, SUNEET SINGAL,
and MAJIQUE LADNIER,
OPINION
Defendants.
FIRST
CAPITAL
REAL
ESTATE
INVESTMENTS LLC, SUNEET SINGAL,
and MAJIQUE LADNIER,
Third-party Plaintiffs,
v.
HMC HOSPITALITY OPERATING
COMPANY,
Third-party Defendant.
ARLEO, UNITED STATES DISTRICT JUDGE
THIS MATTER comes before the Court by way of Third-party Defendant HMC
Hospitality Operating Company’s (“HMC” or “Third-party Defendant”) Motion for Summary
Judgment. ECF No. 30. For the reasons that follow, the Motion is granted.
I.
FACTUAL BACKGROUND
The Third-party Complaint involves claims for indemnification brought by First Capital
Real Estate Investments, LLC (“First Capital”), Suneet Singal (“Singal”), and Majique Ladnier
(“Ladnier” or, together with First Capital and Singal, “Third-party Plaintiffs”) against HMC
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pursuant to a hotel management agreement. Third-party Compl. (“TPC”) ¶¶ 17-18; see also id.,
Ex. D (the “Management Agreement”).
A.
The Underlying Litigation
The underlying litigation in this matter involves a franchise termination dispute between
Plaintiff Wyndham Hotels and Resorts, LLC (“Wyndham”) and Third-party Plaintiffs. See
generally Wyndham Compl., ECF No. 1.
On August 21, 2014, Wyndham entered into a franchise agreement with non-party
Amarillo Ambassador 265, LLC (“Amarillo”) for the operation of a hotel facility located at 3100
West Interstate 40, Amarillo, Texas, Site No. 48812-05214-01 (the “Hotel”). Id. ¶ 10; see also id.,
Ex. A (the “Franchise Agreement”). Pursuant to the Franchise Agreement, Amarillo agreed, in
relevant part, to operate the Hotel for a fifteen-year term, make certain periodic payments to
Wyndham “for royalties, marketing and global sales fees, taxes, interest, reservation system user
fees, and other fees,” and prepare and submit monthly financial reports to Wyndham. Id. ¶¶ 11-15.
Wyndham could terminate the Franchise Agreement, with notice to Amarillo, “if Amarillo (a)
discontinued operating the Hotel as a Wyndham guest lodging establishment; and/or (b) lost
possession or the right to possession of the Hotel,” and Amarillo agreed that in the event of a
Franchise Agreement termination, it would pay liquidated damages pursuant to a formula in the
Agreement. Id. ¶¶ 16-17; see also Franchise Agreement §§ 17.A, 18.C. Third-party Plaintiffs
guaranteed Amarillo’s Franchise Agreement obligations and agreed that, in the event of a default,
they would “immediately make each payment and perform each obligation of [Amarillo] under the
[Franchise] Agreement.” Id. ¶¶ 19-21; see also id., Ex. C (the “Guaranty”).
On or about October 11, 2017, Amarillo unilaterally terminated the Franchise Agreement
by ceasing to operate the Hotel. Id. ¶ 22. Wyndham acknowledged Amarillo’s termination by
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letter dated November 8, 2017, and informed Amarillo that it owed $256,105.29 in liquidated
damages, as well as other outstanding fees totaling $189,428.98. Id. ¶¶ 23, 27. The Guaranty
requires Third-party Plaintiffs to pay these damages and fees, but to date they have not done so.
Id. ¶¶ 25-27. On May 17, 2018, Wyndham filed a complaint against Third-party Plaintiffs, seeking
to recover the outstanding amounts due under the Guaranty (the “underlying litigation”). See
generally Wyndham Compl.
B.
The Third-party Complaint
On August 17, 2018, Third-party Plaintiffs filed a third-party complaint against HMC,
alleging that they are entitled to indemnification and/or contribution from HMC pursuant to the
Management Agreement because of HMC’s “negligence in contributing to the loss alleged in” the
underlying litigation. TPC ¶ 17.
1.
