Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 1 of 49
`CIVIL COVER SHEET
`The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as
`provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the
`purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THE FORM.)
`I. (a) PLAINTIFFS
`DEFENDANTS
`Bensalem Lodging Associates LLC
`Holiday Hospitality Franchising, LLC, Six Continents Hotels, Inc. d/b/a
`Intercontinental Hotels Group and IHG Owners Association, Inc.
`DeKalb
`
`JS 44 (Rev. 10/20)
`
`(b) County of Residence of First Listed Plaintiff
`(EXCEPT IN U.S. PLAINTIFF CASES)
`
`Bucks
`
`NOTE:
`
`(c) Attorney’s (Firm Name, Address, and Telephone Number)
`White and Williams LLP
`1650 Market St., One Liberty Place, Suite 1800, Philadelphia, PA 19103
`(215) 864-7000
`II. BASIS OF JURISDICTION (Place an “X” in One Box Only)
`III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff
`(For Diversity Cases Only)
`and One Box for Defendant)
`1. U.S. Government
`3
`Federal Question
`PTF
`DEF
`PTF
`DEF
`Plaintiff
`(U.S. Government Not a Party)
` 1
` 1
` 4
` 4
`
`Citizen of This State
`
`Incorporated or Principal Place
` of Business In This State
`
`County of Residence of First Listed Defendant
`(IN U.S. PLAINTIFF CASES ONLY)
`IN LAND CONDEMNATION CASES, USE THE LOCATION OF
`THE TRACT OF LAND INVOLVED.
`Attorneys (If Known)
`
` 2. U.S. Government
`Defendant
`
` 4 Diversity
`(Indicate Citizenship of Parties in Item III)
`
`Citizen of Another State
`
`Citizen or Subject of a
`Foreign Country
`
`FORFEITURE/PENALTY
`625 Drug Related Seizure
`of Property 21 USC 881
`690 Other
`
`LABOR
`710 Fair Labor Standards
`Act
`720 Labor/Management
`Relations
`740 Railway
`751 Family and Medical
`Leave Act
`790 Other Labor Litigation
`791 Employee Retirement
`Income Security Act
`
`IMMIGRATION
`462 Naturalization Application
`465 Other Immigration
`Actions
`
` 2
`
` 3
`
` 2
`
` 3
`
`Incorporated and Principal Place
` of Business In Another State
`
`Foreign Nation
`
` 5
`
` 6
`
` 5
`
` 6
`
`PROPERTY RIGHTS
`820 Copyrights
`830 Patent
`835 Patent - Abbreviated
`New Drug Application
`840 Trademark
`880 Defend Trade Secrets
`Act of 2016
`
`Click here for: Nature of Suit Code Descriptions.
`BANKRUPTCY
`OTHER STATUTES
`422 Appeal 28 USC 158
`375 False Claims Act
`423 Withdrawal
`376 Qui Tam (31 USC
`28 USC 157
`3729(a))
`400 State Reapportionment
`410 Antitrust
`430 Banks and Banking
`450 Commerce
`460 Deportation
`470 Racketeer Influenced and
`Corrupt Organizations
`480 Consumer Credit
`(15 USC 1681 or 1692)
`485 Telephone Consumer
`Production Act
`490 Cable/Sat TV
`850 Securities/Commodities/
`Exchange
`890 Other Statutory Actions
`891 Agricultural Acts
`893 Environmental Matters
`895 Freedom of Information
`Act
`896 Arbitration
`899 Administrative Procedure
`Act/Review or Appeal of
`Agency Decision
`950 Constitutionality of
`State Statutes
`
`SOCIAL SECURITY
`861 HIA (1395ff)
`862 Black Lung (923)
`863 DIWC/DIWW (405(g))
`864 SSID Title XVI
`865 RSI (405(g))
`
`FEDERAL TAX SUITS
`870 Taxes (U.S. Plaintiff
`or Defendant)
`871 IRS-Third Party
`26 USC 7609
`
`IV. NATURE OF SUIT (Place an “X” in One Box Only)
`CONTRACT
`TORTS
`110 Insurance
`120 Marine
`130 Miller Act
`140 Negotiable Instrument
`150 Recovery of Overpayment
`& Enforcement of Judgment
`151 Medicare Act
`152 Recovery of Defaulted
`Student Loans
`(Excludes Veterans)
`153 Recovery of Overpayment
`of Veteran’s Benefits
`160 Stockholders’ Suits
`190 Other Contract
`195 Contract Product Liability
`196 Franchise
`
`PERSONAL INJURY
`310 Airplane
