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Dated: New York, New York PRYOR CASHM N LLP
May 10, 2016
By:
Todd E. Soloway
Joshua D. Bernstein
Bryan T. Mohler
7 Times S...
Fax: (212) 326-0806
-and-
William E. Wallace III
Angela Stoner
CAPITAL LEGAL GROUP (US) PLLC
1717 Pennsylvania Avenue, NW
...
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
CITYFRONT HOTEL ASSOCIATES LIMITED
PARTNERSHIP and DREAM TEAM HO...
2. The Sheraton Grand Chicago (the "Sheraton Chicago") is a hotel located on land
owned by an affiliate of Cityfront and l...
8. As Owners' agents, and consistent with the terms of the Sheraton Contract and
Westin Contract and the fiduciary duties ...
11. Sheraton and Westin also agreed for themselves and their affiliates, including
Starwood, that they would not merge wit...
16. Starwood and Sheraton LLC have also agreed to indemnify Plaintiffs for
liabilities, losses, expenses and attorneys' fe...
23. Upon information and belief, Defendant Starwood is a corporation organized
under the laws of Maryland, having its prin...
JURISDICTION AND VENUE
28. This Court has personal jurisdiction over Defendants because Defendants
regularly conduct busin...
develop and construct the hotel, and invested an additional approximately $85 million in capital
improvements since the Sh...
39. The terms of the Sheraton Contract also evidence the fiduciary relationship
between Sheraton and Cityfront. For exampl...
C. The Sheraton Chicago's Area of Protection
42. Pursuant to Article XXXII of the Sheraton Contract, as amended, Sheraton
...
"controlled" have the meanings correlative to the foregoing and (b) "Person"
means any individual, corporation, partnershi...
..
Motel Status :Location ;Rooms Banquet .
!Sheraton Grand Chicago :Existing ,301 East North Water 11,218 125,000 '
;Aloft...
53. The Marriott hotels currently within the Sheraton Chicago AOP are as follows:
, .
'Hotel i Status :Location !Rooms Ban...
million to develop and construct the hotel, and invested an additional $80 plus million dollars in
capital improvements si...
solely as agent of [Dream Team] . . , [and] [n]othing [in the Westin Contract] shall constitute
or be construed to be or c...
the north by 48th Street, to the east by 6th Avenue, to the south by 34th Street and to the west by
the Hudson River," oth...
69. Since the start of the Westin Contract, the fees and charges paid to Westin to date
exceed $122 million; and, the fees...
Hotel
1Westin Times Square
1W New York, Times Square
Four Points by Sheraton Midtown Times Square
The Chatwal, New York Ci...
follows:
rHotel
iCourtyard by Marriott
!Courtyard Herald Square
Courtyard New York Times Square West
. Courtyard New York ...
other things, exchanging confidential information, including the confidential information of the
Plaintiffs.
82. Based on ...
86. In their most recent Annual Reports, both Starwood and Marriott lauded their
respective companies' growing revenues an...
89. Likewise, Marriott's Chief Executive Officer boasted in Marriott's 2014 Annual
Report, that:
2014 was a record-setting...
94. While details of the merger and integration remain largely opaque, Starwood and
Marriott have made broad statements ab...
99. Defendants have not even tried to explain how Marriott can manage, lawfully or
otherwise, hotels currently being opera...
or the localities in which, the businesses of Starwood and its subsidiaries, taken as
a whole (or, for purposes of this Se...
greater size will help us stay competitive in a quickly-evolving
marketplace.
* * *
So what do we do? First, we want to ex...
114. Marriott, by reason of its due diligence regarding the proposed merger and on
notice from Starwood, knows of Starwood...
Marriott to cease all activities that aid, abet and assist Starwood in the on-going violations of the
Sheraton Contract an...
123. Sheraton LLC agreed with Cityfront that it was and is "the intention [of Cityfront
and Sheraton LLC] that [Sheraton L...
128. Cityfront, Sheraton, Sheraton LLC and Starwood agreed that the term "affiliates"
would be construed very broadly to m...
131. As recently as April 15, 2016, an officer and/or employee of Starwood, on behalf
of Starwood, Sheraton and Sheraton L...
refuse to pay Sheraton's management fees, at a minimum, until such time as Sheraton, Starwood
and their affiliates cure th...
140. Starwood affirmed in the Starwood Westin Guaranty Contract that it was and is
"the intention [of Dream Team and Starw...
144. The parties to the Westin Contract also agreed that the term "operate" would be
construed very broadly to mean "to de...
150. As a direct and proximate result of Westin's and Starwood's breaches of the
Westin Contract, Dream Team also has sust...
Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full,
prompt and complete perfor...
157. With Starwood's and Sheraton LLC's explicit written consent, Sheraton, on
behalf of itself and its affiliates, agreed...
161. Sheraton's affiliates, including Starwood and Sheraton LLC, were aware that
Sheraton was obligating both itself and i...
which may be difficult if not impossible to quantify with reasonable precision and therefore for
which no adequate remedy ...
Westin's agreement, obligations and performance, when it executed on May 30, 2000, the First
Amendment to Operating Agreem...
174. Dream Team, Westin and Starwood agreed that the term "affiliates" would be
construed very broadly to mean:
with respe...
of the Westin Contract, and (ii) announcing its intention to close on the Merger Agreement in the
coming months notwithsta...
SIXTH CAUSE OF ACTION
(Breach of Sheraton LLC Guaranty Contract)
(Cityfront Against Sheraton LLC)
181. Plaintiffs repeat a...
other ways caused Sheraton to breach its fiduciary obligation to act in the best interests of
Cityfront,
187. Cityfront ha...
incurred as a result of Sheraton's breaches of its obligations. Starwood Sheraton Guaranty
Contract.
193. Starwood, pursua...
Sheraton Contract and will continue to incur costs, attorneys' fees and expenses to prevent on-
going and future breaches ...
204. Starwood "also agree[d] to indemnify [Dream Team] against all liabilities and pay
all of the expenses of [Dream Team]...
from Starwood damages for all losses caused by Westin's defaults and breaches of fiduciary duty
under the Westin Contract....
which may be difficult if not impossible to quantify with reasonable precision and therefore for
which no adequate remedy ...
219. Starwood and Westin owe Dream Team the highest fiduciary obligations and
utmost duties of loyalty, good faith, fair d...
ELEVENTH CAUSE OF ACTION
(Aiding and Abetting Breach of Fiduciary Duty)
(Plaintiffs Against Marriott)
223. Plaintiffs repe...
trial and punitive damages in the amount at least three times the amount of compensatory
damages.
TWELFTH CAUSE OF ACTION
...
of which have caused Starwood and the Starwood affiliates Sheraton, Sheraton LLC and Westin
to breach their express and im...
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
Marriott Starwood Merger Complaint NY Supreme Court
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Marriott Starwood Merger Complaint NY Supreme Court

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Cityfront Hotel Assoicates Limited Partnership and Dream Team Hotel Associates LLC vs Starwood Hotels & Resorts Worldwide Inc & Marriott International Inc

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Marriott Starwood Merger Complaint NY Supreme Court

  1. 1. Dated: New York, New York PRYOR CASHM N LLP May 10, 2016 By: Todd E. Soloway Joshua D. Bernstein Bryan T. Mohler 7 Times Square New York, New York 10036-6569 Tel: (212) 421-4100 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK CITYFRONT HOTEL ASSOCIATES LIMITED PARTNERSHIP and DREAM TEAM HOTEL ASSOCIATES, LLC, Plaintiffs, - against - STARWOOD HOTELS & RESORTS WORLDWIDE, INC., MARRIOTT INTERNATIONAL, INC., SHERATON OPERATING CORPORATION, THE SHERATON LLC, and WESTIN HOTEL MANAGEMENT, L.P., Index No. Date Purchased: SUMMONS Plaintiff designates New York County as the place for trial. The basis of this designation is CPLR 503. Defendants. To the Above-Named Defendants: YOU ARE HEREBY SUMMONED to answer the complaint in this action and to serve a copy of your answer, or, if the complaint is not served with this summons, to serve a notice of appearance, on the plaintiff's attorneys within twenty (20) days after the service of this summons, exclusive of the day of service; or within thirty (30) days after completion of service made in any other manner than by personal delivery within the State. In case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the Complaint. FILED: NEW YORK COUNTY CLERK 05/10/2016 08:00 AM INDEX NO. 652521/2016 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 05/10/2016 1 of 64
  2. 2. Fax: (212) 326-0806 -and- William E. Wallace III Angela Stoner CAPITAL LEGAL GROUP (US) PLLC 1717 Pennsylvania Avenue, NW Suite 1025 Washington, DC 20006 Tel: (202) 559-9185 Fax: (202) 644-5227 Attorneys for Plaintiffs Defendants' Addresses: Starwood Hotels & Resorts Worldwide, Inc. One StarPoint Stamford, Connecticut 06902 Marriott International, Inc. 10400 Fernwood Road Bethesda, Maryland 20817 Sheraton Operating Corporation One StarPoint Stamford, Connecticut 06902 The Sheraton LLC One StarPoint Stamford, Connecticut 06902 Westin Hotel Management, L.P. One StarPoint Stamford, Connecticut 06902 2 of 64
  3. 3. SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK CITYFRONT HOTEL ASSOCIATES LIMITED PARTNERSHIP and DREAM TEAM HOTEL ASSOCIATES, LLC, Plaintiffs, - against - STARWOOD HOTELS & RESORTS WORLDWIDE, INC., MARRIOTT INTERNATIONAL, INC., SHERATON OPERATING CORPORATION, THE SHERATON LLC, and WES TIN HOTEL MANAGEMENT, L.P., Index No. VERIFIED COMPLAINT Defendants. Plaintiffs Cityfront Hotel Associates Limited Partnership ("Cityfront") and Dream Team Hotel Associates, LLC ("Dream Team") (collectively, "Owners" or "Plaintiffs"), by their attorneys, bring this action against defendants Starwood Hotels & Resorts Worldwide, Inc. ("Starwood"), Marriott International, Inc. ("Marriott"), Sheraton Operating Corporation ("Sheraton"), The Sheraton LLC, (successor-in-interest to The Sheraton Corporation, f/k/a ITT Sheraton Corporation, f/k/a The Sheraton Corporation) ("Sheraton LLC"), and Westin Hotel Management, L.P., as successor to Westin License Company East ("Westin"), and allege as follows: NATURE OF THE ACTION 1. Plaintiffs bring this action as a result of Starwood's November 2015 agreement to merge with Marriott, which, on information and belief, is proceeding to a closing tentatively scheduled for July 2016, in blatant violation of Starwood's, Sheraton's, Sheraton LLC's and Westin's contractual and fiduciary obligations owed to Plaintiffs. 3 of 64
  4. 4. 2. The Sheraton Grand Chicago (the "Sheraton Chicago") is a hotel located on land owned by an affiliate of Cityfront and leased to Cityfront for purposes of conducting a hospitality business in downtown Chicago. Cityfront has contracted with Sheraton, a subsidiary of Starwood, to manage the Sheraton Chicago. 3. Pursuant to the terms of the December 18, 1989 Management Agreement, as amended, between Cityfront as "Owner" and Sheraton as "Operator" (the "Sheraton Contract"), Sheraton undertook to operate and manage the Sheraton Chicago as Owner's agent, thereby assuming the attendant fiduciary duties owed by an agent to its principal. 4. Both Starwood and Sheraton LLC have guaranteed Sheraton's performance of its contractual and fiduciary obligations owed to Cityfront and have agreed to indemnify Cityfront for all losses caused by Sheraton's failure of performance. 5. The Westin New York at Times Square (the "Westin Times Square" and collectively with the Sheraton Chicago, the "Hotels") is a hotel owned by an affiliate of Dream Team and sub-leased to Dream Team for purposes of conducting a hospitality business in the Times Square area of New York City. Dream Team has contracted with Westin, a subsidiary of Starwood, to manage the Westin Times Square. 6. Pursuant to the terms of the December 7, 1998 Operating Agreement, as amended, between Dream Team as "Owner" and Westin as "Operator" (the "Westin Contract"), Westin undertook to operate and manage the Westin Times Square as Owner's agent, thereby assuming the attendant fiduciary duties owed by an agent to its principal. 7. Starwood has guaranteed Westin's performance of its contractual and fiduciary obligations owed to Dream Team as Owner, and has agreed to indemnify Dream Team for all losses caused by Westin's failure of performance. 2 4 of 64