The Management Agreement
On April 1, 2014, HMC and Amarillo entered into the Management Agreement, pursuant
to which HMC agreed “to be responsible for the management and running of” the Hotel, including
hiring and firing Hotel employees.1 Id. ¶¶ 18-20. HMC allegedly shut down the Hotel after it
discovered that certain employees “engaged in embezzlement” and fired them. Id. ¶¶ 25-26.
Third-party Plaintiffs allege that the Hotel’s closure ultimately led to Wyndham bringing the
underlying litigation.2 Id. ¶¶ 45-47.
HMC agreed to indemnify Amarillo and its affiliates in the event of any acts or omissions
constituting fraud, gross negligence, or willful misconduct (the “Indemnification Provision”). Id.
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The Management Agreement contains a Texas choice of law provision. See Management Agreement, Art. 16.
2
HMC and Amarillo terminated the Management Agreement in November 2014. See infra Section I.B.2. It bears
noting that this termination occurred nearly three years before Amarillo allegedly unilaterally terminated the Franchise
Agreement with Wyndham, which is the subject of the underlying litigation. See Wyndham Compl. ¶ 22 (alleging
that Amarillo terminated the Franchise Agreement in October 2017).
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¶¶ 21-23. Third-party Plaintiffs allege that HMC’s failure to train and supervise its employees,
such that embezzlement occurred, triggered the Indemnification Provision. Id. ¶¶ 28-30. Thirdparty Plaintiffs claim that they are entitled to indemnification because the Guaranty makes them
“affiliates” of Amarillo for purposes of the Management Agreement. Id. ¶¶ 37-42; see also
Management Agreement, Art. 11.
2.
The Termination Agreement
Amarillo and HMC terminated the Management Agreement on November 30, 2014.
Third-party Plaintiffs’ Statement of Material Facts (“TPP SOMF”) ¶ 20, ECF No. 31.1; see also
ECF No. 30.9 (the “Termination Agreement”). Pursuant to the Termination Agreement, HMC
“terminate[d] all of the employees employed . . . at the Hotel,” among other things. Termination
Agreement § 2. Section 4 of the Termination Agreement contains a broad release of claims by
both parties:
[Amarillo and HMC] hereby waive, surrender and release each other and their
partners, employees, officers, agents or representatives, from any liability, actions,
causes of action, covenants, agreements, promises, claims, counterclaims, defenses,
offsets, charges, recoupments, obligations and demands whatsoever (whether
known or unknown, direct or indirect, contingent or non-contingent) at law, in
equity of [sic] otherwise, which such party ever had or now has against the other,
its partners, employees, officers, agents or representatives, by reason of any matter,
cause or thing arising under or related to the Management Agreement; save and
except the liabilities of [Amarillo] that survive the termination of the Management
Agreement as provided [in Section 6 of the Termination Agreement.]
Termination Agreement § 4 (“Section 4”). Additionally, Amarillo “and its affiliates”
consent[ed] to the termination . . . and release, discharge and hold harmless [HMC]
. . . from any and all suits, claims, controversies, rights, promises, debts, liabilities,
demands, obligations, costs, expenses, actions and causes of action of every nature,
character and description, in law or in equity, whether presently known or
unknown, vested or contingent, suspected or unsuspected, arising under, relating
to, or in connection with (1) the Hotel, (2) the Management Agreement, and (3)
[HMC]’s performance under the Management Agreement (collectively, the
"Owners Released Claims"). [Amarillo and its affiliates] also covenant not to bring
any suit, action, or proceeding, or make any demand or claims of any type, against
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[HMC] . . . with respect to any Owner Released Claims. [HMC] . . . may plead or
assert the release and covenant not to sue in this Section 5 as a complete defense
and bar to any claim brought against any of them in contravention of this Section 5
and, if any such claim is brought against any of them, [Amarillo] shall indemnify,
defend and hold harmless any such party from and against such claim.