`315 Airplane Product
`Liability
`320 Assault, Libel &
`Slander
`330 Federal Employers’
`Liability
`340 Marine
`345 Marine Product
`Liability
`350 Motor Vehicle
`355 Motor Vehicle
`Product Liability
`360 Other Personal
`Injury
`362 Personal Injury -
`Medical Malpractice
`CIVIL RIGHTS
`440 Other Civil Rights
`441 Voting
`442 Employment
`443 Housing/
`Accommodations
`445 Amer. w/Disabilities -
`Employment
`446 Amer. w/Disabilities -
`Other
`448 Education
`
`PERSONAL INJURY
`365 Personal Injury -
`Product Liability
`367 Health Care/
`Pharmaceutical
`Personal Injury
`Product Liability
`368 Asbestos Personal
`Injury Product
`Liability
`PERSONAL PROPERTY
`370 Other Fraud
`371 Truth in Lending
`380 Other Personal
`Property Damage
`385 Property Damage
`Product Liability
`
`PRISONER PETITIONS
`Habeas Corpus:
`463 Alien Detainee
`510 Motions to Vacate
`Sentence
`530 General
`535 Death Penalty
`Other:
`540 Mandamus & Other
`550 Civil Rights
`555 Prison Condition
`560 Civil Detainee -
`Conditions of
`Confinement
`
`REAL PROPERTY
`210 Land Condemnation
`220 Foreclosure
`230 Rent Lease & Ejectment
`240 Torts to Land
`245 Tort Product Liability
`290 All Other Real Property
`
`VI. CAUSE OF ACTION
`
`VII. REQUESTED IN
`COMPLAINT:
`VIII. RELATED CASE(S)
`IF ANY
`
`DATE
`
`FOR OFFICE USE ONLY
`RECEIPT #
`
`V. ORIGIN (Place an “X” in One Box Only)
` 1 Original
` 2 Removed from
`Proceeding
`State Court
`
` 3 Remanded from
`Appellate Court
`
` 4 Reinstated or
`Reopened
`
` 6 Multidistrict
`Litigation
`Transfer
`
` 8 Multidistrict
`Litigation -
`Direct File
`
` 5 Transferred from
`Another District
`(specify)
`Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdiction statutes unless diversity):
`15 U.S.C. § 1 et seq.
`Brief description of cause:
`Violation of Sherman Act, Breach of Contract, Breach of Fiduciary Duty
`DEMAND $ 100,000,000
`CHECK IF THIS IS A CLASS ACTION
`UNDER RULE 23, F.R.Cv.P.
`JUDGE
`
`(See instructions):
`
`CHECK YES only if demanded in complaint:
`JURY DEMAND:
` Yes
` No
`DOCKET NUMBER
`
`SIGNATURE OF ATTORNEY OF RECORD
`
`AMOUNT
`
`APPLYING IFP
`
`JUDGE
`
`MAG. JUDGE
`
`June 29, 2021
`
`

`

`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 2 of 49
`UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
`
`DESIGNATION FORM
`(to be used by counsel or pro se plaintiff to indicate the category of the case for the purpose of assignment to the appropriate calendar)
`
`Address of Plaintiff: ______________________________________________________________________________________________
`
`Address of Defendant: ____________________________________________________________________________________________
`
`Place of Accident, Incident or Transaction: ___________________________________________________________________________
`
`RELATED CASE, IF ANY:
`
`Case Number: ______________________________ Judge: _________________________________ Date Terminated: ______________________
`
`Civil cases are deemed related when Yes is answered to any of the following questions:
`
`1.
`
`Is this case related to property included in an earlier numbered suit pending or within one year
`previously terminated action in this court?
`
`2. Does this case involve the same issue of fact or grow out of the same transaction as a prior suit
`pending or within one year previously terminated action in this court?
`
`3. Does this case involve the validity or infringement of a patent already in suit or any earlier
`numbered case pending or within one year previously terminated action of this court?
