United States District Court, D. New Mexico
PRESIDENTIAL HOSPITALITY, LLC, a New Mexico limited liability company; ACE DEVELOPMENT, INC., a New Mexico Corporation and SAM BLUE, Plaintiff,
WYNDHAM HOTEL GROUP, LLC, a New Jersey limited liability company; BAYMONT INN AND SUITES FRANCHISE SYSTEMS, INC., a Delaware Corporation and MICROTEL INN AND SUITES FRANCHISING, INC., a Georgia corporation, Defendants.
Jo Collins Lewis Roca Rothgerber Christie LLP Albuquerque,
Martin Enriquez Anovven Law Greenwood Village, Colorado
Attorneys for the Plaintiffs
E. Thompson Elizabeth Ann Martinez Modrall, Sperling, Roehl,
Harris & Sick, PA Albuquerque, New Mexico
S. Sager Steven R. Marino DLA Piper Short Hills, New Jersey
Attorneys for the Defendants
MEMORANDUM OPINION AND ORDER
MATTER comes before the Court on: (i) the Motion for
Temporary Restraining Order and Preliminary Injunction in
Federal Court, filed September 27, 2017 (Doc.
8)(“Motion”); and (ii) the Plaintiffs'
Petition for Temporary Restraining Order and Preliminary
Injunction (Eleventh Judicial District Court, County of San
Juan, State of New Mexico), filed in state court September
22, 2017, filed in federal court September 26, 2017 (Doc.
1-2)(“State Motion”). The Court held a hearing on
November 28, 2017. The primary issue is whether to issue a
temporary restraining order reinstating the Microtel Inn and
Suites Franchising, Inc. License Agreement (dated March 18,
2011), filed September 27, 2017 (Doc.
15-1)(“Contract”), which was terminated on
September 18, 2017. The Court will not issue a TRO
reinstating the Contract, because irreparable harm is
unlikely to occur absent such an order. The primary harm
alleged -- revenue loss -- can be cured with money damages,
so the harm is not irreparable. The Court is also unpersuaded
that the revenue loss is certain to result in the
Plaintiffs' business' failure. Record evidence
suggests that the late September, 2017, drop in reservations,
upon which the Plaintiffs' heavily rely in arguing that
their hotel is doomed was an expected dip in business.
Moreover, there are many actions, such as relisting their
hotel online under a different name, that the Plaintiffs can
take to keep their hotel afloat. Accordingly, the
irreparable-harm prong of issuing a TRO weighs against the
Plaintiffs. In addition, the Plaintiffs have not established
a likelihood of success on the merits. There is insufficient
factual evidence for the Court to conclude that Defendants
Wyndham Hotel Group, LLC or Microtel Inn and Suites
Franchising, Inc. waived the Contract's termination
provisions with their conduct. Indeed, much of their conduct
suggests that they reserved their Contract termination rights
with written notices that stated expressly that they reserved
their rights. Because those two factors --irreparable harm
and substantial likelihood of success on the merits -- are
the most important factors in the TRO analysis, and because
those two factors weigh against the Plaintiffs, the Court
will not issue a TRO. Accordingly, the Court denies the
Motion and the State Motion.
to rule 52(a)(2) of the Federal Rules of Civil Procedure, the
Court makes findings of fact and conclusions of law to
support its disposition of the Motion. See
Fed.R.Civ.P. 52(a)(2), 65(d)(1). The Court will first
introduce the parties and then outline the timeline of events
in this case. The Court will then discuss the arguments for
and against the Motion.
parties did not, at the TRO hearing, present any evidence, so
the Court may rely on the Complaint, the FAC, the briefing,
attachments, and oral arguments to determine the applicable
facts. The following Findings of Fact and Conclusions of Law
are only the Court's early expression of its views on the
facts and the law. They do not bind the Court or the parties
down the road. See University of Texas v. Camenisch,
451 U.S. 390, 395 (1981)(“[T]he findings of fact and
conclusions of law made by a court granting a preliminary
injunction are not binding at trial on the merits.”).