  5. 5. 8. As Owners' agents, and consistent with the terms of the Sheraton Contract and Westin Contract and the fiduciary duties they owed to Cityfront and Dream Team, Sheraton and Westin agreed to (a) be responsible for the operation, direction, management and supervision of the Hotels, (b) determine labor policies (including the hiring, transfer and discharge of all employees), (c) establish credit policies (including entering into agreements with credit card organizations), (d) establish terms of admittance, charges for rooms, entertainment and amusement policies, (e) set food and beverage policies, (f) institute legal proceedings, (g) oversee and manage all phases of sales, marketing, advertising, promotion and publicity relating to the Hotels and (h) enter into contracts, leases, concession agreements and other undertakings on behalf of Plaintiffs as Plaintiffs' agent. 9. In exchange for the Plaintiffs' agreement to invest more than $500 million dollars to develop, construct and improve the two Hotels, and to induce the Plaintiffs to enter into long- term management agreements with Starwood's affiliates, whereby Starwood's affiliates would accept and assume responsibility for managing the Hotels as set out above, Starwood and its affiliates agreed that neither they nor any of their other affiliates would own, franchise, manage or operate any other hotels within a certain delineated geographical region of Chicago and New York City (with certain specified exceptions). 10. More specifically, both the Sheraton Contract and the Westin Contract contain radius restriction clauses defining with specificity an area, commonly referred to as an area of protection ("AOP"), within which Sheraton and Westin, respectively, together with their affiliates, are prohibited from owning, franchising, operating or managing other hotels (subject to limited, specifically enumerated exceptions). 3 5 of 64
  6. 6. 11. Sheraton and Westin also agreed for themselves and their affiliates, including Starwood, that they would not merge with another company or entity that would cause Sheraton or Westin, or their affiliates, to breach their contractual and fiduciary obligations to the Plaintiffs, including the obligations set out in the AOP clauses of the management contracts. 12. Starwood, Sheraton, and Westin breached their fiduciary duty of loyalty, and the explicit terms of the contracts between the parties, by, among other acts, negotiating an agreement to merge with Marriott, which operates numerous other hotels within the Sheraton Chicago AOP and the Westin Times Square AOR 13. Starwood's agreement to merge with Marriott will deprive the Plaintiffs of valuable and critically important rights set out in the Sheraton Contract and the Westin Contract. 14. Starwood and Westin also breached their fiduciary duty of loyalty, and the terms of the Westin Contract, by agreeing to manage, operate, own or franchise the Element New York Times Square West hotel (the "Element Times Square") within the Westin Times Square AOP in derogation of their obligations set out in the Westin Contract. 15. Pursuant to certain Guaranties of Management Agreement, Starwood and Sheraton LLC have guaranteed Sheraton's and Westin's performance of their respective obligations under the Sheraton Contact and the Westin Contract, and made clear that it was and is "the intention [of the parties to the contracts of guaranty] that [Starwood and Sheraton LLC] shall remain liable as principal for the performance of all of the terms, covenants, agreements and conditions of the [Sheraton Contract and Westin Contract] to be performed by [Sheraton and Westin] by the terms of the [Sheraton Contract and Westin Contract] or by operation of law." (Emphasis added.) 4 6 of 64
  7. 7. 16. Starwood and Sheraton LLC have also agreed to indemnify Plaintiffs for liabilities, losses, expenses and attorneys' fees incurred in connection with the enforcement of the applicable management agreements. 17. Marriott has actively and intentionally aided and abetted breaches of the Sheraton Contract and Westin Contract. 18. Further, by its acts and misconduct, Marriott has tortiously interfered with the Sheraton Contract, the Westin Contract, and three separate guaranty contracts, two by Starwood and one by Sheraton LLC. 19. Plaintiffs do not have an adequate remedy at law because Defendants' acts and omissions will result in the violation of restrictive covenants for which irreparable harm will occur (and in any event is presumed as a matter of law). 20. Plaintiffs file this action seeking relief in the form ofinjunctive relief. Plaintiffs also seek equitable and monetary relief for breach of contract, anticipatory repudiation of contract, breach of fiduciary duty, unjust enrichment, tortious interference with contract, aiding and abetting the breach of fiduciary duty and for attorneys' fees and costs. Plaintiffs also seek the imposition of a constructive trust, and such other and further relief as the Court may deem just and proper. THE PARTIES 21. Plaintiff Cityfront is a limited partnership organized under the laws of Illinois, having its principal place of business at 100 Park Avenue, 18th Floor, New York, New York. 22. Plaintiff Dream Team is a limited liability company organized under the laws of Delaware, having its principal place of business at 100 Park Avenue, 18th Floor, New York, New York. 5 7 of 64
  8. 8. 23. Upon information and belief, Defendant Starwood is a corporation organized under the laws of Maryland, having its principal place of business at One StarPoint, Stamford, Connecticut. Starwood operates hotels under the St. Regis, Luxury Collection, W, Westin, Le Meridien, Sheraton, Four Points by Sheraton, Aloft, Element by Westin and Tribute Portfolio brands. 24. Upon information and belief, Defendant Marriott is a corporation organized under the laws of Maryland, having its principal place of business at 10400 Fernwood Road, Bethesda, Maryland. Marriott operates hotels under the Ritz-Carlton, Bulgari, Edition, JW Marriott, Autograph Collection, Renaissance, Marriott, Delta, Marriott Executive Apartments, Marriott Vacation Club, Gaylord, AC Hotels, Courtyard by Marriott, Residence Inn by Marriott, SpringHill Suites by Marriott, Fairfield Inn & Suites by Marriott, TownePlace Suites by Marriott, Protea and Moxy brands. 25. Upon information and belief, Defendant Sheraton is a subsidiary of Starwood, organized under the laws of Delaware, having its principal place of business at One StarPoint, Stamford, Connecticut. 26. Upon information and belief, Defendant Sheraton LLC is a subsidiary of Starwood, organized under the laws of Delaware, having its principal place of business at One StarPoint, Stamford, Connecticut. 27. Upon information and belief, Defendant Westin is a subsidiary of Starwood, organized under the laws of Delaware, having its principal place of business at One StarPoint, Stamford, Connecticut. 6 8 of 64
  9. 9. JURISDICTION AND VENUE 28. This Court has personal jurisdiction over Defendants because Defendants regularly conduct business within the State and County of New York, including through the management, franchising, operation, and marketing of numerous hotels in Manhattan. In addition, New York County is where some of the acts that are the subject of this complaint occurred. 29. In addition to the foregoing, under Section 11.8(I) of the Westin Contract, Westin submitted to the exclusive jurisdiction of the federal and state courts located in New York County, New York. 30. Venue is proper in New York County pursuant to N.Y. C.P.L.R. § 503. FACTS I. THE SHERATON GRAND CHICAGO 31. Located in the heart of downtown Chicago, the Sheraton Chicago is situated on the Chicago River Esplanade, within walking distance of Navy Pier, Magnificent Mile shopping, Millennium Park, and the Loop business district. 32. The Sheraton Chicago offers 1,218 guest rooms, including 57 suites, each with a view of the Chicago River, Lake Michigan or the Chicago skyline, as well as 125,000 square feet of banquet space that can accommodate meetings and conventions for up to 4,600 people. 33. On or about December 18, 1989, Cityfront, as Owner, and Sheraton, as Operator, entered into the Sheraton Contract, as subsequently amended, by which Cityfront agreed to construct a first-class convention hotel and, upon completion, Sheraton agreed to manage and operate the hotel on behalf of Cityfront. 34. Cityfront took on enormous financial risk to fund the development and construction of the Sheraton Chicago. Cityfront initially invested approximately $180 million to 7 9 of 64
  10. 10. develop and construct the hotel, and invested an additional approximately $85 million in capital improvements since the Sheraton Chicago opened. Sheraton's promises of fidelity and focused attention to the success of the venture were the bedrock of that investment. 35. Construction of the Sheraton Chicago was completed and the hotel officially opened in March 1992. The initial term of the Sheraton Contract was 20 years, with Sheraton having two 10-year renewal options. Sheraton exercised the first ten year option, such that Sheraton's, Sheraton LLC's and Starwood's obligations under the contract run through at least December 31, 2022. A. Sheraton's Obligations Under the Sheraton Contract 36. Pursuant to the terms of the Sheraton Contract, Sheraton agreed broadly to "be responsible for, the operation, direction, management and supervision of the [Sheraton Chicago], subject to the terms of [the Sheraton Contract]." Sheraton Contract, Art. VI. 37. Sheraton also is required to "operate the Hotel and all of its facilities and activities in the same manner as is customary and usual in the operation of other similar Sheraton hotels consistent with the [Sheraton Chicago's] facilities and in accordance with the criteria of first class Sheraton convention hotels." Id. B. Sheraton's Fiduciary Obligations 38. Pursuant to Article VII of the Sheraton Contract, Sheraton also agreed to act as Cityfront's agent and therefore its fiduciary: In the performance of its duties as Operator of the Hotel, [Sheraton] shall act solely as agent of [Cityfront]. Nothing [in the Sheraton Contract] shall constitute or be construed to be or create a partnership or joint venture between [Cityfront] and [Sheraton]. (Emphasis added.) 8 10 of 64
  11. 11. 39. The terms of the Sheraton Contract also evidence the fiduciary relationship between Sheraton and Cityfront. For example, pursuant to Article VI Sheraton holds power and discretion to determine the following: • labor policies, including the hiring, transfer and discharge of all employees and entering into a contract or contracts with an applicable union or unions; • credit policies, including entering into agreements with credit card organizations; • terms of admittance; • charges for rooms; • entertainment and amusement policies; • food and beverage policies, including the right to conduct catering operations outside of the Hotel; • the institution of such legal proceedings in the name of Owner or Operator as Operator shall deem appropriate in connection with the operation of the Hotel; and • all phases of sales, marketing, advertising, promotion and publicity relating to the Hotel. 40. In its role as manager of the Sheraton Chicago, Sheraton also is imbued with sole discretion to control the Sheraton Chicago's operating funds, creating a special confidential relationship and fiduciary duty running from Sheraton to Cityfront. 41. Starwood also collects and has access to virtually every piece of competitively sensitive data and confidential information regarding the operation of the Sheraton Chicago. As a natural consequence of its expansive involvement in the business affairs of the Hotel, it has extraordinary influence over the ultimate success or failure of Cityfront's business. 9 11 of 64