`
`4.
`
`Is this case a second or successive habeas corpus, social security appeal, or pro se civil rights
`case filed by the same individual?
`
`Yes
`
`Yes
`
`Yes
`
`Yes
`
`No
`
`No
`
`No
`
`No
`
`I certify that, to my knowledge, the within case
`this court except as noted above.
`
` is /
`
` is not related to any case now pending or within one year previously terminated action in
`
`DATE: __________________________________ __________________________________________ ___________________________________
` Attorney-at-Law / Pro Se Plaintiff
`
` Attorney I.D. # (if applicable)
`
`CIVIL: (Place a √ in one category only)
`
`A.
`
`Federal Question Cases:
`
`Indemnity Contract, Marine Contract, and All Other Contracts
` 1.
` 2. FELA
` 3.
`Jones Act-Personal Injury
` 4. Antitrust
` 5. Patent
` 6. Labor-Management Relations
` 7. Civil Rights
` 8. Habeas Corpus
` 9. Securities Act(s) Cases
` 10. Social Security Review Cases
` 11. All other Federal Question Cases
`(Please specify): ____________________________________________
`
`B. Diversity Jurisdiction Cases:
`
`Insurance Contract and Other Contracts
` 1.
` 2. Airplane Personal Injury
` 3. Assault, Defamation
` 4. Marine Personal Injury
` 5. Motor Vehicle Personal Injury
` 6. Other Personal Injury (Please specify): _____________________
` 7. Products Liability
` 8. Products Liability – Asbestos
` 9. All other Diversity Cases
`(Please specify): ____________________________________________
`
`ARBITRATION CERTIFICATION
`(The effect of this certification is to remove the case from eligibility for arbitration.)
`
`I, ____________________________________________, counsel of record or pro se plaintiff, do hereby certify:
`
` Pursuant to Local Civil Rule 53.2, § 3(c) (2), that to the best of my knowledge and belief, the damages recoverable in this civil action case
`exceed the sum of $150,000.00 exclusive of interest and costs:
`
` Relief other than monetary damages is sought.
`
`DATE: __________________________________ __________________________________________ ___________________________________
` Attorney-at-Law / Pro Se Plaintiff
`
` Attorney I.D. # (if applicable)
`
`NOTE: A trial de novo will be a trial by jury only if there has been compliance with F.R.C.P. 38.
`
` Civ. 609 (5/2018)
`
`

`

`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 3 of 49
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
`
`CASE MANAGEMENT TRACK DESIGNATION FORM
`
`Bensalem Lodging Associates LLC
`
`v.
`Holiday Hospitality Franchising, LLC, Six
`Continents Hotels, Inc. d/b/a Intercontinental
`Hotels Group, and IHG Owners Association,
`Inc.
`
`:
`:
`:
`:
`:
`:
`
`CIVIL ACTION
`
`NO.
`
`In accordance with the Civil Justice Expense and Delay Reduction Plan of this court, counsel for
`plaintiff shall complete a Case Management Track Designation Form in all civil cases at the time of
`filing the complaint and serve a copy on all defendants. (See § 1:03 of the plan set forth on the reverse
`side of this form.) In the event that a defendant does not agree with the plaintiff regarding said
`designation, that defendant shall, with its first appearance, submit to the clerk of court and serve on the
`plaintiff and all other parties, a case management track designation form specifying the track
`to which that defendant believes the case should be assigned.
`
`SELECT ONE OF THE FOLLOWING CASE MANAGEMENT TRACKS:
`
`(a) Habeas Corpus  Cases brought under 28 U.S.C. §2241 through §2255.
`
`(b) Social Security  Cases requesting review of a decision of the Secretary of Health
`and Human Services denying plaintiff Social Security Benefits.
`
`(c) Arbitration  Cases required to be designated for arbitration under Local Civil Rule 53.2.
`
`(d) Asbestos  Cases involving claims for personal injury or property damage from
`exposure to asbestos.
`
`(e) Special Management  Cases that do not fall into tracks (a) through (d) that are
`commonly referred to as complex and that need special or intense management by
` the court. (See reverse side of this form for a detailed explanation of special
`management cases.)
