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Ramada Worldwide, Inc. v. Homewood Hotel

February 5, 2007

RAMADA WORLDWIDE, INC., FORMERLY KNOWN AS RAMADA FRANCHISE, INC., PLAINTIFF,
v.
HOMEWOOD HOTEL, INC., SATISH SETHI, AND ELIZA SHETHI, DEFENDANTS.



The opinion of the court was delivered by: James F. Holderman, Chief Judge

MEMORANDUM OPINION AND ORDER REGARDING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT

Before this court is plaintiff Ramada Worldwide, Inc.'s ("Ramada") motion for summary judgment (Dkt. No. 41) in its trademark infringement and breach-of-contract suit against one of its former franchisees, Homewood Hotel, Inc. ("Homewood"), and its owners and guarantors, Satish and Eliza Shethi. For the reasons stated below, the motion is granted.

BACKGROUND

The defendants admit most of the facts set out in Ramada's L.R. 56.1 statement. The lawsuit stems from a valid and binding License Agreement ("Agreement") entered into by Ramada and the defendants on November 1, 2000, amended on October 12, 2002, and an Addendum to the License Agreement for Satellite Connectivity Services ("Addendum") entered into on June 2, 2003. (Pl. 56.1 ¶¶ 17, 18.) As relevant here, in exchange for permission to use the Ramada mark and other benefits, the defendants were obligated to operate a Ramada guest lodging facility for a 15-year term and make periodic, monthly payments to Ramada for royalties, services assessments including advertising, marketing and training, taxes, interest, reservation system user fees, annual conference fees, and other fees, collectively referred to as "Recurring Fees." (Id. ¶¶ 19, 21.) Royalty fees were calculated based on 4% of the monthly gross guest room revenues, and service assessments along with the reservation system fees and other services and programs are accounted based on 4.5% of the monthly gross guest room revenues. (Id. ¶ 22.) To determine the amount of Recurring Fees, the defendants submitted to Ramada monthly revenue reports detailing the gross room revenues for the Homewood facility. (Id. ¶ 23.) Any unpaid amounts owed to Ramada under the Agreement would be assessed interest at a rate of the lesser of 1.5% or the maximum rate permitted by applicable law. a month, until the amount was paid. (Id. ¶ 24.)

Should the defendants not timely pay the amount owed to Ramada, fail to remedy any other default of their obligations and warranties under the Agreement in 30 days after written receipt of notice from Ramada specifying one of the defaults, or accumulate two or more notices of default under the Agreement within the period of a year, regardless whether the defaults were cured, Ramada could terminate the Agreement with notice to Homewood. (Pl. 56.1. ¶25.) In the event of a premature termination two years or more before the 15-year term, that did not comply with the exceptions set out in the Amendment to the Agreement, the defendants expressly agreed to pay Ramada liquidated damages in the amount of $150,000, and additional $1000 in liquidated damages for the premature termination of the Addendum. At the time of the agreement, the defendants concede that counsel for the defendants successfully negotiated with Ramada for a lower liquidated damages amount. (Def. 56.1 Resp. ¶ 29.). Specifically, the defendants admit that the liquidated damages provision in the Agreement "was the result of an informed, negotiated compromise between the parties." (Id. ¶¶ 29, 31.) In addition, the defendants admit that the liquidated damages were set because actual damages would be difficult or impossible to ascertain on the execution date of the Agreement and the agreed-on amount was a reasonable pre-estimate of the damages that would be incurred and was not a penalty. (Id. ¶¶ 27, 31.) The defendants also had to immediately cease using any of Ramada's marks upon premature termination of the Agreement. (Pl. 56.1 ¶ 32.) For any action brought to enforce the Agreement, the non-prevailing party contracted to pay all costs and expenses, including reasonable attorneys' fees incurred by the prevailing party. (Id. ¶ 33.)

The defendants concede that they failed to pay Recurring Fees owed to Ramada in the amount of $100,763.18, inclusive of interest, and did not submit monthly gross guest room revenue reports from June 22, 2004 until the termination of the Agreement on December 29, 2004 by Ramada based on the defendants' default. (Pl. ¶¶ 39-43, 50) The defendants also admit that the Shethis are jointly and severally liable for Homewood's obligations under the Agreement. (Id. ¶ 37.)

Ramada sent the defendants three letters regarding their failure to pay their monthly Recurring Fees and submit their monthly gross revenue reports before terminating the Agreement in a letter dated December 29, 2004. In a letter dated June 24, 2004, Ramada first gave the defendants notice of default. (Pl. 56.1 ¶ 40.) Ramada subsequently sent the defendants further notice of default in letters dated November 10, 2004 and November 24, 2004. (Id. ¶¶ 41, 42.) In the letter dated December 29, 2004, Ramada terminated the Agreement effective December 29, 2004, and informed the defendants that, in addition to paying all past due Recurring Fees and other charges, they had to perform the post-termination obligations, including the de-identification of the facility of all items pertaining to the Ramada marks within 14 days of the termination date of December 29, 2004. (Id. ¶¶ 43-44.) As relevant here, the de-identification procedures that Ramada attached to the termination letter specified that the defendants were to remove any Ramada marks from the facility's signage, all interior signage, billboards, stationary, pads, pens, business cards, directories and brochures, folios and registration cards, do-not-disturb signs, laundry bags, telephone plates, telephone dialing instruction, door signage, rate/law cards, soap, shampoos, key tags, credit card imprinter, name tags/uniforms, ice buckets/trays, ashtrays/matches, plaques, guest checks, receipts, and menus, as well as Ramada trade dress and paint schemes. (Pl. Ex. H.) The procedures also advised that Ramada "quality assurance inspectors will visit the Facility at any time after ten days after the Termination date to verify that you have performed these de-identification obligations." (Id.)

On February 16, 2005, about a month after the 14-day time limit for the defendants to de-identify the Homewood facility expired, a quality assurance inspector visited the Homewood facility. In his report, the quality assurance inspector noted that the Ramada mark had been removed from the exterior signage, TV channel ID plates, door signage, ashtrays/matches, plaques, menus, and ashtrays. (Pl. Ex. I.) But the quality assurance inspector noted that many items still carried the Ramada mark including: signage from interior public areas, stationery/pads/pens, directories/brochures, business cards, folios/registration cards, do-not-disturb signs, comment cards, telephone plates, rate/law cards, soap/shampoo, key tags, credit card imprinter, laundry bags, name tags/uniforms, ice buckets/trays, and guest checks/receipts. (Pl. Ex. I.) Attached to the report provided by the quality assurance inspectors are time-stamped photographs from February 16, 2005, documenting and corroborating his report. (Id.)

According to Satish Shethi, either by February 17, 2004 or by March 2004, the entire de-identification process was complete. (Satish Shethi Dep. at 85.) Satish Shethi, however, contradicts himself even in his own deposition, stating at first that he only continued to use some of the trademarks for "a few days or whatever," (id. at 34) and then clarifying that the de-identification process took "more than a few weeks" (id. at 82,) before explicitly testifying that the complete de-identification was accomplished "Sometime in March a hundred percent." (id. at 85.) When counsel for Ramada asked, "So sometime in March, but you don't know specifically when?," Satish Shethi responded "Right before March. Right after this gentleman [the quality assurance inspector] came out and he found some items." (Id. at 86.) Counsel for Ramada and Satish Shethi continued their exchange:

Q: Okay. At what point was the de-identification completed at the hotel?

A: March.

Q: By March?

A: Yeah.

Q: And you don't know what date in ...


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