Camp Creek Hospitality v. Sheraton ( 1997 )

PUBLISH
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_______________
No. 95-8960
_______________
D. C. Docket No. 1:93-cv-1868-ODE
CAMP CREEK HOSPITALITY INNS, INC.
d.b.a. SHERATON INN ATLANTA AIRPORT,
Plaintiff-Appellant,
versus
SHERATON FRANCHISE CORPORATION, ITT SHERATON
RESERVATIONS CORPORATION, SHERATON SAVANNAH
CORPORATION, and ITT SHERATON CORPORATION,
Defendants-Appellees.
______________________________
Appeal from the United States District Court
for the Northern District of Georgia
______________________________
(December 11, 1997)
Before BIRCH and CARNES, Circuit Judges, and MICHAEL*, Senior
District Judge.
*
Honorable James H. Michael, Senior U.S. District Court
Judge for the Western District of Virginia, sitting by designation.
BIRCH, Circuit Judge:
Camp Creek Hospitality Inns, Inc. (“Camp
Creek”) appeals the district court’s grant of
summary judgment in favor of Sheraton
Franchise Corporation, ITT Sheraton
Reservations Corporation, Sheraton Savannah
Corporation, and the ITT Sheraton Corporation
(collectively “Sheraton”),1 arguing that genuine
issues of material fact remain with respect to each
of its claims. Camp Creek also appeals the district court’s
decision to dismiss its motion to compel discovery as moot. We
affirm in part and reverse in part.
Our review of the district court’s grant of summary judgment is
plenary, but we apply the same legal standards that bound the
district court. See Barfield v. Brierton, 883 F.2d 923, 933-34 (11th
1
Sheraton Franchise Corporation (“Sheraton Franchise”), ITT
Sheraton Reservations Corporation (“Sheraton Reservations”), and
Sheraton Savannah Corporation (“Sheraton Savannah”), are affiliated
with or wholly-owned subsidiaries of the ITT Sheraton Corporation
(“ITT Sheraton”).
2
Cir. 1989). The purpose of a motion for summary judgment is to
“pierce the pleadings and to assess the proof in order to see
whether there is a genuine need for trial.” Matshushita Elec. Indus.
Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348,
1356, 89 L. Ed.2d 538 (1986). A dispute over an issue of material
fact is genuine if the evidence would permit a reasonable jury to
return a verdict for the party against whom summary judgment is
sought. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248,
106 S. Ct. 2505, 2510, 91 L. Ed.2d 202 (1986). In reviewing
the district court’s grant of summary judgment
we must review the evidence and all
reasonable factual inferences in the light most
favorable to the party opposing the motion.
See Welch v. Celotex Corp., 951 F.2d 1235,
1237 (11th Cir. 1992). If, however, the evidence
of a genuine issue of material fact is “merely
colorable” or of insignificant probative value,
3
summary judgment is appropriate. See Liberty
Lobby, Inc., 477 U.S. at 249-50, 106 S. Ct. at
2511.
BACKGROUND
In September 1990, Camp Creek entered a
series of agreements with Sheraton that
authorized Camp Creek to establish and
operate a Sheraton Inn franchise (the “Inn”)
approximately 3.5 miles west of the Atlanta
airport. Camp Creek entered into a License
Agreement with Sheraton Franchise that
permitted Camp Creek to operate its property
under the Sheraton name in exchange for the
payment of various franchise royalties. The
License Agreement required Camp Creek to
enter a separate contract with Sheraton
Reservations that permitted the Inn to
4
participate in Sheraton’s nationwide
reservations system (the “Reservatron system”)
for the payment of additional associated fees.
Camp Creek’s participation in this system
allowed Sheraton’s agents to accept
reservations on the Inn’s behalf using
occupation and pricing data that Camp Creek
supplied to Sheraton Reservations.
Camp Creek was not the only Sheraton
property in the vicinity of the Atlanta airport in
1990; the Sheraton Hotel Atlanta Airport (the
“SHAA”), another franchisee, already served
that market. Although Sheraton distinguishes
between inns (mid-price properties) and hotels
(higher-end properties) within its own system,
Sheraton’s concerns about potential customer
confusion led to some disagreement over the
5
Inn’s name. Camp Creek, which wanted to
confirm its presence near the airport in the
minds of potential guests, sought a name that
would include an “Atlanta Airport” designator.
The License Agreement, however, gave
Sheraton Franchise control over the name and,
to avoid confusion among Sheraton customers,
the parties agreed upon the “Sheraton Inn
Hartsfield-West, Atlanta Airport.” Although
there is evidence to support Sheraton’s
contention that Camp Creek initially was happy
with this designation, by early 1992 Camp
Creek had begun to ask permission to change
its name to “Sheraton Inn Atlanta Airport,”
based on its contention that travelers did not
associate “Hartsfield-West” with the airport.
Sheraton Franchise agreed to the change in the
6
Inn’s name with the express reservation that the
decision was subject to reconsideration should
the change create customer confusion.
In 1992, Camp Creek experienced two
problems in connection with its participation in
the Sheraton Reservatron system. First,
Sheraton’s representatives failed to book
reservations for the Inn over a period of time
because an error led them to believe the Inn
was fully booked. Sheraton Reservations
claimed that the problem was rooted in the
computer software but refused to provide
compensation or further explanation for the
problem. At approximately the same time,
Camp Creek received erroneous charges for
reservations that, the parties later discovered,
were due to confusion in the American Airlines
7
SABRE reservations system. A stern warning
from Sheraton Reservations prompted Camp
Creek to pay the charges and pursue a refund.
After encountering delays and intransigence
from Sheraton, Camp Creek eventually
recovered some credit for the billing error.
In March 1992, Sheraton began to consider
acquiring a hotel property, then operating under
the Hyatt flag, in the vicinity of the Atlanta
Airport. Sheraton’s interest was apparently
sparked by Hyatt’s willingness to sell the
property at a substantial discount. Various
members of ITT Sheraton’s staff evaluated the
proposal, both at their corporate headquarters
in Boston, Massachusetts and in Atlanta, where
they traveled to study competitive properties.
The evidence, viewed in the light most
8
favorable to Camp Creek, shows that ITT
Sheraton’s representatives did not visit the Inn
to evaluate whether the new hotel would
compete against the Inn; similarly, ITT
Sheraton’s internal evaluations of the project
did not seriously consider the competitive harm
that might befall the Inn if the property
converted to the Sheraton flag. The appellees
maintain that it never viewed the Hyatt property
as a threat to the Inn because Sheraton
expected the property’s connection to the
Georgia International Convention Center to
attract predominately group business.
The evidence also suggests that at least
one of the ITT Sheraton employees working on
the Hyatt acquisition may have viewed the Inn
and the SHAA as potential obstacles to the
9
project’s success. David Proch-Wilson, who
was primarily responsible for the acquisition,
prepared a series of documents that indicated
a desire, first, to eject both franchises from the
Sheraton system, alternatively, to convert the
SHAA to an Inn if it elected to remain a
Sheraton franchise, and finally, to require Camp
Creek to change the Inn’s name back to
“Sheraton Inn Hartsfield-West.” Indeed, in
February 1993, Sheraton Franchise informed
Camp Creek that the Inn’s name would be
changed to “Sheraton Inn Hartsfield-West,”
citing customer confusion between the two
Sheraton franchises already in the area. In the
same month, Sheraton Franchise offered the
SHAA the opportunity to reclassify itself as an
Inn in the Sheraton system. Camp Creek
10
immediately protested the change in its name.
