News for the Hospitality Executive
Jury Awards 10 million to Owner of Ritz-Carlton Bali;
At Core of Case -
A Material Breach of Loyalty Displayed by Marriott International
(Ritz-Carlton's Parent Company)
Against The Ritz-Carlton Hotel Company
DALLAS, Feb 04, 2008 - One of the hospitality industry's most closely-watched trials has ended in victory for a hotel owner against The Ritz-Carlton Hotel Company, LLC ("Ritz-Carlton"). Bickel & Brewer law firm has announced that its client, Karang Mas Sejahtera ("KMS"), owner of the exclusive Ritz-Carlton Bali Resort & Spa ("Ritz-Carlton Bali"), prevailed in a case that may have wide-ranging implications on the manner in which hotel management agreements are interpreted -- and enforced.
On January 25, following a three-week trial, a nine person jury in the United States District Court in Greenbelt, Maryland, reached a unanimous decision that Ritz-Carlton violated its fiduciary duties to KMS and the Ritz-Carlton Bali. The jury awarded KMS $382,000 in actual damages and $10 million in punitive damages -- $5 million more than KMS had requested. The landmark verdict also allows KMS to pursue millions more in attorneys' fees.
"The jury's decision affirms our client's position -- that Ritz-Carlton breached its fiduciary duty from a financial, operational and competitive point of view," says William A. Brewer III, partner at Bickel & Brewer and counsel for KMS. "This case is of vital importance to the hospitality industry, as it further underscores and clarifies the rights, responsibilities and obligations of all parties involved in a hotel management agreement."
Filed more than three years ago, this lawsuit has become one of the nation's most high-profile disputes between a hotel management company and individual hotel owner. The case centers around the development and opening of the Bulgari Bali Hotel, which began operation in September 2006, just three miles from the KMS property. KMS demonstrated that Ritz-Carlton violated its fiduciary duties by operating that competing property in disregard of KMS' territorial rights and failing to recognize its responsibilities as an agent of the Ritz-Carlton Bali. The Bulgari Bali, which is managed by Ritz-Carlton, is the first resort in the upstart Bulgari Hotels & Resorts chain, a joint venture between Marriott International (Ritz-Carlton's parent company) and high-fashion Italian jeweler Bulgari SpA.
The Bulgari Bali Hotel opened under Ritz-Carlton management despite concerns from KMS that the luxury hotel would violate the territorial exclusivity provision KMS held with Ritz-Carlton. Among several other claims, KMS alleged that the Bulgari property was benefiting from the use of the Ritz-Carlton brand name in its marketing and promotion -- all in direct violation of the operating agreement between the KMS and Ritz-Carlton.
"At the end of the day, we proved that our client suffered a material breach of loyalty," says James S. Renard, partner at Bickel & Brewer who joined Brewer as counsel for KMS. "We alleged -- and the jury emphatically agreed -- that Ritz-Carlton was bound by a contractual obligation not to use the Ritz-Carlton name and brand to operate another hotel on the Indonesian Island of Bali without our client's consent."
Brewer says this jury verdict may be a seminal moment for the hospitality industry. His law firm has been involved in many of them over the past several decades, representing a wide range of internationally-known hotel franchisors, management companies, owners, developers and investors. As an example, Bickel& Brewer successfully argued Woolley v. Embassy Suites, Inc., the case in which the court held that hotel management agreements are agency agreements and, as such, are always terminable at the option of the owner. In 1999, Bickel & Brewer extended Woolley by establishing that a franchise agreement may also create an agency relationship between the franchisor and the hotel owner.
"This case is like the Woolley cases in that it has the potential to change the industry's legal landscape," Renard says. "This jury verdict compels the industry to look more closely at management agreements -- and evaluate the manner in which they are interpreted by all involved parties."
Brewer and Renard were joined in representing KMS by firm counsel Ken Hickox, associate Rob Millimet and litigation consultant Christopher Mayzner.
Ritz-Carlton was represented by Kenneth Smurzynski and Malachi Jones of Williams & Connolly.
About the Ritz-Carlton Bali Resort & Spa:
The Ritz-Carlton Bali Resort & Spa is located on the Island of Bali in the Republic of Indonesia. Built on 173 acres, the resort features 368 guest rooms, including 38 new cliff villas with breathtaking views of the Indian Ocean. As one of Bali's premier resort locations, the Ritz-Carlton Bali offers guests 12 restaurants and lounges, golf, tennis, indoor and outdoor pools, a spa complex, and access to Kubu Beach, a stunning and secluded private cove. Visit the Ritz-Carlton Bali Resort & Spa at http://www.ritzcarlton.com/en/Properties/Bali.
About Bickel & Brewer:
Founded in 1984, Bickel & Brewer has earned a reputation as one of the most aggressive and successful law firms in the United States practicing exclusively in the field of complex commercial litigation and dispute resolution. With offices in Dallas and New York, Bickel & Brewer represents a wide spectrum of industry leaders -- from entrepreneurs to Fortune 500 corporations -- facing the most challenging of legal issues. Visit Bickel & Brewer at http://www.bickelbrewer.com.
Bickel & Brewer
|Also See:||A Jury Verdict Rules Marriott/Ritz-Carlton Breached Contractual and Fiduciary Duties with Owner of the The Ritz-Carlton Bali; Juror's Viewed Marriott's New Brand, Bulgari, as a Way for Marriott to Get Around Territorial Restrictions that Franchisees and Hotel Owners Have / Jim Butler / February 2008|