Thus, the Findings of Fact and Conclusions of Law serve the
limited purpose of deciding the Motion and the State Motion
and do not fully resolve the case.
Wyndham Hotel through its affiliates, Defendant Baymont Inn
and Suites Franchise Systems Inc., and Microtel Inn offers,
sells, owns, and operates hotels and hotel chains throughout
the United States. See Presidential Hospitality, LLC v.
Wyndham Hotel Group, LLC, No. D-1116-CV-2017-01329,
First Amended Complaint for Violation of the New Mexico
Unfair Practices Act; Fraudulent Inducement; Negligent
Misrepresentation; and Jury Demand ¶ 1, at 2 (Eleventh
Judicial District Court, County of San Juan, State of New
Mexico), filed September 25, 2017, filed in federal court on
September 26, 2017 (Doc. 1-5)(“FAC”).
Plaintiff Sam Blue is a New Mexico citizen, who is a managing
member of Plaintiff Presidential Hospitality, LLC.
See Draft Transcript of Motion Proceedings at
10:7-17 (taken September 28, 2017)(Court,
other member of Presidential Hospitality is Plaintiff Ace
Development, Inc., a New Mexico corporation with its
principal place of business in New Mexico. See Tr.
at 10:11-14 (Court, Enriquez); id. at 10:18-24
March, 2011, Blue entered the Contract, purchasing the rights
to a Microtel Inn franchise. See Contract at 1.
May, 2013, Blue assigned his rights and obligations under the
Contract to Presidential Hospitality. See Amendment
Assignment and Assumption Agreement at 1, filed September 27,
2017 (Doc. 15-2)(“Assignment Agreement”).
According to the Plaintiffs, “through various
representations, promises, omissions, ” of which many
were “false, incomplete, and misleading, ” in
addition to “high-pressure-sales tactics, ” the
Wyndham Hotel and Microtel Inn induced Blue to purchase that
Microtel Inn franchise. FAC ¶ 2, at 1.
Again, according to the Plaintiffs, that inducement resulted
from a relationship formed among Blue and an agent of the
Wyndham Hotel, Gregg Koffler. See FAC ¶¶
12-49, 65-70, at 4-11, 14-16.
first met Koffler in June, 2010, because Koffler had
contacted Blue to tell him that the Wyndham Hotel was
interested in property that Blue owned in Aztec, New Mexico.
See FAC ¶¶ 15-19, at 4-5.
believed that the Wyndham Hotel wanted to buy his land.
See FAC ¶ 18, at 5.
his meeting with Koffler, however, instead of discussing the
Wyndham Hotel's interest in buying Blue's property,
Koffler solicited Blue to purchase a Baymont Inn franchise.
See FAC ¶ 19, at 5.
Koffler told Blue that, if Blue purchased the franchise, Blue
would be able to quickly flip the property for a profit.
See FAC ¶ 21, at 5 (“Mr. Koffler told Mr.
Blue that there would be a line of people interested in
purchasing the hotel and he guaranteed a buyer by the time
the hotel was built.”); id. ¶ 28, at 7.
Blue was initially uninterested, because he wanted to sell
his property. See FAC ¶¶ 13, 20, at 4-5.
further persuade Blue that purchasing the franchise was a
solid investment, Koffler told Blue that the Wyndham Hotel
“would most likely want to invest in the construction
of the hotel, ” FAC ¶ 22, at 5, and that Blue, who
had no experience in running a hotel, would not have to
operate it, see FAC ¶¶ 1, 21, 27 at 2,
After speaking briefly with a Wyndham Hotel executive,
Koffler represented to Blue that the Wyndham Hotel would
invest $150, 000.00 in the property. See FAC ¶
23, at 6.
Koffler did not tell Blue that the Wyndham Hotel's
investment would be a loan. See FAC ¶ 23, at 6.
Upon Koffler's representations, in particular the
representation that the Wyndham Hotel would invest $150,
000.00 of its own money in the property's development,
Blue agreed to apply for a Baymont Inn franchise.
See FAC ¶ 25, at 6.
About a month later, and after Blue had been preliminarily
approved to buy the franchise, Blue had second thoughts and
said to Koffler that he did not think anyone would want to
buy the hotel from him. See FAC ¶ 26, at 6.