`
`(f) Standard Management -- Cases that do not fall into any one of the other tracks.
`
`( )
`
`( )
`
`( )
`
`( )
`
`(x)
`
`(
`
`)
`
`June 29, 2021
`Date
`
`215-864-7165
`Telephone
`
`Justin E. Proper
` Attorney-at-law
`
`215-399-9620
` Fax Number
`
` Attorney for Plaintiff
`
`properj@whiteandwilliams.com
` E-mail Address
`
`(Civ. 660) 10/02
`
`27350965v.1
`
`

`

`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 4 of 49
`
`IN THE UNITED STATES DISTRICT COURT
`FOR THE EASTERN DISTRICT OF PENNSYLVANIA
`
`BENSALEM LODGING ASSOCIATES LLC,
`a Pennsylvania Limited Liability Company,
`individually and on behalf of all others
`similarly situated,
`
` Plaintiff,
`
`v.
`
`HOLIDAY HOSPITALITY FRANCHISING,
`LLC, SIX CONTINENTS HOTELS, INC. d/b/a
`INTERCONTINENTAL HOTELS GROUP
`and IHG OWNERS ASSOCIATION, INC.
`
`CIVIL ACTION No. ________________
`
` JURY TRIAL DEMANDED
`
`Defendants.
`
`COMPLAINT – CLASS ACTION
`
`Plaintiff Bensalem Lodging Associates, LLC, a Pennsylvania Limited Liability Company,
`
`individually and on behalf of all others similarly situated, brings this class action lawsuit against
`
`Holiday Hospitality Franchising, LLC, Six Continents Hotels, Inc. d/b/a Intercontinental Hotels
`
`Group and IHG Owners Association, Inc. and alleges as follows upon personal knowledge as to
`
`themselves and their own acts and experience, and, as to all other matters, upon information and
`
`belief, including investigation conducted by its attorneys.
`
`INTRODUCTION
`
`1.
`
`Defendant Six Continents Hotels, Inc. (“SCH”) is the world’s largest hotel
`
`company by room count, and does business under the name InterContinental Hotels Group
`
`(“IHG”) (SCH and IHG may hereinafter be collectively referred to as “IHG”).
`
`2.
`
`IHG operates approximately some 5,600 hotels across more than 15 brands. IHG
`
`takes an asset-light approach, owning, franchising and/or managing hotels for third parties, with
`
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 5 of 49
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`Holiday Inn as its mainstay chain, under such brands as Holiday Inn, Holiday Inn Express and
`
`Holiday Inn Resorts (the “Holiday Inn Brands”), each bearing the identification as “an IHG Hotel.”
`
`3.
`
`IHG also owns, manages and/or franchises other hotel brands such as Crowne
`
`Plaza, InterContinental, Staybridge Suites, Candlewood Suites, Hotel Indigo, Regent and
`
`Kimpton.
`
`4.
`
`5.
`
`IHG’s Holiday Inn Brands account for approximately 70% of its total hotel count.
`
`IHG owns Defendant Holiday Hospitality Franchising, LLC (“HHF”), its affiliate
`
`which offers and sells Holiday Inn Brand franchises including, but not limited to, Holiday Inn,
`
`Holiday Inn Express and Holiday Inn Resort.
`
`6.
`
`Defendant IHG owns and acts through its franchising affiliate, HHF and its agent
`
`and representative IHG Owners Association (“IHGOA”).
`
`7.
`
`HHF enters into franchise agreements titled “Holiday Hospitality Franchising, LLC
`
`License Agreement(s)” (“License Agreement”) with HHF franchisees.
`
`8.
`
`Plaintiff BENSALEM LODGING ASSOCIATES LLC, a Pennsylvania Limited
`
`Liability Company, is a franchisee that owns and operates a hotel located at 3327 Street Road in
`
`Bensalem, Pennsylvania 19020, that bears a HHF brand mark pursuant to a License Agreement.
`
`9.
`
`Many HHF Franchisees are individuals, single member limited liability companies
`
`or closely held corporations who are either immigrants or second-generation Americans of Indian
`
`or other South Asian origin. Plaintiff is one such HHF franchisee.
`
`10.
