APPENDIX TO DEBTORS’ MEMORANDUM OF POINTS AND …

62358/0001-40624537v1

IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

In re:

SC SJ HOLDINGS LLC, et al.1

Debtors.

Chapter 11

Case No. 21-10549 (JTD)

(Jointly Administered)

APPENDIX TO DEBTORS’ MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF DEBTORS’ MOTION TO ESTIMATE MAXIMUM AMOUNT OF

FAIRMONT HOTEL & RESORTS (U.S.) INC.’S CONTINGENT AND UNLIQUIDATED CLAIM

PILLSBURY WINTHROP SHAW PITTMAN LLP Patrick Potter (Admitted Pro Hac Vice) Robert Wallan (Admitted Pro Hac Vice) Rahman Connelly (Admitted Pro Hac Vice) 1200 Seventeenth Street, NW Washington, DC 20036 Telephone: (202) 663-8928 Facsimile: (202) 663-8007

Proposed Counsel to the Debtors and Debtors in Possession

COLE SCHOTZ, P.C. Justin Alberto (No. 5126) Patrick Reilley (No. 4451) 500 Delaware Avenue, Suite 1410 Wilmington, Delaware 19801 Telephone: (302) 652-3131 Facsimile: (302) 652-3117

Proposed Counsel to the Debtors and Debtors in Possession

April 23, 2021

1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, include: SC SJ Holdings LLC (5141) and FMT SJ LLC (7200). The mailing address for both Debtors is 3223 Crow Canyon Road, Suite 300 San Ramon, CA 94583.

Case 21-10549-JTD Doc 239 Filed 04/23/21 of 2

62358/0001-40624537v1

Master Chronological Index

Exh. No.

Description Date Pages

A Plaintiff FHR TB, LLC’s Motion for Final Summary Judgment and Incorporated Memorandum of Law, FHR TB, LLC v. TB Isle Resort, LP., Case No. 11-cv-23115-RNS (S.D. Fla. 2011) (Doc. 98)

04/12/2012 A008

B Reply in Support of Plaintiff FHR TB, LLC’s Motion for Summary Judgment, FHR TB, LLC v. TB Isle Resort, LP., Case No. 11-cv-23115-RNS (S.D. Fla. 2011) (Doc. 98)

06/11/2012 A034

Case 21-10549-JTD Doc 239 Filed 04/23/21 of 2

62358/0001-40624537v1

Exhibit A

Plaintiff FHR TB, LLC’s Motion for Final Summary Judgment and Incorporated Memorandum of Law, FHR TB, LLC v. TB Isle Resort, LP., Case No. 11-cv-

23115-RNS (S.D. Fla. 2011) (Doc. 98)

Case 21-10549-JTD Doc 239-1 Filed 04/23/21 Page 1 of 27

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No.: 1:11-cv-23115-SCOLA/ROSENBAUM

FHR TB, LLC, a Delaware limited liability company, and FAIRMONT HOTELS & RESORTS (U.S.) INC., Plaintiffs, vs. TB ISLE RESORT, LP, a Delaware limited partnership, Defendant/Counterplaintiff, vs. FHR TB, LLC, a Delaware limited liability company, Counterdefendant/Plaintiff. ___________________________________/

PLAINTIFF FHR TB, LLC’s MOTION FOR FINAL SUMMARY JUDGMENT AND INCORPORATED MEMORANDUM OF LAW

Case 1:11-cv-23115-RNS Document 98 Entered on FLSD Docket 04/12/2012 Page 1 of 25

A008

Case 21-10549-JTD Doc 109 Filed 03/30/21 Page 8 of 59Case 21-10549-JTD Doc 239-1 Filed 04/23/21 Page 2 of 27

i

TABLE OF CONTENTS

Page

TABLE OF CITATIONS ............................................................................................................... ii

I. INTRODUCTION .......................................................................................................... 1

II. BACKGROUND ............................................................................................................ 2

A. The Parties Agreed to a Long-Term Hotel Management Agreement. ......................................................................................................... 2

B. The Parties Agreed that if Turnberry Terminated the HMA Early, It Would Pay Fairmont a Breach Termination Fee that it Stipulated was Reasonable. ................................................................................ 3

C. Turnberry Breached the HMA When it Terminated the HMA and Owes Fairmont the Breach Termination Fee and for Amounts Owed Prior to the Breach. .................................................................. 3

III. ARGUMENT .................................................................................................................. 4

A. Summary Judgment Standard ............................................................................ 4

B. There is No Genuine Issue of Material Fact About Turnberry’s Material Breach of the HMA Because Turnberry Admits Its Breach ................................................................................................................ 5

C. The Liquidated Damages Provision Is Enforceable as a Matter of Law ................................................................................................................ 6

1. As a Matter of Law, The Breach Termination Fee is Not Grossly Disproportionate to Fairmont’s Probable Anticipated Loss ......................................................................................... 9

2. There Is No Genuine Issue of Fact for Trial on the Issue of Whether Fairmont’s Prospective Damages Upon Early Termination Were Not Capable Of Precise Estimation at the Time the Parties Executed the HMA .................................................. 15

D. Summary Judgment is Appropriate on Debts Under the HMA That Turnberry Owed Fairmont Before Turnberry Unilaterally Terminated the HMA ....................................................................................... 18

IV. CONCLUSION ............................................................................................................. 19


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TABLE OF CITATIONS

CASES Page

Addressing Sys. & Prods., Inc. v. Friedman, 874 N.Y.S.2d 430 (N.Y. App. Div. 2009) ............................................................ 12, 13, 14

Alliance Metals, Inc., of Atlanta v. Hinely Industries, Inc., 222 F.3d 895 (11th Cir. 2000) .............................................................................................6

Alvarez v. Prospect Hosp., 68 N.Y.2d 320 (1986) ..........................................................................................................4

Ames Linen Serv. v. Katz, 779 N.Y.S.2d 600 (N.Y. App. Div. 2004) ...............................................................5, 12, 17

Bates Adver. USA, Inc. v. 498 Seventh, LLC, 850 N.E.2d 1137 (N.Y. 2006) ..............................................................................................8

Benjamin Partners, LLC v. 583-587 Broadway Condo., 824 N.Y.S.2d 631 (N.Y. App. Div. 2006) ...................................................................14, 15

Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854 (N.Y. Sup. Ct. 1985) .................................................................... passim

DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F.Supp.2d 192 (E.D.N.Y 1999) ..............................................................................13, 16

Drapkin v. Mafco Consol. Group, Inc., No. 09 CIV. 1285 PGG, 2011 WL 4443945 (S.D.N.Y. Sept. 23, 2011) .............................6

Fifty States Mgt. Corp. v Pioneer Auto Parks, 46 N.Y.2d 573 (1979) ..........................................................................................................8

GFI Brokers, LLC v. Santana, Nos. 06 Civ. 3988 & 4611, 2009 WL 2482130 (S.D.N.Y. Aug. 13, 2009) ......................11

Global Crossing Bandwith, Inc. v. Ols, Inc., 566 F. Supp. 2d 196 (W.D.N.Y. 2008) ............................................................................8, 9

Grynberg v. Advance Nanotech, Inc., 912 N.Y.S.2d 205 (N.Y. App. Div. 2010) .........................................................................14

JMD Holding Corp. v. Cong. Fin. Corp., 828 N.E.2d 604 (N.Y. 2005) ...................................................................................... passim


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TABLE OF CITATIONS

CASES (cont’d) Page

iii

Needham v. Candie’s, Inc., No. 01 CIV.7184 LTS FM, 2002 WL 1896892 (S.D.N.Y. Aug. 16, 2002) ........................6

Point Prod. A.G. v. Sony Music Entm’t, Inc. v. Phonomatic Group, A.G., No. 93 CIV. 4001 NRB, 2000 WL 1006236 (S.D.N.Y. July 20, 2000) ..............................6

Rattigan v. Commodore Int’l Ltd., 739 F. Supp. 167 (S.D.N.Y. 1990).......................................................................................7

Red Line Air, LLC v. G. Howard Assocs., Inc., No. CV-09-3928 (RRM)(JMA), 2010 WL 2346299 (E.D.N.Y. May 11, 2010) .................9

Tenber Assocs. v. Bloomberg L.P., 859 N.Y.S.2d 61 (N.Y. App. Div. 2008) ...........................................................................14

Thompson Everett, Inc. v. Nat’l Cable Advert., 57 F.3d 1317 (4th Cir. 1995) ...............................................................................................5

Time Assocs. Inc. v. Blake Realty Inc., 622 N.Y.S.2d 816 (N.Y. App. Div. 1995) .........................................................................15

Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 361 N.E. 2d 1015 (N.Y. 1977) ................................................................................... passim

USI Ins. Servs. LLC v. Miner, No. 10 Civ. 8162(LAP), 2011 WL 2848139 (S.D.N.Y. July 7, 2011) ................................6

Vital Pharm., Inc. v. Pinnacle Distrib., LLC, No. 08-61984-Civ, 2009 WL 3208131 (S.D. Fla. Oct. 2, 2009) .........................................5

Walter E. Heller & Co., Inc. v American Flyers Airline Corp., 459 F.2d 896 (2d Cir. 1972)...............................................................................................17

Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383 (S.D.N.Y. 2004) ..................................................................................8

Weiser LLP v. Coopersmith, 902 N.Y.S.2d 74 (N.Y. App. Div. 2010) ...........................................................................14

Wells Fargo Bank N.W., N.A. v. Taca Int’l Airlines, S.A., 315 F.Supp.2d 347 (S.D.N.Y. 2003) ......................................................................5, 7, 9, 15

Wojciechowski v. Birnbaum, 595 N.Y.S.2d 3 (N.Y. App. Div. 1993) .............................................................................15


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CASES (cont’d) Page

iv

XCO Intl. Inc. v Pacific Scientific Co., 369 F.3d 998 (7th Cir 2004) ............................................................................................8, 9

RULES

Rule 56(a), Federal Rules of Civil Procedure ..................................................................................4

Rule 56(b), Federal Rules of Civil Procedure ...............................................................................1,2


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FHR TB, LLC (“FHR TB”) (“Fairmont”), pursuant to Rule 56(b) of the Federal Rules of

Civil Procedure, moves for the entry of final summary judgment in its favor, and against

Defendant, TB Isle Resort, L.P. (“Turnberry” or “Defendant”), on counts I and II of the Third

Amended Complaint (“Complaint”). Fairmont also moves for summary judgment against

Turnberry on Turnberry’s Counterclaim for declaration of its liability for liquidated damages.1

I. INTRODUCTION

In the early morning hours of August 28, 2011, Turnberry removed Fairmont, the hotel

manager, from the Fairmont Turnberry Isle Resort & Club (the “Hotel”) with no notice and in

violation of the parties’ long-term Hotel Management Agreement (“HMA”) (Exhibit 1 to

Fairmont’s Third Amended Complaint). Turnberry admits its material breach.

