Source: http://nm.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180702_0001390.DNM.htm/qx
Timestamp: 2019-04-25 20:44:44+00:00

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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.
THIS MATTER comes before the Court on the Defendants' Brief in Support of Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a), filed September 29, 2017 (Doc. 19)(“Motion”). The Court held a hearing on June 4, 2018. The primary issues are: (i) whether the forum selection clause in the Microtel Inns and Suites Franchising, Inc. License Agreement, filed September 27, 2017 (Doc. 15-1)(“Franchise Agreement”), is contractually valid; (ii) whether the United States District Court for the District of New Jersey would have personal jurisdiction over the Plaintiffs if the Court transferred the case; (iii) whether the forum selection clause in the Franchise Agreement and incorporated in the Amendment Assignment and Assumption Agreement, filed September 27, 2017 (Doc. 15-2)(“Assignment Agreement”), is void under New Mexico law, as those agreements are construction contracts under N.M. Stat. Ann. § 57-28A-1; and (iv) whether the Court should transfer this matter to the United States District Court for the District of New Jersey so that it can be consolidated with Microtel Inns and Suites Franchising, Inc. v. Presidential Hospitality, LLC, No. 17-5637 (D.N.J.)(Wigenton, J.)(“New Jersey Action”). The Court concludes that: (i) the forum selection clause is contractually valid; (ii) New Jersey has personal jurisdiction over Plaintiff Presidential Hospitality and Plaintiff Sam Blue, but not over Plaintiff Ace Development, Inc.; (iii) the Court may not consider New Mexico public policy when it sits in diversity and considers a 28 U.S.C. § 1404(a) motion, but, even if it could, the Franchise Agreement and the Assignment Agreement are not construction contracts under N.M. Stat. Ann. § 57-28A-1, so the forum selection clause at issue would not be void as against public policy; and (iv) the Court will transfer Presidential Hospitality's and Blue's claims. The Court may not transfer Ace Development's claims, because New Jersey does not appear to have personal jurisdiction over that Plaintiff. Accordingly, the Court grants the Motion in part and denies it in part. The Court severs Ace Development's claims under rule 21 of the Federal Rules of Civil Procedure and transfers the remaining parties and claims.
The Court draws its facts from the First Amended Complaint for Violation of the New Mexico Unfair Practices Act; Fraudulent Inducement; Negligent Misrepresentation; and Jury Demand, filed September 25, 2017 (Eleventh Judicial District Court, County of San Juan, State of New Mexico), filed in federal court on September 26, 2017 (Doc. 1-5)(“FAC”) and from various attachments to the parties' briefing. The Court uses and accepts those facts as true only for the purposes of this Memorandum Opinion and Order. The Court's acceptance and use of those facts here does not mean that those facts are true or that later litigation on those facts is foreclosed. The Court also notes that the case is at an uncommon posture on a motion to transfer in that the Court has already adjudicated a motion for a temporary restraining order, see Memorandum Opinion and Order, 2018 WL 2604831, filed June 2018 (Doc. 37)(“MOO”), so it has a greater grasp on the facts than it would have on a typical motion to transfer. The Court summarizes the facts relevant to the transfer issue and then states its more detailed factual findings from the MOO.
Venue. Any litigation arising out of or related to this Agreement including, without limitation, any breach of this Agreement and any and all disputes between the parties, regardless of the form of action, shall be instituted exclusively at our discretion in the state or federal court of general jurisdiction closest to our then-current principal business address. You expressly agree that you are subject to the jurisdiction and venue of those courts for purposes of such litigation. You hereby waive and covenant not to assert any claim that you are not subject to personal jurisdiction in those courts or that venue in those courts is for any reason improper, inconvenient, prejudicial or otherwise inappropriate (including, without limitation, any claim under the judicial doctrine of forum non conveniens). The provisions of this Paragraph 13N shall be self-executing.
