A few days ago I talked about what a hotel expert might say about one of three significant lodging industry lawsuits of which this is the second one to be discussed. The next excerpt from the article at HotelNewsNow.com is about the litigation involving a predominant seller and broker and three hotel transactions. Below are the commentary and those issues to consider from our perspective on the 2nd case: – In the case summary – Host Hotels & Resorts v. Molinaro Koger, Scioto Partners and Dearborn Hotel – the Plaintiff “Host Hotels & Resorts filed a lawsuit against brokerage firm Molinaro Koger, accusing president Rob Koger and the firm of fraud in misrepresenting sales it handled for Host. Host alleges that Molinaro Koger set up companies led by internal employees to buy three hotels from Host and resell them for a profit. In one case, the initial buyer of one Host hotel was actually dead, the lawsuit states.” Attorneys, brokers, investors, and their hotel expert can read more here. – According to James Butler, an attorney with Jeffer, Mangels, Butler & Mitchell, who was interviewed for the article and a leading authority on hotels “These are serious allegations. A lot of facts were put into the complaint, such as who called who and who did what. You have very specific, detailed, factual allegations—it’s not fishing.” If you sell or buy a hotel, there is often an unspoken fiduciary responsibility due to the real estate nature and deal volume size of similar transactions. Typically, the brokerage firm and their employees want to avoid exposing themselves to any conflict of interest or act of impropriety. This is especially true if the parties have done a sizeable number of hotel transactions over the years and maintain a close relationship. Still, if you are being sued or bringing a lawsuit in a similar transaction, there are a number of facts to look at in these circumstances. One in particular would be the facts concerning the overall deal that was brought by the broker and its ultimate financial benefit to the seller. A hotel expert may say that broker and its employees who deal with investors privately is not unusual in commercial real estate. Also, if it allows a major piece of funding in a transaction that influenced higher pricing, it could provide a better deal.