`
`The hotel franchise industry holds particular appeal and attraction to these HHF
`
`Franchisees by providing investment and traditional family business ownership opportunities
`
`which they can build through diligence, dedication and hard work.
`
`11.
`
`This class action lawsuit seeks to put an end to IHG/HHF’s unlawful, abusive,
`
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 6 of 49
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`fraudulent, anticompetitive and unconscionable practices designed solely to benefit and to enrich
`
`IHG/HHF’s shareholders and to do so at the expense and to the detriment of Plaintiff and the class
`
`members, namely, similarly situated HHF franchisees.
`
`12.
`
`At the heart of IHG/HHF’s unlawful scheme is its requirement that its franchisees
`
`use certain mandated vendors and suppliers for the purchase of virtually all goods and services
`
`necessary to maintain and to run a hotel.
`
`13.
`
`IHG/HHF’s forced exclusive use of certain chosen vendors and suppliers imposes
`
`well above-market procurement costs on HHF Franchisees which include, but are not limited to,
`
`those associated with its onerous and exorbitant Property Improvement Plan (“PIP”).
`
`14.
`
`Under the guise of improving the franchisees’ hotels to maintain “brand standards,”
`
`IHG/HHF forces its franchisees to frequently undertake expensive renovations, remodeling and
`
`construction as part of the PIP, and in so doing manipulates and shortens the warranty periods on
`
`mandated products the franchisees must purchase, then disingenuously uses this to justify PIP
`
`requirements as purportedly necessary to meet “brand standards” when, in reality, IHG/HHF’s
`
`sole purpose is to maximize its kickbacks and unjustifiably run up costs on their franchisees in bad
`
`faith.
`
`15.
`
`IHG/HHF deceitfully represent to their franchisees that they select vendors with
`
`the laudable goal of using the franchisees’ collective bargaining power to secure a group discount
`
`and to ensure adequate quality and supply of products and services, and refer to these procurement
`
`programs as the “IHG Marketplace.”
`
`16.
`
`In fact, however, IHG/HHF’s primary goal in negotiating with vendors has little to
`
`nothing to do with the best interests of franchisees but rather is to secure the largest possible profit
`
`and kickback for itself, which the chosen vendors finance through the above-market rates charged
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 7 of 49
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`to HHF Franchisees in collusion with IHG/HHF.
`
`17.
`
`Furthermore, the above-market priced products which IHG/HHF forces franchisees
`
`to purchase through the IHG Marketplace and related programs is overwhelmingly of inferior
`
`quality.
`
`18.
`
`These low-quality “IHG Approved” purchases are forced upon franchisees and
`
`disingenuously characterized as meeting supposed brand standards of quality, when in truth the
`
`sole purpose is to maximize kickbacks for IHG/HHF and unjustifiably run up costs on their
`
`franchisees in bad faith.
`
`19.
`
`Upon information and good faith belief, IHG/HHF have each netted tens of millions
`
`of ill-gotten dollars as a result of this illicit vendor supply arrangement.
`
`20.
`
`Additionally, IHG/HHF engages in other oppressive, bad-faith, fraudulent and
`
`unconscionable conduct as more fully described herein. For instance, IHG holds itself out to the
`
`public as offering discounts, travel benefits and other perks to repeat guests through its IHG
`
`Rewards Club loyalty program. IHG has a mobile booking app as well as cloud-based hotel
`
`solutions which it represents as driving demand for its hotel owners and which ostensibly allows
`
`hotel owners to reach potential guests at a lower cost. Hotel guests can accumulate points per
`
`dollars spent which can be redeemed at IHG hotels.
`
`21. When those points are then redeemed at a hotel, however, only a small fraction of
`
`the value is reimbursed to franchisees while IHG/HHF requires that Plaintiff and franchisees (and
`
`not IHG/HHF) pay taxes on the full value of the product or service obtained by hotel guests.
`
`22.
`
`Furthermore, in instances where hotel guests’ accumulated reward points from
`
`stays at Plaintiff’s (or other franchisees’) hotel expire, the points never return to Plaintiff or to any
`
`source-of-origin franchisees.
