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Dady Jabs Super 8 on Franchisees' Right to Free Association

Posted Fri, 2008/02/29 - 20:22 by Janet Sparks
Franchisee Group Warns, Comply or We Will Pursue Legal Remedies

MINNEAPOLIS (Blue MauMau) - J. Michael Dady, Dady & Garner, didn't pull any punches in his February 13 letter to Super 8 Motels president John Valletta. "Over the past month, we have become aware of derogatory statements you have made about O8A [Owners 8 Association] and its leadership." Dady took issue with Valletta discrediting the franchisee association and its leadership, pressuring franchisees not to join, and threatening retaliation against its members. He warns, "We are writing to provide you with notice that these statements likely violate state franchise protection statutes which prevent a franchisor from prohibiting, restricting, or inhibiting its franchisees' right to free association."

Dady also requested a notice to the Owners 8 Association stating that Super 8 and Wyndham Hotel Group support the right of Super 8 franchisees to freely associate, and that they will refrain from making discouraging statements about the group. He further warns, "While neither the O8A nor any of its members are pursuing their legal remedies at this time, they remain ready and willing to do so if you do not comply with these requests."

Applicable Statutory Laws Prohibiting Derogatory Statements

In his letter, Dady reminds Valletta of Super 8's callous statements made to franchisees, such as, "Do you really want to follow leadership with ideas as absurd as this?" and, "For those of you who know better than to become part of any organization with such low quality standards and expectations, . . ." and, "I will pursue every means possible to prevent the damage they [O8A] may cause to our brand . . ."

Dady cites each of the franchise protection statues that apply to the relationship between Super 8 and its franchisees, defined as a "franchise." The term "franchise" requires that the following three elements be present, which he says are satisfied between Super 8 and its franchisees:

  • The relationship must involve the use of the trademark
  • There must be either a "community of interest" between the franchisor and the franchisee, or the franchisor must provide the franchisee with a "marketing plan."
  • The franchisor must charge the franchisee a fee.

Super 8, according to Dady's letter, has likely violated Franchise Protection Statutes, in interfering with the franchisees' right to associate, and if so, franchisees will be able to seek injunctive relief, actual damages, costs and attorney fees.

In closing he states, "Due to the immediacy of the O8A's concerns, we request that you provide. . . written notice, that Super 8 and Wyndham Hotel Group support the Super 8 franchisees' right to freely associate." He gives them a deadline of February 20, 2008.

Super 8 Responds to Franchisees' Demand

After receiving not only Dady's letter, but also one from Jay Patel, president of the Owners 8 Association, on February 14, Valletta shot back . Patel's letter had outlined the association's top four issues with the Super 8 franchise system: Technology Standards; TripRewards Guest Loyalty Program; Guest Services Assessments and Processing Fees; and Quality Assurance Reporting and Fees. It also extended an invitation for Valletta to attend an upcoming O8A conference to discuss those issues.

Although he acknowledged receipt of the letters, he informed Patel that because he received the letter from their association's attorney, Super 8 could only correspond through its counsel. And he said it was unclear whether he would be able to meet with the association without the company's attorney being present, again due to the involvement of Dady & Garner. He said, "We will contact you about this in the future."

Shootout Begins Between Outside Counsel and Dady

But on February 22, Edward R. Spalty, Armstrong Teasdale LLP, also fired back at Dady, advising him that they had been retained to represent the interests of Super 8. He took issue with Dady's allegations that Valletta was making statements that violate franchise protection statutes, saying, "This statement is wholly inaccurate and a review of said statutes and related case law confirm as much."

Spalty reminded Dady that Valletta's memo of January 7, 2008, stated, "Of course, we cannot prevent franchisees from organizing their own owners group and we would not try." In fact, Super 8 always supports any legitimate effort to promote dialogue and discussion." But he adds that because Valletta's statement is on the Owners 8 franchisee website, it should satisfy Dady's "unnecessary demand."

He again emphasized that Super 8 has made no effort to prohibit the association of its franchisees and that has consistently been their policy." But on the other hand, Spalty says Super 8 will not stand by when blatant misrepresentations are made by any person or organization regarding the company and its franchisees. "Said inaccuracies are defamatory and interfere with existing contractual relationship and expectancies between SMI [Super 8] and its franchisees."

Dady informed Patel that Spalty's letter was essentially the response he had asked for, and he recommended that "our Association be "forever vigilant" with respect to this issue. With Patel's approval, Dady thanked Spalty for his letter and his acknowledgment, on behalf of Super 8, that they may not take any action, directly or indirectly, to prohibit the association of franchisees. While they might have a difference of opinion as to the message Valletta was sending in his communications with franchisees, Dady said "we trust that, in the future, we will not have to again address this concern given your recognition of Super 8's legal responsibilities, and the Super 8 franchisees' legal rights, with respect to this issue."

Mr. Valletta did not respond to a phone call, through Super 8's Communications, requesting his comments for this article.

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