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Compagnie Des Grands Hotels d'Afrique S.A. v. Starwood Capital Group Global I LLC

United States District Court, D. Delaware

January 9, 2019



         Presently before this Court is a joint motion to dismiss filed by Defendants Starwood Capital Group Global I LLC ("Starwood Capital Group")[1] and Starman Hotel Holdings LLC ("Starman"). (D.I. 15). The motion to dismiss is based on Federal Rule of Civil Procedure 12(b)(6). The matter is fully briefed. (D.I. 16, 23, 27).

         For the reasons set forth herein, Defendants' motion is granted in part and denied in part.

         I. BACKGROUND

         On April 30, 2018, Plaintiff Compagnie des Grands Hotels d'Afrique S.A. filed this action to enforce against Starwood Capital Group and Starman a foreign arbitration award finding Woodman Maroc S.a.r.l. ("Woodman") liable for breach of contract. (D.I. 1). Plaintiff is the owner of the Royal Mansour Hotel ("Hotel"), a luxury hotel in Casablanca, Morocco. (Id. ¶ 2). In 1989, Plaintiff entered into a thirty-five year Management Agreement with the Trusthouse Forte Group. (Id.)[2] The Management Agreement provided that the manager would always maintain the Hotel as an international five-star hotel and would make quarterly fee payments to Plaintiff as owner of the hotel. (Id.)

         By 2005, Le Meridien Group ("Meridien") "had become the owner of the manager of the Hotel." (Id. ¶ 3).[3] That same year, Defendant Starwood Capital Group and Lehman Brothers formed Starman to purchase the owned and leased properties of the Meridien Group. (Id. ¶¶ 3-4). Thus, Starman became "owner of the manager of the Hotel." (/d).[4] As part of the acquisition by Starman, Starman entered into a management agreement with Starwood Hotels & Resorts Worldwide, Inc. ("Starwood Hotels"). (Id. ¶¶ 5, 35-36). Additionally, the acquisition required Woodman to enter into a separate operating agreement with Starwood Hotels. (Id. ¶¶ 6, 38). Therefore, after the acquisition organized by Starwood Capital Group, Starman owned and leased the properties of the Meridien Group and those properties entered management agreements with Starwood Hotels. (Id. ¶¶ 4-6). Under the operating agreement between Starwood Hotels and Woodman, Starwood Hotels became the agent of Woodman and agreed to "supervise, direct and control, the [o]peration of all aspects of the [Hotel] for and on behalf of Woodman. (M¶ 38).

         In June 2006, Plaintiff, unaware of the acquisition, attempted to communicate with Meridien in regard to the Management Agreement. (Id. ¶ 43). In response, Starwood Hotels contacted the Hotel and informed it of the change in management, i.e., that Starwood Hotels had acquired the Meridien brand and that the Management Agreement for the Hotel had been "transferred to Starman." (Id. ¶¶ 43-44). In the following months, Plaintiff received correspondence from Starman regarding the Hotel. (Id. ¶¶ 44-46).

         From 2006 to 2011, Plaintiff received and addressed letters to Starman and a Starman subsidiary, Starman UK. (Id. ¶¶ 46-47). By 2010, Woodman failed to make the minimum payments due to Plaintiff under the Management Agreement. (Id. ¶ 49). As a result, Plaintiffs counsel intervened and began corresponding with Woodman and Starman. (Id.) Shortly after Plaintiffs counsel accused Woodman of default, Woodman began to communicate directly with Plaintiff. (Id. ¶ 52).[5]

         Between 2011 and 2013, there was continued correspondence between Woodman and Plaintiff regarding the Management Agreement. (Id. ¶ 52). On February 28, 2012, Woodman's shares were sold to a Starman subsidiary called Starman (Maroc) S.a.r.l. (Id. ¶ 54).[6] On January 7, 2013, Woodman contacted Plaintiff to acknowledge Woodman's failure to pay the December 31, 2012 minimum payment under the contract and to inform Plaintiff that Woodman did not intend to make any more payments and planned to file for insolvency soon. (Id. ¶ 55). The next day, Plaintiff gave Woodman formal notice of default and informed Woodman that it was in breach of the Management Agreement. (Id. ¶ 56). Woodman did not file for insolvency, but through continued correspondence, claimed multiple times to be insolvent. (Id. ¶¶ 57, 66, 80, 90, 100).

         On August 6, 2013, Plaintiff commenced arbitration against Woodman for breach of the Management Agreement. (Id. ¶ 58). On June 19, 2014, Defendant Starman sold its subsidiary, Starman (Maroc) S.a.r.L, to a newly created entity called Maquay Investments Ltd. ("Maquay") for €100. (Id. ¶ 59). In July 2014, Plaintiff received news of this sale and Maquay placed Starman (Maroc) S.a.r.L into liquidation. (Id. ¶ 61). On August 13, 2014, Woodman informed Plaintiff that Woodman would no longer take part in the arbitration due to its insolvency and would "not be in a position to satisfy any judgment or award for costs." (Id. ¶ 66).

         At the arbitration, Plaintiff requested interim relief, which was granted on September 19, 2014. (Id.69). The arbitrators reasoned that Plaintiff had "shown sufficient evidence that, despite its failure to pay the fees owed under the Management Agreement, [Woodman] may have made and still is about to make, payments to the profit of [Starman] under an operating agreement which it allegedly entered into with [Starwood Hotels]," and that "there is a serious threat that [Woodman's] assets [will] be diverted to the profit of [Starman] and to the detriment of Plaintiff. (Id.) The arbitrators ordered Woodman

(a) to "hand back the possession, operation and business of the Hotel to [Plaintiff]" within 31 days, including taking all practical measures needed to effect an orderly handover of the business with respect to the transition of Hotel guest and reservation data; (b) within 14 days of handing over the Hotel, to provide a full financial statement as of the handover date and [to] account to CGHA for all payments made by Woodman since December 31, 2012; and (c) to cease making any payments to any third party, including under the Operating Agreement, until the [arbitrators issued their final award on liability.

(Id. ¶ 70). The financial statements revealed that Woodman made payments totaling approximately $1 million to Starwood Hotels' entities during 2013 and 2014. (Id. ¶ 71). Woodman made none of its required payments to Plaintiff during this time. (Id. ¶ 55). The arbitration award was issued on May 6, 2015 and found Woodman breached its obligations under the Management Agreement. (Id. ¶¶ 73, 76).

         Woodman has failed to make any payments on the arbitration award. (Id. ¶ 81).

         Plaintiffs complaint alleges that the arbitration award against Woodman should be enforced under Delaware law (D.I. 23 at l)[7] against Starman on alter ego and agency liability theories, and against Starwood Capital Group on agency liability theory. Plaintiff seeks to recover damages accordingly. (Id. at 46).


         a. Rule 12(b)(6)

         When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the Court must accept the complaint's factual allegations as true.[8]See Bell Ail. Corp. v. Twombly,550 U.S. 544, 555-56 (2007). Rule 8(a) requires "a short and plain statement of the claim showing that the pleader is entitled to relief." Id. at 555. The factual allegations do not have to be detailed, but they must provide more than labels, conclusions, or a "formulaic recitation" of the claim elements. Id. ("Factual allegations must be enough to raise a right to relief above the speculative level... on the assumption that all the allegations in the complaint are true (even if doubtful in fact)."). Moreover, there must be sufficient factual matter to state a facially plausible claim to relief. Ashcroft v. Iqbal,556 U.S. 662, 678 (2009). The facial plausibility standard is satisfied when the complaint's factual content "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id ...

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