In correspondence to Sheraton Franchise,
Camp Creek demanded evidence of customer
confusion and offered to work with Sheraton to
resolve any other factors giving rise to
confusion. Camp Creek maintained that guests
did not associate the “Hartsfield-West”
designator with the Atlanta Airport and that the
change would threaten its business. Although
the evidence on this point is in some dispute,
Camp Creek apparently did not change the
Inn’s name on its signs and shuttle vans and
continued to answer the phone using the
Atlanta Airport designator. Nevertheless, the
Inn’s name did change in the Reservatron
system and in Sheraton’s nationwide
advertising. Sheraton Franchise never
11
provided documentation of specific instances of
customer confusion and in April 1994 agreed to
permit the Inn’s name to revert to “Sheraton Inn
Atlanta Airport.”
Meanwhile, in April 1993, ITT Sheraton
consummated its acquisition project by
purchasing the Hyatt property. Sheraton
Savannah became the owner of the hotel and
began operating it under the name “Sheraton
Gateway Hotel, Atlanta Airport” (the “Gateway”)
on May 1, 1993. The record suggests that the
presence of a third Sheraton property in the
Atlanta Airport market caused some customer
confusion and that Camp Creek suffered some
decrease in the growth of its business,
particularly in its higher-end business. Although
the parties cannot agree on the extent of the
12
problems, Camp Creek presented evidence that
suggests a number of guests who had
reservations at the Inn actually stayed at the
Gateway at rates equivalent to or lower than the
Inn’s rates, and often at rates below the
Gateway’s “walk-in” rate.
Although ITT Sheraton had expected the
Gateway to be profitable almost immediately, it
soon became clear that the Gateway would not
live up to projections. Tom Faust, the manager
of the Gateway, blamed at least part of the
Gateway’s poor performance on competition
from the Sheraton franchises, particularly the
SHAA, and he proposed that Sheraton
eliminate both franchises. The evidence also
shows that Faust, who had previously been responsible for
Sheraton Reservations, had access to confidential,
13
competitively sensitive information from the
Reservatron system concerning the franchises, and
that he used this information to support his
argument for ejecting the franchises from the
Sheraton system. Sheraton, however, never
adopted Faust’s proposal.
The evidence, construed in Camp Creek’s
favor, shows that the Gateway could have
made use of this confidential information to
compete against the Inn. Moreover, an
analysis of the Gateway’s actual performance
shows that the two properties do compete for
customers in a number of market segments.
Sheraton denies that Faust made any competitive use of the Inn’s
confidential information and maintains that, although
the Gateway did offer lower prices for a time, it
14
did so only to attract first-time customers who
might return at higher prices.
Camp Creek has also presented evidence
that suggests Sheraton has taken actions to
favor the Gateway, Sheraton’s own property,
over the Inn. Although Sheraton maintains that
its Reservations software displays the
properties in the Atlanta Airport market in a
random fashion and that its agents have no
means by which to distinguish franchises from
corporate hotels, Camp Creek has presented
evidence of almost 300 test calls that suggest
the agents disproportionately list the Gateway
as the first choice to callers inquiring about
reservations. Camp Creek also has presented
evidence that Sheraton’s nationwide advertising
15
favored the Gateway over both the SHAA and
the Inn.
Finally, Sheraton’s evidence shows that the
Inn’s overall economic performance has
continued to improve since the Gateway
opened. Camp Creek’s experts, however, have
suggested that the Inn experienced abnormally
high no-show and cancellation rates, that the
Inn has not grown at the rate projected, and
that it has failed to achieve a reasonably
desirable mix of business, so that even though
occupancy rates have remained high, the Inn
would have been substantially more profitable
had the Gateway never entered the market as
a Sheraton property.
DISCUSSION
16
As an initial matter, we note that Camp
Creek’s amended complaint sets forth a myriad
of statutory and common law claims under
Massachusetts, Georgia, and federal law based
on the common nucleus of facts described
above. Although the complaint and the record
in this case are complicated and voluminous,
Camp Creek’s allegations boil down to the
basic proposition that the defendants, by
establishing and operating a competing
Sheraton hotel in the Atlanta Airport market,
violated one or more of the duties (sounding in
contract, tort, or both) that a franchisor owes to
its franchisee. We examine these broad
contentions before addressing Camp Creek’s
more discrete claims for relief.
I. The Implied Covenant of Good Faith and Fair Dealing
17
(Counts I, II and X-A)
Camp Creek claims that, although
Sheraton’s conduct may not have contradicted
the express terms of the License Agreement or
Reservations Agreement, Sheraton
nonetheless violated the covenant of good faith
and fair dealing that is implicit in every contract
under Massachusetts law. First, Camp Creek
argues that Sheraton’s decision to establish
and operate the Gateway in the Atlanta Airport
market breached this implied covenant.
Second, Camp Creek submits that even if
Massachusetts law does not prohibit a
franchisor’s encroachment relative to the facts
of this case,2 a number of acts incident to
2
We adopt the term “encroachment” only as it has evolved in
the cases and academic commentary discussing the issues before us.
Our use of that term is not intended to attribute impropriety (or
the lack thereof) to the defendants’ actions in this case.
18
Sheraton’s competition with Camp Creek
constitute independent breaches of the implied
covenant of good faith. We address each claim
in turn.
A. Sheraton’s Establishment of the Gateway Hotel
(Count I)
As the License Agreement contains no
covenant not to compete and does not grant the
Inn an exclusive territory, Camp Creek does not
contend that Sheraton violated any express
term of the License Agreement by establishing
and operating the Gateway Hotel. Instead,
Camp Creek relies on the implied covenant of
good faith and fair dealing and argues that, by
establishing the Gateway in such proximity to
the Inn, Sheraton denied Camp Creek the fruits
of the contract. Sheraton replies that it did not
19
deny Camp Creek any benefit under the
contract and argues that the implied covenant,
as applied by Massachusetts courts, may not
be employed to rewrite the express terms of a
contract.
We note that Massachusetts does imply a
covenant of good faith and fair dealing in all
contracts. See Fortune v. National Cash
Register Co., 364 N.E.2d 1251, 1256 (Mass.
1977) (recognizing good faith and fair dealing
as “pervasive requirements” in Massachusetts
law.) This covenant requires parties to contracts
to deal honestly and in good faith in the
performance and enforcement of their
agreements, see Hawthorne’s, Inc. v.
Warrenton Realty, Inc., 606 N.E.2d 908, 914
(Mass. 1993), and to refrain from impairing the
20
other party’s right to receive the fruits of the
contract, see Larson v. Larson, 636 N.E.2d
1365, 1368 (Mass. App. Ct. 1994) (quoting
Anthony’s Pier Four, Inc. v. HBC Assoc., 583
N.E.2d 806, 820 (Mass. 1991)). The covenant
of good faith, however, may not be used to
rewrite or override the express terms of a
contract. See e.g., Zapatha v. Dairy Mart, Inc.,
408 N.E.2d 1370 (1980) (rejecting a
franchisee’s challenge to its termination
pursuant to the express terms of the franchise
agreement).
Although the parties have brought a great
deal of persuasive authority to our attention,
they have cited no Massachusetts case that
applies the covenant of good faith to facts
similar to those present here. The great weight
21
of authority on applying the implied covenant of
good faith and fair dealing to cases of
encroachment converges around two fairly
simple propositions: (1) when the parties
include contract language on the issue of
competing franchises the implied covenant will
not defeat those terms;3 and (2) when there is
no such language the franchisor may not
capitalize upon the franchisee’s business in bad
faith.4 See Piantes v. Pepperidge Farms, Inc.,
3
See, e.g., Cook v. Little Caesar
Enterprises, Inc., 972 F. Supp. 400, 409 (E.D.