See Franchise Agreement at 29. In May, 2013, Blue, Presidential Hospitality, and Microtel Inn, entered into the Assignment Agreement, which transferred Blue's rights and obligations under the Franchise Agreement to Presidential Hospitality, and allowed Presidential Hospitality to build and operate the hotel in Aztec, New Mexico, instead of in Durango. See Assignment Agreement at 1, 4. Blue remained secondarily liable for payment and performance of the Franchise Agreement. See Assignment Agreement at 1. The Assignment Agreement incorporates the Franchise Agreement, including the Franchise Agreement's forum selection clause. See Assignment Agreement at 2; Response at 2 n.1 (admitting that the forum selection clause is incorporated into the Assignment Agreement by reference). Related to the Assignment Agreement, Blue signed a Guaranty that Presidential Hospitality will punctually pay and perform its obligations. See Guaranty at 1, filed September 27, 2017 (Doc. 15-3)(“Guaranty”). Blue acknowledged in the Guaranty that the Franchise Agreement's forum selection clause applies to the Guaranty. See Guaranty at 1.
The Assignment Agreement also stipulates that a Development Incentive Note, filed September 29, 2017 (Doc. 19-2)(“Dev. Incentive Note”) amends the Franchise Agreement. See Assignment Agreement at 4. In the Dev. Incentive Note, Microtel Inn agrees to loan $105, 000.00 to Presidential Hospitality, at no interest, on the conditions that Presidential Hospitality passes a credit review, pays an application fee, completes the hotel in compliance with the standards set forth in the Franchise Agreement, and opens the hotel no later than April 5, 2014. See Dev. Incentive Note at 1. Under the Dev. Incentive Note, one-fifteenth of the loan amount will be forgiven on each anniversary of the hotel's opening date. See Dev. Incentive Note at 1.
In March, 2015, Presidential Hospitality and Blue defaulted on their fee payments to Microtel Inn. See Letter from Wyndham Hotel Group, LLC to Presidential Hospitality, LLC and Sam Blue, at 1 (dated March 10, 2015), filed September 26, 2017 (Doc. 1-3). In August, 2015, Presidential Hospitality and Microtel Inn entered a payment plan to pay off the past amount Presidential Hospitality and Blue owed as a result of the March, 2015 default. See Payment Plan Relating to the License Agreement between Microtel Inn & Suites and Presidential Hospitality, LLC, for the Facility Designated as Unit #47176-03078-01-MTL, Located in Aztec, New Mexico at 1 (dated August 3, 2015), filed September 26, 2017 (Doc. 1-4)(“Payment Plan”). Presidential Hospitality did not make the required payments under the Payment Plan. See Letter from Wyndham Hotel Group, LLC to Sam Blue and Presidential Hospitality, LLC at 1 (dated October 8, 2015), filed September 26, 2017 (Doc. 1-4)(“October Default Notice”). In July, 2017, Wyndham Hotel sent Presidential Hospitality and Blue another default notice. See Letter from Wyndham Hotel Group, LLC to Sam Blue and Presidential Hospitality, LLC at 1 (dated July 12, 2017), filed September 26, 2017 (Doc. 1-4)(“July Default Notice”). Presidential Hospitality and Blue never cured that default, so Wyndham Hotel and Microtel Inn terminated the Franchise Agreement. See Letter from Wyndham Hotel Group, LLC to Sam Blue and Presidential Hospitality, LLC at 1 (dated September 12, 2017), filed September 27, 2017 (Doc. 15-5)(“Termination Notice”).
On August 1, 2017, Microtel Inn sued Presidential Hospitality and Blue in New Jersey for the fees owed under the Franchise Agreement. See Microtel Inns and Suites Franchising, Inc. v. Presidential Hospitality, LLC, No. 17-5637, Complaint at ¶¶ 1-3, 35-44, at 1-2, 7-8 (D.N.J.)(Doc. 1). See also Microtel Inns and Suites Franchising, Inc. v. Presidential Hospitality, LLC, No. 17-5637, First Amended Complaint at ¶¶ 1-3, 67-86, at 1-2, 14-17 (D.N.J.)(Doc. 9)(“NJ FAC”). In the N.J. FAC, Microtel Inn alleges that Presidential Hospitality and Blue: (i) have violated the Lanham Act, 15 U.S.C. § 1125(a), by continuing to use the Microtel registered mark after the Franchise Agreement's termination, see N.J. FAC ¶¶ 45-55, at 10-12; (ii) owe damages for breach of the Franchise Agreement, N.J. FAC ¶¶ 56-81, at 12-16; and (iii) owe damages for breach of the Dev. Incentive Note, N.J. FAC ¶¶ 82-86, at 16-17.