  12. 12. C. The Sheraton Chicago's Area of Protection 42. Pursuant to Article XXXII of the Sheraton Contract, as amended, Sheraton explicitly agreed that neither it nor any of its affiliates, would own, franchise, operate or manage: • within two miles of the Sheraton Chicago, any hotel other than certain pre- existing hotels specifically identified in the Sheraton Contract; • within four miles of the Sheraton Chicago, a W Hotel; and • within fifteen miles of the Sheraton Chicago, any hotel that has 750 guest rooms or more or 35,000 square feet or more of meeting, conference and/or banquet space. 43. This AOP was specifically and deliberately negotiated by the parties to the Sheraton Contract, and was intended to provide Cityfront and the Sheraton Chicago with Starwood's and Sheraton's focused attention and loyalty in downtown Chicago and to enable Cityfront to compete successfully against the other hotels in the area, including the many Marriott managed and franchised hotels — all of which were (and currently are) competing with the Sheraton Chicago to be successful. 44. The terms of the Sheraton Chicago AOP were carefully and fully negotiated and reflect the goals of both Cityfront as principal and Starwood as agent. 45. It was agreed that the protections afforded Cityfront would be expansive. Toward that end, it was agreed that affiliates of Sheraton would be bound by the Sheraton contract and the term "affiliates" was broadly defined to mean: with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, (a) "control" when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms "controlling" and 10 12 of 64
  13. 13. "controlled" have the meanings correlative to the foregoing and (b) "Person" means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, or other entity and any federal, state, county or municipal government or any political subdivision thereof. Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and Starwood Hotels and Resorts Trust and any of the foregoing entities' Affiliates shall be Affiliates of Operator. 46. Starwood has negotiated for certain limited exceptions to the restrictions imposed on it by the AOP clause, including for example, specifically identified, pre-existing hotels operated by Sheraton or its affiliates, and limited, specified rights for Sheraton (or its affiliates) to operate certain additional or newly developed hotels. These exceptions were deliberately negotiated and predicated on Starwood's professed commitment to comply in all other respects with its contractual and fiduciary obligations — especially as those duties relate to the AOP clause. 47. As consideration for this exclusivity, the parties entered into the long term Sheraton Contract that provides, among other financial incentives, financially lucrative base and incentive fees. The total base, incentive, marketing and numerous other miscellaneous fees and charges paid to Sheraton in 2015 for managing the Sheraton Chicago as Cityfront's agent exceeded $8.7 million. 48. Since the start of the Sheraton Contract, the fees and charges paid to Sheraton to date exceed $146 million. And, the fees and charges to be paid by Cityfront to Sheraton over the present term of the Sheraton Contract likely will exceed $205 million. 49. As permitted by the Sheraton Contract, Starwood currently owns, operates, manages or franchises the following eight hotels located within the Sheraton Chicago AOP (including the Sheraton Chicago, itself): 11 13 of 64
  14. 14. .. Motel Status :Location ;Rooms Banquet . !Sheraton Grand Chicago :Existing ,301 East North Water 11,218 125,000 ' ;Aloft Chicago Magnificent Mile. _ . . Development 243Ontario Street iTBD..... . TBD W Lakeshore :Existing 644 North Lakeshore Drive '520 13,700 'W City Center Existing 172 West Adams 403 14,500 Tremont _. Existing 100 East Chestnut 135 0 The Westin Michigan Avenue :Existing 909 North Michigan Avenue 752 37,000 The Westin Chicago River North Existing . 320 North Dearborn 424 28,000 1Aloft Chicago Citycenter Existing 1515 North Clark , 274 9,500 The Gwen Chicago, A Luxury Collection Hotel lExisting 1521 North Rush 311 : 27,000 1 i 4,037TOTAL 19 254,700 50. Within the Sheraton Chicago AOP, Marriott currently owns, operates, franchises and/or manages 15 hotels, with an additional three in development, not one of which would be permitted by the terms of the Sheraton Contract. The introduction of these 18 additional hotels into the Sheraton Chicago AOP increases the number of guest rooms (excluding those of the Sheraton Chicago) being owned, operated, managed or franchised by an affiliate of Cityfront's agent by 260% — in clear violation of the Sheraton Contract. 51. Among these 18 Marriott hotels are two very large convention type hotels, one of which has competed with the Sheraton Chicago for years and the other of which will be brand- new when its construction is completed and it opens for business in 2018. These two hotels are designed to cater directly to the same large group meetings and conventions customers that comprise approximately 65% of the Sheraton Chicago's business. 52. Currently, the Sheraton Chicago is the only hotel operated by Starwood or its affiliates in Chicago capable of accommodating these customers and it receives, as a result of the Sheraton Chicago AOP, the undivided attention of Starwood's and its affiliates' sales and marketing professionals. This bargained-for focus and exclusivity will be eviscerated if and when the merger closes and the businesses of Starwood and Marriott are integrated in violation of the Sheraton Contract. 12 14 of 64
  15. 15. 53. The Marriott hotels currently within the Sheraton Chicago AOP are as follows: , . 'Hotel i Status :Location !Rooms Banquet ; AC Hotel Chicago Downtown !Existing 1630 N. Rush Street 1226 ,,3,000 !Autograph Collection (SMAS Hotels Project) Construction ;East Ontario 1192 TBD Autograph Collection Hotel Chicago Downtown ; Existing 333 North Dearborn Street 354 :11,823 !Courtyard Chicago Downtown/Magnificent Mile ;Existing j165 East Ontario Street 306 3,658 ;Courtyard Chicago Downtown/River North Existing 30 East Hubbard 337 15,000 I- • , 1 1Fairfield Inn & Suites Chicago Downtown/Magnificent Mile Existing 1216 East Ontario Street 1180 12,558 'Fairfield Inn & Suites Chicago Downtown/River North Existing 60 West Illinois Street Chicago 185 :231 ;JW Marriott I Existing 151 West Adams Street 610 44,000 , Marriott Downtown Magnificent Mile - Existing 540 North Michigan Ave 1,200 66,400 !Marriott Marquis Hotel Construction McCormick Place 1,206 , 90,000 1Moxy Hotel Development TBD ,162 TBD ;Renaissance Blackstone iExisting 636 South Michigan Ave i 1242 111,396 1Renaissance Downtown Existing ;1 West Wacker Drive 1560 134,867 1 Residence Inn Chicago Downtown/Magnificent Mile 1Existing 1201 East Walton Place .1221 i496 ,Residence Inn Chicago Downtown/River North 1;Existing 1410 North Dearborn St 1270 11,358 Residence Inn Chicago Downtown/Loop :Existing 11 South Lasalle Street 381 , 6,700 Springhill Suites Chicago Downtown/River North Existing 1410 North Dearborn St. !253 1,358 The Ritz Carlton, Chicago 'Existing 160 East Person Street 437 25,000 . TOTAL 18 7,322 307,845 i II. THE WESTIN TIMES SQUARE 54. Located in the heart of New York City's Times Square, the Westin Times Square is within steps of over forty Broadway theatres, world famous shopping and famed Restaurant Row. The Westin Times Square offers 873 luxurious guest rooms, 34,000 square feet of meeting and banquet space and sweeping views of New York City skylines. 55. On or about December 7, 1998, Dream Team, as Owner, and Westin, as Operator, entered into the Westin Contract, as subsequently amended, by which Dream Team agreed to construct a first-class hotel and, upon completion, Westin agreed to manage and operate the Hotel on behalf of Dream Team. Starwood simultaneously contracted with Dream Team to guarantee Westin's performance. 56. Dream Team took on enormous financial risk to fund the development and construction of the Westin New York. Dream Team initially invested approximately $320 13 15 of 64
  16. 16. million to develop and construct the hotel, and invested an additional $80 plus million dollars in capital improvements since the Westin Times Square opened. Westin's promises of fidelity and focused attention to the success of the venture were the bedrock of that investment. 57. Construction of the Westin Times Square was completed and the hotel officially opened in October 2002. The initial term of the Westin Contract is 20 years, with Dream Team having two 10-year renewal options. The initial term of the Westin Contract expires on or about December 31, 2022 and Dream Team can extend Westin's and Starwood's obligations under the contract through December 31, 2042. A. Westin's Obligations Under the Westin Contract 58. Pursuant to Section 3.2 of the Westin Contract, Dream Team, as Owner, and Westin, as Operator, agreed that "the day-to-day operation, direction, management and supervision of the Hotel, subject to those specific approvals of Owner and other limitations set forth [in the Westin Contract], shall be the exclusive responsibility of, and shall constitute the authority of Operator." 59. Under the terms of the Westin Contract, Westin also is required to "operate the Hotel and all of its facilities and activities in the same manner as is customary and usual in the operation of the higher standard of (i) other similar first class Westin hotels, or (ii) first class hotels in the Borough of Manhattan, New York, New York generally consistent with the Hotel's facilities . . . ." Westin Contract, Section 3.3. B. Westin's Fiduciary Obligations 60. Pursuant to Section 9.3 of the Westin Contract, Westin also agreed to act as Dream Team's agent and thereby assume fiduciary responsibilities to Dream Team. Specifically, Westin agreed that "[i]n the performance of its duties as Operator of the Hotel, [Westin] shall act 14 16 of 64
  17. 17. solely as agent of [Dream Team] . . , [and] [n]othing [in the Westin Contract] shall constitute or be construed to be or create a partnership or joint venture between [Dream Team] and [Westin]." (Emphasis added.) 61. The terms of the Westin Contract also evidence the fiduciary relationship between Westin and Cityfront. For example, pursuant to Section 3.2 Westin holds power and discretion to determine the following: • Labor policies; • Credit policies; • Terms of admittance; • Entertainment and amusement policies; • Food and beverage policies, including the right to conduct catering operations outside of the Hotel; and • The institution of legal proceedings in the name of Owner or Operator. 62. In its role as manager of the Westin Times Square, Westin also possesses sole discretion to control the Westin Times Square's operating funds, creating a special confidential relationship and fiduciary duty running from Westin to Dream Team. 63. Westin also collects and has access to virtually every piece of competitively sensitive data and confidential information regarding the operation of the Westin Times Square. As a natural consequence of its expansive involvement in the business affairs of the hotel, it has extraordinary influence over the ultimate success or failure of Dream Team's business. C. The Westin Times Square's Area of Protection 64. Pursuant to Section 9.7 of the Westin Contract, as amended, Westin and its affiliates are prohibited from owning, managing, franchising or operating "any Full Service Hotel in the Restricted Area," defined as "the area in New York County, New York bounded to 15 17 of 64