Mich. 1997) (franchisor did not engage in bad
faith by locating another franchise outside the
one mile “exclusive territory” granted to the
franchisee in the contract); Payne v. McDonald’s
Corp., 957 F. Supp. 749, 754-60 (D. Md. 1997) (no
bad faith when the license agreement clearly and
unambiguously stated that franchisee can expect no
exclusive territory) (collecting similar cases).
4
The seminal case in this line is Sheck v.
Burger King Corp., in which the district court,
applying Florida law, held that language in the
franchise agreement that specifically denied the
22
875 F. Supp. 929, 937-40 (D. Mass. 1995)
(describing the trends and collecting cases).
With these broad propositions in place, we
turn to the contract in this case. Although the
License Agreement appears to provide some
guidance with respect to the parties’ intentions
on this issue, the contract, as executed, says
franchisee “any area, market or territorial
rights” did not “imply a wholly different right to
Burger King–the right to open other proximate
franchises at will regardless of their effect on
the Plaintiff’s operations.” 756 F. Supp. 543, 549
(S.D. Fla. 1991) (“Scheck I”). The district court
found that whether the franchisor had breached the
implied covenant by granting another franchise in
close proximity to the plaintiff’s restaurant was
a question of fact for the jury. See Scheck v.
Burger King Corp., 798 F. Supp. 692, 696 (S.D.
Fla. 1992) (“Scheck II”). As Sheraton points out,
the Scheck cases have been criticized, ignored,
and distinguished in a number of subsequent
opinions. See e.g., Barnes v. Burger King Corp.,
932 F. Supp. 1420, 1437-38 (rejecting the Scheck
court’s reading of the franchise agreement). But
see In re Vylene Enterprises, Inc., 90 F.3d 1472,
1477 (9th Cir. 1996) (applying the Scheck reasoning
to a franchise contract silent on the issue of
exclusive territory).
23
nothing about whether or where Sheraton could
establish a competing hotel. Paragraph four of
the License Agreement and Schedule B,
reproduced below, limit Sheraton’s right to grant
additional licenses, but only within the site of
the Inn.5 This language makes it clear that
Camp Creek had no contractual right to expect
the Sheraton to refrain from licensing the
Sheraton name to additional franchises beyond
the site of the Inn. Cf. Quality Inns Int’l, Inc. v. Dollar
Inns of Amer., Inc., [1992-93 Transf. Binder] Bus. Franchise
5
The License Agreement, as executed, provides:
This license is personal to the Licensee and is
restricted to the operation of the Inn on the
location specified . . . , and is to be construed
to permit only such activities as would normally be
incident to the operation of a Sheraton Inn. So
long as this Agreement is in effect, the Licensor
shall not grant any other license authorizing the
use of the name “Sheraton” for hotels, motels or
inns located within the licensed area described in
Schedule B hereto attached.
Schedule B to the License Agreement states: “LICENSED AREA[:]
Site Only.”
24
Guide (CCH) ¶ 10,007 at 23,184 (finding that a non-exclusive
franchise agreement implies the possibility of other franchises).
By the express terms of the contract, therefore,
the Sheraton could have authorized a
competing franchise directly across the street
from the Inn, and Camp Creek would have little
recourse. See Piantes, 875 F. Supp. at 937-40 (relying on
express language in a contract to reject a claim based on the
implied covenant of good faith under Massachusetts law);
Shawmut Bank, N.A. v. Wayman, 606 N.E.2d
925, 928 (Mass. App. Ct. 1993) (rejecting a
claim based on the implied covenant of good
faith when the plaintiff had expressly waived the
protections at issue); see also Clark v. America’s Favorite
Chicken Co., 110 F.3d 295, 297-98 (5th Cir. 1997) (rejecting a
franchisee’s claim that the implied covenant of good faith prevents
25
the franchisor from permitting competition expressly contemplated
in the franchise agreement).
Sheraton, however, did not establish such a
franchise in this case; instead, it purchased and
operated the Gateway on its own behalf.
Although the standard form license agreement
Sheraton used in its negotiations with Camp
Creek contains language addressing
Sheraton’s ability to compete against the
franchisee, the parties deleted that language
from their contract.6 Although the parties
6
The deleted provision of the License Agreement stated:
The absolute and unrestricted right however is
reserved to Sheraton or any subsidiary or affiliate
of Sheraton to own, lease, manage, operate, or
otherwise be interested in any inn, motel or hotel
of any kind in said licensed area operated under
the name “Sheraton” or otherwise, either
exclusively for its own account or in conjunction
with others . . . . The rights of Sheraton or an
affiliate to operate in the restricted area as
above set forth may be exercised regardless of any
competitive effect on the Licensee.
We note that had the parties retained this provision in paragraph
four of the contract, by Sheraton’s own argument, it, too, would
have been limited to the site of the Inn as described in Schedule
26
contest the reason for the deletion, the fact
remains that the fully integrated License
Agreement7 is not ambiguous; it is simply silent
on the issue of whether or where Sheraton and
its affiliates can establish properties that
compete against the Inn. Sheraton’s argument that the
site-only term dictates the outcome of this case, therefore, is
unavailing. Nor will we accept either party’s
invitation to imply such language into the
contract to decide the issue.
As a result, we must determine whether the
implied covenant of good faith and fair dealing,
as interpreted by Massachusetts courts, permits
the Sheraton to establish its own hotel in the
B.
7
Paragraph nineteen of the License Agreement contains the
following merger clause: “There are no other agreements or
understandings, either oral or in writing, between the parties
affecting this Agreement . . . . “
27
same vicinity as the Inn. The facts of this
situation present neither of the extremes that
the parties alluded to in their briefs or at oral
argument. There can be no doubt, for example,
that had Sheraton established its own hotel in
Chattanooga, Tennessee, summary judgment
would have been appropriate because no
reasonable trier of fact could have found that
Sheraton had violated its obligation of good
faith to Camp Creek. Conversely, we do not
face a circumstance in which Sheraton chose to
establish its competing hotel directly across the
street from Camp Creek’s Inn. Moreover, this
case does not lend itself to an easy resolution
under the Massachusetts cases that hold
against plaintiffs who argue that the implied
covenant requires the defendant to protect the
28
plaintiff’s interests beyond any measure of
commercial reason. See Zapatha, 408 N.E.2d at 1378(reversing judgment for plaintiff based on the implied covenant of
good faith when there was no evidence that the defendant “failed
to observe reasonable commercial standards of fair dealing in the
trade”).8 This case presents a different situation,
one in which reasonable people could differ
over whether Sheraton’s conduct, given all the
facts and circumstances, violated the duty of
8
In Waltham Prof., Inc. v. Nutri/System,
Inc., [1985-86 Transf. Binder] Bus. Franchise
Guide (CCH) ¶ 8479, at 15,917 (D. Mass. 1985), for
example, the franchisee unsuccessfully argued that
the implied duty of good faith required the
franchisor to extend funds to replace the
contribution of a recently defunct franchise to a
joint-advertising fund so that the other
franchisees would not have to increase their
contributions. Similarly, in Coraccio v. Lowell
Five Cents Sav. Bank, 612 N.E.2d 650, 655 (Mass.