In 2005, these sophisticated parties, represented by experienced counsel, had negotiated

at arm’s length and entered into a 50-year agreement under which Fairmont would be the

operator of the Hotel. The parties agreed to a detailed liquidated damages clause in the event of a

wrongful early termination and stipulated that the agreed-upon formula was fair and reasonable

under all the circumstances. In 2011, Turnberry had a change of heart, decided to run the Hotel

itself, forcibly removed Fairmont without notice, and unilaterally terminated the HMA.

Turnberry admits that the ouster breached the HMA, but now, incredibly, it claims that the

1 Although both Plaintiffs are parties to the HMA, Turnberry has moved to dismiss counts III and IV of the Third Amended Complaint (D.E. 97), relating to Fairmont Hotels & Resorts (U.S.) Inc.’s (“Fairmont-US”) claims for breach of contract. However, that motion is not a bar to the resolution of this motion on behalf of FHR TB. Turnberry has not moved to dismiss the claims of FHR TB, which claims are identical to those asserted in the Second Amended Complaint by FHR TB, and to which Turnberry filed an answer and affirmative defenses. Moreover, Fairmont-US is not seeking damages in addition to the damages FHR TB seeks. In other words, the Plaintiffs seek only one recovery.


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damages provision it bargained for is unenforceable. Fairmont’s entitlement to that fee is a

question of law that must be determined by summary judgment.

As a result of Turnberry’s record admissions, there is no issue of fact to be tried as to

Turnberry’s breach of the HMA. The HMA sets out an agreed-to formula for a liquidated

damage amount, which is enforceable under New York law (the law the parties chose).

Accordingly, Fairmont is entitled to summary judgment in its favor on its Complaint and on

Turnberry’s Counterclaim—as to both liability and damages.

II. BACKGROUND

A. The Parties Agreed to a Long-Term Hotel Management Agreement.

In December 2005, Fairmont’s parent company, Fairmont Hotels & Resorts (U.S.) Inc.

(“Fairmont-US”), had an option to purchase the Hotel from the prior owner and Turnberry

wanted to purchase the property. See Plaintiff’s Rule 56(b) Statement of Material Facts as to

Which There is No Genuine Issue to be Tried, filed simultaneously herewith, at ¶ 1 (hereafter

“FACTS ¶ __”). Pursuant to a Purchase Agreement between the parties, Fairmont-US exercised

its purchase option to buy the Hotel, entered into a sale contract with the then-owner, and then

assigned its rights under that contract to Turnberry. Id. In exchange, Turnberry agreed to enter

into the long-term, 50-year HMA with plaintiffs, including FHR TB, LLC, for the operation and

management of the Hotel.2 Id. Executing the HMA was an express condition of the closing of the

Purchase Agreement for the Hotel, so on the same day Turnberry purchased the Hotel, the parties

executed the HMA. Id.

2 The initial “Operating Term” of the HMA is 25 years (Section 2.1), extended for “five (5) additional consecutive 5-year Extension Terms,” unless Fairmont was in “Material Default” (Section 2.2). FACTS ¶ 2. Therefore, Fairmont was engaged to operate and manage the Hotel for 50 years unless Fairmont was in Material Default. Id.


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B. The Parties Agreed that if Turnberry Terminated the HMA Early, It Would Pay Fairmont a Breach Termination Fee that it Stipulated was Reasonable.

The HMA also provides for liquidated damages—a “Breach Termination Fee”—if

Turnberry prematurely terminated the HMA. FACTS ¶ 9. This formula provides that, in the

event of an early termination, Fairmont will receive an amount equal to its estimated annual

management fees for the remaining term of the HMA, which in turn is based on an average of

past fees earned, increased by 3% per year, and discounted to present value. Id. ¶¶ 21-24.

When the parties executed the HMA, damages for an early termination of the 50-year

agreement were, of course, difficult to ascertain with any precision. Id. ¶ 11. The parties thus

stipulated that damages in the event of an early termination would be “inherently uncertain,” and

“difficult or impossible to determine” because they would include not only lost revenues (“loss

of Management Fees and other revenue under this Agreement”), but also “harm to Operator’s

reputation, loss of goodwill, disruption of operations, loss of contributions to budgeted system

expenses and loss of a hotel with strategic significance to Operator’s system,” among others. Id.

¶¶ 11, 13-19, 29. The formula these sophisticated parties agreed to was a reasonable

approximation of the injuries Fairmont would suffer from a premature breach by Turnberry, and

they stipulated that it was in fact a reasonable estimate of the anticipated loss. Id. ¶¶ 19-20. The

formula does not exceed the total amount the parties reasonably anticipated Fairmont would earn

if Turnberry fully performed the HMA. Id. ¶¶ 21-26.

C. Turnberry Breached the HMA When it Terminated the HMA and Owes Fairmont the Breach Termination Fee and for Amounts Owed Prior to the Breach.

Early in the morning of Sunday, August 28, 2011, with no advance warning or any

notice, Turnberry forcibly removed Fairmont’s personnel from the Hotel. FACTS ¶ 4. Later that

morning, Turnberry notified Fairmont in a letter that it was terminating the HMA. Id. ¶ 5.


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Turnberry’s actions constituted a Material Default under the HMA, as Turnberry admits. Id. ¶¶

7-8. The Breach Termination Fee formula calculates out to $31,604,748. Id. ¶ 10.

At the time Turnberry terminated the HMA, it owed Fairmont for unpaid fees and

expenses incurred up to that date in the amount of $2,266,231.48. Id. ¶¶ 30-39. Pursuant to

Section 16.9 of the HMA, these damages are separate and apart from the damages arising from

the Breach Termination Fee and actual damages caused by Turnberry’s wrongful termination of

the HMA. Id. ¶ 31. Section 16.9 excepts from the Breach Termination Fee “Operator’s right to

receive payment of amounts accrued, due or owing to Operator as of the date of the breach

termination under this Agreement.” Id.

III. ARGUMENT

It is undisputed that Turnberry unilaterally terminated and breached the HMA long before

its 50-year term expired, triggering the Breach Termination Fee. This bargained-for formula

reflected the parties’ mutual understanding and best estimate of the probable losses in the event

of a breach that were, at the time of contracting, impossible to quantify with any precision. The

liquidated damage amount is not grossly disproportionate to the actual damages the parties

anticipated and stipulated would occur as a consequence of a future breach. Accordingly, the

liquidated damage provision must be enforced as a matter of law.

A. Summary Judgment Standard

Fairmont is entitled to judgment as a matter of law because the undisputed facts

demonstrate that there is “no genuine dispute as to any material fact.” Fed. R. Civ. P. 56(a). “The

proponent of a motion for summary judgment ‘must make a prima facie showing of entitlement

to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any

material issues of fact.’” JMD Holding Corp. v. Cong. Fin. Corp., 828 N.E.2d 604, 612 (N.Y.

2005) (quoting Alvarez v. Prospect Hosp., 68 N.Y.2d 320, 324 (1986)). The evidence must be


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viewed in the light most favorable to Turnberry as the non-moving party, see Vital Pharm., Inc.

v. Pinnacle Distrib., LLC, No. 08-61984-Civ, 2009 WL 3208131, at *1-2 (S.D. Fla. Oct. 2,

2009), and in considering a summary judgment motion, the court may draw inferences in favor

of Turnberry, but only if such inferences “fall within the range of reasonable probability and not

be so tenuous as to amount to speculation or conjecture.” Thompson Everett, Inc. v. Nat’l Cable

Adver., 57 F.3d 1317, 1323 (4th Cir. 1995).

The determination of whether a liquidated damages provision is enforceable is an issue of

law properly decided on summary judgment, as is the amount of such damages. See, e.g., Wells

Fargo Bank NW., N.A. v. Taca Int’l Airlines, S.A., 315 F. Supp. 2d 347, 350 (S.D.N.Y. 2003)

(granting summary judgment on both enforceability and calculation); Ames Linen Serv. v. Katz,

779 N.Y.S.2d 600, 601-02 (N.Y. App. Div. 2004) (same). Application of these standards to the

facts of the present case, together with the authorities we cite below, establishes that this Court

should enter summary judgment for Fairmont and against Turnberry.