`
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 8 of 49
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`23. Whenever a guest calls IHG Guest Relations to complain about poor service,
`
`regardless of who is at fault, the hotel is penalized without appropriate investigations and charged
`
`case management fees of over $150, in addition to any other monetary reimbursements provided
`
`to the guest. In an attempt to appease guests, the Guest Relations representatives unjustly assess
`
`penalties to the hotels and rarely considers the franchisees’ perspectives, depriving franchisees the
`
`right to remedy the situation with minimal loss.
`
`24.
`
`IHG/HHF also frequently introduces new marketing programs under the guise of
`
`providing franchisees with a “choice” as to whether they should participate or not.
`
`25.
`
`In reality, however, all such marketing programs are forced upon the franchisees
`
`insofar as any and all decisions to “opt out” are met with vindictive, punitive and retaliatory action
`
`by IHG/HHF.
`
`26.
`
`These programs are in addition to all marketing fees contracted and paid for by the
`
`franchisees further to the License Agreements, and serve as an additional revenue source by
`
`imposing additional fees and fines for the sole profit and benefit of IHG/HHF, and to do so without
`
`disclosure or agreement by deceit, implied threat and actual retribution rendering franchisees’
`
`supposed “opt-out” choice completely illusory.
`
`27.
`
`Furthermore, although the facts set forth herein predominantly existed before
`
`March, 2020 and continuously thereafter, IHG/HHF has ceased all of its marketing since the
`
`imposition of Covid-19 related restrictions in early 2020. Despite the fact that IHG/HHF has not
`
`been engaged in any marketing activities or efforts for approximately a year, it continues to require
`
`franchisees to pay significant marketing related fees for which they receive nothing in return.
`
`28. Moreover, IHG/HHF routinely assesses additional fees and penalties against
`
`franchisees which are not authorized by the applicable License Agreement and are fundamentally
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 9 of 49
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`excessive and unfair. These fees and penalties are disingenuously assessed as a means to
`
`intimidate franchisees, including to serve as bad faith bases for default notices and threatened
`
`termination, as well as to harm the economic viability, profitability and creditworthiness of certain,
`
`targeted franchisees.
`
`29.
`
`For instance, IHG/HHF routinely requires its franchisees to pay multiple fees for
`
`the same product or service. And, IHG/HHF routinely assesses additional fees against franchisees
`
`for services and products that IHG/HHF either does not, in fact, provide or provides at an inferior
`
`quality.
`
`30.
`
`IHG/HHF imposes requirements on its franchisees to undergo hotel inspections any
`
`time there are conversions, construction, changes in ownership, brand changes or re-licensing. In
`
`conjunction with IHG/HHF’s unilaterally imposed mandates for any such hotel changes,
`
`IHG/HHF requires its franchisees to pay for the inspections, IHG/HHF’s written reports and any
`
`re-evaluations and re-inspections that IHG/HHF alone deems necessary. In practice, IHG/HHF
`
`stages these inspections to maximize criticism of franchisee hotels as a pretext for imposing
`
`additional inspections, reports and fines, all deliberately interposed for IHG/HHF’s own financial
`
`benefit and to the detriment of franchisees.
`
`31.
`
`IHG/HHF arbitrarily imposes rules and regulations and/or unreasonably interprets
`
`rules and regulations in order to justify assessing monetary penalties against franchisees.
`
`32.
`
`Quite egregiously, IHG/HHF routinely discriminates, demeans and is both
`
`explicitly and implicitly hostile and bigoted towards Plaintiff, and towards Indian-American and
`
`South Asian-American franchisees.
`
`33.
`
`IHG/HHF corrupts its Owners Association, the IHGOA, the function of which
`
`IHG/HHF represents in the License Agreement “to function in a manner consistent with the best
`
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 10 of 49
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`interests of all persons using the System” but instead is staffed almost exclusively with IHG/HHF
`
`representatives to the exclusion of franchisees and operates to undermine and to harm the very
`
`hotel owners and franchisees it purports to represent.
`
`34.
`
`HHF’s actions are unconscionable and outrageous, and have pushed franchisees to
`
`the financial breaking point.
`
`35.
`
`This lawsuit seeks an accounting (COUNT V), declaratory (COUNT III) and
`
`injunctive relief, monetary damages and other relief for breach of contract (COUNT I) and breach
`
`of fiduciary duty (COUNT II), as well as recovery for violations of the Sherman Act, 15 U.S.C. §
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`1 (COUNT IV).