1993), the court dismissed a claim that the
covenant of good faith, implied in a mortgage
contract, required a bank to refrain from granting
the plaintiff’s husband a second mortgage on
property they owned as tenants by the entirety.
No reasonable trier of fact could have found a
violation of good faith in either case.
29
good faith and fair dealing.9 See In re Vylene, 90 F.3d
at 1476. As a result, summary judgment is
10
inappropriate.
Sheraton further urges, that regardless of
whether a reasonable jury could find a violation
of their duty to Camp Creek, summary judgment is
nevertheless appropriate because Camp Creek
has failed to show damages. In support of this
argument, Sheraton emphasizes that the Inn
has been more profitable every year since the
Gateway opened. Camp Creek, however, has
presented evidence of damages through the
9
We note that the parties have presented a great deal of
conflicting evidence on Sheraton’s intentions toward the Inn, which
they argue supports the presence or absence of bad faith. Camp
Creek’s evidence concerning a number of specific “bad acts”
supports an inference of bad faith that is sufficient to withstand
Sheraton’s motion for summary judgment. See infra Part I(B).
10
This is not to say, however, that Sheraton can never avoid
a trial on the issue of its good faith when it seeks to open a new
hotel near any of its franchisees; Sheraton need only include (or
refrain from limiting and deleting) clear language reserving its
right to compete against its franchisees in its License Agreements.
30
affidavits of two experts and the Inn’s General
Manager. These affidavits describe a number
of trends present in the market for hotel rooms
in the Atlanta area, both before and after
Sheraton began operating the Gateway, and
present credible theories and measures of
damages attributable to the additional intra-
brand competition associated with the
Gateway’s entry to the market. We hold that
Camp Creek’s evidence is sufficient to
withstand Sheraton’s motion for summary
judgment on this claim.
B. Sheraton’s Specific “Bad Acts” and the Implied
Covenant of Good Faith (Count II)
In addition to the broad allegation that
Sheraton breached its implied duty of good faith
31
by competing against the Inn, Camp Creek
makes specific additional claims based on
discrete incidents that occurred in connection
with that competition. None of these claims
standing alone, however, survive scrutiny
because Camp Creek has failed to present
evidence of damages connected to these bad
acts. As we discuss below, although many of
the acts in question may be probative on the
issue of Sheraton’s good or bad faith in
connection with Count I of the complaint, these
acts, even considered in tandem, do not give
rise to a claim for breach of the implied duty of
good faith.
1. The Name Game
The district court granted summary
judgment on Camp Creek’s claim that
32
Sheraton’s decision to require the Inn to drop
the “Atlanta Airport” designation from its name
violated the implied covenant of good faith and
fair conduct. Paragraph five of the License
Agreement expressly gave Sheraton the right to
approve or disapprove of the Inn’s name.
Moreover, as Sheraton points out, when it
initially gave the Inn permission to change its
name to the “Sheraton Inn Atlanta Airport” in
1992, it reserved the right to reconsider that
change should any customer confusion arise.
As we noted above, however, a party to an
agreement may not use its contractual
discretion in bad faith. See Anthony’s Pier
Four, 583 N.E.2d at 820-21 (finding a violation
of good faith when the defendant used its
33
contractual discretion to exact financial
concessions from the other party).
Nevertheless, we must affirm the district
court’s decision on this particular claim because
Camp Creek has failed to link any damages to
Sheraton’s conduct regarding the Inn’s name.
Although Camp Creek’s experts have provided
general allegations of lost business, they have
not made any attempt to isolate the damages
that Camp Creek suffered as a result of the
name change from the damages the Inn
sustained from additional competition in its
market. Camp Creek’s evidence on this claim,
therefore, while probative on the issue of
Sheraton’s intent and any bad faith, cannot
34
sustain an independent claim for breach of the
implied covenant.11
2. Playing Favorites
Camp Creek maintains that Sheraton
Reservations committed a number of breaches
of both the express terms of the Reservation
Agreement and the covenant of good faith and
fair dealing implied in that contract. Camp
Creek argues that it has presented evidence to
show that Sheraton Reservations agents
systematically favored the Gateway Hotel over
the Inn when fielding customer calls. Although
11
Camp Creek has presented evidence that shows that David
Proch-Wilson, the Sheraton employee in charge of acquiring the
Gateway Hotel, first sought to eject both the Inn and the Hotel
from the Sheraton system and then, on December 8, 1992, suggested
that Sheraton could solve its concerns about the Inn by changing
its name; on January 26, 1993, Proch-Wilson requested the
Inn be notified of such a change. Although Sheraton claims its
decision on February 2, 1993, to require the Inn to drop “Atlanta
Airport” from its name was motivated by customer confusion
regarding the preexisting “Sheraton Hotel Atlanta Airport” and has
presented evidence that Proch-Wilson had no influence over the
decision, Camp Creek has raised issues of material fact regarding
Sheraton’s intentions.
35
no provision of the Reservations Agreement
specifically addresses this issue, it is clear that
the conduct Camp Creek has alleged would
deprive the Inn of the benefits of the contract
(i.e. reservations) and therefore breach the
covenant of good faith inherent in that
agreement. Again, however, we affirm the
district court’s decision to grant summary
judgment on this claim because Camp Creek
has failed to provide any evidence or theory to
connect any damages to this particular claim.
Sheraton, on the other hand, has presented
evidence to demonstrate that the number of
reservations the Inn received through the
Reservatron system actually increased in every
year after the Gateway opened. As a result,
36
Camp Creek’s claim for a breach of the implied
covenant must fail.12
3. Misuse of Confidential Information
Next, we consider Camp Creek’s claim that Sheraton
Reservations improperly supplied confidential, competitively
sensitive information about the Inn’s reservations and pricing
structure to the Gateway. The evidence shows that
Tom Faust, manager of the Gateway, had
access to such confidential information
regarding the Inn, in breach of Sheraton’s own
procedures. Although Sheraton admits that
Faust improperly used the information to
12
Once again, Camp Creek should be able to use its evidence
of favoritism on remand to attempt to demonstrate Sheraton’s
alleged bad faith. Although Camp Creek’s 289 test-calls do not
constitute anything approaching a scientific survey, we note that,
contrary to the district court’s opinion, it does not violate the
rule against hearsay. See Fed. R. Evid. 801(c) (defining hearsay
as testimony offered for the truth of the matter asserted); Fed. R.
Evid. 801(d)(2)(D) (excluding statements made by an authorized
agent from the definition of hearsay).
37
propose the Inn’s elimination from the Atlanta
Airport market, Sheraton contends that Faust’s
proposal fell on deaf ears and that, as a result,
Camp Creek can show neither prejudice nor
damage from this breach of confidentiality. As
Camp Creek has failed to contradict Sheraton
with evidence of damages it suffered in connection with
Faust’s proposal, we affirm the district court’s grant
of summary judgment. Similarly, Camp Creek has
failed to provide sufficient evidence of damages with respect
to its allegation that the Gateway used this
misappropriated information to restructure its
own rates to compete against the Inn. Although
Camp Creek points to a conclusory statement
from one of its experts to the effect that the
Gateway’s use of the information damaged the
Inn, see Berman Aff. at ¶ 31, no reasonable jury
38
could distinguish, on the sole basis of this
evidence, between losses the Inn suffered
because of the improper use of its confidential
information and those due to the simple
increase in intra-brand competition. See Liberty
Lobby, Inc., 477 U.S. at 249-50, 106 S. Ct. at 2511
(summary judgment appropriate when non-
movant’s evidence is “merely colorable”).