B. There is No Genuine Issue of Material Fact About Turnberry’s Material Breach of the HMA Because Turnberry Admits Its Breach

There is no dispute that Fairmont materially breached the HMA because Fairmont admits

that its August 28, 2011 ouster and premature termination of the agreement constituted a

Material Default under the HMA. But Turnberry attempts to excuse its breach by asserting (“on

information and belief” only) that Fairmont committed a prior breach that, if it occurred at all,

and if it constituted a Material Default under the HMA, may excuse Turnberry’s default.3 Under

3 In its Affirmative Defenses, Turnberry alleges “on information and belief” that Fairmont overcharged Turnberry for certain services and expenses under the HMA, and that, “to the extent overcharges were unknown by Turnberry, and constituted Material Defaults under the HMA, such prior breaches by Fairmont excused Turnberry from performing its obligations under the contract, and bar Fairmont’s claims.” (D.E. 88-1 at ¶¶ 49, 50). Turnberry states in its Answer that it “may have been excused from” providing Fairmont notice and an opportunity to cure such an alleged breach that it didn’t know about until after it terminated the HMA. (D.E. 88-1 at ¶ 19).


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New York Law, however, “where the agreement specifies conditions precedent to the right of

cancellation, the conditions must be complied with.” Needham v. Candie’s, Inc., No. 01

CIV.7184 LTS FM, 2002 WL 1896892, at *3 (S.D.N.Y. Aug. 16, 2002) (citations omitted). This

is so even where the alleged breach is discovered after termination of the contract, as Turnberry

suggests may occur here. Point Prod. A.G. v. Sony Music Entm’t, Inc. v. Phonomatic Group,

A.G., No. 93 CIV. 4001 NRB, 2000 WL 1006236, at *4 (S.D.N.Y. July 20, 2000) (“Point’s

alleged defaults, and the alleged incurability thereof, simply did not excuse Sony from its

contractual obligation to provide notice and cure prior to termination,” even where Sony learned

of the alleged defaults after commencing litigation). No breach by Fairmont, therefore, that

Turnberry may discover after it unilaterally terminated the HMA can excuse its breach because

the HMA required Turnberry to give Fairmont notice and an opportunity to cure any breach.

Turnberry admits that it did not give such notice and opportunity to cure. FACTS ¶ 8.4 There is

no issue for trial on this question.

C. The Liquidated Damages Provision Is Enforceable as a Matter of Law

Having committed a material default under the HMA, Turnberry triggered the HMA’s

liquidated damages provision. Enforcement of such a provision presents an issue of law for

4 See also Drapkin v. Mafco Consol. Group, Inc., No. 09 CIV. 1285 PGG, 2011 WL 4443945, at *5 (S.D.N.Y. Sept. 23, 2011) (granting summary judgment for employee in part because company did not abide by notice and cure provision, stating: “Because the Company did not give Drapkin notice and an opportunity to cure as required under Section 5, it may not contend that he breached this provision.”); USI Ins. Servs. LLC v. Miner, No. 10 Civ. 8162(LAP), 2011 WL 2848139, at *5 (S.D.N.Y. July 7, 2011) (“Under New York law, where no notice was given as set forth under the Employment Agreement, there can be no breach of the Employment Agreement because defendant was not afforded the opportunity to cure the defect.”); Alliance Metals, Inc., of Atlanta v. Hinely Industries, Inc., 222 F.3d 895, 903-04 (11th Cir. 2000) (affirming summary judgment in favor of plaintiff for breach of contract despite defendant’s argument that plaintiff’s prior breach excused performance, stating: “If we were to so hold, we would effectively render meaningless contractual ‘notice and cure’ requirements like the one included in the non-competition provision here.”).


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summary judgment. Wells Fargo Bank, 315 F. Supp. 2d at 350. “Furthermore, the enforceability

of a liquidated damages provision is a legal issue not requiring an evidentiary showing.” Id.

(citing Rattigan v. Commodore Int’l Ltd., 739 F. Supp. 167, 169-70 (S.D.N.Y. 1990)).

Because Fairmont and Turnberry understood that a premature termination of the long-

term HMA would cause substantial damages that were difficult to determine in advance with any

precision, and they wished to avoid the expense and uncertainties of litigating the issues, the

parties negotiated the Breach Termination Fee. “Provisions for liquidated damage have value in

those situations where it would be difficult, if not actually impossible, to calculate the amount of

actual damage. In such cases, the contracting parties may agree between themselves as to the

amount of damages to be paid upon breach rather than leaving that amount to the calculation of a

court or jury.” Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015, 1018

(N.Y. 1977). The HMA explains the uncertainties the parties recognized and addressed in the

formula:

(b) Owner and Operator further acknowledge and agree that Operator’s damages in the event of a Breach Termination of this Agreement would be difficult or impossible to determine, including without limitation, loss of Management Fees and other revenue under this Agreement, harm to Operator’s reputation, loss of goodwill, disruption of operations, loss of contributions to budgeted system expenses and loss of a hotel with strategic significance to Operator’s system. Given the inherent uncertainty as to the measure of such damages and the parties desire to establish a methodology for the calculation of damages . . . .

HMA, Section 16.9(b); see also FACTS ¶¶ 12-19.

The formula the parties agreed to is the sum of anticipated management fees under the

HMA for the remaining years of the HMA with a 3% growth rate over prior actual fees earned

under the HMA, discounted to present value. FACTS ¶ 21.5

5 Specifically, Section 16.9 calls for the payment of “the sum of the present value (using a 10% discount factor) of the Management Fees estimated to be received for each Fiscal Year of the


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“A contractual provision fixing damages in the event of breach will be sustained if the

amount liquidated bears a reasonable proportion to the probable loss and the amount of actual

loss is incapable or difficult of precise estimation.” Truck Rent-A-Center, 361 N.E.2d at 1018.

Thus, the burden is on the party challenging the enforceability of such a provision to

“demonstrate either that damages flowing from a prospective early termination were readily

ascertainable at the time [the parties] entered into their . . agreement, or that the early termination

fee is conspicuously disproportionate to these foreseeable losses.” JMD Holding Corp., 828

N.E.2d at 609; Bates Adver. USA, Inc. v. 498 Seventh, LLC, 850 N.E.2d 1137, 1139-40 (N.Y.

2006); Wechsler v. Hunt Health Sys., Ltd., 330 F. Supp. 2d 383, 413 (S.D.N.Y. 2004).

In its Counterclaim, as well as in its Answer, Turnberry—with only conclusory

allegations—claims that the provision it freely entered into is an unenforceable penalty. But New

York law favors the enforcement of liquidated damages provisions and New York courts “have

cautioned generally against interfering with parties’ agreements.” JMD Holding Corp., 828

N.E.2d at 609 (“Absent some element of fraud, exploitive overreaching or unconscionable

conduct . . . to exploit a technical breach, there is no warrant, either in law or equity, for a court

to refuse enforcement of the agreement of the parties.”) (citing Fifty States Mgt. Corp. v Pioneer

Auto Parks, 46 N.Y.2d 573, 577 (1979). See also Global Crossing Bandwith, Inc. v. OLS, Inc.,

566 F. Supp. 2d 196, 202 (W.D.N.Y. 2008) (“‘The rule [against penalty clauses] hangs on, but is

chastened by an emerging presumption against interpreting liquidated damages clauses as

penalty clauses’”) (quoting XCO Int’l. Inc. v Pacific Scientific Co., 369 F.3d 998, 1002-03 (7th

remaining Operating Term of this Agreement, including all Extension Terms remaining under this Agreement. The Management Fees estimated to be received for any given Fiscal Year shall be determined by increasing the Management Fees received for the last full Fiscal Year prior to the termination of this Agreement . . . using a three percent (3%) growth rate for each year that has elapsed since such termination.” FACTS ¶ 21.


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Cir 2004)). “Generally, as long as the provision reasonably estimates actual damages, courts will

enforce the contract so as not to interfere with the agreement of the parties.” Red Line Air, LLC

v. G. Howard Assocs., Inc., No. CV-09-3928 (RRM)(JMA), 2010 WL 2346299, at *1 (E.D.N.Y.

May 11, 2010) (enforcing liquidated damages clause entitling plaintiff to full payments on 120-

month contract where defendant breached after 38 months because it was “proportional to the

parties’ reasonable estimation of the probable loss that would result from a default.”). The

HMA’s Breach Termination Fee is such an estimate and the parties stipulated to this.

1. As a Matter of Law, The Breach Termination Fee is Not Grossly Disproportionate to Fairmont’s Probable Anticipated Loss

A liquidated damages provision will be enforced as long as the stipulated sum is not

grossly disproportionate to the probable damages that the parties anticipated would arise from a

breach, viewed as of the date of execution of the contract. Truck Rent-A-Center, Inc., 361 N.E.2d

at 1018-19. See also Wells Fargo Bank, 315 F. Supp. 2d at 350 (enforcing formula chosen by

parties for premature termination of lease agreement for aircraft that resulted in a $31,084,462.08

award). New York courts are “justifiably reluctant to substitute their after-the-fact conclusions

regarding the proportionality of liquidated damages provisions for the ex ante estimates of the

parties.” Global Crossing Bandwith, 566 F. Supp. 2d at 204.

The formula Fairmont and Turnberry agreed to in the HMA is reasonable in light of the

harm to Fairmont the parties anticipated would be caused by a premature termination of the long-

term HMA. Because the agreed-to formula is based upon actual management fees earned before

any breach, and the assumptions the parties agreed to as an estimate of future fees are reasonable

(contemplating a 3% growth rate each year), and is discounted to present value, the formula does

not result in an amount grossly disproportionate to those damages the parties could have foreseen

at the time they entered into the HMA, especially where the parties understood that actual


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damages of various types besides lost management fees were uncertain and variable. See also

Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854, 862 (N.Y. Sup. Ct. 1985) (enforcing clause

based on full income for the life of the contract where damages other than loss of income were

likely and of uncertain amount).

