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Shri Gayatri, LLC v. Days Inn Worldwide Inc.

United States District Court, D. Massachusetts

March 28, 2018

SHRI GAYATRI, LLC, Plaintiff,
v.
DAYS INNS WORLDWIDE, INC. Defendant.

          MEMORANDUM AND ORDER ON DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

          Timothy S. Hillman United States District Judge

         Plaintiff Shri Gayatri, LLC (“Shri Gayatri”) brought the present suit after defendant Days Inns Worldwide, Inc. (“DIW”) terminated the parties' License Agreement for the operation of a Days Inn lodging facility in Sturbridge, MA, after the facility was severely damaged by a tornado. Shri Gayatri asserts that the DIW's termination of the License Agreement was a breach of contract (Count I); breach of the implied covenant of good faith and fair dealing (Count II); and that DIW's conduct violated Mass. Gen. L. ch. 93A (Count III).

         Background

         Plaintiff Shri Gayatri is a Massachusetts LLC with three members: Jayesh Patel, Dina Patel, and Kamlesh Patel. Shri Gayatri operated a guest lodging facility at 66-68 Haynes Road, Sturbridge, MA (the “Facility”). Jayesh Patel, either alone or together with other business partners, also owns or has owns several other franchised hotels, including a Motel 6 in Sturbridge, Mass., a Motel 6 in Westborough, Mass., and a Hampton Inn in Auburn, Mass. Defendant DIW operates a guest lodging facility franchise system, comprised of, inter alia, federally-registered trademarks and the DIW central reservations system. Shri Gayatri was a franchisee of DIW, and the relationship was created and governed by the License Agreement executed by both parties' on December 8, 1997. The License Agreement is specific to the Facility's location on Haynes Road. Under the License Agreement, Shri Gayatri would operate its lodging facility as a Days Inns franchise for a term of fifteen years, beginning January 4, 1999, and ending on January 3, 2014. Section 5 of the License Agreement states, in all capital letters, that neither party has a right or option to renew the Agreement.

         Section 3.4 of the License Agreement required Shri Gayatri to “operate and maintain the Facility continuously after the Opening Date on a year-round basis as required by System Standards and offer transient guest lodging and other related services of the Facility…to the public in compliance with the law and System Standards.” Section 3.4 also provided that Shri Gayatri “may add to or discontinue the amenities, services and facilities described in Schedule B…only with [DIW's] prior written consent which [DIW] will not unreasonably withhold or delay.” However, Section 11.2 gives DIW the right to unilaterally terminate the License or the Agreement if Shri Gayatri were to “you discontinue operating the Facility as a ‘Days Inn, '” or if DIW is “authorized to terminate under Section 3.1.”

         Section 11.3.1 of the License Agreement lays out terms covering the event of a casualty (such as a tornado) that prevents Shri Gayatri from operating their facility in the normal course of business. In the event of such a casualty, the Agreement provides:

You will tell us in writing within 60 days after the Casualty whether or not you will restore, rebuild and refurbish the Facility to conform to System Standards and its condition prior to the Casualty. This restoration will be completed within 180 days after the Casualty. You may decide within the 60 days after the Casualty, and if we do not hear from you, we will assume that you have decided, to terminate this Agreement, effective as of the date of your notice or 60 days after the Casualty, whichever comes first. If this Agreement so terminates, you will pay all amounts accrued prior to termination and follow the post termination requirements in Section 13. You will not be obligated to pay Liquidated Damages if the Facility will no longer be used as an extended stay or transient lodging facility after the Casualty.
Section 11.3.1 (emphasis added).

         The Agreement does not contain terms regarding the availability of an extension to the 180-day period set for restoration after a casualty, nor does the Agreement specifically state that failure to complete restoration in the 180-day limit gives DIW the unilateral right to terminate the License Agreement.

         On June 1, 2011, the Facility sustained severe damage after it was hit by a tornado, to the extent that it was required to completely shut down operations. Shri Gayatri promptly notified DIW of the casualty, and the closure. On June 6, 2011, DIW sent a letter (“Temporary Closing Letter”) acknowledging that the Facility would be temporarily closed from June 3, 2011 through December 3, 2011. The Temporary Closing Letter also stated “[i]f you are unable to open the Facility by December 3, 2011, it is imperative that you contact us prior to December 3, 2011, to advise us of when the Facility will reopen.” Jayesh Patel signed the letter, acknowledging that he agreed to its terms, and returned it to DIW.

         Jayesh Patel claims that the Facility suffered additional damage from Hurricane Irene on August 28, 2011, and following a snowstorm on October 29, 2011. Apart from Patel's deposition testimony, there is no evidence in the record that the Facility suffered any damage after the tornado, nor any evidence that DIW was ever notified of these additional alleged casualty losses.

         During the 180-day period of temporary closing, Shri Gayatri made minor repairs, such as removing fallen trees and placing a tarp over the roof, but it did not rebuild or reopen the Facility, nor did it apply for the necessary permits to do any work to the Facility during that time. Shri Gayatri was engaged in a dispute with its insurer during the 180-day period regarding coverage for the loss. A representative of DIW, Mr. Dudhwala, said that DIW would work with Shri Gayatri to reopen, and also informed Jayesh Patel that “[w]e will work on the extension of closing.” CSMF ¶ 29. Just before the December 3, 2011 deadline for reopening, Shri Gayatri requested an extension of time to reopen, which DIW denied. On December 9, 2011, DIW sent a letter to Shri Gayatri acknowledging termination of the License Agreement as a result of Shri Gayatri's failure to reopen the Facility by December 3, 2011.

         The day after the tornado, Jayesh Patel advised his bank that he would be using the insurance money received from the tornado damage to pay off a loan on a separate property in Sturbridge. On August 1, 2011, while in the process of seeking to finance or refinance other properties, Jayesh Patel advised his bank that Shri Gayatri had no intention of rebuilding the Facility at Haynes Road, a fact that he confirmed in his deposition testimony. Shri Gayatri planned to use the proceeds to build a new hotel at a different location in Sturbridge, when market conditions were favorable. Several years after the tornado, the Facility was demolished by Shri Gayatri, and no new guest lodging facility was built on the site.

         In December 2013, Shri Gayatri filed suit against Charter Oak Fire Insurance Company in this Court alleging that the insurer's inaction during the 180-day period prevented Shri Gayatri from rebuilding and reopening its Facility within the 180-day period, leading to the termination of its License Agreement with DIW. This Court ruled in favor of the insurer on a motion for summary judgment, noting that ...


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