Termination Agreement § 5 (emphasis added) (“Section 5,” and together with Section 4, the
“Termination Agreement Releases”).3 Singal executed the Termination Agreement on behalf of
Amarillo and First Capital. TPP SOMF ¶ 27. The Termination Agreement contains a Texas choice
of law provision. Termination Agreement § 7.
II.
PROCEDURAL HISTORY
Third-party Plaintiffs filed their Complaint on August 17, 2018, seeking a declaration that,
to the extent Third-party Plaintiffs are found liable to Wyndham in the underlying litigation, they
are entitled to indemnification from HMC. See TPC at 8. HMC moved to dismiss the TPC,
arguing that the claim was barred by the Termination Agreement Releases. See ECF No. 13. On
April 30, 2019, the Court denied that motion, finding that the Termination Agreement was not
integral to or relied upon by the Third-party Complaint, and thus could not be considered at the
motion to dismiss stage. See ECF No. 21 at 3-4. The Court ordered that limited discovery be
taken on the issue of the scope of the Termination Agreement Releases. Id. at 4. HMC moved for
summary judgment on September 6, 2019, ECF No. 30, which Third-party Plaintiffs now oppose,
ECF No. 31.
Section 6 explains continuing rights, duties, and obligations of Amarillo. Specifically, the “rights, duties and
obligations of [Amarillo] and its affiliates, that by their nature or by the express language of the Management
Agreement survive the expiration or earlier termination of such Management Agreement shall remain in full force and
effect and survive” the Termination Agreement. Termination Agreement § 6. It also enumerates a number of
obligations Amarillo owed to HMC at the time the Termination Agreement was executed. Id.
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III.
LEGAL STANDARD
Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment will be
granted if the pleadings, depositions, answers to interrogatories, and admissions on file, together
with available affidavits, show that there is no genuine dispute as to any material fact and that the
moving party is entitled to judgment as a matter of law. See Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). “[S]ummary judgment
may be granted only if there exists no genuine issue of material fact that would permit a reasonable
jury to find for the nonmoving party.” Miller v. Ind. Hosp., 843 F.2d 139, 143 (3d Cir. 1988). All
facts and inferences must be construed in the light most favorable to the non-moving party. Peters
v. Del. River Port Auth., 16 F.3d 1346, 1349 (3d Cir. 1994).
IV.
DISCUSSION
A.
Choice of Law
HMC argues that the Court should apply New Jersey law when interpreting the
Termination Agreement, even though the Termination and Management Agreements both contain
Texas choice of law provisions. See HMC Br. at 3-6, ECF No. 30.2. Because the Court discerns
no conflict between Texas and New Jersey law, it will apply New Jersey law.4
A federal court sitting in diversity applies the choice of law rules of the state in which it is
located. Collins v. MaryKay, Inc., 874 F.3d 176, 183 (3d Cir. 2017). As such, New Jersey choice
of law rules apply here.
In New Jersey, “[t]he first step in a conflicts analysis is to decide whether there is an actual
conflict between the laws of the states with interests in the litigation.” Continental Ins. Co. v.
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Third-party Plaintiffs make no choice-of-law arguments. They do, however, rely on New Jersey case law governing
contractual interpretation in their brief. See Third-party Pl. Br. at 1-2, ECF No. 31.
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Honeywell Int’l, Inc., 234 N.J. 23, 46 (2018) (citing P.V. ex rel. T.V. v. Camp Jaycee, 197 N.J.
132, 143 (2008)). Where there is no conflict, “the choice-of-law question is inconsequential, and
the forum state applies its own law to resolve the disputed issue.” Rowe v. Hoffman-La Roche,
Inc., 189 N.J. 615, 621 (2007). To find a conflict, there must be “a substantive difference between
the laws of the interested states.” Continental, 234 N.J. at 46 (internal quotation marks and
citations omitted).