As reflected in the HMA and the Declaration of Tom Storey (see FACTS, ¶¶ 9-20) the

formula accounts for circumstances the parties could not possibly determine with certainty at the

time of contracting, most important, how long Turnberry would honor the contract. Without

knowing the actual number of years that would be remaining, the parties also could not know

inflation, interest rates, and other variables that change over time. In addition, by tying the

formula to the number of years remaining under the term of the HMA, the formula reasonably

reflects the reality that the less time remaining under the term, the less damages Fairmont would

suffer from a Breach Termination. Such clauses are routinely upheld as enforceable. See, e.g.,

JMD Holding Corp., 828 N.E.2d at 607 (formula in stipulation for compensation resulted in

decreased liquidated damages as the end of the agreement drew closer).

The formula the parties chose as the best approximation of future damages is based on

gross estimated revenues from Management Fees. As the parties stipulated, this was a reasonable

formula because a formula based on net revenues would not capture the categories of damages

other than lost management fees that the parties understood and agreed were likely to occur.

Such damages (many listed in Section 16.9(b)) included harm to Fairmont’s reputation and loss

of goodwill, harm from disruption of operations, loss of contributions to budgeted system

expenses, loss of a hotel in a key tourist market, fees, out of pocket expenses, lost profits and lost

opportunities. All of these losses were anticipated and foreseeable at the time the HMA was

executed, but difficult or impossible to determine in advance. In other words, as we explain, any


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11

expenses of performance are offset by those types of damages, which the parties could not

precisely quantify in advance.6

Courts routinely enforce liquidated damages formulas tied to gross revenues for the full

remaining term of the subject contract. In Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854 (N.Y.

Sup. Ct. 1985), for example, the court enforced a liquidated damages clause and awarded a

terminated CEO the full gross revenues for the remainder of his 5-year contract after just two

months of performance and without regard to deductions for expenses of performance. Notably,

the CEO in Boyle completed just 3% of the full term of his contract (compared to about 10% in

the case before the Court), yet the court enforced the clause guaranteeing full income for the

complete duration of the contract.7 See also GFI Brokers, LLC v. Santana, Nos. 06 Civ.

3988(GEL) and 4611(GEL), 2009 WL 2482130, *4-5 (S.D.N.Y. Aug. 13, 2009) (fact that

formula overestimates as to one damage element does not make the damage formula a penalty,

especially where formula underestimates as to other damage elements); Truck Rent-A-Center,

361 N.E.2d at 1018-19 (observing that parties could reasonably measure losses by amount of

rental fee and could assume there might not be a market for re-rental, and enforcing provision

6 In addition to its rights as the Operator of the Hotel, the HMA provided Fairmont with other rights, such as Fairmont’s right of first offer and refusal in the event Turnberry decided in the future to sell the Hotel. This and other valuable rights terminated with the HMA. The Breach Termination Fee formula also does not account for damages from the loss of these rights. See Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854, 861-62 (N.Y. Sup. Ct. 1985) (upholding clause providing for full payment to CEO of salary for life of contract and observing that breach of the contract caused losses other than loss of salary not accounted for in clause).

7 The court concluded that “the parties could reasonably agree that instead of litigating the question of damages after the event, which would leave uncertainties, such as the employee’s efforts to mitigate damages by securing other employment, and the question as to how long the other employment might last, or whether the benefits were comparable, they could reasonably agree beforehand as to what damages would be payable.” 518 N.Y.S.2d at 861. These and other uncertainties the court considered are very similar to those the parties in this case faced when they reasonably agreed to liquidate the damages instead of spending substantial sums to litigate the issues after the fact.


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12

calling for rents due for full term of the agreement); See also Addressing Sys. & Prods., Inc. v.

Friedman, 874 N.Y.S.2d 430, 431-32 (N.Y. App. Div. 2009). See also Ames Linen Serv., 779

N.Y.S.2d at 601 (enforcing formula for premature termination of equipment rental agreement

where damages “would be calculated by multiplying one half of defendant’s average weekly

rentals prior to breach times the number of weeks remaining”).

Here, similarly, the parties reasonably agreed to fix the amount based on the remaining

term of the HMA instead of litigating the many uncertainties underlying the question of damages

after the fact. As explained above, the parties knew that lost Management Fees were not the only

damages Fairmont would suffer from a premature termination. See HMA, Section 16.9. Using

the full term of the HMA would compensate for those other categories of damages not captured

in Management Fees. The parties also understood that the South Florida market in comparable

luxury properties was extremely narrow, and opportunities to compensate for the loss of the

Turnberry property by entering a long-term management agreement to operate a different South

Florida luxury property were, at the time of contracting, very speculative. And even if such a

property could be found, uncertainties remained (like in the Boyle case) about the terms and

duration of such an alternate arrangement. Third, the parties understood that, even if Fairmont

opened a second Florida location, its presence would not mitigate the loss to Fairmont of the

Turnberry property. The loss of the Turnberry HMA would be a complete loss. No second

location would mitigate that loss.

Moreover, the parties stipulated in Section 16.9 (d) that:

OWNER AND OPERATOR AGREE THAT BREACH OF TERMINATION FEE IS THE PARTIES’ BEST AND MOST ACCURATE ESTIMATE OF THE DAMAGES OPERATOR WOULD SUFFER IN THE EVENT OF A BREACH TERMINATION, AND THAT SUCH ESTIMATE IS REASONABLE UNDER THE CIRCUMSTANCES EXISTING ON THE DATE OF THIS AGREEMENT.


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13

Such acknowledgements by sophisticated parties are relied upon by courts when enforcing such

provisions. See, e.g., JMD Holding Corp., 828 N.E.2d at 607-13.

The fact that Fairmont and Turnberry are sophisticated business parties, were represented

by experienced counsel throughout the negotiation of the HMA, and that the Breach Termination

Fee was the subject of extensive and focused negotiation (FACTS ¶ 27) are additional factors to

be considered in determining the reasonableness of the Breach Termination Fee. “[W]hen

analyzing the reasonableness of a liquidated damages provision, the court must consider ‘the

sophistication of the parties and whether both sides were represented by able counsel who

negotiated the contract at arms length without the ability to overreach the other side.’” DAR &

Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192, 203 (E.D.N.Y 1999) (citations

omitted). See also Addressing Sys. & Prods., Inc., 874 N.Y.S.2d at 431-32 (“Where, as here, the

parties to the agreement were sophisticated business people, and the terms of the agreement were

mutually negotiated, with each party represented by experienced counsel, a liquidated damages

provision which is reached at arm’s length is entitled to deference.”); Boyle, 518 N.Y.S.2d at 861

(“Both parties to the contract were sophisticated and were represented by able counsel. This is a

factor to be taken into consideration in determining whether one side is now exacting an

unconscionable penalty.”).

In this case, Fairmont and Turnberry expressly acknowledged that they were

sophisticated parties with experience in negotiating these types of contracts. See § 16.9(e) (“Both

parties further acknowledge that they are experienced in negotiating agreements of this sort, have

had the advice of counsel in connection herewith, and have been advised as to, and fully

understand, that . . . the express terms and conditions of this agreement are intended to fully

express and define the extent and limitations of the relationship between the parties.”); Truck


A025


14

Rent-A-Center, Inc., 361 N.E.2d at 1019-20 (enforcing liquidated damages provision and noting

that “[t]he agreement was fully negotiated and the provisions of the form, in many other respects,

were amended. There is no indication of any disparity of bargaining power or of

unconscionability.”).

Therefore, as the parties themselves acknowledged, the Breach Termination Fee bears a

reasonable proportion to the probable or foreseeable amount of damages that, at the time of

executing the HMA, the parties believed Fairmont would suffer in the event of a breach and is

thus enforceable. See also Grynberg v. Advance Nanotech, Inc., 912 N.Y.S.2d 205, 205-06 (N.Y.

App. Div. 2010) (finding that liquidated damages provision was reasonable because damages to

be covered were those arising from a decline in value of shares before they were registered and

amount was reasonable estimate of possible damages); Weiser LLP v. Coopersmith, 902

N.Y.S.2d 74, 76 (N.Y. App. Div. 2010) (finding that liquidated damages provision requiring

departing partners to pay damages based on gross billings charged to clients of old firm was

reasonable in light of potential damages as new firm had assumed liabilities of old firm,

including substantial unfunded pension obligations); Addressing Sys. & Prods., Inc., 874

N.Y.S.2d at 431 (finding liquidated damages reasonable where potential damages arising from

violation of non-compete agreement not readily ascertainable at time contract executed); Tenber

Assocs. v. Bloomberg L.P., 859 N.Y.S.2d 61, 63 (N.Y. App. Div. 2008) (finding that liquidated

damages clause providing for two times the existing rent in the event of a holdover was not an

unenforceable penalty because amount was not plainly or grossly disproportionate to the

probable loss); Benjamin Partners, LLC v. 583-587 Broadway Condo., 824 N.Y.S.2d 631, 632

(N.Y. App. Div. 2006) (finding that liquidated damages clause was enforceable because

defendant failed to demonstrate that damages fixed in agreement were conspicuously


A026


15

disproportionate to the losses sustained); Time Assocs. Inc. v. Blake Realty Inc., 622 N.Y.S.2d

816, 818-19 (N.Y. App. Div. 1995) (liquidated damages not grossly disproportionate to

purchaser’s loss in action arising from sale of a business where goodwill and decrease in income

of business were anticipated by parties); Wojciechowski v. Birnbaum, 595 N.Y.S.2d 3, 4 (N.Y.

