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Days Inns Worldwide, Inc v. May & Young Hotel-New Orleans

December 19, 2012

DAYS INNS WORLDWIDE, INC.,
PLAINTIFF,
v.
MAY & YOUNG HOTEL-NEW ORLEANS, LLC, ET AL., DEFENDANTS.



The opinion of the court was delivered by: William J. Martini, U.S.D.J.:

OPINION

Plaintiff Days Inns Worldwide, Inc. ("DIW") filed this action against Defendants May & Young Hotel-New Orleans, LLC ("May & Young") and Shenquan Yang ("Yang") (collectively, "Defendants"). The Complaint alleged that May & Young breached a franchise licensing agreement with DIW ("License Agreement"), and that Yang breached an agreement to guarantee May & Young's obligations under the License Agreement (the "Guaranty"). Defendants filed counterclaims for tortious interference with prospective economic advantage, breach of contract, and fraud, but decided not to pursue these counterclaims at trial.

The Court conducted a one-day bench trial on December 4, 2012. Defendant Yang failed to appear at trial.*fn1 Although defense counsel was present at the trial, the defense was unable to present any evidence in light of Yang's failure to appear as a witness. Plaintiff submitted proposed findings of fact and conclusions of law on December 13, 2012. After carefully considering the record evidence and the submissions, the Court finds that May & Young breached the License Agreement, and that Yang breached the Guaranty. The Court further finds that DIW is entitled to damages in the amount of $508,799.79, plus the costs incurred in this action in an amount to be determined. This Opinion constitutes the Court's findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a).

I.JURISDICTION, VENUE, AND APPLICABLE LAW

This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. § 1332 because Plaintiff and all Defendants are citizens of different states and the amount in controversy exceeds $75,000. This Court has personal jurisdiction over Defendant May & Young by virtue of section 17.6.3 of the License Agreement. This Court has personal jurisdiction over Yang pursuant to the Guaranty, in which Yang agreed that he was personally bound by section 17 of the License Agreement. Venue is proper in this District pursuant to section 17.6.3 of the License Agreement, as that provision contains an express waiver by May & Young of any objection to venue in this District.

II.FINDINGS OF FACT*fn2

A.The Parties

DIW is a Delaware corporation with its principal place of business in Parsippany, New Jersey. (Final Pretrial Order ("FPO") (ECF No. 33), Stipulated Facts at 1). DIW owns and operates a national guest lodging facility franchise system and is widely known as a provider of guest lodging facility services. (FPO, Stipulated Facts at 2).

May & Young is a limited liability company organized and existing under the laws of the State of Louisiana with its principal place of business in Harvey, Louisiana. (FPO, Stipulated Facts at 3). Yang is a citizen of the State of California residing at 10542 Gaylemont Lane, San Diego, California 92310. (FPO, Stipulated Facts at 4). Yang is the principal and only constituent member of May & Young. Id.

B.The Agreements between the Parties

On or about August 16, 2007, DIW entered the License Agreement with May & Young for the operation of a 106-room guest lodging facility located at 3750 Westbank Expressway, Harvey, Louisiana 70058 (the "Facility"). (FPO, Stipulated Facts at 8; Exhibit P-1). On or about August 16, 2007, DIW entered into a Satellite Connectivity Services Addendum (the "Satellite Addendum") with May & Young. (FPO, Stipulated Facts at 6; Exhibit P-2). Effective as of the date of the License Agreement, Yang provided DIW with the Guaranty of May & Young's obligations under the License Agreement. (FPO, Stipulated Facts at 7; Exhibit P-3).

Pursuant to section 5 of the License Agreement, May & Young was obligated to operate a Days Inn® guest lodging facility for a 15-year term. (FPO, Stipulated Facts at 9; Exhibit P-1). Pursuant to section 7, section 18, and Schedule C of the License Agreement, May & Young was required to make certain periodic payments to DIW for royalties, service assessments, mandatory marketing program charges, internet booking fees, reservation system charges, guest services assessments, taxes, interest, relicense fee, and other fees (collectively, "Recurring Fees"). (FPO, Stipulated Facts at 10; Exhibit P- 1). Pursuant to section 7.3 of the License Agreement, May & Young agreed that interest "on any past due amount [is] payable to [DIW] under this Agreement at the rate of 1.5% per month or the maximum rate permitted by applicable law, whichever is less, accruing from the due date until amount is paid." (FPO, Stipulated Facts at 11; Exhibit P-1).

Pursuant to section 3.8 of the License Agreement, May & Young was required to prepare and submit monthly reports to DIW disclosing, among other things, the amount of gross room revenue earned by May & Young at the Facility in the preceding month for purposes of establishing the amount of royalties and other Recurring Fees due to DIW. (FPO, Stipulated Facts at 12; Exhibit P-1). Also pursuant to section 3.8 of the License Agreement, May & Young agreed to maintain accurate financial information, including books, records, and accounts, relating to the gross room revenue of the Facility. Pursuant to sections 3.8 and 4.8 of the License Agreement, May & Young agreed to allow DIW to examine, audit, and make copies of the entries in these books, records, and accounts. (FPO, Stipulated Facts at 13; Exhibit P-1). Pursuant to section 3.9 of the License Agreement, DIW has the unlimited right to conduct unannounced quality assurance inspections of the Facility to determine whether the Facility was in compliance with DIW's quality assurance requirements. (FPO, Stipulated Facts at 14; Exhibit P-1).

Pursuant to section 11.2 of the License Agreement, DIW could terminate the License Agreement, with notice to May & Young, if May & Young (a) discontinued operating the Facility as a Days InnĀ® guest lodging facility establishment, or (b) lost possession or the right to possession of the Facility. (FPO, Stipulated Facts at 15; Exhibit P-1). Pursuant to section 12.1 of the License Agreement, May & Young agreed that, in the event of a termination of the License Agreement pursuant to Section 11.2, it would pay liquidated damages to DIW in accordance with a formula specified in the License Agreement. (FPO, Stipulated Facts at 16; Exhibit P-1). Pursuant to section 17.4 of the License Agreement, May & Young agreed that the non-prevailing party would "pay all costs and expenses, ...


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