Here, the Court finds no substantive difference between New Jersey and Texas law
governing releases. Under both New Jersey and Texas law, a release is merely a form of a contract
to which the usual rules of contractual interpretation apply. See Cooper v. Borough of Wenonah,
977 F. Supp. 305, 311-12 (D.N.J. 1997) (“[C]ontract principles determine the rights of the parties
[to a release].”); Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 848 (Tex. App. 2001) (“Like any
other agreement, a release is subject to the rules of construction governing contracts.”). Looking
further to each state’s contractual interpretation principles, the Court finds no relevant difference
that is “outcome determinative” such that it would be “substantive.” See McCarrell v. HoffmannLaRoche, Inc., 227 N.J. 569, 584 (2017); see also, e.g., Davis v. Dell, Inc., No. 07-630, 2008 WL
3843837, at *3 (D.N.J. Aug. 15, 2008) (collecting cases and noting that “[u]nder both Texas and
New Jersey law when interpreting a term in a contract, it is appropriate to look at the circumstances
surrounding the formation of the contract”); compare M.J. Paquet, Inc. v. N.J. Dep’t of Transp.,
171 N.J. 378, 396 (2002) (“Generally, the terms of an agreement are to be given their plain and
ordinary meaning.”) and Cumberland Cnty. Improvement Auth. v. GSP Recycling Co., Inc., 358
N.J. Super. 484, 497 (App. Div. 2003) (“[A contract] should not be interpreted to render one of its
terms meaningless.”) with Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex.
1996) (“We give terms their plain, ordinary, and generally accepted meaning[.]”) and Kelley-
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Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 464 (Tex. 1998) (holding that Texas
contractual interpretation rules require a court to “attempt to give effect to all contract provisions
so that none will be rendered meaningless”). Because there is no actual conflict between the laws
of these jurisdictions, the Court applies New Jersey law to interpret the scope of the Termination
Agreement.
B.
Contractual Interpretation
HMC argues that the Termination Agreement Releases bar Third-party Plaintiffs’ claims.
HMC Br. at 6-10, 15-20. Third-party Plaintiffs argue their claims are not barred because HMC’s
indemnification obligations under the Management Agreement could not be terminated. Thirdparty Pl. Br. at 1-2. The Court agrees with HMC.
Under New Jersey law, contractual interpretation “is a question of law for the court to
determine, and can be resolved on summary judgment.” Adron, Inc. v. Home Ins. Co., 292 N.J.
Super 463, 473 (App. Div. 1996). “[A] signed release carries considerable weight” and will be
given its “plain and ordinary meaning.” M.J. Paquet, 171 N.J. at 396. “Where the terms of a
contract are clear and unambiguous . . . [the Court] must enforce those terms as written.” Karl’s
Sales & Serv., Inc. v. Gimbel Bros., Inc., 249 N.J. Super. 487, 493 (App. Div. 1991), certif. denied
127 N.J. 548 (1991).
Here, the Termination Agreement Releases are unambiguous. Section 4 releases HMC and
Amarillo “from any liability, actions, causes of action, covenants, agreements, promises, claims,
counterclaims, defenses, offsets, charges, recoupments, obligations, and demands whatsoever . . .
arising under or related to the Management Agreement.”
Termination Agreement § 4.
Additionally, under Section 5, Amarillo specifically “release[d], discharge[d] and h[eld] harmless
[HMC] . . . from any and all suits . . . whether presently known or unknown . . . arising under, or
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in connection with” the Management Agreement. Termination Agreement § 5. Applying the plain
meaning of these terms, the Court finds that Third-party Plaintiffs’ claims are barred because they
arise under the Management Agreement: the Third-party Complaint is entirely premised on the
notion that HMC breached the Management Agreement by failing to properly train and supervise
employees of the Hotel. See TPC ¶ 20 (“Pursuant to the Management Agreement, [HMC]
promised and covenanted to be responsible for the hiring of employees for the day to day running
of [the Hotel].”); id. ¶ 28 (“Pursuant to [Management Agreement] Article 11, employees hired
directly by [HMC] who are not properly trained and engage in fraud result in [HMC] being liable
in gross negligence.”); id. ¶¶ 44-45 (describing how HMC’s conduct under the Management
Agreement “resulted in the closure of” the Hotel). As such, under the Termination Agreement
Releases, Third-party Plaintiffs’ claims were released as of the date of the Termination Agreement.
