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Paul Zimmerman

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Hotel News Update: Amicable Resolution Reached in High-Profile Litigation Over Management Agreement

Marriott International, Inc. ("Marriott") and Eden Roc, LLLP ("Eden Roc"), the owner of the Eden Roc Hotel in Miami Beach, Florida, have jointly announced an amicable resolution of their ongoing litigation concerning the hotel. Under the terms of the agreement, Eden Roc will pay Marriott $10 million now and $11 million five years from now (among other contingent payments) according to a joint statement from the companies. This brings to a close one of the more high-profile hotel owner-operator disputes in recent years.

I commented on this litigation in 2015, noting that the dispute raised fundamental questions about the owner-operator relationship. A New York state appeals court in 2013 allowed the hotel owner to terminate Marriott's 30-year management agreement, a decision that was notable for delineating the circumstances where an owner can remove an operator. Marriott  had pursued damages for breach of the management contract, leading to this week’s settlement.

Marriott had sought tens of millions of dollars in damages from the hotel's owner for allegedly breaching the management agreement, and had alleged that Eden Roc's breach had robbed its Renaissance Hotel Management Co. LLC subsidiary of 42 years of management fees. Under the management contract, Renaissance was supposed to operate the hotel until the year 2055.

Under the terms of the announced resolution, the parties have agreed to resolve the dispute on the following terms: Eden Roc will pay Marriott $10 million on signing; the parties have agreed to enter into franchise agreements for three Residence Inn hotels in Mexico owned by principals of Eden Roc but, if the hotels are not open for business within four years, Eden Roc has agreed to pay Marriott up to $10 million by the fifth anniversary of the settlement. Eden Roc has also agreed to pay Marriott an additional $11 million on the fifth anniversary of the settlement. Eden Roc has further agreed to offer additional franchise opportunities to Marriott that, if consummated, would offset all or part of this payment. If all three of the Residence Inn hotels are not opened within four years, the total payments under this settlement agreement could be upwards of $31 million.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.