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SUMMARY JUDGMENT UPHELD IN FAVOR OF NIXON PEABODY CLIENT HOWARD JOHNSON FRANCHISE SYSTEMS, INC.
The First Circuit upholded summary judgment for Arthur Pressman and Gordon Jones of Nixon Peabody's Boston office in a $25 M Puerto Rico Franchise Case.
On August 1, 2006, in a per curiam opinion, the First Circuit upheld summary judgment in favor of their client Howard Johnson Franchise Systems, Inc. in an action brought by its former San Juan franchisee Hotel Associates, Inc. The action involved a claim that Howard Johnson had violated an area of protection contained in Hotel Associates' franchise agreement by granting franchise rights to another hotel 1/4 mile from the plaintiff's hotel. Plaintiff's expert had opined that plaintiff's lost profits over the term of the franchise were $25M. The trial court had ruled that the franchise agreement had terminated ex proprio vigore upon plaintiff's sale of the property to a related entity. In an interesting twist, the First Circuit rejected the trial court's basis for summary judgment, and instead affirmed on another basis that Arthur and Gordon had argued -- that the area of protection had not become effective yet under the terms of the franchise agreement. Even though the former president of Howard Johnson had testified that he understood that the area of protection was effective, the First Circuit panel (Selya, Howard and Lipez) agreed with Arthur and Gordon that such testimony was "immaterial" in light of the clear language of the franchise agreement.