App. Div. 1993) (finding that liquidated damages clause was not unreasonably large for breach

of contract).

There were about 44 fiscal years remaining under the terms of the HMA (including all

extension terms, the inclusion of which Section 16.9 expressly contemplates). The amount of

liquidated damages to which Fairmont is entitled under the agreed-to formula is thus

$31,604,748. FACTS ¶ 10. There is no genuine issue for trial on this calculation and judgment as

a matter of law is appropriate. See Wells Fargo Bank, 315 F. Supp. 2d at 349-54 (granting

summary judgment on calculation exceeding $31 million under agreement’s breach termination

formula).

2. There Is No Genuine Issue of Fact for Trial on the Issue of Whether Fairmont’s Prospective Damages Upon Early Termination Were Not Capable Of Precise Estimation at the Time the Parties Executed the HMA

Because it cannot prove at trial that the Breach Termination Fee is grossly

disproportionate to the probable prospective losses from an early termination, Turnberry will

bear the prima facie burden at trial of proving that Fairmont’s prospective damages for an early

termination of the HMA were capable of precise estimation at the time the parties executed the

HMA. JMD Holding Corp., 828 N.E.2d at 609, 613. There is no genuine issue for trial on this

issue either. These sophisticated parties understood and stipulated in the HMA that the types of

damages that would occur if Turnberry prematurely terminated the HMA were “difficult or

impossible to determine.” FACTS ¶¶ 11-20. “Provisions for liquidated damage have value in

those situations where it would be difficult, if not actually impossible, to calculate the amount of


A027


16

actual damage. In such cases, the contracting parties may agree between themselves as to the

amount of damages to be paid upon breach rather than leaving that amount to the calculation of a

court or jury.” Truck Rent-A-Center, Inc., 361 N.E.2d at 1018. See also JMD Holding Corp., 828

N.E.2d at 609-13.

At the time the parties executed the HMA, the parties reasonably understood (and

stipulated) that there were several kinds of damages that would occur from an early termination

of the 50-year HMA, including loss of management fees and other revenue, harm to Fairmont’s

reputation, loss of goodwill, disruption of operations, loss of contributions to budgeted system

expenses, and loss of a hotel with strategic significance to Fairmont’s resort system. FACTS ¶

13. Damages were also inherently difficult to estimate ex ante under the HMA because of the

many variables that must be taken into account. Most significantly, the parties could not know at

the time they contracted how much time would be remaining on the 50-year term at the time of a

Breach Termination. Id. ¶ 12. Other variables inherent in estimating damages were what inflation

rates would be over the life of the HMA, income levels based on room occupancy, and many

other figures that would fluctuate over the 50-year term of the contract, and thus not be capable

of precise estimation in advance. The parties’ acknowledgement that a premature termination

would leave Fairmont without a presence in the high-visibility South Florida market (see HMA

at Section 16.9(b)) and thus would have new start-up costs to establish a new presence has also

been recognized as an element of damage that is difficult to determine in advance. Cf. DAR &

Assocs., Inc., 37 F. Supp. 2d at 201-03 (severed relationship would leave non-breaching party

with no presence in the market and cause attendant damage). The elements of damages the

parties here anticipated, and the variables they could not have quantified at the time of

contracting, are the kinds of damages that courts recognize are “real but difficult to estimate ex


A028


17

ante,” and support the parties’ choice of liquidating damages. See, e.g., JMD Holding Corp., 828

N.E.2d at 611 (citing Walter E. Heller & Co. v American Flyers Airline Corp., 459 F.2d 896,

899 (2d Cir. 1972)).

The parties also expressly acknowledged the difficulty of ascertaining the amount of such

damages. See § 16.9(b) (“Owner and Operator further acknowledge and agree that Operator’s

damages in the event of a Breach Termination of this Agreement would be difficult or

impossible to determine. . .”); § 16.9(b) (“Given the inherent uncertainty as to the measure of

such damages. . .”); § 16.9(c) (“the inability to predict with a more certain method absolute

growth in the measure of GOP [gross operating profit] and, therefore, the Incentive Fee payable

to Operator over the balance of the term of this Agreement”); § 16.9(c) (“the inherent difficulty

in predicting or quantifying the measure of damages from the non-fee components of Operator’s

damages. . .”).8 And, as explained above, such stipulations from sophisticated parties dealing at

arm’s length are entitled to deference and underscore the inherent impossibility of precisely

estimating damages from a future breach. These elements of anticipated damages and

unquantifiable variables and other obvious uncertainties inherent in the long-term HMA made it

“reasonable that a sum for liquidated damages should be agreed to after arm’s-length

negotiations.” JMD Holding Corp. 828 N.E.2d at 611.

Because the damages were incapable of being precisely estimated at the time that the

HMA was executed, the liquidated damages provision satisfies the second requirement and is

8 The parties’ acknowledgments about the difficulty of estimating the foreseeable elements of damages likely to occur from an early termination of the HMA are entitled to deference. Ames Linen Serv. v. Katz, 779 N.Y.S.2d 600, 601 (N.Y. App. Div. 2004) (upholding liquidated damages provision where “defendant acknowledged [in the contract] that due to the nature of plaintiff’s business, damages caused by defendant’s premature termination of the contract would be ‘difficult, if not impossible to determine’”).


A029


18

enforceable under New York law. Accordingly, Fairmont is entitled to summary judgment on

Count One of its complaint (breach of the HMA and recovery of liquidated damages).9

D. Summary Judgment is Appropriate on Debts Under the HMA That Turnberry Owed Fairmont Before Turnberry Unilaterally Terminated the HMA

There being no genuine issue of fact for trial regarding Turnberry’s material breach of the

HMA, the Court may also grant summary judgment on the calculation of the damages for

amounts Turnberry owed Fairmont under the HMA as of August 28, 2011, the date Turnberry

prematurely terminated the HMA (Count II of Fairmont’s Third Amended Complaint). Section

16.9(d) of the HMA provides that such amounts owing are not included as part of the Breach

Termination Fee, but are to be paid separately upon a breach:

[T]HE BREACH TERMINATION FEE SHALL BE THE SOLE MEASURE OF DAMAGES OF OPERATOR FOR OWNER’S WRONGFUL TERMINATION OF THIS AGREEMENT . . . EXCEPTING IN THE CASE OF OPERATOR, OPERATOR’S RIGHT TO RECEIVE PAYMENT OF AMOUNTS ACCRUED, DUE OR OWING TO OPERATOR AS OF THE DATE OF THE BREACH TERMINATION UNDER THIS AGREEMENT AND WITHOUT AFFECTING OR LIMITING ANY RIGHTS OPERATOR MAY HAVE IN EQUITY.

Thus, Fairmont’s right to receive payment from Turnberry for amounts that were due or owing

under the HMA as of August 28, 2011, is unaffected by the amounts it is due for the Breach

Termination Fee. The past due amount Turnberry owes Fairmont under the HMA as of

August 28, 2011 is $2,266,231.48. FACTS ¶ 31. There is no genuine issue for trial about

Turnberry’s liability for this amount under Section 16.9(d) or the calculation of the amount,

which Turnberry acknowledged and never disputed until asserting a general denial in its answer.

Summary judgment in Fairmont’s favor is thus warranted on Count II of Fairmont’s Complaint.

9 Fairmont is also entitled to summary judgment in its favor on Turnberry’s Counterclaim (seeking declaration of liability for liquidated damages) because the counterclaim turns on the identical issues to be decided here.


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19

IV. CONCLUSION

There is no fair dispute about any material fact, and Fairmont’s claims present pure

questions of law for the Court to resolve on summary judgment, which it should enter in favor of

FHR TB, LLC and against Defendant, with respect to Counts I and II of the Third Amended

Complaint and against Turnberry on its Counterclaim.

Dated: April 12, 2012 Respectfully Submitted,

Counsel for Plaintiff FHR TB, LLC

HOLLAND & KNIGHT LLP s/Richard C. Hutchison

Richard C. Hutchison

Florida Bar No. 709360 515 East Las Olas Boulevard, Suite 1200 Fort Lauderdale, FL 33301 Tel: 954-525-1000 Fax: 954-463-2030 Email: [email protected] Brett A. Barfield Florida Bar No. 0192252 Michael E. Hantman Florida Bar No. 0502790 701 Brickell Avenue, Suite 3000 Miami, FL 33131 Tel: 305-374-8500 Fax: 305-789-7799 Email: [email protected] Email: [email protected] Forrest A. Hainline, III, Pro Hac Vice Goodwin Procter LLP Three Embarcadero Center III, 24 Floor San Francisco, CA 94111 Tel: 415-733-6065 Fax: 415-677-9041 Email: [email protected]


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20

CERTIFICATE OF SERVICE

I Hereby Certify that on April 12, 2012, I electronically filed the foregoing Plaintiff FHR TB, LLC’s Motion for Final Summary Judgment with the Clerk of the Court using the CM/ECF system which will send a notice of electronic filing to all counsel of record listed below: Dennis Richard Laurel W. Marc-Charles Michael R. Tolley RICHARD AND RICHARD, P.A. 825 Brickell Bay Drive Tower III - Suite 17th Floor Miami, Florida 33131 (305) 374-6688 Tel (305) 374-0384 Fax email: [email protected] [email protected] [email protected]

Counsel for Defendant

s/Richard C. Hutchison

Richard C. Hutchison


A032


Exhibit C

Reply in Support of Plaintiff FHR TB, LLC’s Motion for Summary Judgment, FHR TB, LLC v. TB Isle Resort, LP., Case No. 11-cv-23115-RNS (S.D. Fla. 2011)

(Doc. 98)