  18. 18. the north by 48th Street, to the east by 6th Avenue, to the south by 34th Street and to the west by the Hudson River," other than one pre-existing hotel specifically identified in the Westin Contract, as well as timeshare resorts; extended stay hotels; casino/gaming oriented hotels; any hotel operated under the St. Regis brand or such other luxury hotel brand owned by Westin or its affiliates; one or more Four Points or other economy or limited service hotels consisting, in the aggregate, of no more than an additional 1000 guest rooms, and certain other Full Service Hotels acquired by Westin or its affiliates provided certain conditions are satisfied (which are not satisfied here). 65. The Westin Times Square AOP restrictions do not expire until the last two years of the last option extension period. Thus, Westin's AOP obligations are enforceable by Dream Team until 2040. 66. This AOP was specifically and deliberately negotiated by the parties to the Westin Contract and related Starwood Guaranty, and was intended to provide Dream Team and the Westin Times Square with Starwood's and Westin's focused attention and loyalty in the New York City Times Square area and to help Dream Team compete successfully against the many other hotels in the area, including the many Marriott managed and franchised hotels — all of which were (and currently are) competing with the Westin Times Square to be successful. 67. As consideration for this exclusivity, the parties entered into the long-term Westin Contract that provides, among other financial incentives, financially lucrative base and incentive fees. 68. The total base, incentive, marketing and numerous other miscellaneous fees and charges paid to Westin in 2015 for managing the Westin Times Square as Dream Team's agent exceeded $10.4 million. 16 18 of 64
  19. 19. 69. Since the start of the Westin Contract, the fees and charges paid to Westin to date exceed $122 million; and, the fees and charges to be paid by Dream Team to Westin over the full term of the Westin Contract likely will exceed $500 million. 70. Westin explicitly agreed in Section 9.7(B) of the Westin Contract that it would not "suffer or permit merger, consolidation, reorganization, or other activity that would result in [Westin] or its Affiliate's Operation of, directly or indirectly, any Full Service Hotel in the Restricted Area, except the Existing Hotels (as [therein] defined)." Westin further agreed to numerous restrictions going forward if a permitted merger were to occur. 71. In situations where a merger is permitted, Westin agreed in Section 9.7(B)(c) that with respect to the newly acquired hotels "the Acquired Hotels and the Acquired Brand shall not be combined, incorporated or included in or linked to (electronically or otherwise) the exclusive 'Westin' reservation system or any 'Westin' component of the Starwood reservation system and, furthermore, shall not be listed or otherwise referenced in any Westin directory or in any 'Westin' collateral sales material and there shall be no internet hyperlink between the 'Westin' brand and the Acquired Brand. . . ." 72. Section 9.7's exception to the AOP restrictions based on mergers and consolidations is inapplicable where, as with the Marriott-Starwood merger, Starwood and its affiliates are the entities being acquired. 73. Starwood currently owns, operates, manages or franchises five hotels located in the Westin Contract AOP (including the Westin Times Square) and is developing two additional hotels in the Westin Contract AOP: 17 19 of 64
  20. 20. Hotel 1Westin Times Square 1W New York, Times Square Four Points by Sheraton Midtown Times Square The Chatwal, New York City, A Luxury Collection Hotel Element New York Times Square West .Four Points by Sheraton Manhattan Hudson Yards Aloft Hudson Yards !TOTAL !Status !Existing .Existing Existing Existing Existing Construction Construction .7 !Location 1270 West 43rd Street 1567 Broadway 326 West 40th Street 130 West 44th Street 3 1 1 West 39th Street 444 10th Avenue 450 11th Avenue 1Rooms 873 1509 ! 244 76 411 151 438 2,702 74. Starwood is operating the Element Times Square in violation of the Westin Contract. 75. Within the Westin Times Square AOP, Marriott currently owns, operates, manages and/or franchises eight hotels, with an additional three under construction and one undergoing a major renovation. It will be a violation of the Westin Contract for an affiliate of Westin to own, operate, franchise or manage any of these hotels. 76. The introduction of these 12 additional hotels into the Westin Times Square AOP increases the number of guest rooms (excluding those of the Westin Times Square and the prohibited Element Times Square) being owned, operated, managed or franchised by an affiliate of Dream Team's agent by 384% — in clear violation of the Westin Contract. 18 20 of 64
  21. 21. follows: rHotel iCourtyard by Marriott !Courtyard Herald Square Courtyard New York Times Square West . Courtyard New York Times Square Fairfield Inn Times Square 'Marriott Marquis ;Renaissance Midtown Hotel !Renaissance New York Times Square !Residence Inn Times Square 'Times Square Edition Hotel iTowne Place Suites 1 !Marriott Moxy1-Totel TOTAL 1 Status , Construction 1Existing lExisting Existing Existing Existing Existing Existing Existing 'Construction !Construction ' Renovation 112 77. The Marriott hotels currently within the Westin Times Square AOP are as Location Rooms 461 W. 34th Street 399 171 W. 35th Street 167 1307 W. 37th Street 1224 114 W. 40th Street 1244 330W. 40th Street 240 1535 Broadway 1,966 218 W. 35th Street 348 2 Times Square . 310 1033 6th Avenue 357 701 7th Avenue 1452 326 W. 44th Street 1112 485 7th Avenue 625 [ 5,444 III. THE MARRIOTT-STARWOOD MERGER 78. After approximately six months of actively shopping the company, Starwood on November 15, 2015, signed an Agreement and Plan of Merger (the "Merger Agreement") with Marriott. The Merger Agreement has a number of conditions that must be satisfied (or waived) before the deal closes. 79. A number of the prerequisites to closing the Merger Agreement have been satisfied, including obtaining the approval of the shareholders of both Starwood and Marriott. 80. Defendants have stated and repeated often that (a) the merger is going forward, (b) representatives of Starwood and Marriott have had numerous planning meetings, and (c) undisclosed steps are being taken to integrate the operations of the companies, 81. Starwood's CEO has admitted that he has been meeting with the Marriott CEO to plan the integration of the two companies. Upon information and belief, Defendants are, among 19 21 of 64
  22. 22. other things, exchanging confidential information, including the confidential information of the Plaintiffs. 82. Based on filings made with the Securities and Exchange Commission, Starwood will, at closing, become a wholly owned affiliate of Marriott. Starwood and Marriott have stated publicly that they expect the closing will occur in mid-20I6 upon obtaining certain regulatory approvals and the satisfaction of other customary closing conditions, but more recently a Starwood representative has represented to Plaintiffs that the deal could close as early as June 1, 2016. A. The Parties Before the Merger 83. Both Starwood and Marriott are among the world's leading hotel companies, with each possessing some of the world's most recognizable hotel and leisure brands such as Starwood brands St. Regis, W, Westin and Sheraton, and Marriott brands Ritz-Carlton, Marriott, Courtyard by Marriott and Residence Inn by Marriott. 84. Starwood recently described itself as "one of the largest hotel and leisure companies in the world, with more than 1,270 properties providing approximately 363,000 rooms in approximately 100 countries and more than 180,000 employees under its management at its owned and managed properties, vacation ownership resorts and corporate offices." 85. Meanwhile, Marriott describes itself as "one of the world's leading lodging companies," and as an "operator, franchisor, and licensor of hotels and timeshare properties in 85 countries and territories under 19 brand names." Marriott claims it operates or franchises 4,364 properties with 749,990 rooms. Marriott has expressed its belief that its portfolio of brands is the broadest of any lodging company in the world (even before the merger). 20 22 of 64
  23. 23. 86. In their most recent Annual Reports, both Starwood and Marriott lauded their respective companies' growing revenues and increasing market share. By all accounts both companies are very successful operating as independent entities and the CEOs of both companies have assured the shareholders and the public that this transaction most definitely is not a marriage of necessity. 87. In Starwood's 2014 Annual Report, Starwood's then-Chief Executive Officer Adam Aron wrote: [In 2014,] Starwood delivered another year of growth in our revenue per available room (RevPAR), and both adjusted EBITDA and earnings per share (EPS) were ahead of our expectations. Across each of our three global divisions, we posted rising RevPAR Index, which means increasing market share and is a sign of the global strength of our world class hotel brands. Starwood also achieved our second-best signing year ever for new hotels to open in the future. 88. In February 2016, Starwood's current CEO told certain hotel owners, "[wje have terrific momentum coming into 2016 with RevPAR index gains in each of our six global regions and a record-breaking year of growth where we opened more hotels and signed more new deals than in Starwood's entire history. This year's priorities will build on this success — accelerating our growth, developing our talent, innovating across our brands, and delighting our guests to grow our RevPAR faster than the competition and deliver superior returns to our owners." (Emphasis added.) 21 23 of 64
  24. 24. 89. Likewise, Marriott's Chief Executive Officer boasted in Marriott's 2014 Annual Report, that: 2014 was a record-setting year for Marriott International on our journey to be the World's Favorite Travel Company. We signed agreements for more than 650 hotels or 100,000 rooms — the most deals ever signed in our company's history. That's a signing pace of nearly two new hotel deals a day. This significant achievement takes our pipeline of hotels under development to a record of more than 1,400 properties and 240,000 rooms. We're on target to reach 1 million rooms over the next several years as our owners invest over $50 billion in new hotels. . . . Demand across our system was strong in 2014. Worldwide Revenue per Available Room (RevPAR) rose 6.6 percent and average daily rates rose 3.7 percent with business and leisure demand driving worldwide occupancy to over 73 percent. (Emphasis added.) 90. Starwood (on behalf of its owners) currently competes with Marriott (on behalf of its owners) not only in the Chicago and New York City AOPs that are the subject of this litigation, but throughout the United States and beyond. B. The Merger Plan 91. Both of the merging companies claim the combination and ultimate integration of the two companies will be the biggest merger in the history of the hospitality industry. 92. According to Marriott, the Starwood-Marriott merger will create "the world's largest hotel company. . . operating or franchising more than 5,500 hotels with 1.1 million rooms worldwide" operating under "approximately 30 brands." The combined company will have up to 75 million hotel loyalty members, comprised of 21 million Starwood Preferred Guest members and 54 million Marriott Rewards members. 93. The Merger Agreement, as filed with the SEC, provides that, on the terms and subject to the conditions set forth in the agreement, Marriott will combine with Starwood in a series of transactions pursuant to which Starwood ultimately will become a wholly owned direct subsidiary of Marriott LLC Merger Sub, which in turn is a wholly owned subsidiary of Marriott. 22 24 of 64
  25. 25. 94. While details of the merger and integration remain largely opaque, Starwood and Marriott have made broad statements about their mutual plan to integrate fully and completely the Starwood and Marriott business operations. 95. In an April 8, 2016 letter informing certain hotel owners that the shareholders of both Starwood and Marriott had approved the merger, Starwood's CEO admitted that Starwood's intention is to continue forward with its duty of loyalty to Owners but that the competition with Marriott managed hotels will soon come to an end: It is also important for you to keep in mind that although stockholders of both companies have approved the transaction, we are separate and independent companies and will remain so until the transaction has closed. That means we will continue to compete vigorously in the marketplace, and we remain focused on driving business to your hotels. At the same time, our teams are continuing to chart the path toward the successful integration of the two companies. (Emphasis added.) 96. Starwood could not have been more clear that its "vigorous[ 1" competition against Marriott and "focus[] on driving business to [Plaintiffs] hotels" will end when the merger closes, and it already has taken steps to implement the cessation of competition that historically has existed between the two companies. 97. This is in direct violation of Starwood's fiduciary duties to Plaintiffs and a blatant breach of its contractual obligations to Plaintiffs. 98. As a result, Plaintiffs will be robbed of the benefit of their contractually bargained-for exclusivity and competitive advantage for the Sheraton Chicago and Westin Times Square, as the Hotels' respective AOPs will be littered with hotels which Starwood, and then Marriott, are barred from owning, managing, operating or franchising. 23 25 of 64