Koffler again told Blue that the Wyndham Hotel “was
going to have buyers ‘lined up, '” FAC ¶
28, at 7, and also that, if Blue did not agree to purchase
the franchise, Koffler would probably lose his job,
see FAC ¶ 29, at 7.
Blue subsequently agreed to the purchase and entered into the
Baymont Franchise Systems Inc., Franchise Agreement
(“Baymont Contract”). See FAC
¶¶ 34-35, at 8.
Baymont Inn did not provide Blue “a complete and timely
copy of its Franchise Disclosure Document”
(“FDD”). FAC ¶ 36, at 8.
According to Blue, as a result of the Baymont Contract, he
and Koffler befriended each other. See FAC
¶¶ 37-38 at 8.
“Mr. Koffler often told Mr. Blue what a great person he
was and that he bragged to his family about him.” FAC
¶ 38, at 8.
Accordingly, “Mr. Blue felt compelled to help Mr.
Koffler who referred to Mr. Blue as his
‘friend.'” FAC ¶ 38, at 8.
Shortly after entering the Baymont Contract, Koffler asked
Blue to accompany him on a potential deal to sell another
franchise. See FAC ¶ 37, at 8 (“Mr.
Koffler asked Mr. Blue to vouch for him and Wyndham.”).
Koffler told Blue that his job had been stressful lately,
straining relations with his family, so “he needed to
make this sale.” FAC ¶ 37, at 8.
When the potential deal did not happen, Koffler confessed to
Blue that he needed to sell another franchise or the Wyndham
Hotel would fire him, and he would lose both his house and
his family. See FAC ¶ 39, at 9.
Koffler also told Blue that he “owed people
money” and that those people “would hurt his
family” if he did not pay them back. FAC ¶ 40, at
Koffler later recounted, the threats against him were
“either you pay me or I'll come knock on your door;
I know where you live and I am going to tell your wife
exactly what's going on here and you know, who knows what
else was going to happen.” FAC ¶ 65, at 14.
the following weeks, Koffler frequently solicited Blue to buy
a Microtel Inn franchise for a property in Durango, Colorado.
See FAC ¶ 41, at 9.
Koffler again aggressively pitched the deal to Blue.
See FAC ¶ 41, at 9.
Koffler told Blue that Blue could easily re-sell the property
for profit and that “Wyndham would have several buyers
ready to purchase the hotel.” FAC ¶ 42, at 9.
Koffler added that the Microtel Inn franchise would be an
even better deal than the Baymont franchise, because Microtel
Inn was a “new brand” that would be Wyndham
Hotel's “top money maker.” FAC ¶ 41, at
Koffler also told Blue that “it was hard to get a
Microtel franchise, ” but he could get Blue a special
price. FAC ¶ 41, at 9.
further induce the sale, Koffler provided Blue a Smith Travel
Research Report (“Smith Report”). See
FAC ¶ 43, at 9-10.
Smith Report contained information about hotels in Durango
from 2005 to 2011, including: (i) occupancy percentage; (ii)
average daily rate; (iii) revenue per available room; (iv)
supply; (v) demand; and (vi) revenue. See FAC ¶
43, at 10.
Koffler represented that any Microtel Inn hotel would
“perform as well or better than the hotels in the
S[mith] report.” FAC ¶ 43, at 10.
Relying on Koffler's representations, Blue entered the
Contract for a Microtel Inn franchise and paid a $30, 000.00
initial franchise fee. See FAC ¶¶ 44-46,
Under the Contract, Wyndham Hotel and Microtel Inn have the
right to terminate the Contract with an opportunity to cure
if Presidential Hospitality “fail[s] to pay us or any
of our affiliates fees or other amounts due under this
Agreement . . . including, without limitation, Application
Fees, Royalty Fees, Contributions, GDS fees, travel agent
commission fees or ISP fees.” Contract at 22.
