Judge Grants Summary Judgment to Super 8 Franchisees

SOUIX FALLS, S.D. Federal Judge Lawrence L. Piersol signed on Tuesday an order granting and yet denying in part the motion for summary judgment filed on behalf of 160 franchisees, and denying Super 8 Motels’ motion for summary judgment entirely.

The class action lawsuit was filed to determine if Super 8 breached its franchise agreement with the motel owners when it imposed a five percent fee on room sales to customers registered with its TripRewards Program.

In response to this latest ruling, Scott Abdallah of Johnson, Heidepriem & Abdallah, representing the franchisee plaintiffs, said, “Obviously, our clients are very pleased with the court’s decision.  We have felt all along that this was a straightforward breach of contract case, and the Court agreed.”

Judge Piersol clearly states that the agreement specific to these 160 motel operators does not permit Super 8 to charge the five percent fee. He declares in his ruling, “The Agreement provides that franchisees will be charged 2 percent, not a 7 percent fee for a franchisee's participation in the customer loyalty program.” In answer to the franchisor’s argument for the additional fee, the judge explained that even if Super 8 has the right in its contract to change its system standards and rules of operation, including its customer loyalty program, it may not unilaterally impose a fee for the operation of that program greater than what is stated in the agreement.

But in his order denying in part the franchisees’ motion for $3 million in compensation, he states that whether any benefits accrued to class members as a result of Super 8's breach of the agreement and the monetary value of those alleged benefits are issues that need to be determined by a jury. In a breach of contract, the plaintiffs are entitled to recover all damages, but they must be reasonably certain as to the amount, he said.  The franchise owners are seeking $3,418,112.34 plus interest in their motion for summary judgment, plus any additional amount paid out by the judgment date of the case.

Although Judge Piersol agrees that franchisees are entitled to reasonable amounts, he questions if the sum they claim are owed them exceeds the actual amount that they would have gained had Super 8 fully performed its contractual duties. The company had argued that awarding class members the full sum would result in a windfall to the franchisees. The franchisor’s attorneys argue that the damages figure does not account for the amount the motel owner-operators allegedly save as a result of not being required to give customers participating in the old customer loyalty program. Company lawyers also state that the franchisees ignore income received from room sales to customers seeking to take advantage of the benefits of the TripRewards program.

The judge ruled that the parties will be able to present their respective “non-speculative” damages positions to the jury. The trial that was previously scheduled to commence on April 13, is now scheduled for June 1, 2010.