Radisson Hotels International, Inc. v. Fairmont Partners LLC

Background

Radisson Hotels International, Inc. licensed Fairmont Partners LLC to renovate and operate a Radisson System hotel in Sheffield, Alabama, under a 20-year agreement governed by Minnesota law. The agreement allowed Fairmont Partners to terminate for cause by giving notice effective 10 days after delivery. It also allowed Radisson Hotels to terminate if Fairmont Partners defaulted, including by ceasing to continuously operate the hotel. The agreement required Fairmont Partners to perform specified obligations after termination.

Fairmont Partners sent Radisson Hotels a termination notice on May 9, 2018. Radisson Hotels responded that the notice did not comply with the agreement and was therefore null and void. On May 16, 2018, Radisson Hotels separately terminated the agreement, citing Fairmont Partners’ failure to continuously operate the hotel. Radisson Hotels demanded unpaid royalty, marketing contribution, and reservation fees, as well as liquidated damages.

After the termination, Radisson Hotels discovered that Fairmont Partners was operating a new hotel under the name The Shoals Hotel Sheffield at the former Radisson hotel site. According to the complaint, Fairmont Partners continued using and associating the new hotel with Radisson Hotels’ marks, including on internet websites and directory listings. Radisson Hotels sued for breach of contract, trademark infringement, and unfair competition, seeking damages, an injunction, a declaration concerning Fairmont Partners’ termination notice, attorneys’ fees and costs, and other relief under the Lanham Act.

Fairmont Partners was served on May 3, 2019, but did not answer or otherwise respond by the May 24, 2019 deadline. The clerk entered default on June 4, 2019. Radisson Hotels then moved for default judgment.

Default Judgment Standard

A default judgment requires two steps: entry of default by the clerk and an application to the court for judgment. When default is entered, the complaint’s factual allegations generally are treated as admitted, except allegations about the amount of damages. The court must still determine whether those facts establish a valid cause of action and must determine damages with reasonable certainty.

Contractual Relief

The court concluded that the license agreement was enforceable when Radisson Hotels exercised its termination right on May 16, 2018. Even if Fairmont Partners’ May 9 termination notice had been valid, the agreement made that termination effective on May 19, 2018—10 days after delivery. The court also concluded that the agreement’s post-termination obligations applied automatically when the agreement ended “for any reason.” Accepting the complaint’s factual allegations as true for purposes of the motion, the court found a cause of action to enforce the agreement and held that Radisson Hotels was entitled to the agreement’s benefits.

Damages and Fees

The court awarded Radisson Hotels $112,149.06 in consequential damages for unpaid royalty, marketing contribution, and reservation fees due as of the termination date identified in the order. The court also awarded $242,400 in liquidated damages under the agreement. It found that amount reasonable because the parties had projected approximately $300,000 in annual royalty and marketing fees, negotiated the liquidated-damages amount when they entered the agreement, and had 17 years remaining on the license term when termination occurred.

The court awarded $15,810.90 in attorneys’ fees and costs under the agreement, consisting of $15,116.50 in fees and $694.40 in costs. The court found the fees reasonable based on 43.2 hours of legal work and hourly rates ranging from $220 to $550.

Injunctive Relief

The court granted an injunction requiring Fairmont Partners to comply with the agreement’s post-termination obligations. Those obligations included stopping use of Radisson Hotels’ marks, stopping representations that the new hotel was a current or former Radisson System hotel, and stopping operation of the hotel as a Radisson System hotel. The injunction also required Fairmont Partners to remove advertising materials using the marks and transfer the telephone number 256-381-4710 to Radisson Hotels.

Order

The court granted Radisson Hotels’ motion for default judgment as specified in the order. It directed the clerk to enter judgment against Fairmont Partners in the amount of $370,359.96 and ordered Fairmont Partners to stop using Radisson Hotels’ marks, remove related advertising, transfer the specified telephone number, and comply with all post-termination obligations in section 20.1 of the license agreement. The order was signed by Judge Wilhelmina M. Wright.