  26. 26. 99. Defendants have not even tried to explain how Marriott can manage, lawfully or otherwise, hotels currently being operated by Starwood as an agent with fiduciary obligations to its owners at the same time Marriott is responsible for managing many other hotels which are not subject to agency relationships and fiduciary duties. 100. Indeed, on information and belief, Marriott has for many years been adamant in its refusal to take on the role of agent for the hotels it manages and has made clear that it does not and will not assume fiduciary duties to the owners of hotels in the Marriott stable. 101. For all practical and legal purposes, it is virtually impossible for Marriott to manage some hotels for some owners as agents with fiduciary duties owed those owners, while simultaneously managing other hotels for other owners to whom it does not owe fiduciary duties. 102. Plaintiffs face the real and serious risk that if the Merger Agreement closes and the Starwood business is integrated into Marriott, unless enjoined and restrained, Marriott simply will reject as untenable the fiduciary obligations owed to some owners, such as the Plaintiffs, and manage to the lowest common denominator as a manager without fiduciary duties. C. Starwood Misrepresents the Impact of the Merger on Plaintiffs 103. In the Merger Agreement made available to the Starwood and Marriott shareholders, and filed with the Securities Exchange Commission for public consumption, Starwood represented that there are no contracts (other than contracts that have brand-specific radius restrictions) that limit in any material respect the manner or the localities in which the business of Starwood and its subsidiaries is or would be conducted: .. • neither Starwood nor any of its subsidiaries is a party to or bound by ... (iii) any non-competition agreement, any agreement that grants the other party or any third person exclusivity or "most favored nation" status or any other agreement or obligation (in each case other than brand-specific radius restrictions in management or franchise agreements entered into in the ordinary course of business ...) which purports to limit in any material respect the manner in which, 24 26 of 64
  27. 27. or the localities in which, the businesses of Starwood and its subsidiaries, taken as a whole (or, for purposes of this Section 3.1(o) , Marriott and its subsidiaries, taken as a whole, assuming the Combination Transactions have taken place), is or would be conducted ... Merger Agreement at pages 19-20, Article III, Section 3.1(0). 104. As evidenced by the Sheraton Contract and the Westin Contract, both of which have radius restrictions that are not "brand specific" and which will prohibit the operation of approximately 30 hotels in the downtown Chicago and New York City markets, this representation is grossly inaccurate and misleading, if not false. D. Starwood and Marriott Ignore Plaintiffs' Rights 105. There have been few public disclosures concerning the specifics of the integration of Starwood's operations into Marriott. 106. Marriott's Chief Executive Officer has said the "integration plan will evolve as Marriott approaches the closing of the transaction, but at this point [Marriott] anticipate[s] little change in Starwood's brand line-up . . . . While [Marriott's] thinking is quickly evolving, [he] expects Starwood brands to remain in place." 107. It has been announced that the Marriott sales model contemplates its sales associates making available to all customers the full array of branded hotels, including those hotels identified above that sit within the AOPs in the Sheraton Contract and Westin Contract. 108. As a result, the exclusivity rights conferred by the AOPs in the Sheraton Contract and Westin Contract will be rendered meaningless. 109. There also is a palpable absence of discussion or concern about abiding by its fiduciary obligations to hotel owners. In his blog, Marriott's CEO writes: The reasons we took this leap, the largest in our company's 88 years, are two-fold. First, we are confident we can create value for the shareholders of both companies. Second, we are convinced the 25 27 of 64
  28. 28. greater size will help us stay competitive in a quickly-evolving marketplace. * * * So what do we do? First, we want to expand our offerings to ensure we have the right product in the right place to serve our loyal guests and capture new ones. Second, we want to be big enough to be able to cost-effectively invest in marketing and technology to stay front and center for our guests. Third, we want to have the best loyalty programs in the business. This merger does all that. 110. While the putative merger might or might not "do all that," what it does for certain is rob from Plaintiffs the valuable rights for which they bargained. E. Marriott Aids and Abets Starwood in Its Breach of Its Duties 111. Starwood admits that it gave the Sheraton Contract and the Westin Contract to Marriott or otherwise made them available to Marriott. Merger Agreement at pages 18-19, Article III, Section 3.1(o)("Starwood has delivered or made available to Marriott, prior to the execution of this Agreement, true and complete copies of all Starwood Material Contracts not filed as exhibits to the Starwood Filed SEC Documents.") 112. During a recent investor call to discuss the proposed merger, Marriott's CEO explained that Marriott has reviewed the relevant hotel contracts, and specifically has evaluated whether the merger would cause territorial restriction (AOP) issues. 113. Marriott's CEO acknowledged that Marriott is aware of "maybe two hotels" which had contracts that could be problematic but the Marriott CEO deemed it "not a significant issue" and re-affirmed Marriott's intention to proceed with the merger notwithstanding what it considers inconsequential collateral damage. 26 28 of 64
  29. 29. 114. Marriott, by reason of its due diligence regarding the proposed merger and on notice from Starwood, knows of Starwood's contractual and fiduciary duties to the Owners, and that the method and terms of the proposed merger would cause Starwood to violate the contracts. 115. Without Marriott's merger proposal and assistance, including by way of illustration, the acts and omissions described above, Starwood would not have breached its obligations to Plaintiffs by entering into the Merger Agreement. FIRST CAUSE OF ACTION (Permanent Injunction) (Plaintiffs Against All Defendants) 116. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 115 above as if fully set forth herein, 117. By virtue of Defendants' wrongful acts committed to date together with the wrongful conduct Defendants have stated will take place in the future, including Defendants' intentional breach of the AOP clauses in the Sheraton Contract and the Westin Contract, Plaintiffs have sustained significant injury as a proximate result of Defendants' wrongful actions, and will sustain additional future injury which, unless enjoined, will be irreparable. 118. Plaintiffs have no adequate remedy at law. 119. By reason of the foregoing, Plaintiffs are entitled to a permanent injunction enjoining and restraining Defendants, their employees, agents, servants, representatives and any other person or entity acting on their behalf, as follows: (a) enjoining Starwood, Sheraton, Sheraton LLC, Westin and their affiliates from owning, operating, managing or franchising hotels in violation of the AOP clauses in the Sheraton Contract and the Westin Contract, (b) enjoining Starwood, Sheraton, Sheraton LLC, Westin and their affiliates from taking steps to close the Merger Agreement in breach of their fiduciary obligations to Plaintiffs; (c) requiring 27 29 of 64
  30. 30. Marriott to cease all activities that aid, abet and assist Starwood in the on-going violations of the Sheraton Contract and Westin Contract, (d) prohibiting Starwood and Marriott from adopting a plan of integration that will be in violation of the Sheraton Contract or Westin Contract; (e) prohibiting Starwood from providing to Marriott any confidential and/or competitively sensitive information relating to the Sheraton Chicago or the Westin Times Square; and (f) compelling Starwood and Sheraton LLC to guarantee the performance by Sheraton and Westin of their obligations under the Sheraton Contract and Westin Contract, respectively. SECOND CAUSE OF ACTION (Breach of Sheraton Contract) (Cityfront Against Sheraton, Sheraton LLC and Starwood) 120. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 119 above as if fully set forth herein. 121. Cityfront entered into the Sheraton Contract with Sheraton on or about December 18, 1989. Sheraton LLC became a party to the Sheraton Contract on or about December 7, 1998 when the First Amendment to Management Agreement was executed; and Starwood became a party to the Sheraton Contract on December 15, 2000 when it signed the Second Amendment to Management Agreement. 122. In conjunction with the execution of the Sheraton Contract, Cityfront on December 18, 1989 entered into a contract with what is now Sheraton LLC whereby Sheraton LLC guaranteed Sheraton's compliance with its obligations to Cityfront pursuant to the Sheraton Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." (the "Sheraton LLC Guaranty Contract"). 28 30 of 64
  31. 31. 123. Sheraton LLC agreed with Cityfront that it was and is "the intention [of Cityfront and Sheraton LLC] that [Sheraton LLC] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Sheraton Contract] to be performed by [Sheraton] by the terms of the [Sheraton Contract] or by operation of law." (Emphasis added.) 124. In conjunction with the execution of the First Amendment to the Sheraton Contract, Cityfront on December 7, 1998 entered into a contract with Starwood whereby Starwood guaranteed Sheraton's compliance with its obligations to Cityfront pursuant to the Sheraton Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." (the "Starwood Sheraton Guaranty Contract"). 125. Starwood affirmed in the Starwood Sheraton Guaranty Contract that it was and is "the intention [of Cityfront and Starwood] that [Starwood] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Sheraton Contract] to be performed by [Sheraton] by the terms of the [Sheraton Contract] or by operation of law." (Emphasis added.) 126. With Starwood's and Sheraton LLC's explicit written consent, Sheraton, on behalf of itself and its affiliates, agreed that neither it nor its affiliates would operate other hotels within a specified area surrounding the Sheraton Chicago (with certain identified exceptions). 127. Sheraton also agreed for itself and its affiliates, with Starwood's and Sheraton LLC's explicit written consent, that neither it nor its affiliates would agree to or suffer a merger that would result in a violation of the AOP clause. 29 31 of 64
