As the aggressive delta variant of the COVID-19 pandemic is wreaking national havoc, lawsuits filed by hotel properties in three states should serve as a wake-up call for all hospitality owners who hire a management company. Their efforts to keep workers employed through the COVID-19 pandemic could be imperiled if the management company refuses to turn over all the records its contract requires.
Litigation filed in Florida, Georgia, and Alabama allege that a management company failed to meet its legal obligations to the hotel properties, including refusing to turn over all records related to its management of the properties. One of the consequences is that the owners may not be able to receive the vitally important full benefits of COVID-19-related federal legislation – including a tax credit designed to keep workers on the job.
“The hotel owners were committed to being good corporate citizens, doing their part by keeping staff on the job despite the obvious downturn in the economy. The federal relief programs are a vital part of keeping those workers employed, but the management company’s refusal to turn over records as required is unwarranted and undermines efforts to serve the public and employees,” said David Weiss, a Tallahassee, FL-based attorney with Ausley McMullen, who represents one of the hotel owners. “The owners entered into an agreement with the management company in good faith and were entirely disappointed by the business practices they encountered.”
The four lawsuits were filed in Tallahassee, Florida, by Capital Circle Properties LLC; in DeKalb County, Georgia, by SM Investors LLC; and in Mobile, Alabama, by Montilimar Hospitality LLC and Service Hospitality LLC. Common to all four suits is the name MMI Hotel Group of Flowood, Mississippi, as defendant.
The hotel owners accuse the management company of improperly withholding records, including those they need to secure tax credits and forgiveness of loans saving workers’ jobs during the COVID-19 pandemic. The hotels relied on loans under the Paycheck Protection Program (PPP) and the Employee Retention Credit to keep workers on their payroll. Those COVID relief programs require businesses to provide detailed documentation to the federal government, but the essential documents are being withheld by the management company, according to the similar lawsuits.
The four hotels involved in the litigation are TownePlace Suite by Marriott properties in Tallahassee and Mobile, AL; a Hampton Inn in Stone Mountain, GA; and a Fairfield Inn & Suites by Marriott in Mobile.
The hotel operators claim MMI Hotel Group “breached its fiduciary duties … by failing to perform, failing to properly perform, and negligently performing its obligations” in managing the hotels from December 2019 to December 2020 and in failing to turn over all records related to management of the hotels.
Because the management company failed to transfer all of the hotels’ books to the owners as required under their contracts, the owners likely cannot meet the federal requirements related to the COVID relief legislation, including but not limited to the tax credit program. This jeopardizes the funds they anticipated when they kept employees on staff.