A033


62358/0001-40624537v1

Exhibit B

Reply in Support of Plaintiff FHR TB, LLC’s Motion for Summary Judgment, FHR TB, LLC v. TB Isle Resort, LP., Case No. 11-cv-23115-RNS (S.D. Fla. 2011)

(Doc. 98)

Case 21-10549-JTD Doc 239-2 Filed 04/23/21 Page 1 of 17

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

MIAMI DIVISION

Case No.: 11-cv-23115-SCOLA/BANDSTRA

FHR TB, LLC, a Delaware limited liability company, and FAIRMONT HOTELS & RESORTS (U.S.) INC., Plaintiffs, vs. TB ISLE RESORT, LP, a Delaware limited partnership. Defendant. ___________________________________/

REPLY IN SUPPORT OF PLAINTIFF FHR TB, LLC’S MOTION FOR SUMMARY JUDGMENT


A034


ii

TABLE OF CITATIONS

CASES Page

Addressing Sys. & Prods., Inc. v. Friedman, 874 N.Y.S.2d 430 (N.Y. App. Div. 2009) ...........................................................................6

Ames Linen Serv. v. Katz, 779 N.Y.S.2d 600 (N.Y. App. Div. 2004) ...........................................................................7

Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854 (N.Y. Sup. Ct. 1985) ......................................................................2, 3, 7

Burnett v. Frayne, No. C 09–04693, 2011 WL 5830339 (N.D. Cal. Nov. 18, 2011) ......................................10

Canon Latin Am., Inc. v. Lantech (C.R.), S.A., 2011 WL 240684 (Jan. 24. 2011) ........................................................................................6

Celotex Corp. v. Catrett, 477 U.S. 317 (1986) .............................................................................................................6

Crown It Servs., Inc. v. Koval-Olsen, 782 N.Y.S. 2d 708 (N.Y. App. Div. 2004) ..........................................................................7

DAR & Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192 (E.D.N.Y 1999) ................................................................................3, 6

Gen’l Elec. Capital Corp., LLC v. G. Howard Assocs., Inc., No. 09-CV-3923 (RRM) (JMA), 2010 WL 2346296 (E.D.N.Y. May 18, 2010) .....................................................................5

GFI Brokers, LLC v. Santana, Nos. 06 Civ. 3988(GEL) and 4611(GEL), 2009 WL 2482130 (S.D.N.Y. Aug. 13, 2009) .....................................................................7

Global Crossing Bandwith, Inc. v. OLS, Inc., 566 F.Supp.2d 196 (W.D.N.Y. 2008) ..........................................................................5, 6, 7

Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352 (11th Cir. 1985) ...........................................................................................8

Gregory v. Simon & Schuster, Inc., No. 93 CIV. 4674 (JSM), 1994 WL 381481 (S.D.N.Y. July 19, 1994) ........................................................................4

Grynberg v. Advance Nanotech, Inc., 912 N.Y.S.2d 205 (N.Y. App. Div. 2010) ...........................................................................2


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TABLE OF CITATIONS

CASES Page

iii

Huen N.Y., Inc. v. Board of Educ. Clinton Cent. School. Dist., 890 N.Y.S.2d 748 (N.Y. App. Div. 2009) ...........................................................................4

In re El-Roh Realty Corp., 902 N.Y.S.2d 727 (N.Y. App. Div.) ....................................................................................3

Food Mgt. Group v. Matrix Realty Group, Inc. (In re Food Mgt. Group, LLC), No. 05-08636 (ASH), 2007 WL 4352225 (Bankr. S.D.N.Y. 2007) ....................................4

In re Hooker Invs., Inc, 145 B.R. 138 (Bankr. S.D.N.Y. 1992) .................................................................................7

In re M Waikiki, LLC, Case No. 11-02371 (Bankr. HI May 29, 2012) ............................................................3, 6, 7

JMD Holding Corp. v. Cong. Fin. Corp., 828 N.E.2d 604 (N.Y. 2005) ........................................................................................2, 5, 9

Kenford Co. v. County of Erie, 540 N.Y.S.2d 1 (1989) .........................................................................................................3

Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592 (PAE), 2011 WL 6019245 (S.D.N.Y. Dec. 2, 2011) ..............................7

Oscar de la Renta v. Mulberry Thai Silks, Inc., No. 08 Civ. 4341, 2009 WL 1054830 (S.D.N.Y. April 17, 2009) .......................................7

Red Line Air, LLC v. G. Howard Assocs., Inc., No. CV-09-3928 (RRM)(JMA), 2010 WL 2346299 (E.D.N.Y. May 11, 2010) .....................................................................5

Reynolds v. Potter, 178 Fed. Appx. 998 (11th Cir. 2006) ...................................................................................9

Ronnen v. Ajax Elec. Motor Corp., 671 N.E.2d 534 (N.Y. 1996) ................................................................................................4

Time Assocs. Inc. v. Blake Realty Inc., 622 N.Y.S.2d 816 (N.Y. App. Div. 1995) .......................................................................3, 5

Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89 (2d. Cir. 2007)..................................................................................................3

Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015 (N.Y. 1977) ..............................................................................................5


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TABLE OF CITATIONS

CASES Page

iv

U.S. Fidelity & Guaranty Co. v. Braspetro Oil Servs. Co., 369 F.3d 34 (2d Cir. 2004)...................................................................................................4

United States v. Carlin, 948 F.Supp. 271 (S.D.N.Y.1996).........................................................................................8

Virgilio v. Ryland Group, Inc., No. 11–11027, 2012 WL 1758086 (11th Cir. 2012)............................................................8

Wingster v. Head, 318 Fed. Appx. 809 (11th Cir. 2009) ...................................................................................9

X.L.O. Concrete Corp. v. John T. Brady & Co., 482 N.Y.S.2d 476 (N.Y. App. Div. 1984) .......................................................................2, 5

RULES

Rule 56(d), Federal Rules of Civil Procedure ............................................................................9, 10

OTHER AUTHORITIES

Black's Law Dictionary (9th ed. 2009) ............................................................................................3


A037


1

Plaintiff, FHR TB, LLC (“Fairmont”), replies in support of its Motion for Summary

Judgment (D.E. 98). Turnberry fails to rebut Fairmont’s showing of the absence of a triable issue

of fact. Instead, Turnberry raises novel theories that violate basic canons of contract

interpretation, applies the wrong standard for the “grossly disproportionate” analysis (and

concedes that damages were not readily ascertainable), and asks the Court to postpone summary

judgment on the mere hope that ongoing discovery might turn up evidence to support its

defenses. Judgment is due to be entered in Fairmont’s favor.1

I. The Breach Termination Fee Is The Agreed-Upon Method For Calculating Actual Damages For A Breach Termination And There Is No Inconsistency; Turnberry’s Interpretation Would Violate Basic Canons Of Contract Construction

The Court may make short shrift of Turnberry’s novel argument that the HMA’s general

limitation of remedies in Section 16.9(e) to “direct and actual damages” somehow “trumps” or

supersedes the Breach Termination Fee provision in Sections 16.9(b)-(d). The parties agreed they

would seek only their direct and actual damages. The parties further agreed that direct and actual

damages in the case of a breach termination were difficult to calculate in advance and thus

agreed to a formula that would best estimate Fairmont’s direct and actual damages (the very

purpose of a liquidated damage clause). The parties expressly agreed that this formula was the

“sole measure” for direct damages for a breach termination: “OWNER AND OPERATOR

AGREE THAT . . . [THE] BREACH TERMINATION FEE SHALL BE THE SOLE

MEASURE OF DAMAGES OF OPERATOR FOR OWNER’S WRONGFUL

1Because Turnberry’s cross-motion for summary judgment raises no new issues, Fairmont relies on this Reply brief, and Fairmont will not file a formal response to the cross motion. In the event Turnberry nevertheless files additional briefing, Fairmont reserves the right to seek leave to respond to such briefing. Fairmont’s argument in Part I of this brief constitutes Fairmont’s counter to Turnberry’s two-paragraph statement of material facts in support of the cross motion, which merely quotes the HMA (D.E. 119).


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2

TERMINATION OF THIS AGREEMENT (DIRECTLY BY AN OWNER . . . .). 16.9(d). This

agreed-to formula, which fixes direct and actual damages for the breach termination, is

binding and must be enforced. JMD Holding Corp. v. Cong. Fin. Corp., 828 N.E.2d 604, 612

(N.Y. 2005) (early termination fee fixed by parties is deemed to be the actual damages

sustained); Boyle v. Petrie Stores Corp., 518 N.Y.S.2d 854, 860-61 (N.Y. Sup. Ct. 1985) (parties

may agree to dollar figure representing their actual damages).

Turnberry’s quote of Section 16.9(e) (Response at p. 4) omits reference to the other

material provisions in 16.9, which state that damages for a breach termination would be difficult

to determine (16.9(b)), that the formula is the parties’ best estimate of damages for a breach

termination (16.9(d)), and that the formula shall be the sole measure of damages arising directly

as a result of a breach termination. Additionally, Turnberry omits reference to the clause in

16.9(e) confirming that the remedies provided for liquidating direct damages for a breach

termination and all other remedies in the HMA are “adequate” and “shall apply in all actions.”

See X.L.O. Concrete Corp. v. John T. Brady & Co., 482 N.Y.S.2d 476, 479 (N.Y. App. Div.

1984) (when parties agree to measure of damages, it must be enforced by court); Grynberg v.

Advance Nanotech, Inc., 912 N.Y.S.2d 205 (N.Y. App. Div. 2010) (liquidated damages clause

“not rendered nugatory by the general remedies clause”).