  32. 32. 128. Cityfront, Sheraton, Sheraton LLC and Starwood agreed that the term "affiliates" would be construed very broadly to mean: with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, (a) "control" when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing and (b) "Person" means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, or other entity and any federal, state, county or municipal government or any political subdivision thereof. Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and Starwood Hotels and Resorts Trust and any of the foregoing entities' Affiliates shall be Affiliates of Operator. Sheraton Contract, Seventh Amendment, Schedule A, Page 1, Article XXXII(A) 129. Cityfront, Sheraton, Sheraton LLC and Starwood also agreed that the term "operate" would be construed very broadly to "mean to develop, construct, own, in whole or in part, and/or manage, operate, lease, sublease, finance, provide management or operations services or franchise a Facility (as [therein] defined)." Sheraton Contract, Seventh Amendment, Schedule A, Page 1, Article XXXII(A). A "Facility" was defined as "a hotel, motor inn or similar facility." Id 130. Sheraton's affiliates, including Starwood and Sheraton LLC, were aware that Sheraton was obligating both itself and its affiliates to the terms of the Sheraton Contract and Starwood and Sheraton LLC not only acquiesced in Sheraton's execution of the Sheraton Contract which imposed obligations on Starwood and Sheraton LLC, but (a) became parties to the Sheraton Contract, (b) explicitly consented to the terms of the Sheraton Contract, (c) repeatedly ratified the terms of the Sheraton Contract, and (d) independently guaranteed the performance of the duties set out in the Sheraton Contract. 30 32 of 64
  33. 33. 131. As recently as April 15, 2016, an officer and/or employee of Starwood, on behalf of Starwood, Sheraton and Sheraton LLC, executed the Seventh Amendment to the Sheraton Contract re-affirming and ratifying the contractual and fiduciary obligations set out in the Sheraton Contract. 132. By negotiating the terms of, and entering into the Merger Agreement with Marriott, which will result in Marriott becoming an affiliate of Sheraton (and Starwood) operating competing hotels within the Sheraton Chicago AOP, none of which are permitted by the terms of the Sheraton Contract, Starwood breached its obligations under the Sheraton Contract and also caused Sheraton and Sheraton LLC to be in breach of their obligations under the Sheraton Contract. 133. Cityfront has fully performed all of its obligations under the Sheraton Contract, and all conditions precedent have been satisfied. 134. As a direct and proximate result of Sheraton's breaches of the Sheraton Contract, the Sheraton Chicago's business will be lost and/or diverted with little or no likelihood of being recovered — resulting in injury to Cityfront, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 135. As a direct and proximate result of Sheraton's, Sheraton LLC's and Starwood's breaches of the Sheraton Contract, Cityfront also has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Sheraton, Starwood and their affiliates by virtue of the many past and anticipated future breaches of contract, (iii) disgorgement of all management fees paid by Cityfront to Sheraton during the period that Sheraton has been in flagrant breach of its contractual and fiduciary duties, and (iv) the right to 31 33 of 64
  34. 34. refuse to pay Sheraton's management fees, at a minimum, until such time as Sheraton, Starwood and their affiliates cure their contractual defaults and remedy their breaches of fiduciary duty. THIRD CAUSE OF ACTION (Breach of Westin Contract) (Dream Team Against Westin and Starwood) 136. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 135 above as if fully set forth herein. 137. Dream Team entered into the Westin Contract with Westin on or about December 7, 1998. Westin agreed to act as Dream Team's agent and thereby assumed the fiduciary duties that come with being an agent. The Westin Contract was amended May 30, 2000 and the parties to the Westin Contract at that time ratified the terms of the Westin Contract and re-affirmed their agreement that the Westin Contract remains in full force and effect. 138. Starwood became a party to the Westin Contract for purposes of providing its explicit consent to the ratification of the Westin Contract and acknowledging its guaranty of Westin's agreement, obligations and performance, when it executed on May 30, 2000, the First Amendment to Operating Agreement. 139. In conjunction with the execution of the Westin Contract, on December 7, 1998 Dream Team entered into a contract with Starwood whereby Starwood guaranteed Westin's compliance with its obligations to Dream Team pursuant to the Westin Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Dream Team] ... full, prompt and complete performance by [Westin] of each and all of the terms, covenants, agreements and conditions in the [Westin Contract] contained on the part of [Westin] to be kept, observed and performed." (the "Starwood Westin Guaranty Contract"). 32 34 of 64
  35. 35. 140. Starwood affirmed in the Starwood Westin Guaranty Contract that it was and is "the intention [of Dream Team and Starwood] that [Starwood] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Westin Contract] to be performed by [Westin] by the terms of the [Westin Contract] or by operation of law." (Emphasis added.) 141. Westin, for itself and its affiliates, agreed that neither it nor its affiliates would own, manage, operate or franchise "any Full Service Hotel in the Restricted Area," defined as "the area in New York County, New York bounded to the north by 48th Street, to the east by 6th Avenue, to the south by 34th Street and to the west by the Hudson River;" except as specifically authorized in the Westin Contract. 142. Westin also agreed for itself and its affiliates that it would not agree to or suffer a merger that would result in a violation of the AOP clause. 143. It was agreed by the parties to the Westin Contract that the term "affiliates" would be construed very broadly to mean: with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, (a) "control" when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing and (b) "Person" means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, or other entity and any federal, state, county or municipal government or any political subdivision thereof Starwood Hotel & Resorts Worldwide, Inc. and Starwood Hotels and Resorts Trust and any of the foregoing entities' Affiliates shall be Affiliates of Operators. Westin Contract at Page 16, Section 1.2(A). 33 35 of 64
  36. 36. 144. The parties to the Westin Contract also agreed that the term "operate" would be construed very broadly to mean "to develop, construct, own, in whole or in part, and/or manage, operate, lease, sublease, finance, provide management or operations services or franchise a hotel." Westin Contract at Page 106, Section 9.7(A), 145. By negotiating the terms of and entering into the Merger Agreement with Marriott resulting in Marriott becoming an affiliate of Westin (and Starwood) operating competing hotels within the Westin Time Square AOP, none of which are permitted by the terms of the Westin Contract, Starwood breached its obligations under the Westin Contract and also caused Westin to be in breach of its obligations under the Westin Contract, 146. Starwood also caused a material breach of the Westin Contract when it, Westin or another of their affiliates agreed to own, manage, operate or franchise the Element Times Square, a full service hotel located within the AOP defined in the Westin Contract. 147. Westin, Starwood and/or one of their affiliates continues to own, manage, operate or franchise the Element Times Square in derogation of their contractual and fiduciary obligations to Dream Team. 148. Dream Team has fully performed all of its obligations under the Westin Contract, and all conditions precedent have been satisfied, 149. As a direct and proximate result of Westin's breaches of the Westin Contract, the Westin Times Square's business has been and will continue to be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Dream Team, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 34 36 of 64
  37. 37. 150. As a direct and proximate result of Westin's and Starwood's breaches of the Westin Contract, Dream Team also has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Westin, Starwood and their affiliates by virtue of the many past and anticipated future breaches of contract, (iii) disgorgement of all management fees paid by Dream Team to Westin during the period that Westin, Starwood and their affiliates have been in flagrant breach of their contractual and fiduciary duties, and (iv) the right to refuse to pay Westin's management fees, at a minimum, until such time as Westin, Starwood and their affiliates cure their contractual defaults and remedy their breaches of fiduciary duty. FOURTH CAUSE OF ACTION (Anticipatory Repudiation of Sheraton Contract) (Cityfront Against Sheraton, Sheraton LLC and Starwood) 151. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 150 above as if fully set forth herein. 152. Cityfront entered into the Sheraton Contract with Sheraton on or about December 18, 1989. Sheraton agreed to act as Cityfront's agent and thereby assumed the fiduciary duties that come with being an agent. Sheraton LLC became a party to the Sheraton Contract on or about December 7, 1998 when the First Amendment to Management Agreement was executed; and Starwood became a party to the Sheraton Contract on December 15, 2000 when it signed the Second Amendment to Management Agreement. 153. In conjunction with the execution of the Sheraton Contract, Cityfront on December 18, 1989 entered into a contract with what is now Sheraton LLC whereby Sheraton LLC guaranteed Sheraton's compliance with its obligations to Cityfront pursuant to the Sheraton 35 37 of 64
  38. 38. Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." Sheraton LLC Guaranty Contract. 154. Sheraton LLC agreed with Cityfront that it was and is "the intention [of Cityfront and Sheraton LLC] that [Sheraton LLC] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Sheraton Contract] to be performed by [Sheraton] by the terms of the [Sheraton Contract] or by operation of law." (Emphasis added.) 155. In conjunction with the execution of the First Amendment to the Sheraton Contract, Cityfront on December 7, 1998 entered into a contract with Starwood whereby Starwood guaranteed Sheraton's compliance with its obligations to Cityfront pursuant to the Sheraton Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." Starwood Sheraton Guaranty Contract. . 156. Starwood affirmed in the Starwood Sheraton Guaranty Contract that it was and is "the intention [of Cityfront and Starwood] that [Starwood] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Sheraton Contract] to be performed by [Sheraton] by the terms of the [Sheraton Contract] or by operation of law." (Emphasis added.) 36 38 of 64
  39. 39. 157. With Starwood's and Sheraton LLC's explicit written consent, Sheraton, on behalf of itself and its affiliates, agreed that neither it, nor its affiliates would operate other hotels within a specified area surrounding the Sheraton Chicago (with certain identified exceptions). 158. Sheraton also agreed for itself and its affiliates, with Starwood's and Sheraton LLC's explicit written consent, that neither it nor its affiliates would agree to or suffer a merger that would result in a violation of the AOP clause. 159. Cityfront, Sheraton, Sheraton LLC and Starwood agreed that the term "affiliates" would be construed very broadly to mean: with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, (a) "control" when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing and (b) "Person" means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, or other entity and any federal, state, county or municipal government or any political subdivision thereof. Starwood Hotels & Resorts Worldwide, Inc. ("Starwood") and Starwood Hotels and Resorts Trust and any of the foregoing entities' Affiliates shall be Affiliates of Operator. Sheraton Contract, Seventh Amendment, Schedule A, Page 1, Article XXXII(A). 160. Cityfront, Sheraton, Sheraton LLC and Starwood also agreed that the term "operate" would be construed very broadly to "mean to develop, construct, own, in whole or in part, and/or manage, operate, lease, sublease, finance, provide management or operations services or franchise a Facility (as [therein] defined)." Sheraton Contract, Seventh Amendment, Schedule A, Page 1, Article XXXII(A). A "Facility" was defined as "a hotel, motor inn or similar facility." Id. 37 39 of 64