1. Wyndham Hotel through its affiliates, Baymont Inn and Microtel Inn offers, sells, owns, and operates hotels and hotel chains throughout the United States. See FAC ¶ 1, at 2.
2. 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, Enriquez)(“Sept. Tr.”).
3. The other member of Presidential Hospitality is Plaintiff Ace Development, Inc., a New Mexico corporation with its principal place of business in New Mexico. See Sept. Tr. at 10:11-14 (Court, Enriquez); id. at 10:18-24 (Court, Enriquez).
4. In March, 2011, Blue entered the Franchise Agreement, purchasing the rights to a Microtel Inn franchise. See Franchise Agreement at 1.
5. In May, 2013, Blue assigned his rights and obligations under the Contract to Presidential Hospitality. See Assignment Agreement at 1.
6. 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.
7. 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.
8. Blue 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.
9. Blue believed that the Wyndham Hotel wanted to buy his land. See FAC ¶ 18, at 5.
10. At 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.
11. 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.
12. Blue was initially uninterested, because he wanted to sell his property. See FAC ¶¶ 13, 20, at 4-5.
13. To 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, 5-6.
14. 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.
15. Koffler did not tell Blue that the Wyndham Hotel's investment would be a loan. See FAC ¶ 23, at 6.
16. 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.
17. About a month later, and after Blue received preliminary approval to buy the franchise, Blue had second thoughts and told Koffler that he did not think anyone would want to buy the hotel from him. See FAC ¶ 26, at 6.
18. 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.
19. Blue subsequently agreed to the purchase and entered into the Baymont Franchise Systems Inc., Franchise Agreement (“Baymont Contract”). See FAC ¶¶ 34-35, at 8.
20. Baymont Inn did not provide Blue “a complete and timely copy of its Franchise Disclosure Document” (“FDD”). FAC ¶ 36, at 8.
21. According to Blue, as a result of the Baymont Contract, he and Koffler became friends. See FAC ¶¶ 37-38 at 8.
22. “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.
23. Accordingly, “Mr. Blue felt compelled to help Mr. Koffler who referred to Mr. Blue as his ‘friend.'” FAC ¶ 38, at 8.
24. 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.”).
25. 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.
26. 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.
27. 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 9.
28. As 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.
29. In the following weeks, Koffler frequently solicited Blue to buy a Microtel Inn franchise for a property in Durango, Colorado. See FAC ¶ 41, at 9.
30. Koffler again aggressively pitched the deal to Blue. See FAC ¶ 41, at 9.
31. 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.
32. 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 9.
33. 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.
34. To further induce the sale, Koffler provided Blue a Smith Travel Research Report (“Smith Report”). See FAC ¶ 43, at 9-10.
35. The Smith Report contained information about hotels in Durango from 2005 to 2011, including: occupancy percentage, average daily rate, revenue per available room, supply, demand, and revenue. See FAC ¶ 43, at 10.
36. 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.
37. 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, at 10.
38. 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.” Franchise Agreement at 22.
39. 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.” Franchise Agreement at 22.
40. Microtel Inn did not provide Blue “a complete and timely copy of its FDD.” FAC ¶ 50, at 11.
41. A few months after Blue entered the Contract, Blue had still not yet started building the Baymont hotel. See FAC ¶ 47, at 10.
42. 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.
43. 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.
44. 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.
45. 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.
46. Blue agreed to the transfer. See FAC ¶ 51, at 11.
47. 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.
48. 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, https://bit.ly/2xxKple.
49. Many people who travel to Aztec do not travel there again.
50. 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 Hotel, http://www.mcmelegantealbuquerque.com/.