Accordingly, we affirm the district court’s grant
of summary judgment in favor of Sheraton on
this issue.13
D. Billing Disputes (Count X-A)
Next, we consider Camp Creek’s claim that Sheraton
Reservations breached the Reservations Agreement by over-
13
This is not to say that Camp Creek may not present its
evidence on this issue at trial, as it is plainly probative on the
issue of whether Sheraton acted in bad faith towards its
franchisee.
39
billing the Inn in connection with reservations made by American
Airlines’ SABRE reservations system. The parties do not contest
the error, nor do they dispute that Sheraton Reservations
eventually corrected the problem once Camp Creek brought the
matter to its attention. What remains in dispute, however, is
whether the Inn received the full amount of credit to which it was
entitled. Camp Creek presents deposition testimony of the Inn’s
general manager to the effect that Sheraton Reservations should
have credited the Inn approximately $1,800 more than it received.
See I Sunderji Dep. at 202-03. As material facts appear to be in
dispute on this issue, Camp Creek has presented evidence
sufficient to survive summary judgment.
No issue of material fact, however, remains on Camp
Creek’s claim that its reservations service was interrupted for a
period of time. Sheraton Reservations has presented evidence
that it stopped making reservations for the Inn due to a computer
software problem. Although Camp Creek denies this explanation,
40
it has presented no alternative, actionable theory for the
interruption. As the district court correctly noted, paragraph seven
of the Reservations Agreement contains an express indemnity
provision stating that neither Sheraton Reservations nor any of its
parent or affiliated companies may be held liable for “THE
INTERRUPTION OR MALFUNCTIONING OF THE SYSTEM,
WHETHER BASED ON CONTRACT, TORT OR ANY OTHER
LEGAL THEORY.” This provision establishes that Camp Creek
waived any and all claims to recover damages for an interruption
in the Sheraton Reservations system. As Camp Creek has not
rebutted Sheraton’s argument with any evidence or theory that
would permit recovery, we affirm the district court’s grant of
summary judgment on this issue. See Matsushita, 475 U.S. at
587, 106 S. Ct. at 1356 (holding that once the movant makes a
sufficient showing, the non-movant “must do more than simply
show that there is some metaphysical doubt as to the material
facts.”).
41
II. Tortious Interference with Contract and Business
Relations (Count III)
Camp Creek also claims that the Gateway
Hotel tortiously interfered with its contracts with
guests and its business relations. The parties
agree that Georgia law governs Camp Creek’s
claims for tortious interference. Camp Creek
claims that the defendants interfered with (1)
Camp Creek’s License Agreement and Reservations Agreement;
(2) the Inn’s contracts with its customers; and (3)
the Inn’s prospective customer relationships.
Camp Creek’s allegations of tortious
interference with contract and business
relationships state two independent but related
claims. See Renden, Inc. v. Liberty Real Estate
Ltd. Partnership III, 444 S.E.2d 814, 817 (Ga.
42
App. Ct. 1994). The claims share the following
key elements:
(1) improper action or wrongful conduct
by the defendant without privilege; (2)
the defendant acted purposely and with
malice with the intent to injure; (3) the
defendant induced a breach of
contractual obligations or caused a party
or third-parties to discontinue or fail to
enter into an anticipated business
relationship with the plaintiff; and (4) the
defendant’s tortious conduct proximately
caused damage to the plaintiff.”
Disaster Services Inc. v. ERC Partnership, No.
A97A2183, (Ga. App. Sept. 8, 1997); see also
Sweeney v. Athens Reg’l Med. Ctr., 709 F.
Supp. 1563, 1577-78 (M.D. Ga. 1989) (stating
the elements of tortious interference with
contract); Hayes v. Irwin, 541 F. Supp. 397, 429 (N.D. Ga. 1982)
(stating the elements of tortious interference with business
relationships).
43
A. The License and Reservations Agreements
First, we address Camp Creek’s claim that
ITT Sheraton and the Sheraton Savannah
tortiously interfered with the License Agreement
and Reservations Agreement. The evidence
shows that the only actions ITT Sheraton and
Sheraton Savannah took were to establish the
Gateway Hotel and compete against the Inn.14
We must decide, therefore, whether Sheraton’s
competition in the Atlanta Airport market
constitutes a tort, independent of the parties
contractual obligations.
At the outset, it is worth noting that simple
competition for guests between hotels ordinarily
14
Camp Creek’s evidence of misuse of confidential
information, an improper change in the Inn’s name, and favoritism
in the Reservatron system implicate Sheraton Franchise and Sheraton
Reservations, who as parties to the License and Reservation
Agreements cannot tortiously interfere with those contracts. See
SunAmerica Fin. v. 260 Peachtree St., 415 S.E.2d 677, 684 (Ga. App.
1992)(collecting cases).
44
does not give rise to an actionable tort claim.
See Hayes, 541 F. Supp. at 430 (describing the
competitive privilege). Camp Creek would have
no basis to complain, for example, if the
Marriott Corporation established a hotel in the
Atlanta Airport area and began competing with
the Inn for customers. Camp Creek argues that
its franchise relationship with Sheraton requires
a different result in this case, citing Hayes for
the proposition that once two entities have
agreed to pursue business together they may
not then tortiously interfere with each other’s
pursuit of that business. See also DeLong
Equip. Co. v. Washington Mills Abrasive Co.,
887 F.2d 1499, 1518-19 (11th Cir. 1989)
(privilege defense unavailable where
interference is achieved by violating a
45
confidential relationship). The Hayes court did
indeed reject the invocation of the competitive
privilege in a case where one of the principals
in a two-person partnership contacted his
partner’s clients in an attempt to discredit him
and deprive him of their business. See Hayes,
541 F. Supp. at 430-31. A franchise
relationship, however, is distinguishable from
the partnership at issue in the Hayes case. See
Capital Ford Truck Sales, Inc. v. Ford Motor Co., 819 F. Supp.
1555, 1579 (N.D. Ga. 1992) (collecting cases that find no fiduciary
relationship between franchisor and franchisee). The
agreements establishing the franchise
relationship in this case make it very clear that
Camp Creek is only one of a vast number of
hotels in the Sheraton system and that
Sheraton and Camp Creek are not engaged in
46
a partnership to pursue business in the Atlanta
Airport market.15 Moreover, Camp Creek has
failed to provide any evidence of unique
circumstances that might support the
proposition that the parties intended to create a
confidential or fiduciary relationship.16 See Allen
v. Hub Cap Heaven, Inc., 484 S.E.2d 259, 264 (Ga. App. 1997)
(standard franchise relationship does not present a fiduciary
relationship); Kienel v. Lanier, 378 S.E.2d 359, 361
(Ga. App. 1989) (no fiduciary relationship where
parties’ agreement provided for the pursuit of
separate business objectives). Although we
have held that a reasonable jury could find that
Sheraton’s competition against Camp Creek
15
In fact, paragraph eight of the License Agreement expressly
disclaims any such partnership.
16
This conclusion also disposes of Camp Creek’s claim for
unfair competition under Georgia common law (Count V), which
depends on the argument that Sheraton abused and exploited a
confidential relationship between the parties.
47
violated the contractual obligations between the
parties, we decline to convert such a claim into
an independent claim for tort. We hold that
Sheraton’s choice to compete against the Inn
was subject to the competitive privilege and
was not “improper” or “wrongful” in the sense
used in Georgia’s cases on tortious interference
with contract. We affirm the district court’s
grant of summary judgment on this issue.