  40. 40. 161. Sheraton's affiliates, including Starwood and Sheraton LLC, were aware that Sheraton was obligating both itself and its affiliates to the terms of the Sheraton Contract, and Starwood and Sheraton LLC not only acquiesced in Sheraton's execution of the Sheraton Contract which imposed obligations on Starwood and Sheraton LLC, but (a) became parties to the Sheraton Contract, (b) explicitly consented to the terms of the Sheraton Contract, (c) repeatedly ratified the terms of the Sheraton Contract, and (d) independently guaranteed the performance of the duties set out in the Sheraton Contract. 162. As recently as April 15, 2016, an officer and/or employee of Starwood, on behalf of Starwood, Sheraton and Sheraton LLC, executed the Seventh Amendment to the Sheraton Contract affirming and ratifying for itself and its affiliates, which includes Starwood, the contractual and fiduciary obligations set out in the Sheraton Contract. 163. By (i) negotiating the terms of, and entering into the Merger Agreement with Marriott, which will result in Marriott becoming an affiliate of Sheraton, Sheraton LLC and Starwood operating competing hotels within the Sheraton Chicago AOP, none of which are permitted by the terms of the Sheraton Contract, and (ii) announcing its intention to close on the Merger Agreement in the coming months notwithstanding the Sheraton Contract, Starwood breached its obligations under the Sheraton Contract and also caused Sheraton and Sheraton LLC to be in breach of their obligations under the Sheraton Contract. 164. Cityfront has fully performed all of its obligations under the Sheraton Contract to date, and all conditions precedent have been satisfied. 165. As a direct and proximate result of Sheraton's, Sheraton LLC's and Starwood's's anticipatory repudiation of the Sheraton Contract, the Sheraton Chicago's business will be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Cityfront, 38 40 of 64
  41. 41. which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 166. As a direct and proximate result of Sheraton's, Sheraton LLC's and Starwood's anticipatory repudiation of the Sheraton Contract, Cityfront also has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Sheraton, Starwood and their affiliates by virtue of the many past and anticipated future breaches of contract, (iii) disgorgement of all management fees paid by Cityfront to Sheraton during the period that Sheraton has been in flagrant breach of its contractual and fiduciary duties, and (iv) the right to refuse to pay Sheraton's management fees, at a minimum, until such time as Sheraton, Starwood and their affiliates cure their contractual defaults and remedy their breaches of fiduciary duty. FIFTH CAUSE OF ACTION (Anticipatory Repudiation of Westin Contract) (Dream Team Against Westin and Starwood) 167. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 166 above as if fully set forth herein. 168. Dream Team entered into the Westin Contract with Westin on or about December 7, 1998. Westin agreed to act as Dream Team's agent and thereby assumed the fiduciary duties that come with being an agent. The Westin Contract was amended May 30, 2000 and the parties to the Westin Contract at that time ratified the terms of the Westin Contract and re-affirmed their agreement that the Westin Contract remains in full force and effect. 169. Starwood became a party to the Westin Contract for purposes of providing its explicit consent to the ratification of the Westin Contract and acknowledging its guaranty of 39 41 of 64
  42. 42. Westin's agreement, obligations and performance, when it executed on May 30, 2000, the First Amendment to Operating Agreement. 170. In conjunction with the execution of the Westin Contract, on December 7, 1998 Dream Team entered into a contract with Starwood whereby Starwood guaranteed Westin's compliance with its obligations to Dream Team pursuant to the Westin Contract and "unconditionally, absolutely and irrevocably guarantee[d] to [Dream Team] ... full, prompt and complete performance by [Westin] of each and all of the terms, covenants, agreements and conditions in the [Westin Contract] contained on the part of [Westin] to be kept, observed and performed." (the "Starwood Westin Guaranty Contract"). 171. Starwood affirmed in the Starwood Westin Guaranty Contract that it was and is "the intention [of Dream Team and Starwood] that [Starwood] shall remain liable as principal for the performance of all of the terms, covenants, agreements, and conditions of the [Westin Contract] to be performed by [Westin] by the terms of the [Westin Contract] or by operation of law." (Emphasis added.) 172. With Starwood's explicit written consent, Westin, for itself and its affiliates, agreed that neither it nor its affiliates would own, manage, operate or franchise "any Full Service Hotel in the Restricted Area," defined as "the area in New York County, New York bounded to the north by 48th Street, to the east by 6th Avenue, to the south by 34th Street and to the west by the Hudson River;" except as specifically authorized in the Westin Contract. 173. Westin also agreed for itself and its affiliates, with Starwood's explicit written consent, that it would not agree to or suffer a merger that would result in a violation of the AOP clause. 40 42 of 64
  43. 43. 174. Dream Team, Westin and Starwood agreed that the term "affiliates" would be construed very broadly to mean: with respect to any specified Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, (a) "control" when used with respect to any specified Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other beneficial interest, by contract or otherwise; and the terms "controlling" and "controlled" have the meanings correlative to the foregoing and (b) "Person" means any individual, corporation, partnership, limited liability company, joint venture, estate, trust, unincorporated association, or other entity and any federal, state, county or municipal government or any political subdivision thereof. Starwood Hotel & Resorts Worldwide, Inc. and Starwood Hotels and Resorts Trust and any of the foregoing entities' Affiliates shall be Affiliates of Operators. Westin Contract at Page 16, Section 1.2(A). 175. Dream Team, Westin and Starwood also agreed that the term "operate" would be construed very broadly to mean "to develop, construct, own, in whole or in part, and/or manage, operate, lease, sublease, finance, provide management or operations services or franchise a hotel." Westin Contract at Page 106, Section 9,7(A). 176. Westin's affiliates, including Starwood, were aware that Westin was obligating both itself and its affiliates to the terms of the Westin Contract and Starwood not only acquiesced in Westin's execution of the Westin Contract which imposed obligations on Starwood, but (a) became a party to the Westin Contract, (b) explicitly consented to the terms of the Westin Contract, (c) ratified the terms of the Westin Contract, and (d) independently guaranteed the performance of the duties set out in the Westin Contract. 177. By (i) negotiating the terms of and entering into the Merger Agreement with Marriott resulting in Marriott becoming an affiliate of Westin (and Starwood) operating competing hotels within the Westin Time Square AOP, none of which are permitted by the terms 41 43 of 64
  44. 44. of the Westin Contract, and (ii) announcing its intention to close on the Merger Agreement in the coming months notwithstanding the Westin Contract, Starwood breached its obligations under the Westin Contract and also caused Westin to be in breach of its obligations under the Westin Contract. 178. Dream Team has fully performed all of its obligations under the Westin Contract to date, and all conditions precedent have been satisfied. 179. As a direct and proximate result of Westin's and Starwood's anticipatory repudiation of the Westin Contract, the Westin Times Square's business has been and will continue to be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Dream Team, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 180. As a direct and proximate result of Westin's and Starwood's anticipatory repudiation of the Westin Contract, Dream Team also has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Westin, Starwood and their affiliates by virtue of the many past and anticipated future breaches of contract, (iii) disgorgement of all management fees paid by Dream Team to Westin during the period that Westin, Starwood and their affiliates have been in flagrant breach of their contractual and fiduciary duties, and (iv) the right to refuse to pay Westin's management fees, at a minimum, until such time as Westin, Starwood and their affiliates cure their contractual defaults and remedy their breaches of fiduciary duty. 42 44 of 64
  45. 45. SIXTH CAUSE OF ACTION (Breach of Sheraton LLC Guaranty Contract) (Cityfront Against Sheraton LLC) 181. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 180 above as if fully set forth herein. 182. In conjunction with the execution of the Sheraton Contract, Cityfront on December 18, 1989 entered into a contract with what is now Sheraton LLC whereby Sheraton LLC guaranteed Sheraton's compliance with its obligations to Cityfront pursuant to the Sheraton Contract and agreed to indemnify Cityfront for all damages and losses incurred as a result of Sheraton's breaches of its obligations. Sheraton LLC Guaranty Contract. 183. Sheraton LLC "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] ... full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." Id. 184. Sheraton LLC "also agree[d] to indemnify [Cityfront] against all liabilities and pay all of the expenses of [Cityfront], including without limitation reasonable attorneys' fees, incurred in enforcing or preventing a breach of any of the terms, covenants, agreements and conditions of the [Sheraton Contract] or incurred in enforcing this Guaranty, provided [Cityfront] is the prevailing party, and until paid to [Cityfront], such sums will bear interest at the rate of twelve percent (12%) per annum." Id. 185. It was agreed by Cityfront and Sheraton LLC that the Sheraton LLC Guaranty Contract would be and "is a guaranty of payment, performance and compliance." Id. 186. Starwood caused Sheraton to breach the Sheraton Contract by, among other acts, negotiating the terms of and entering into an agreement to merge with Marriott, and in numerous 43 45 of 64
  46. 46. other ways caused Sheraton to breach its fiduciary obligation to act in the best interests of Cityfront, 187. Cityfront has suffered damages and losses as a result of Sheraton's failure to deliver full, prompt and complete performance of its obligations under the Sheraton Contract, and Cityfront has incurred costs, attorneys' fees and expenses in enforcing the terms of the Sheraton Contract and will continue to incur costs, attorneys' fees and expenses to prevent on- going and future breaches of Sheraton's obligations under the Sheraton Contract. 188. As a direct and proximate result of the breaches of the Sheraton Contract, Cityfront has sustained and will continue to sustain injuries for which monetary damages are difficult to calculate and for which monetary damages will not be an adequate remedy. 189. Sheraton LLC has waived, among other things, notice and demand. 190. Cityfront is entitled to relief compelling Sheraton's performance and compliance with Sheraton's obligations as set out in the Sheraton Contract, and is entitled to recover from Sheraton LLC damages for all losses caused by Sheraton's defaults and breaches of fiduciary duty under the Sheraton Contract. SEVENTH CAUSE OF ACTION (Breach of Starwood Sheraton Guaranty Contract) (Cityfront Against Starwood) 191. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 190 above as if fully set forth herein. 192. On December 7, 1998, Cityfront entered into a contract with Starwood whereby Starwood guaranteed Sheraton's performance of and compliance with its obligations to Cityfront pursuant to the Sheraton Contract and agreed to indemnify Cityfront for all damages and losses 44 46 of 64