Wyndham Hotel and Microtel Inn also have the right to
terminate the Contract “without giving you an
opportunity to cure the default, effective upon written
notice to you” if “you receive from us three (3)
notices of default of this Agreement within a twelve (12)
month period, regardless of whether the defaults are
cured.” Contract at 22.
Microtel Inn did not provide Blue “a complete and
timely copy of its FDD.” FAC ¶ 50, at 11.
few months after Blue entered the Contract, Blue had still
not yet started building the Baymont hotel. See FAC
¶ 47, at 10.
When Koffler asked about the delay, Blue responded that he
again had doubts about the Baymont hotel, and that he was
willing to renege on it, losing his initial investment
franchise fee. See FAC ¶ 47, at 10.
Koffler told Blue that building a Microtel Inn hotel in Aztec
would cost less than building a Baymont hotel in the same
location. See FAC ¶ 47, at 11.
Accordingly, Koffler stated to Blue that he would work with
the Wyndham Hotel to transfer the Microtel Inn franchise from
Colorado to New Mexico. See FAC ¶ 47, at 11.
Koffler assured Blue that a Microtel Inn hotel in Aztec would
“perform equally as profitable as the hotels in the
March 8, 2011 S[mith] report.” FAC ¶ 48, at 11.
Blue agreed to the transfer. See FAC ¶ 51, at
Thus, Blue assigned the Microtel Inn franchise to
Presidential Hospitality -- of which Blue was a managing
member -- and the Microtel Deal's franchise site was
moved from Durango to Aztec. See FAC ¶¶
51, 55, 57 at 11-12; Assignment Agreement, at 1.
There are several hotels in the Aztec area, many of which do
not have brand names associated with them. See Step
Back Inn, http://stepbackinn.com/; Miss Gail's
Inn, https://bit.ly/2xxKple; Enchantment Lodge,
Many people who travel to Aztec do not travel there again.
Many hotels exist without a well-known brand, such as Wyndham
or Hilton or Hyatt, attached to their name. See,
e.g., Hotel Encanto,
https://www.hotelencanto.com/; MCM Elegenté
Under the Assignment Agreement, Blue and the other owner of
Presidential Hospitality -- ACE Development -- remain
secondarily liable for Presidential Hospitality's
performance under the Contract. See FAC ¶¶
54, 59 at 12.
Presidential Hospitality subsequently built the Microtel Inn
hotel in Aztec. See FAC ¶ 58, at 12.
the Microtel Inn hotel neared completion, Blue contacted the
Wyndham Hotel to determine whether it had found a buyer.
See FAC ¶ 60, at 12.
that time, Koffler no longer worked for the Wyndham Hotel.
See FAC ¶ 60, at 12-13.
Wyndham Hotel had no buyers yet, but a representative said it
would “put the word out.” FAC ¶ 60, at 13.
When the Microtel Inn hotel was completed on October 3, 2013,
the Wyndham Hotel still had not found a buyer. See
FAC ¶ 63, at 13.
According to Blue, “Wyndham never intended or tried to
find a buyer. . . . Mr. Koffler's representations and
promises were only intended to induce Mr. Blue to purchase
the hotel franchises and construct the hotel so that Wyndham
could collect on royalty payments for 20 years.” FAC
¶ 63, at 13.
Since completion, the Microtel Inn hotel has not performed on
par or better than the hotels listed in the Smith Report that
Koffler gave to Blue. See FAC ¶ 64, at 13.
March 10, 2015, Wyndham Hotel sent Presidential Hospitality
and Blue a notice of monetary default, stating that they were
past due in recurring fees and charges in the amount of $38,
453.96. See Letter from Wyndham Hotel Group to Sam
Blue and Presidential Hospitality, LLC at 1 (dated March 10,
2015), filed September 26, 2017 (Doc. 1-3)(“March
default notice also states that:
If you do not pay this amount within the time permitted, we
reserve all rights under the terms of the Agreement including
but not limited to termination of the Agreement and your
right to operate in the Microtel Inn and Suites by Wyndham
System. This Notice does not modify, replace, or affect any
default under the Agreement, or any other default and
termination notices, if any, from us or any of our affiliates
regarding the Facility. We also reserve the right to take any
interim steps permitted ...