The Breach Termination Fee formula is based on the amounts (management fees)

Fairmont would have received under the HMA, which are general damages under New York

law, not consequential. The HMA acknowledges that a wrongful termination will result in the

“loss of Management Fees and other revenue . . ., harm to [Fairmont’s] reputation, loss of

goodwill, disruption of operations, loss of contributions to budgeted system expenses and loss of

a hotel with strategic significance to [Fairmont’s] system.” In other words, the parties


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3

specifically acknowledged that these damages would be the natural and probable consequences

of a breach termination. Damages that are direct and probable, including lost profits, are not

consequential; consequential damages are those arising from collateral transactions beyond the

scope of agreement. Tractebel Energy Mktg., Inc. v. AEP Power Mktg., Inc., 487 F.3d 89, 109

(2d. Cir. 2007); Kenford Co. v. County of Erie, 540 N.Y.S.2d 1, 3 (1989) (“the nonbreaching

party may recover general damages which are the natural and probable consequence of the

breach.”); In re M Waikiki, LLC, Case No. 11-02371, at ¶12 (Bankr. HI May 29, 2012) (slip op.

attached hereto as Exhibit 1). The damages allowed under the Breach Termination Fee, then, are

general under New York law and not consequential. Here, the parties agreed that the loss of

management fees and revenue, and harm to goodwill and reputation, would flow directly and

immediately from a breach termination. See BLACK’S LAW DICTIONARY 446 (9th ed. 2009)

(noting that “general damages” are also termed “direct damages”). Thus, based on the express

terms of the HMA, these damages are direct and general damages, and not consequential

damages. Cf. id. at 445 (consequential damages are “[l]osses that do not flow directly and

immediately from an injurious act but that result indirectly from the act.”). See also DAR &

Assocs., Inc. v. Uniforce Servs., Inc., 37 F. Supp. 2d 192, 202 (E.D.N.Y 1999) (“actual damages

would include the loss of goodwill”); Boyle, 518 N.Y.S.2d at 861 (accounting for reputation

damage in determining that liquidated damage clause was not disproportionate to actual

damages); Time Assocs. Inc. v. Blake Realty Inc., 622 N.Y.S.2d 816, 818-19 (N.Y. App. Div.

1995) (accounting for value of goodwill and reputation in determining that liquidated damage

clause not disproportionate to actual damages).

Turnberry’s novel interpretation of Section 16.9 would also violate several basic canons

of contract construction. Turnberry’s construction of Section 16.9 would render the Breach


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Termination Fee a nullity. But New York law has “long and consistently ruled against any

construction that would render a contractual provision meaningless or without force or effect.”

Ronnen v. Ajax Elec. Motor Corp., 671 N.E.2d 534, 536 (N.Y. 1996). Every effort must be made

to harmonize all terms of a contract. See In re El-Roh Realty Corp., 902 N.Y.S.2d 727, 729 (N.Y.

App. Div. 2010). For this reason, the court in Gregory v. Simon & Schuster, Inc., rejected an

interpretation of a contract that “would render the liquidated damages clause unenforceable and

without effect” because “[s]uch a result is inconsistent with basic principles of contract

construction.” No. 93 CIV. 4674 (JSM), 1994 WL 381481, at *6 (S.D.N.Y July 19, 1994).

Turnberry’s interpretation would also violate the “well-established principle of contract

interpretation that specific provisions concerning an issue are controlling over general

provisions.” See Huen New York, Inc. v. Board of Educ. Clinton Cent. School Dist., 890

N.Y.S.2d 748, 749 (N.Y. App. Div. 2009). Here, the parties agreed that damages for a wrongful

early termination – a specific type of breach – would be remedied by the Breach Termination

Fee, the “sole measure” for the direct and actual damages (16.9(d)) for a breach termination and

must be “appl[ied] in all actions.” (16.9(e)).

The argument that the actual damage clause nullifies the Breach Termination Fee is

frivolous. First, Turnberry cites cases that hold merely that a party cannot recover both liquidated

and actual damages for the same act. See U.S. Fidelity & Guar. Co. v. Braspetro Oil Servs. Co.,

369 F.3d 34 (2d Cir. 2004); Food Mgt. Group v. Matrix Realty Group, Inc. (In re Food Mgt.

Group, LLC), No. 05–08636 (ASH), 2007 WL 4352225 (Bankr. S.D.N.Y. 2007). Turnberry cites

no case that prohibits parties from agreeing to a specific method for liquidating actual damages

for a specific kind of breach, as the parties did here. The parties stipulated that the methodology

they negotiated was the best, most accurate, and reasonable estimate of Fairmont’s actual


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damages for an early termination. And it was. Indeed, New York courts have long recognized

and enforced the parties’ right to establish a fixed methodology for calculating and liquidating

actual damages. See Truck Rent-A-Center, Inc. v. Puritan Farms 2nd, Inc., 361 N.E.2d 1015,

1017 (N.Y. 1977) (damage provision was a “fair estimate of actual damages which would be

difficult to ascertain precisely” and was therefore enforceable); see also Gen’l Elec. Capital

Corp., LLC v. G. Howard Assocs., Inc., No. 09-CV-3923 (RRM) (JMA), 2010 WL 2346296, at

*3 (E.D.N.Y. May 18, 2010) (clause enforceable if it “reasonably estimates actual damages”);

Red Line Air, LLC v. G. Howard Assocs., Inc., No. CV-09-3928 (RRM)(JMA), 2010 WL

2346299, at *1 (E.D.N.Y. May 11, 2010) (same); Time Assocs., 622 N.Y.S.2d at 818-19 (same).2

The Breach Termination Fee was the product of arm’s length negotiation by sophisticated

parties, and the formula is binding and enforceable. See X.L.O. Concrete Corp., 482 N.Y.S.2d at

479-80 (when parties “lay down a rule to []measure the damages” this measure “must be

exclusively followed”). Turnberry completely ignores the overwhelming authority giving

substantial weight to this additional factor requiring enforcement of the parties’ agreed-to

formula. See D.E. 98 at 13-14; see also Global Crossing Bandwith, Inc. v. OLS, Inc., 566 F.

Supp. 2d 196, 202 (W.D.N.Y. 2008).

II. Turnberry Has Failed To Meet Its Burden Of Creating An Issue Of Fact On Enforceability Of The Breach Termination Fee

Turnberry fails as a matter of law to establish the existence of any triable issue of fact on

the issue of gross disproportionality because it simply applies the wrong standard. Turnberry

bears the burden of proof at trial to show that the Breach Termination Fee results in an award

grossly disproportionate to the probable damages the parties anticipated would arise from a 2 Turnberry is wrong that there is a presumption that a liquidated damage clause constitutes a penalty. To the contrary, as we explained in Fairmont’s Summary Judgment Motion, D.E. 98 at p. 8 (hereinafter cited as “D.E. 98 at ___”), the provision is presumed valid and a defendant has the burden of proving that it is invalid. JMD Holding, 828 N.E. 2d at 610 (trend favors enforcement of liquidated damage clauses); Global Crossing, 566 F. Supp. 2d at 202 (same).


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breach, viewed as of the date of execution of the contract. See D.E. 98 at 8, 9. Turnberry’s entire

analysis (and that of its expert) erroneously compares the Breach Termination Fee to the

damages viewed from the date of the breach. Such a calculation is irrelevant and improper under

New York law. Addressing Sys. & Prods., Inc. v. Friedman, 874 N.Y.S.2d 430, 431 (N.Y. App.

Div. 2009) (using post-breach calculation of damages to challenge liquidated damage amount

has no basis in the law and is improper); Global Crossing, 566 F. Supp. 2d at 203-04

(reasonableness of liquidated damages clause is measured as of time parties entered into contract,

not as of the time of breach); DAR & Assocs., 37 F. Supp. 2d at 200 (same).

“If the non-moving party fails to ‘make a sufficient showing on an essential element of

her case with respect to which she has the burden of proof [at trial],’ then the Court must enter

summary judgment for the moving party.” Canon Latin Am., Inc. v. Lantech (C.R.), S.A., No. 08-

21518-CIV, 2011 WL 240684, at *2 (S.D. Fla. Jan. 24. 2011) (citing Celotex Corp. v. Catrett,

477 U.S. 317, 323 (1986)). Turnberry has thus failed as a matter of law to demonstrate any issue

of fact on the issue of gross disproportionality because it applies the wrong standard. And

Turnberry does not dispute that the damages at the time of contracting were not readily

ascertainable. See D.E. 118 at ¶14. The Court, therefore, “must” enter summary judgment on the

issue of the enforceability of the Breach Termination Fee.

Turnberry and its experts principally argue that revenues and profits from luxury hotel

management agreements are too speculative beyond three to five years to justify a liquidated

damages clause capturing the remaining 44 years of the HMA. Turnberry cites no authority

whatsoever in support of its position. But in a decision issued last month, a federal bankruptcy

court estimated damages for the full 43 years remaining under a long term hotel management

agreement on facts very similar to those in this case. In re M Waikiki, LLC, Case No. 11-02371


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(Bankr. HI May 29, 2012) (slip op. attached hereto as Exhibit 1). In fact, the court in that case

(applying New York law) specifically noted that an estimate of management fees over a period

of decades is not “too uncertain to support an award of damages” and that “[i]n some

respects, a longer projection is more reliable than a shorter period because the longer period

tends to even out inevitable variability from year to year.” Id. at ¶ 20.3 See also D.E. 98 at 11-12.