  47. 47. incurred as a result of Sheraton's breaches of its obligations. Starwood Sheraton Guaranty Contract. 193. Starwood, pursuant to the Starwood Sheraton Guaranty Contract, "unconditionally, absolutely and irrevocably guarantee[d] to [Cityfront] the full, prompt and complete performance by [Sheraton] of each and all of the terms, covenants, agreements and conditions in the [Sheraton Contract] contained on the part of [Sheraton] to be kept, observed and performed." Id. 194. Starwood "also agree[d] to indemnify [Cityfront] against all liabilities and pay all of the expenses of [Cityfront], including without limitation reasonable attorneys' fees, incurred in enforcing or preventing a breach of any of the terms, covenants, agreements and conditions of the [Sheraton Contract] or incurred in enforcing this Guaranty, provided [Cityfront] is the prevailing party, and until paid to [Cityfront], such sums will bear interest at the rate of twelve percent (12%) per annum." Id. 195. It was agreed by Cityfront and Starwood that Starwood's guaranty would be and "is a guaranty of payment, performance and compliance." Id. 196. Starwood caused Sheraton to breach the Sheraton Contract by, among other acts, negotiating the terms of and entering into an agreement to merge with Marriott, and in numerous other ways caused Sheraton to breach its fiduciary obligation to act in the best interests of Cityfront. 197. Cityfront has suffered damages and losses as a result of Sheraton's failure to deliver full, prompt and complete performance of its obligations under the Sheraton Contract, and Cityfront has incurred costs, attorneys' fees and expenses in enforcing the terms of the 45 47 of 64
  48. 48. Sheraton Contract and will continue to incur costs, attorneys' fees and expenses to prevent on- going and future breaches of Sheraton's obligations under the Sheraton Contract. 198. As a direct and proximate result of Sheraton's breaches of the Sheraton Contract, Cityfront has sustained and will continue to sustain injuries for which monetary damages are difficult to calculate and for which monetary damages will not be an adequate remedy. 199. Starwood has waived, among other things, notice and demand. 200. Cityfront is entitled to relief compelling Sheraton's performance of and compliance with Sheraton's obligations contained in the Sheraton Contract and is entitled to recover from Starwood damages for all losses caused by Sheraton's defaults and breaches of fiduciary duty under the Sheraton Contract. EIGHTH CAUSE OF ACTION (Breach of Starwood Westin Guaranty Contract) (Dream Team Against Starwood) 201. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 200 above as if fully set forth herein. 202. In conjunction with the execution of the Westin Contract, Dream Team on December 7, 1998 entered into a contract with Starwood whereby Starwood guaranteed Westin's compliance with its obligations to Dream Team pursuant to the Westin Contract and agreed to indemnify Dream Team for all damages and losses incurred as a result of Westin's breach of its obligations. Starwood Westin Guaranty Contract. 203. Starwood, pursuant to the Starwood Westin Guaranty Contract, "unconditionally, absolutely and irrevocably guarantee[d] to [Dream Team] the full, prompt and complete performance by [Westin] of each and all of the terms, covenants, agreements and conditions in the [Westin Contract] contained on the part of [Westin] to be kept, observed and performed." Id. 46 48 of 64
  49. 49. 204. Starwood "also agree[d] to indemnify [Dream Team] against all liabilities and pay all of the expenses of [Dream Team], including without limitation reasonable attorneys' fees, incurred in enforcing or preventing a breach of any of the terms, covenants, agreements and conditions of the [Westin Contract] or incurred in enforcing this Guaranty, provided [Dream Team] is the prevailing party, and until paid to [Dream Team], such sums will bear interest at the rate of twelve percent (12%) per annum." Id. 205. It was agreed by Dream Team and Starwood that Starwood's guaranty would be and "is a guaranty of payment, performance and compliance." Id. 206. Starwood caused Westin to breach the Westin Contract by, among other acts, negotiating the terms of and entering into an agreement to merge with Marriott, and in numerous other ways caused Westin to breach its fiduciary obligation to act in the best interests of Dream Team. 207. Dream Team has suffered damages and losses as a result of Westin's failure to deliver full, prompt and complete performance of its obligations under the Westin Contract, and Dream Team has incurred costs, attorneys' fees and expenses in enforcing the terms of the Westin Contract and will continue to incur costs, attorneys' fees and expenses to prevent on- going and future breaches of Westin's obligations under the Westin Contract. 208, As a direct and proximate result of Westin's breaches of the Westin Contract, Dream Team has sustained and will continue to sustain injuries for which monetary damages are difficult to calculate and for which monetary damages will not be an adequate remedy. 209, Starwood has waived, among other things, notice and demand. 210. Dream Team is entitled to relief compelling Westin's performance of and compliance with Westin's obligations contained in the Westin Contract and is entitled to recover 47 49 of 64
  50. 50. from Starwood damages for all losses caused by Westin's defaults and breaches of fiduciary duty under the Westin Contract. NINTH CAUSE OF ACTION (Claim for Breach of Fiduciary Duty) (Cityfront Against Sheraton, Sheraton LLC and Starwood) 211. Cityfront repeats and realleges the allegations contained in paragraphs 1 through 210 above as if fully set forth herein. 212. An agency relationship exists between Cityfront on the one hand and Sheraton, Sheraton LLC and Starwood on the other, by virtue of the express terms of the Sheraton Contract. By virtue of Cityfront's entrustment of the management of the Sheraton Chicago and the handling of the revenues, operating funds and proceeds related thereto, a fiduciary relationship was created and continues to exist between the parties. 213. Starwood, Sheraton LLC and Sheraton owe Cityfront the highest fiduciary obligations and utmost duties of loyalty, good faith, fair dealing and full disclosure by virtue of the fiduciary relationship between the parties. Starwood, Sheraton LLC and Sheraton were obliged as fiduciaries not to engage in self-dealing or otherwise to promote its interests at the expense of and to the detriment of Cityfront. 214. By reason of Starwood's, Sheraton LLC's and Sheraton's intentional, knowing and wrongful acts, including but not limited to promoting their own interests to the detriment of Cityfront and the Sheraton Chicago, Starwood, Sheraton LLC and Sheraton breached their fiduciary duties to Cityfront. 215. As a direct and proximate result of Starwood's, Sheraton LLC's and Sheraton's breaches of their fiduciary duties to Cityfront, the Sheraton Chicago's business will be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Cityfront, 48 50 of 64
  51. 51. which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 216. As a direct and proximate result of Starwood's, Sheraton LLC's and Sheraton's breaches of fiduciary duty, Cityfront has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Starwood, Sheraton LLC and Sheraton and their affiliates by virtue of the many past and anticipated future breaches of fiduciary duty, (iii) disgorgement of all management fees paid by Cityfront to Starwood, Sheraton LLC, Sheraton and their affiliates during the period that Starwood, Sheraton LLC, Sheraton and their affiliates have been in flagrant breach of their fiduciary duties, and (iv) the right to refuse to pay Sheraton's management fees, at a minimum, until such time as Starwood, Sheraton LLC, Sheraton and their affiliates purge themselves of their overt disloyalty. TENTH CAUSE OF ACTION (Claim for Breach of Fiduciary Duty) (Dream Team Against Westin and Starwood) 217. Dream Team repeats and realleges the allegations contained in paragraphs 1 through 216 above as if fully set forth herein. 218. An agency relationship exists between Dream Team on the one hand and Starwood and Westin on the other by virtue of the express terms of the Westin Contract and by the performance of Starwood and Westin thereunder. By virtue of Dream Team's entrustment of the management of the Westin Times Square and the handling of the revenues, operating funds and proceeds related thereto, a fiduciary relationship was created and continues to exist between the parties. 49 51 of 64
  52. 52. 219. Starwood and Westin owe Dream Team the highest fiduciary obligations and utmost duties of loyalty, good faith, fair dealing and full disclosure by virtue of the fiduciary relationship between the parties. Starwood and Westin were obliged as a fiduciaries not to engage in self-dealing or otherwise to promote their interests at the expense of and to the detriment of Dream Team. 220. By reason of Starwood's and Westin's intentional, knowing and wrongful acts, including but not limited to promoting their own interests to the detriment of Dream Team and the Westin Times Square, Starwood and Westin have breached their fiduciary duties to Dream Team. 221. As a direct and proximate result of Starwood's and Westin's breaches of their fiduciary duties to Dream Team, the Westin Times Square's business will be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Dream Team, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 222. As a direct and proximate result of Starwood's and Westin's breaches of fiduciary duty, Dream Team has sustained injuries for which compensation is sought in the form of (i) compensatory, consequential and punitive damages in an amount to be determined at the time of trial, (ii) disgorgement of all profits earned by Starwood, Westin and their affiliates by virtue of the many past and anticipated future breaches of fiduciary duty, (iii) disgorgement of all management fees paid by Dream Team to Starwood, Westin and their affiliates during the period that Starwood and Westin have been in flagrant breach of their fiduciary duties, and (iv) the right to refuse to pay Westin's management fees, at a minimum, until such time as Westin, Starwood and their affiliates purge themselves of their overt disloyalty. 50 52 of 64
  53. 53. ELEVENTH CAUSE OF ACTION (Aiding and Abetting Breach of Fiduciary Duty) (Plaintiffs Against Marriott) 223. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 222 above as if fully set forth herein. 224. Starwood, Sheraton, Sheraton LLC and Westin have breached their fiduciary duties to Cityfront and Dream Team by promoting their own interests to the detriment of the Hotels, including by way of illustration, committing the acts and omissions described above. 225. Marriott, by reason of its due diligence regarding the proposed merger and on notice from Starwood, knew of Starwood's, Sheraton's, Sheraton LLC's and Westin's fiduciary duty to Plaintiffs, and that the method and terms of the Merger Agreement would cause Starwood, Sheraton LLC, Sheraton and Westin to violate those duties. 226. Without Marriott's merger proposal and assistance, including by way of illustration, the acts and omissions described above, Starwood, Sheraton, Sheraton LLC and Westin could not have breached their fiduciary duties towards Plaintiffs by Starwood entering into the Merger Agreement. 227. By reason of Marriott's aiding and abetting, the Hotels' business will be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Plaintiffs, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 228. By reason of Marriott's aiding and abetting, Plaintiffs also have been damaged in an amount to be determined at trial, plus interest. 229. The foregoing actions of Marriott were wanton, willful and malicious. Plaintiffs therefore are entitled to an award of compensatory damages in an amount to be determined at 51 53 of 64
  54. 54. trial and punitive damages in the amount at least three times the amount of compensatory damages. TWELFTH CAUSE OF ACTION (Tortious Interference With Contract) (Plaintiffs Against Marriott) 230. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 229 above as if fully set forth herein. 231. The Sheraton Contract is a valid and enforceable contract among Starwood, Sheraton LLC, Sheraton and Cityfront for the management of the Sheraton Chicago. 232. The Westin Contract is a valid and enforceable contract among Starwood, Westin and Dream Team for the management of the Westin Times Square. 233. Those contracts establish that Starwood, Sheraton, