Florida Capital Land Corporation, Florida Capital Hotel Partners (Dallas) Ltd., FCLC Quail Springs, LLC, FCLC Shelton, LLC, and FCLC Vernon Hills, LLC filed a complaint against Prime Hospitality Corp. (NYSE: PDQ) and AmeriSuites Franchising, Inc. in the Superior Court of New Jersey. The plaintiff companies seek rescission of franchise and other agreements, as well as damages.
The complaint alleges AmeriSuites failed in the performance of its contractual duties to the plaintiff companies when it switched to an affiliate of its parent company, Prime Hospitality Corp., for a computerized reservation system “that has suffered from a litany of technical failures and inefficiencies that were known to Defendants but were recklessly disregarded.” The case involves four properties owned by the plaintiff companies in Texas, Connecticut, Illinois, and Oklahoma, and operated under the AmeriSuites flag.
The complaint outlines significant problems with the computerized reservation system that were “so pervasive… [the plaintiff companies have] been denied the essential benefit of a reservation system.” These included the inability to transmit data to interface with room-inventory control systems, inadequate communications software to extract rate data, and basic hardware needs that were not addressed and led to crashes and other data issues. In addition, the complaint alleges AmeriSuites and Prime Hospitality Corp., in an attempt to recover from the severe revenue declines caused by the reservation system failures, substantially lowered room rates throughout the AmeriSuites system, over the plaintiffs’ objection and without first conducting an appropriate analysis of the effect of such a change.
“The loss of revenue resulting from the failings of the reservations system and the ill-conceived rate reduction substantially and detrimentally affected the profitability of the hotels, and continues to do so,” said William M. Bosch, an attorney with Katten Muchin Zavis Rosenman (Washington) and co-counsel to the plaintiff companies with Michael R. Griffinger of Gibbins, Del Deo, Dolan, Griffinger & Vecchione (Newark, NJ).
Bosch notes that, in an attempt to minimize continuing losses, the plaintiff companies terminated management agreements with Prime. The defendants have yet to return hotel funds due to the plaintiffs.
“We are not only seeking the return of these funds, with appropriate interest and penalties, but also will be pursuing a full accounting, and will seek rescission of a restrictive covenant Prime seeks to impose to keep these properties in the AmeriSuites system,” said Bosch. “Our clients have seen how Prime is handling the AmeriSuites franchise, and they understandably want out because they did not get what they bargained for.”
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