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`JURISDICTION AND VENUE
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`36.
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`This Court has subject matter jurisdiction over the federal law claims raised in this
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`class action lawsuit pursuant to pursuant to 28 U.S.C. § 1331 as Plaintiff alleges violations of a
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`federal statute, the Sherman Act, 15 U.S.C. § 1.
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`37.
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`This Court has subject matter jurisdiction over this action pursuant to the Class
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`Action Fairness Act of 2005, Pub. L. No. 109-2 Stat. 4 (“CAFA”), which, inter alia, amends 28
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`U.S.C. § 1332, at new subsection (d), conferring federal jurisdiction over class actions where, as
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`here: (a) there are 100 or more members in the proposed class; (b) some members of the proposed
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`Class have a different citizenship from Defendants and (c) the claims of the proposed class
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`members exceed the sum or value of five million dollars ($5,000,000) in aggregate. See 28 U.S.C.
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`§ 1332(d)(2) & (6).
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`38.
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`This Court has subject matter jurisdiction over the state law claims asserted in this
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`action pursuant to 28 U.S.C. § 1367 because they arise from the same set of operative facts as the
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`federal law claims.
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 11 of 49
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`39.
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`This Court has personal jurisdiction over Defendants IHG, HHF and IHGOA
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`because all Defendants regularly transact business within the geographic boundaries of this
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`District by, inter alia, entering into franchising agreements with franchisees and engaging in
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`routine, systematic and continuous contacts with persons in this District.
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`40.
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`Venue is proper in this judicial district pursuant to 18 U.S.C. §§ 1965(a) and (b)
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`because Defendants HHF, IHG and IHGOA regularly transact business within the geographic
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`boundaries of this District by, inter alia, entering into franchising agreements with franchisors,
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`because said Defendants regularly transact business within the geographic boundaries of this
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`District by, inter alia¸ collecting membership fees from franchisees, and, in the alternative,
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`because the ends of justice require said Defendants to be summoned to this District.
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`41.
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`The business conducted by Plaintiff is pursuant to a certain license agreement with
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`HHF, and Plaintiff’s business location is in Bensalem, Pennsylvania. See 28 U.S.C. § 115(b)(2).
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`THE PARTIES
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`42.
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`Plaintiff BENSALEM LODGING ASSOCIATES LLC, a Pennsylvania Limited
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`Liability Company, is a franchisee that owns and operates a hotel, located at 3327 Street Road in
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`Bensalem, Pennsylvania 19020, that bears a HHF brand mark pursuant to a License Agreement.
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`43.
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`Defendant HHF is a Delaware-registered limited liability company with its
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`principal place of business located at Three Ravinia Drive, Suite 100, Atlanta, Georgia 30346.
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`44.
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`Defendant IHG is a Delaware-registered corporation with its principal place of
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`business is Three Ravinia Drive, Suite 100 Atlanta, Georgia 30346.
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`45.
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`Defendant IHGOA is a Georgia non-profit corporation with its principal place of
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`business
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`is
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`Three Ravinia Drive,
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`Suite
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`100 Atlanta, Georgia
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`30346.
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 12 of 49
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`COMMON FACTUAL ALLEGATIONS
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`A. The Parties’ Relationship
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`46.
`
`47.
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`IHG has been in operation since 2003.
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`Throughout its history, IHG has created and acquired hotel brands, including, but
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`not limited to, Holiday Inn, Holiday Inn Express and Holiday Inn Resort.
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`48.
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`IHG’s franchising affiliate, HHF, licenses the right to use these hotel brand marks
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`to franchisees, including Plaintiff, by entering into franchise agreements with them, which in many
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`cases are referred to as “License Agreements.”
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`49.
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`IHG owns HHF and has developed relationships with various vendors and
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`suppliers to IHG/HHF franchisees.
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`50.
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`By virtue of its ownership of HHF and control over the IHG Marketplace, IHG is
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`an intended third-party beneficiary of the License Agreements.
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`51.
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`In connection with the License Agreements, HHF uses its superior bargaining
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`power to coerce the franchisees into accepting onerous, unequal and unconscionable terms in its
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`License Agreements.
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`52.
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`These onerous terms put immense financial stress on franchisees, threatening their
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`economic viability.
