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NEWARK MOTOR INN CORP. v. HOLIDAY INNS

June 27, 1979

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



The opinion of the court was delivered by: MEANOR

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. ยง 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 P 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 ...

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