In Town Hotels Ltd. Partbership v. Marriott Inter., Inc.

246 F. Supp. 2d 469, 2003 U.S. Dist. LEXIS 2703, 2003 WL 536755
CourtDistrict Court, S.D. West Virginia
DecidedFebruary 25, 2003
DocketCIV.A. 2:02-0481
StatusPublished
Cited by8 cases

This text of 246 F. Supp. 2d 469 (In Town Hotels Ltd. Partbership v. Marriott Inter., Inc.) is published on Counsel Stack Legal Research, covering District Court, S.D. West Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In Town Hotels Ltd. Partbership v. Marriott Inter., Inc., 246 F. Supp. 2d 469, 2003 U.S. Dist. LEXIS 2703, 2003 WL 536755 (S.D.W. Va. 2003).

Opinion

MEMORANDUM OPINION AND ORDER

GOODWIN, District Judge.

Pending is defendant Marriott International, Inc.’s motion to dismiss Counts IV and XIV [Docket 15] and defendant Aven-drá, LLC’s motion to dismiss all counts [Docket 18]. For the following reasons, *472 the court DENIES Marriott’s motion to dismiss Counts IV and XIV. The court GRANTS in part and DENIES in part Avendra’s motion to dismiss all counts. Specifically, the court DISMISSES count VI (fraud) as against Avendrá for failure to plead fraud with specificity.

I. Background

The plaintiffs, In Town Hotels Limited Partnership and In Town Hotels, Inc. (collectively, “In Town Hotels”), brought suit against Marriott International, Inc. (Marriott) and Avendrá, LLC (Avendrá), alleging breach of contract, breach of fiduciary duty, negligence, and fraud arising out of Marriott’s management of the plaintiffs’ hotel, known as the Charleston Town Center Marriott (the Hotel). In an amended complaint, the plaintiffs further alleged that Marriott and Avendrá violated the West Virginia Unfair Practices Act (WVU-PA), W. Va.Code § 47-11A-3, as well as § 2(c) of the Robinson-Patman Act, 15 U.S.C. § 13(c), a federal antitrust provision which prohibits the payment and acceptance of commissions that are not in exchange for services rendered.

Because the court is considering motions to dismiss, the following facts are set out as alleged by the plaintiffs in the complaint. For approximately twenty years the plaintiffs have contracted with Marriott to manage the plaintiffs’ Hotel. Under the terms of the contract, Marriott is granted unfettered authority to manage and control the Hotel. The contract purports to create an agency relationship between Marriott and In Town Hotels whereby Marriott has a fiduciary duty to operate the Hotel solely for the benefit of the plaintiffs. The contract provides that Marriott’s compensation for its services would consist solely of management fees as set forth in the agreement. For the purpose of their antitrust claim, the plaintiffs allege that Marriott, acting in conjunction with Avendrá, entered into exclusive or preferred contracts with vendors to provide goods to the Hotel. In so doing, Marriott and Avendrá solicited and received “sponsorship funds,” which were payments and rebates by vendors made in the course of selling, or in exchange for the opportunity to sell, goods to the Hotel. Marriott and Avendrá retained these payments and rebates for themselves and did not disclose them to the plaintiffs. As a consequence, the plaintiffs allege, the Hotel has been restricted in its choice of vendors, has paid a higher price for goods than it would otherwise have paid, and has suffered vis-a-vis rival hotels (some of which are owned or managed by Marriott) that are not paying these higher prices.

According to the plaintiffs, this scheme violates, among other things, section 2(c) of the Robinson-Patman Act as well as the WVUPA, and entitles them to treble damages. Marriott moved to dismiss both of these claims. Marriott argues that the plaintiffs have failed to allege that they have suffered an antitrust injury and that without such an allegation they lack standing to bring a section 2(c) claim. In addition, Marriott argues that the plaintiffs have failed to allege an injury to a competitor, a requirement of § 47-11A-3 of the WVUPA. The plaintiffs respond that they have adequately plead the necessary injuries for both statutes.

Avendrá filed a separate motion to dismiss all claims against it. It joins in Marriott’s arguments regarding the Robinson-Patman Act and the WVUPA. It also claims that the contract specifically authorizes all of the alleged conduct, and thus that all counts should be dismissed. Finally, it argues that the bulk of the plaintiffs’ claims are fraud-based and that these claims must be dismissed because the plaintiffs have failed to plead fraud with *473 particularity. The plaintiffs respond that the contract does not authorize the conduct in question, and that they have plead all counts with adequate specificity.

The court will first address Marriott’s motion regarding the Robinson-Patman Act and the WVUPA. The court will then turn to Avendra’s additional grounds for dismissal.

II. Marriott’s Motion to Dismiss

A. Robinson-Patman Act section 2(c) Claim

The plaintiffs allege that Marriott’s receipt of undisclosed payments and rebates in the course of purchasing goods for the Hotel violates section 2(c) of the Robinson-Patman Act. Section 2(c) provides, in pertinent part, that:

It shall be unlawful for any person engaged in commerce, in the course of such commerce, to pay or grant, or to receive or accept, anything of value as a commission, brokerage, or other compensation, ... except for services rendered in connection with the sale or purchase of goods, wares, or merchandise ....

15 U.S.C. § 18(c) (West 2003). This provision has been described as a “prolix and obscure statute [which] is a model of bad drafting.” XIV Herbert Hovenkamp, Antitrust Law ¶ 2362, at 219 (1999) [hereinafter Hovenkamp]. Thankfully, the Supreme Court has provided a useful explanation of the intent and function of section 2(c). In FTC v. Henry Broch & Co., 363 U.S. 166, 80 S.Ct. 1158, 4 L.Ed.2d 1124 (1960), the Court explained that “[t]he Robinson-Patman Act was enacted in 1936 to curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power.” Id. at 168, 80 S.Ct. 1158. Prior to the Act, large buyers were obtaining indirect price concessions while evading the Clayton Act’s prohibitions on direct price discrimination. Id. at 168-69, 80 S.Ct. 1158. They did this by “setting up ‘dummy’ brokers who were employed by the buyer and who, in- many cases, rendered no services. The large buyers demanded that the seller pay ‘brokerage’ to these fictitious brokers who then turned it over to their employer.” Id. at 169, 80 S.Ct. 1158.

In response to this practice, Congress passed section 2(c) of the Robinson-Pat-man Act, which prohibits brokerage or similar payments in the absence of services rendered for those payments. “Congress in its wisdom phrased section 2(c) broadly, not only to cover the other methods then in existence but all other means by which brokerage could be used to effect price discrimination.” Id. Indeed, the Court noted that “the [Congressional] debates on the bill show clearly that section 2(c) was intended to proscribe other practices such as the ‘bribing’ of a seller’s broker by the buyer.” Id. at 169 n. 6, 80 S.Ct. 1158 (citing 80 Cong. Rec. 7759-60, 8111-12). Thus, the Court indicated in Henry Broch & Co. that section 2(c) reaches commercial bribery as well as the use of dummy brokers to obtain indirect price discrimination. This statement from Henry Broch & Co.

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Bluebook (online)
246 F. Supp. 2d 469, 2003 U.S. Dist. LEXIS 2703, 2003 WL 536755, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-town-hotels-ltd-partbership-v-marriott-inter-inc-wvsd-2003.