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`53.
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`HHF’S abuse of its position and unfair practices result in the imposition of
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`needless and costly fees, above-market costs for necessary supplies and other goods and results in
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`substantial impacts on HHF franchisees’ ability, who manage and operate their properties
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`commensurate with the highest standards, to operate their properties profitably.
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`54.
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`Plaintiff BENSALEM LODGING ASSOCIATES, LLC is an HHF Franchisee
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`that entered into a franchise agreement with HHF dated October 31, 2012 entitled “Holiday
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`Hospitality Franchising, LLC Conversion License Agreement” (the “License Agreement,” a copy
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`of which is attached hereto as Exhibit A) for a Holiday Inn Express Hotel to be developed and
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`operated by Plaintiff and located at 3327 Street Road in Bensalem, Pennsylvania 19020.
`
`55.
`
`Pursuant to this License Agreement, Defendant HHF granted Plaintiff a non-
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`exclusive license to use Defendant’s System (as defined therein) only at the Hotel and in
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`accordance with the License Agreement. (See License Agreement, §§1(b), 2.)
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`B. Vendor Mandates and Kickbacks – the IHG Marketplace Programs
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`56.
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`A particular manner by which IHG/HHF undermines the viability and profitability
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`of its franchisees is by mandating Plaintiff and HHF franchisees utilize only HHF approved third-
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`party vendors, the purpose of which is for Defendants to reap a significant financial benefit at the
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`direct expense and to the financial detriment of the HHF franchisees.
`
`57.
`
`IHG/HHF’s fraudulent and unconscionable scheme cannot operate without
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`franchisees paying excessive, above-market rates for the goods and services necessary to run a
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`hotel, including, but not limited to:
`
`a)
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`its computerized credit card processing system, Secure
`Payment Solution
`
`b)
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`(“SPS”) which all Hotels are required to use;
`
`c) high speed guest internet services, designated workstations
`and multi-function printers in Hotel business centers (“Public
`Access Computers”), and a designated communication
`service referred to as “SCH Merlin”;
`
`d) HHF’s approved Keycard System;
`
`e)
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`televisions and in-room entertainment compatible with SCH
`Studio;
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`f) an alert system that enables employees to notify hotel
`management of an emergency (“Employee Safety Devices”);
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`for property-level
`g) equipment, software, and services
`technology and telecommunications systems;
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`h) equipment associated with
`program;
`
`the Defendants’ gift card
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`i) mandated food and beverage programs;
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`j)
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`furniture, furnishing, linens, food products, utensils, and
`goods for guests’ consumption and
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`services,
`advertising materials, products,
`k) additional
`equipment or supplies, from which IHG/HHF profits.
`
`58.
`
`The above-market rate pricing charged by vendors and paid by Plaintiff and the
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`franchisees provides the money necessary for those vendors to pay IHG/HHF’s unreasonable and
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`unconscionable kickbacks.
`
`59.
`
`IHG/HHF knowingly and willfully engage in conduct that ensures franchisees pay
`
`above-market prices for goods and services necessary in conjunction with operation of the hotels.
`
`60.
`
`IHG/HHF requires that Plaintiff and HHF Franchisees strictly comply with its
`
`requirements for the types of services and products that may be used, promoted or offered at the
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`hotel, and comply with all of HHF’s “standards and specifications for goods and services used in
`
`the operation of the Hotel and other reasonable requirements to protect the System and the hotel
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`from unreliable sources of supply.” See License Agreement generally.
`
`61.
`
`If IHG/HHF requires HHF franchisees to purchase equipment, furnishings,
`
`supplies or other products for the hotels from a designated or approved supplier or service provider,
`
`whether pursuant to the License Agreement, Standards or any communication from HHF, then
`
`HHF franchisees must purchase the mandated product(s) from mandated vendors and cannot
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`deviate from those vendor mandates without prior approval from HHF.
`
`62.
`
`Defendants IHG and HHF run a program under the guise of being voluntary and
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`Case 2:21-cv-02882-NIQA Document 1 Filed 06/29/21 Page 15 of 49
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`which they falsely represent as delivering value and lower cost purchasing opportunities to HHF
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`franchisees. Nothing could be further from the tru