Red Roof Inn on hook for $11.8 million

Throughout the five-week jury trial, Murat claimed that the hotel operator was motivated to protect its own financial interests in the Baton Rouge market. Red Roof Inns has one other hotel in the market and Accor has three Motel 6 lodges nearby.

Dallas Business Journal
November 26, 2004

Red Roof Inn on hook for $11.8 million
Budget hotel chain loses major battle with franchisee
Sandra Zaragoza

Red Roof Inns will have to pay $11.8 million after breaching a franchise contract, according to a court judgment in a costly, four-year lawsuit against the budget hotel operator.

At the heart of the lawsuit was a soured deal between Boca Raton, Fla.-based Murat Holdings L.L.C. and Dallas-based Red Roof Inns. Judge Charles Stokes, of the 68th District Court, Dallas County, rendered the multimillion-dollar judgment.

Four years ago, Murat sued Red Roof Inns claiming that the hotel operator had "imposed overly-strict guidelines" to deliberately delay the re-opening of the Prince Murat hotel in Baton Rouge, La., as a Red Roof Inn. The hotel had spent about $2 million on renovations.

The case was the first major lawsuit brought by an individual owner against Red Roof Inns after Accor North America bought Red Roof in 1999, according to Bickel and Brewer, a Dallas-based law firm that represented Murat. France-based Accor — whose North America operations are based in Carrollton — is one of the largest hotel operators in the United States and also owns Motel 6 and Studio 6 brands.

This week, Red Roof said that it is planning to appeal.

"We were disappointed by the decision, but are optimistic that we can have the matter reversed or remanded," said David Noteware of Thompson & Knight L.L.P., who served as counsel for Red Roof Inns along with Jenkens & Gilchrist.

'Little guy' prevails
Some hotel industry insiders are viewing the legal decision as a slam dunk for little guys moving to establish their rights in the face of a mega hotel corporation.

"This owner (Emanuel Organek, owner of Murat Holdings) stood by his guns and feels strongly about it. He told them, 'I want you to live up to your agreements,' and it looks likes they have to," said John W. Bickel Jr. of Bickel and Brewer.

The trial verdict came earlier this year when a jury concluded that Red Roof Inns had broken the franchise agreement when it did not allow the hotel to raise the Red Roof Inn flag.

Red Roof Inns contends that it met its obligations under the contract and unsuccessfully appealed the jury's verdict.

Throughout the five-week jury trial, Murat claimed that the hotel operator was motivated to protect its own financial interests in the Baton Rouge market. Red Roof Inns has one other hotel in the market and Accor has three Motel 6 lodges nearby.

Bickel said the client, who has since sold the hotel to developers who converted the property into condos, was pleased with the final judgment.

"I think there is a constant tension (between franchisors and franchisees)," Bickel said. "Franchisors believe that they can basically do what they want — but the rights that owners have can be enforced."

moc.slanruojzib|azogarazs#moc.slanruojzib|azogarazs

© 2004 American City Business Journals Inc.


Brought to you by WikidFranchise.org

Risks: Trial decision always appealed, David and Goliath story, Encroachment (too many outlets put in territory), Lawsuits, individual, Jury trial very rare in Canada, United States, 20041126 Red Roof

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License