Third-party Plaintiffs do not dispute that their claims arise out of the Management
Agreement or that the Termination Agreement Releases are unambiguous. Instead, they invoke
Section 6 of the Termination Agreement, which preserves the “rights, duties and obligations of
[Amarillo] . . . that by their nature or by the express language of the Management Agreement
survive the expiration or earlier termination of such Management Agreement,” and then goes on
to list various obligations that Amarillo owed to HMC. Termination Agreement § 6 (“Section 6”);
see also Third-party Pl. Br. at 2. The claims here are not barred, they argue, because the
Management Agreement provides that all “indemnification obligations under [the Management
Agreement] . . . shall survive the expiration and any termination of th[e Management]
Agreement.” Management Agreement, Art. 11(c). The Court disagrees.
Adopting Third-party Plaintiffs’ reading of Section 6 would render Section 5, which
reiterates that Amarillo releases any and all claims against HMC related to the Management
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Agreement, largely meaningless, because it would allow Amarillo and its affiliates to bring
indemnification claims related to HMC’s performance under the Management Agreement.
Traditional contract principles caution against interpreting contracts in this manner. See, e.g.,
Cumberland Cnty. Improvement Auth., 358 N.J. Super. at 497 (“[A contract] should not be
interpreted to render one of its terms meaningless.”).
To give meaning to each contractual term, the Court considers “the contractual scheme as
a whole.” Newark Publishers’ Ass’n v. Newark Typographical Union, No. 103, 22 N.J. 419, 426
(1956). Section 4 mutually releases Amarillo and HMC from all claims “save and except the
liabilities of [Amarillo] that survive the termination of the Management Agreement as provided
therein and in Section 6 below.” Termination Agreement § 4 (emphasis added). Moreover,
Section 5 provides that Amarillo and its affiliates “covenant not to bring any suit, action, or
proceeding . . . against [HMC]” related to the Management Agreement and that HMC “may plead
or assert the release and covenant not to sue in this Section 5 as a complete defense and bar to any
claim brought against [HMC] in contravention of this Section.” Termination Agreement § 5
(emphasis added). In describing Amarillo’s broad release of claims, Section 5 contains no
qualifications of any kind. It makes no reference to Section 6 or Amarillo’s rights that Third-party
Plaintiffs argue are preserved therein. The preceding sections of the Agreement thus demonstrate
that Section 6 is intended to enumerate obligations of Amarillo that survive the Termination
Agreement, which HMC can still sue to enforce pursuant to Section 4.
This finding is consistent with Section 6’s plain language, which, other than the passing
reference to Amarillo’s “rights” in its introductory sentence, lists several other areas in which
Amarillo agreed to “remain liable to [HMC],” including “all indemnification and hold harmless
obligations of [Amarillo to HMC]” under the Management Agreement. Termination Agreement
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§ 6. The focus of Section 6, then, is on Amarillo’s liabilities under the Management Agreement—
including indemnification. Finding that Section 6 somehow swallows the Termination Agreement
Releases would therefore be inconsistent with “the context and the contractual scheme as a whole.”
Newark Publishers’ Ass’n, 22 N.J. at 426; see also Hardy ex rel. Dowdell v. Abdul-Matin, 198
N.J. 95, 103 (“A basic principle of contract interpretation is to read the document as a whole in a
fair and common sense manner.”) (emphasis added).
As such, the Court finds that the Termination Agreement bars Third-party Plaintiffs’ claims
and summary judgment is appropriate.
V.
CONCLUSION
For the reasons stated above, HMC’s Motion for Summary Judgment, ECF No. 30, is
GRANTED, and the Third-party Complaint is DISMISSED. An appropriate order follows.
Dated: April 2, 2020
/s Madeline Cox Arleo__________
HON. MADELINE COX ARLEO
UNITED STATES DISTRICT JUDGE
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