B. Customer Contracts and Relationships
Second, we consider Camp Creek’s
allegation that Sheraton interfered with the Inn’s
contracts and prospective business
relationships with its customers. In support of
this claim, Camp Creek offers testimony to the
effect that almost 300 guests with reservations
at the Inn actually stayed at the Gateway.
48
Camp Creek claims that these guests boarded
the wrong Sheraton shuttle van at the Atlanta
Airport and, when they arrived at the wrong
hotel, the Gateway knowingly misappropriated
a large percentage of these guests by offering
them rates below the Inn’s reservation rates
and below the Gateway’s “walk in” rate.
As noted above, Georgia law requires a
plaintiff to offer evidence that the defendant
acted improperly and that those acts induced a
breach of contract or prompted a third party to
discontinue or fail to enter an anticipated
business relationship.17 See McDaniel v. Green, 275
S.E.2d 124, 126-27 (Ga. App. 1980) (requiring a causal
17
It is by no means clear that the reservations at issue
constitute a contract under Georgia law. See Brown v. Hilton
Hotels Corp., 211 S.E.2d 125, 127 (Ga. App. Ct. 1974) (permitting
a guest to sue for breach of contract when the hotel refused to
honor a prepaid reservation). We need not reach the question in
this case.
49
connection between the improper act and the interrupted
relationship). Although Camp Creek has presented
evidence that Sheraton engaged in a host of
improper actions, none of those actions relate
to the misappropriation of these (or any other)
customers with reservations. Indeed, given that these
customers initially made reservations at the Inn, the evidence
suggests that any omission of the Atlanta Airport designator from
the Inn’s name in Sheraton’s national advertising and the
Reservatron system,18 any bias in the Reservatron system, and
any misuse of the Inn’s confidential information to restructure the
Gateway’s rates had no impact whatsoever. The evidence,
construed in Camp Creek’s favor, merely shows
that the Gateway offered to meet or beat the
Inn’s rates when these guests arrived at their
18
Camp Creek admits that it never actually changed the
appearance of its vans to comply with Sheraton’s demand that it
change the Inn’s name. As a result, the only way Sheraton could
have confused these 300 customers at the airport was by using its
own name in connection with the Gateway.
50
door. As Camp Creek has presented no
evidence that suggests these guests canceled
their reservations at the Inn because of the
Gateway’s alleged wrongful activity, we affirm
the district court’s grant of summary judgment
on this issue.
Camp Creek’s remaining evidence of
tortious interference supports only the general
contention that Sheraton’s improper conduct
cost Camp Creek guests who might have
otherwise stayed at the Inn. Although a plaintiff
claiming tortious interference with prospective
business relationships need not identify
particular disrupted contracts to recover, Camp
Creek has presented no evidence to distinguish
between guests who chose not to stay at the
Inn as a result of Sheraton’s bad acts and those
51
who simply rejected the Inn because the
Gateway presented a more attractive (or simply
an additional) choice. Camp Creek’s failure to
identify a causal connection between
Sheraton’s tortious activity and the interruption
of any particular business relationship requires
us to affirm the district court’s grant of summary
judgment. See Hayes, 541 F. Supp. at 429(“plaintiff must demonstrate that absent the
interference, those relations were reasonably
likely to develop in fact.”); McDaniel, 275 S.E.2d
at 126-27.
III The Massachusetts Unfair Trade Practices Act (Count IV)
Next, we address Camp Creek’s claim that
the defendants violated the Massachusetts
Unfair Trade Practices Act. See Mass. Gen.
52
Laws ch. 93A (the “Massachusetts Act”). As
the district court correctly observed, that statute
applies only to cases in which “the actions and
transactions constituting the alleged unfair
method of competition or the unfair or deceptive
act or practice occurred primarily and
substantially within the commonwealth [of
Massachusetts].” Id. § 11. Sheraton, as the
party seeking to rely on this provision, bears the
burden of establishing that its conduct falls
outside the Massachusetts Act’s reach. Id.19
To determine whether the conduct in a
particular case took place “primarily and
substantially” within Massachusetts, the courts have
19
Camp Creek’s suggestion that Sheraton should not be heard
to complain about the application of the Massachusetts Act because
it requires its franchisees to sign agreements governed by
Massachusetts law is also unpersuasive. See e.g. , Popkin v.
National Benefit Life Ins. Co., 711 F. Supp. 1194, 1200 (S.D.N.Y.
1989) (dismissing a contractual choice of law argument as
irrelevant to this inquiry).
53
examined: (1) where the defendant committed the
deceptive or unfair acts; (2) where the plaintiff
was deceived and acted upon the defendant’s
unfair acts; and (3) where the plaintiff suffered
losses caused by the defendant’s unfair acts.
See Play Time, Inc. v. LDDS Metromedia
Communications Inc., 123 F.3d 23, 33 (1st Cir.
1997). In the present case, the second and
third prongs of the test favor Sheraton, because
Camp Creek felt the “sting” of any deception in
Atlanta, Georgia. See Clinton Hosp. Ass’n v.
Corson Group, Inc., 907 F.2d 1260, 1266 (1st
Cir. 1990) (applying Bushkin Assoc., Inc. v.
Raytheon Co., 473 N.E.2d 662 (Mass. 1985)).
Camp Creek, therefore, relies on the first
prong of the analysis and argues that the
54
appellees acted in Massachusetts because
Sheraton made all the plans and decisions at
issue at its corporate headquarters in Boston.
Camp Creek’s argument, however, overlooks
the fact that, although Sheraton’s contemplation
of these acts may have taken place in
Massachusetts, the acts themselves took place
outside the Commonwealth.20 Moreover, the
proposition that Camp Creek advances would
require the application of the Massachusetts
Act in every case involving a Massachusetts
defendant, a proposition the courts have
rejected. See Clinton Hosp., 907 F.2d at 1266 (rejecting
bright line rules); Healthco Int’l, Inc. v. A-Dec, Inc., No.
87-0235-S, 104064 at *13 (D. Mass. Apr. 17,
20
The acts Camp Creek cites include the name change
(nationwide), misuse of confidential information (Atlanta),
misleading advertisements (nationwide), and preferential treatment
in the Reservatron system (nationwide).
55
1989) (reading Bushkin to reject the argument
that the Massachusetts Act applies to every
defendant resident in Massachusetts). We
therefore affirm the district court’s grant of
summary judgment on this issue.21
IV Georgia Trade Secrets Act
Camp Creek also asserts that Sheraton
misappropriated confidential information
regarding the Inn in violation of the Georgia
Trade Secrets Act (“GTSA”). See O.C.G.A. §
10-1-760 et seq. The record shows that Tom
Faust, the manager of the Gateway Hotel,
improperly came into possession of information
21
Our application of this express limitation found in the Act
renders unnecessary any determination of whether a Georgia court,
applying Georgia principles of conflicts of law, would apply the
Massachusetts Act at all. See Klaxon Co. v. Stentor Elec. Mfg.
Co., 313 U.S. 487, 496, 61 S. Ct. 1020, 1021, 85 L. Ed. 1447 (1941)
(holding that a federal court hearing a diversity case applies the
conflicts of law rules of the state in which it sits).
56
concerning the Inn’s occupancy levels, average
daily rates, discounting policies, rate levels,
long term contracts, marketing plans, and
operating expenses. Camp Creek also
presented evidence that Faust used this
information to propose the Inn’s ejection from
the Sheraton system and that he may have
used it to compete against the Inn for
customers.
