The Franchise Memorandum

In a case litigated by Gray Plant Mooty, the Eleventh Circuit Court of Appeals last month affirmed the grant of summary judgment to a franchisor seeking recovery of liquidated damages owed under a hotel franchise agreement. In Country Inns & Suites by Carlson, Inc. v. Interstate Properties, LLC, 2009 WL 1298401 (11th Cir. May 12, 2009), the court of appeals considered the franchisee’s arguments that the liquidated damages clause at issue could not be enforced because it did not take into account the amount of time remaining on the franchise agreement in calculating liquidated damages, did not reduce the liquidated damages award to present value, and determined liquidated damages based on gross revenues rather than the franchisor’s actual profits. 

The court of appeals affirmed the district court’s order in all respects, and stated that it found the franchisee’s arguments to be “unpersuasive.” The court agreed with the district court that the liquidated damages that the franchisee agreed to pay were not grossly disproportionate to the damages that might reasonably be expected to follow from a breach. The court also found that the liquidated damages clause did not operate as an impermissible bar on the franchisee’s ability to transfer the hotel.