Turnberry also argues that the formula fails to account for mitigation. But as we have

explained (D.E. 98 at 11-13), mitigation is irrelevant where the parties have agreed to a specific

measure of damages. Boyle, 518 N.Y.S.2d at 862.4 Cf. In re M Waikiki, LLC, Case No. 11-02371

(Bankr. HI May 29, 2012) (slip op. attached hereto as Exhibit 1) (in estimating over forty years

of damages for breach of long-term hotel management agreement, court did not deduct for

possible mitigation). And, as we have explained, the formula actually does not capture other

components of actual damages. Cf. GFI Brokers, LLC v. Santana, Nos. 06 Civ. 3988(GEL) and

4611(GEL), 2009 WL 2482130, at *4-5 (S.D.N.Y. Aug. 13, 2009) (formula valid even though it

may have overestimated as to some damage elements because it plainly underestimated as to

other damages); Global Crossing, 566 F. Supp. 2d at 204 (liquidated damage amount was not a

penalty notwithstanding failure to account for costs; at time of contracting it was not clear what

costs would have been and courts should not rewrite parties’ agreement). The authority presented

3 That damages may be awarded for such a term is not inconsistent with the conclusion (and Turnberry’s concession (see D.E. 118 at ¶14)) that damages at the time of contracting were difficult or impossible to ascertain. 4 See also Crown It Services, Inc. v. Koval-Olsen, 782 N.Y.S. 2d 708, 712 (N.Y. App. Div. 2004) (where a contract contains a valid liquidated damages clause, mitigation is irrelevant); Malinowski v. Wall St. Source, Inc., No. 09 Civ. 9592 (PAE), 2011 WL 6019245, at *2 (S.D.N.Y. Dec. 2, 2011) (liquidated damage clause removes mitigation as an issue); Oscar de la Renta v. Mulberry Thai Silks, Inc., No. 08 Civ. 4341, 2009 WL 1054830, at *6 (S.D.N.Y. April 17, 2009) (court will not subtract mitigation from liquidated damage award); In re Hooker Investments, Inc., 145 B.R. 138, 148 (Bankr. S.D.N.Y. 1992) (liquidated damage provision awarding full amount of unpaid salary was enforceable; mitigation not properly an issue).


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in the summary judgment memorandum fully supports enforcement of the damage formula here

as a matter of law.

III. Turnberry Fails To Demonstrate A Genuine Issue For Trial On The Amounts Due Before The Breach Termination

Fairmont submitted declarations to establish the absence of any genuine issue of fact

about the amounts due before the August 28, 2011, termination pursuant to Section 16.9(d). The

burden shifted to Turnberry to establish a genuine issue of fact. Turnberry never denies the

validity of the amounts stated in Fairmont’s declaration of Daryl Benjamin, but merely alleges,

“upon information and belief,” that Fairmont might have overcharged Turnberry for some

charges, which might entitle Turnberry to a set-off. But this is impermissible: “[U]nsupported

denial[s], upon information and belief, [are] insufficient to raise any issue of fact so as to defeat a

motion for summary judgment.” U.S. v. Carlin, 948 F.Supp. 271, 275 (S.D.N.Y.1996).

In addition, as Fairmont explained in its pending Motion for Protective Order (D.E. 108,

114), Turnberry cannot oppose any amounts due before the arbitration award because relitigation

of those issues is barred by res judicata and collateral estoppel. Greenblatt v. Drexel Burnham

Lambert, Inc., 763 F.2d 1352, 1359-61 (11th Cir. 1985) (arbitration decision has res judicata and

collateral estoppel effect). And it is ludicrous for Turnberry to suggest (Response at pp. 17-18)

that it can now obtain a set-off to the $716,336 in incentive fees awarded in the district court

judgment confirming the arbitration award. Case No. 09-23294-MC-SEITZ (D.E. 14). That

amount is not “sought by Fairmont in connection with the 2009 arbitration,” (Response at pp. 17-

18), it was awarded and confirmed in a final federal court judgment! Case No. 09-23294-MC-

SEITZ (D.E. 14). As to amounts owed after the entry of the arbitration award, Turnberry states

that “Fairmont has not met its burden of establishing that the amount of fees it is claiming

comported with the HMA’s restrictions.” Response at p. 18. But that is not Fairmont’s burden.


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Fairmont presented evidence of the debt owed with its motion, and Turnberry was required to

respond by establishing a genuine issue of fact, which it has failed to do.

IV. Turnberry Has Not Satisfied Rule 56(D) To Postpone Judgment Against It

Turnberry contends that Fairmont’s motion “should be denied as improperly premature.”

Response at 19. Rule 56(d) provides that a ruling may be deferred if a nonmovant shows by

declaration that, “for specified reasons, it cannot present facts essential to justify its opposition . .

. .” To meet its burden, Turnberry must “present[] specific facts explaining [its] inability to make

a substantive response as required by rule 56(e) and by specifically demonstrating how

postponement of a ruling on the motion will enable [it], by discovery or other means, to rebut the

movant’s showing of the absence of a genuine issue of fact.” Wingster v. Head, 318 Fed. Appx.

809, 813 (11th Cir. 2009).5 Turnberry “may not simply rely on vague assertions that additional

discovery will produce needed, but unspecified, facts, but must show the court how the stay will

operate to permit [it] to rebut, through discovery, the movant’s contentions.” Reynolds v. Potter,

178 Fed. Appx. 998, 999 (11th Cir. 2006) (quotations omitted).

Turnberry completely fails to meet this burden. The enforceability of the Breach

Termination Fee is a legal question (D.E. 98 at 5, 6-7), so additional discovery is not material to

the resolution of that issue. Virgilio v. Ryland Group, Inc., No. 11–11027, 2012 WL 1758086, at

*7 (11th Cir. 2012) (denying continuance because “such information would have no bearing on

the ‘purely legal’ issue before the court”). And pending discovery about Fairmont’s alleged

overcharges is immaterial for the additional reason that the relevant period for determining

proportionality to actual damages looks at the damages the parties anticipated would occur at the

time of contracting. See JMD Holding, 828 N.E.2d at 612. The fact that Turnberry filed a cross-

5 Under the amendments to the Federal Rules of Civil Procedure effective December 1, 2010, Rule 56(d) replaced Rule 56(f).


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motion for summary judgment on the issue of whether the Breach Termination Fee is an

unenforceable penalty also belies its argument on this point.

On the issue of the amount of the damages, in addition to what we have said above about

the pre-termination amounts owed, Turnberry fails to clearly show “what information is sought

and how it would preclude summary judgment,” nor has it met its “burden to show what specific

facts it hopes to discover that will raise an issue of material fact.” Burnett v. Frayne, No. C 09–

04693, 2011 WL 5830339, at *1 (N.D. Cal. Nov. 18, 2011) (citations omitted). Turnberry’s

Response and its expert’s declaration make clear that Turnberry has no more than a hope that

additional discovery will support a set-off claim.6 Turnberry’s mere “hope” that further

discovery will substantiate its conclusory allegation of overcharges cannot satisfy its burden

under Rule 56(d) and summary judgment is appropriate now.

WHEREFORE, Fairmont moves for entry of summary judgment with respect to Counts

I and II of the Third Amended Complaint and against Turnberry on its Counterclaim.

6 Turnberry has no evidence that Fairmont did not comply with the HMA or that it overcharged Turnberry. Crain’s declaration confirms that Turnberry’s defense is mere speculation. He says only (and repeatedly) that he has seen no evidence to prove that Fairmont fully complied with the HMA, implying that Turnberry merely hopes to find such evidence in ongoing discovery. That is insufficient. See, e.g., Crain Decl., Ex. A., at 3.2.1 (“I could not find supporting documents or any other supporting data to verify that Fairmont did not charge costs . . . .”); 3.2.1 (“I could not find supporting documents or any other supporting data to completely justify the adequacy and accuracy of a substantial portion of the amounts invoiced.”); 3.2.2 (“I have not found supporting documents or any other supporting data reconciling Fairmont’s charges . . . .”); 3.23 (“I have not found evidence that the Comparable Aggregate Cost Test was satisfied . . . .”); 3.2.5 (“I have not observed evidence that Fairmont fully complied with its responsibilities . . . .”).


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Dated: June 11, 2012 Respectfully Submitted,

HOLLAND & KNIGHT LLP Counsel for Plaintiffs FHR TB, LLC & Fairmont Hotels & Resorts (U.S.) Inc. /s/ Richard C. Hutchison

Richard C. Hutchison Florida Bar No. 709360 515 East Las Olas Boulevard, Suite 1200 Fort Lauderdale, FL 33301 Tel. 954-525-1000 Fax. 954-463-2030 E-mail. [email protected] - and - Brett A. Barfield Florida Bar No. 0192252 Michael E. Hantman Florida Bar No. 0502790 701 Brickell Avenue, Suite 3000 Miami, FL 33131 Tel. 305-374-8500 Fax. 305-789-7799 E-mail. [email protected] E-mail. [email protected] Forrest A. Hainline, III, Pro Hac Vice Goodwin Procter LLP Three Embarcadero Center III, 24 Floor San Francisco, CA 94111 Tel. 415-733-6065 Fax. 415-677-9041 Email. [email protected]


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CERTIFICATE OF SERVICE

I Hereby Certify that on June 11, 2012, I electronically filed the foregoing Reply in Support of Plaintiff’s Motion for Summary Judgment with the Clerk of the Court using the CM/ECF system which will send a notice of electronic filing to all counsel of record listed below:

Dennis Richard Laurel W. Marc-Charles Michael R. Tolley Douglas J. Giuliano, Esq. RICHARD AND RICHARD, P.A. 825 Brickell Bay Drive Tower III - Suite 1748 Miami, Florida 33131 Tel. (305) 374-6688 Fax. (305) 374-0384 Email: [email protected] [email protected] [email protected] [email protected]

Counsel for Defendant

Via ECF Filing

s/Brett A. Barfield Brett A. Barfield

#11282306_v1


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