51. 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.
52. Presidential Hospitality subsequently built the Microtel Inn hotel in Aztec. See FAC ¶ 58, at 12.
53. As the Microtel Inn hotel neared completion, Blue contacted the Wyndham Hotel to determine whether it had found a buyer. See FAC ¶ 60, at 12.
54. At that time, Koffler no longer worked for the Wyndham Hotel. See FAC ¶ 60, at 12-13.
55. The Wyndham Hotel had no buyers yet, but a representative said it would “put the word out.” FAC ¶ 60, at 13.
56. 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.
57. 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.
58. Since completion, the Microtel Inn hotel has not performed on par or better than the hotels listed in the Smith Report. See FAC ¶ 64, at 13.
59. On 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”).
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 under the Agreement because of your default, such as suspending the Facility's access to our central reservation system.
61. Blue received a copy of the March Default Notice. See Declaration of Sam Blue in Support of Plaintiffs' Application for Temporary Restraining Order ¶ 9, at 3 (dated September 22, 2017), filed September 26, 2017 (Doc. 1-2)(“Blue Declaration”).
62. On April 17, 2015, Wyndham Hotel sent Presidential Hospitality and Blue another notice of monetary default, stating they were past due in fees in the amount of $41, 101.56. See Letter from Wyndham Hotel Group to Sam Blue and Presidential Hospitality, LLC at 1 (dated April 17, 2015), filed September 26, 2017 (Doc. 1-3)(“April Default Notice”).
63. The April Default Notice notes that Wyndham Hotel and Microtel Inn had extended the cure period, but states that it is not “waiving the default or any other default under the Agreement by extending the cure period. We are simply giving you a final opportunity to avoid termination.” April Default Notice at 1.
64. Blue received a copy of the April Default Notice. See Blue Declaration ¶ 10, at 3.
65. In August, 2015, Presidential Hospitality and Microtel Inn entered a payment plan to pay off the past amount owed. See Payment Plan relating to the License Agreement between Microtel Inn & Suites and Presidential Hospitality, LLC, for the facility designated as Unit #47176-03078-01-MTL, located in Aztec, NM at 1 (dated August 3, 2015), filed September 26, 2017 (Doc. 1-4)(“Payment Plan”).
This plan does not affect our rights or remedies for any other default that has or may arise under the Agreement. You expressly acknowledge that you are obligated to pay timely any other amounts due under the Agreement or any ancillary agreement and that we may also issue default notices for any other defaults under this Agreement.
67. Presidential Hospitality did not make the required payments under the Payment Plan. See Letter from Wyndham Hotel to Sam Blue and Presidential Hospitality at 1 (dated October 8, 2015), filed September 26, 2017 (Doc. 1-4)(“October Default Notice”).
68. Accordingly, in October, 2015, Wyndham Hotel sent Presidential Hospitality and Blue a third notice of default. See October Default Notice at 1.
October Default Notice at 1.
70. Blue received a copy of the October Default Notice. See Blue Declaration ¶ 11, at 3.
71. Presidential Hospitality and Blue never cured that default. See Tr. at 13:1-4 (Sager).
72. They did, however, make payments to Wyndham Hotel between October, 2015, and July, 2017, in an amount “totaling approximately $42, 000.00.” Declaration of Theresa Bailey in Support of Plaintiffs' Application for Temporary Restraining Order ¶ 4, at 2 (dated September 22, 2017), filed September 26, 2017 (Doc. 1-4)(“Bailey Declaration”).
73. Blue also exchanged various emails in the following months with Wyndham Hotel “in an attempt to work out a resolution regarding unpaid monies.” Blue Declaration ¶ 12, at 3.
74. On January 23, 2017, Blue spoke with Jennifer Constantinou -- a Wyndham Hotel in-house attorney -- who told him that “Wyndham would not pursue collection of the amounts due as long as the parties were discussing a workable solution.” Blue Declaration ¶ 12, at 3.

References: § 1404
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 § 1404
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 § 1125