To support a claim for misappropriation of
trade secrets, Camp Creek must show that (1)
it had a trade secret and (2) the opposing party
misappropriated the trade secret. See
generally, DeGiorgio v. Megabyte Int’l, Inc., 468 S.E.2d 367(Ga. 1996) (applying O.C.G.A. §§ 10-1-761, 763).
Georgia defines trade secrets broadly to include
non-technical and financial data that derives
57
economic value from not being generally known
and is the subject of reasonable efforts to
maintain its secrecy. Id. § 10-1-761(4).22
Whether a particular type of information
constitutes a trade secret is a question of fact.
See Salsbury Lab. v. Merieux Lab., 908 F.2d 706, 712 (11th Cir.
1990) (citing Wilson v. Barton & Ludwig, 296 S.E.2d 74, 78 (Ga.
App. Ct. 1982)). Our review of the record reveals
that Camp Creek has provided evidence upon
22
The Georgia Trade Secrets Act provides in pertinent part:
“Trade secret” means information, without regard to form,
including, but not limited to, technical or nontechnical
data, a formula, a pattern, a compilation, a program, a
device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list
of actual or potential customers or suppliers which is
not commonly known by or available to the public and
which information:
(A) Derives economic value, actual or potential,
from not being generally known to, and not being
readily ascertainable by proper means by, other
persons who can obtain economic value from its
disclosure or use; and
(B) Is the subject of efforts that are reasonable
under the circumstances to maintain its secrecy.
O.C.G.A. § 10-1-761(4). We note that although the Georgia State
Legislature amended this provision in July 1996, the amended
language plays no part in our decision. Compare AmeriGas Propane
L.P. v. T-Bo Propane, Inc., 972 F. Supp. 685, 697-98 (S.D. Ga.
1997) (discussing the amendment and its intended effect).
58
which a reasonable jury could find that the
information in this case meets Georgia’s
statutory definition of a trade secret.
First, Camp Creek has presented expert
testimony suggesting that this information is
closely guarded in the hotel industry, that a
competitor could not easily derive the
information through other means, and that a
competitor could make use of such information
to the detriment of the owner. See Berman Aff.
¶ 29. This evidence shows that the information
is valuable and not of the type any intelligent
competitor could have compiled by legitimate
alternative means. Second, although Camp
Creek did provide the information to Sheraton,
it provided that information pursuant to the
Reservation Agreement and on the apparently
59
mutual understanding that it would be kept
confidential. See Sunderji Aff. Exh. C
(Sheraton representative’s letter noting that
information would be “kept in strict
confidentiality”).23 To the extent Camp Creek
disclosed this type of information elsewhere, it
did so on the express condition that it would not
be made public except as part of aggregate
industry statistics, untraceable to the individual
Inn. Whether Camp Creek’s efforts to keep the
information secret in this case were “reasonable
under the circumstances” presents a question
for the trier of fact. Cf. Avnet, Inc. v. Wyle Lab.
Inc., 437 S.E.2d 302, 303-04 (Ga. 1993)
23
We are cognizant of the fact that not all confidential
information rises to the level of a trade secret. See TDS
Healthcare Sys. Corp. v. Humana Hosp. Ill., Inc., 880 F. Supp.
1572, 1584 (N.D. Ga. 1995). Nevertheless, Camp Creek’s evidence on
this point is more than sufficient to survive Sheraton’s motion for
summary judgment.
60
(comparing and analyzing different measures
taken to secure secrecy of confidential
information).
Camp Creek’s evidence would also support
a finding that Sheraton misappropriated the
information from Camp Creek.24 A defendant
misappropriates a trade secret by knowingly
acquiring it through improper means. See
O.C.G.A. § 10-1-761(2). The GTSA provides
that:
24
The GTSA provides the following definition of
misappropriation in pertinent part:
(A) Acquisition of a trade secret of another by a person
who knows or has reason to know that the trade secret was
acquired by improper means; or
(B) Disclosure or use of a trade secret of another
without express or implied consent by a person who:
. . . .
(ii) At the time of disclosure or use, knew or had
reason to know that knowledge of the trade secret
was:
. . . .
(II) Acquired under circumstances giving rise
to a duty to maintain its secrecy or limit its
use; or
(III) Derived from or through a person who
owed a duty to the person seeking relief to
maintain its secrecy or limit its use; . . . .
O.C.G.A. § 10-1-761(2).
61
“Improper means” includes theft,
bribery, misrepresentation,
breach or inducement of a
breach of a confidential
relationship or other duty to
maintain secrecy or limit use . . .
.
Id. § 10-1-761(1) (emphasis added). Although
we have already held that Camp Creek has
failed to show that a confidential relationship
existed between the parties, the evidence
shows that Camp Creek provided the data in
question to Sheraton Reservations with the
understanding that its use would be limited and
that it would be kept confidential. Sheraton
contends that it came into possession of the
information by legitimate means, either
compiling the data itself or receiving it pursuant
to the Reservations Agreement. Although this
may accurately describe Sheraton
62
Reservations’ initial receipt of the information,
Sheraton has all but admitted that the
Gateway’s possession and use of the data, as
one of Camp Creek’s competitors, was
improper and in violation of Sheraton’s own
policies. See e.g., III Johnson Dep. at 380
(discussing procedures); I Faust Dep. at 220-25
(discussing the Gateway’s acquisition and use
of the Inn’s confidential information). As the
GTSA includes the diversion of information
acquired under legitimate circumstances within
its definition of misappropriation, see O.C.G.A.
§§ 10-1-761(1), 10-1-761(2)(B)(ii)(II) & (III),
Camp Creek has presented evidence which
would allow a reasonable jury to find in its favor
on this claim.
63
Although Camp Creek has presented
evidence that the defendants made some
competitive use of the information, Sheraton
maintains that Camp Creek has failed to
provide evidence of damages on its trade
secret claim. As we have already noted, Camp
Creek’s generalized evidence on damages
does not isolate losses directly attributable to
any particular misuse of confidential
information. See supra Part I(B)(3).
Nevertheless, the GTSA expressly provides for
the award of a reasonable royalty in the event
that the plaintiff cannot prove damages or
unjust enrichment by a preponderance of the
evidence. See O.C.G.A. § 10-1-763(a).
Moreover, the district court may determine that
injunctive relief is appropriate to the extent that
64
the Gateway continues to make use of Camp
Creek’s confidential information to compete for
guests. See O.C.G.A. § 10-1-762. Judgment
as a matter of law, therefore, is inappropriate at
this time, and we reverse the district court’s
grant of summary judgment.
V Additional Statutory Claims
Camp Creek’s complaint goes on to assert a number of
additional statutory claims for relief, relying again on the conduct
described above. We provide a brief discussion of each claim.
A. Lanham Act and Georgia Deceptive Trade Practices
Act (Counts VI & VII)
Camp Creek sets forth a rather novel argument that
Sheraton’s use of the words “Sheraton . . . Atlanta Airport” in
connection with the Gateway Hotel constitutes a violation of the
65
Lanham Act. See 15 U.S.C. § 1125(a). As it is “hornbook law”
that a licensee may not sue its licensor for trademark
infringement, see 2 J. Thomas McCarthy, McCarthy on
Trademarks and Unfair Competition § 18:63, at 18-103 (4th ed.
1996), and any Lanham Act plaintiff must have rights in the name
at issue to seek protection, see ConAgra, Inc. v. Singleton, 743
F.2d 1508, 1512 (11th Cir. 1984), Camp Creek eschews any claim
to the term “Sheraton” alone. Instead, Camp Creek claims a
property interest in the use of “Atlanta Airport” in combination with
Sheraton and alleges that the defendants engaged in “reverse
palming off,” trading on the goodwill that Camp Creek had
acquired in the combination of the two terms.
Although we see a host of difficulties with Camp Creek’s
argument, we, like the district court, will confine our discussion of
this matter to whether the defendant’s designation was actually
false. As even the title of section 1125 makes clear, Camp Creek
must provide some evidence that the defendants falsely
66
designated the Gateway Hotel in some way.25 As the district court
correctly observed, there can be no Lanham Act claim if the
Gateway’s use of “Sheraton . . . Atlanta Airport” is accurate and
creates no false impression. See Original Appalachian Artworks
v. Schlaifer Nance & Co., 679 F. Supp. 1564, 1577 (N.D. Ga.
1987) (“If there is one immediately apparent characteristic of
section 1125, it is that in order to sustain a cause of action
thereunder, a plaintiff must establish the existence of some type
of false designation, description, or representation. The operative
word is ‘false.’”); Debs v. Meliopoulos, No. 1:90-cv-939-WCO,
(N.D. Ga. Dec. 18, 1991) (noting that relief may be granted if the
defendant creates “a false impression”). It is beyond dispute that
the Gateway is a Sheraton property located in the vicinity of the
Atlanta Airport and its use of the disputed terms is literally
accurate. See Original Appalachian Artworks, 679 F. Supp. at
25
The title of that section is “False designations of origin
and false descriptions forbidden.” Moreover, although we would
never have discovered it by reading Camp Creek’s briefs on this
issue, § 1125(a) uses the word “false” or some derivation thereof
no less than six times. See 15 U.S.C. § 1125(a).
67
1577-78 (rejecting a section 1125(a) claim when the challenged
association was factually accurate). As we find nothing “false”
about the defendant’s use of “Sheraton . . . Atlanta Airport,” we
affirm the district court’s grant of summary judgment in favor of
the defendants on the Lanham Act claim.26 Moreover, as the
parties do not dispute that Georgia’s Deceptive Trade Practices
Act, O.C.G.A. § 10-1-372, involves “the same dispositive
question” as the Lanham Act claim, we similarly affirm the district
courts disposition of that claim. See Jellibeans, Inc. v. Skating
Clubs of Georgia, Inc., 716 F.2d 833, 839 (11th Cir. 1983).
26
Indeed, the only way that the Gateway’s use of “Sheraton .
. . Atlanta Airport” could create a false or misleading impression
is if potential guests associated those terms with the Inn. Camp
Creek has not only failed to produce any evidence of such a
particular association, but the prior existence of the SHAA and the
evidence of customer confusion between those franchises contradicts
any such suggestion.
We also reject Camp Creek’s conceptually befuddled suggestion
that the Gateway has engaged in “reverse passing off.” Section
1125(a) prohibits both “passing off,” where A sells its product
under B’s name, and “reverse passing off,” where A sells B’s
product under A’s name. See Waldham Pub. Corp. v. Landoll, Inc.,
43 F.3d 775, 780 (2d Cir. 1994). Although Camp Creek’s evidence
might be read to show that the Gateway sold its own rooms using the
goodwill the Inn had built up in its name (passing off), there is
no evidence to support the proposition that the Gateway sold the
Inn’s product (reverse passing off). See Debs, (collecting cases
and fact patterns).
68
B. Additional Prayers for Relief
Camp Creek maintains that in addition to its claims for
damages on the counts discussed above, it has independent
claims for unjust enrichment, injunctive relief, punitive damages,
and attorneys fees. We address each argument in turn.
1. Unjust Enrichment (Count IX)
Camp Creek argues that, under both Massachusetts and
Georgia law, “a person who has been unjustly enriched at the
expense of another is required to make restitution.” See Salamon
v. Terra, 477 N.E.2d 1029, 1031 (Mass. 1985) (quoting
Restatement of Restitution § 1(1937)); Regional Pacesetters, Inc.
v. Halpern Enter., Inc., 300 S.E.2d 180, 184-5 (Ga. App. 1983).
Camp Creek asserts that the facts in this case support its
argument that the Gateway unjustly enriched itself by competing
with the Inn for business in the Atlanta Airport market. As
previously discussed, Camp Creek may recover damages from
the defendants to the extent that a jury determines that the
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Gateway’s competition constitutes a breach of the defendants’
implied contractual duties. Recovery on a theory of unjust
enrichment, however, is only available “when as a matter of fact
there is no legal contract.” See Regional Pacesetters, 300 S.E.2d
180, 185 (Ga. App. 1983). As a result, the district court properly
granted summary judgment to the defendants.
2. Injunctive Relief (Count VIII)
The district court seems to have misconceived Camp Creek’s
claim for an injunction pursuant to Georgia law, see O.C.G.A. § 9-
5-1, as a demand for a preliminary injunction. Consequently,
regardless of whether the district court’s observation that Fed. R.
Civ. P. 65 precludes Camp Creek’s application for an injunction
under state law is correct,27 the district court erred by applying the
standards governing temporary injunctions. In view of the fact
that Camp Creek’s petition is for a permanent injunction, to be
27
We note that the district court’s conclusion in this regard
is unsupported by citation, but decline to address the matter
further.
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decided at the conclusion of a trial on the merits, the district
court’s reliance on plaintiff’s likelihood of success on the merits is
misplaced. We therefore reverse the district court’s grant of
summary judgment in Sheraton’s favor on this issue.
3. Attorney’s Fees, Punitive Damages, and
Discovery Matters (Count XI)
The district court’s resolution of Camp Creek’s claims for
attorneys’ fees, punitive damages, and its motion to compel
discovery depend, at least to some degree, on the conclusion that
Sheraton was entitled to summary judgment on all of Camp
Creek’s substantive claims. Our determination that Camp Creek
has set forth evidence sufficient to present to a jury on its contract
and GTSA claims requires us to vacate the district court’s denial
of these prayers for relief and remand for reconsideration of
Count XI in light of our opinion.
CONCLUSION
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As we noted at the outset of this opinion,
Camp Creek’s long and interwoven claims for
relief reduce to the basic proposition that
Sheraton violated a variety of duties it owed to
its franchisee. Upon careful consideration of
the arguments, we reverse the district court’s
order granting summary judgment in Sheraton’s
favor with respect to Camp Creek’s claims for:
(1) breach of the implied covenant of good faith
and fair dealing under Massachusetts law in
connection with Sheraton’s establishment and
operation of the Gateway Hotel; (2)
reimbursement from Sheraton in connection
with the American Airlines SABRE reservation
system billing error; (3) violation of the GTSA;
(4) injunctive relief; and (5) attorneys’ fees and
punitive damages (Counts I, X-A, X, VIII & XI).
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We also vacate the district court’s denial of
Camp Creek’s motions to compel discovery.
We affirm the district court’s decision with
regard to Camp Creek’s claims for: (1) breach
of the implied covenant of good faith and fair
dealing in connection with Sheraton’s individual
bad acts; (2) damages caused by the
interruption of service from Sheraton’s
Reservatron system; (3) tortious interference
with contracts and business relationships; (4)
violation of the Massachusetts Unfair Trade
Practices Act; (5) Unfair Competition; (6) the
Lanham Act; (7) the Georgia Unfair Trade
Practices Act; and (8) Unjust Enrichment
(Counts II, X-A, III, IV, V, VI, VII & IX).
Accordingly, we AFFIRM in part, REVERSE in
part, and REMAND this case to the district court
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for further proceedings consistent with this
opinion.
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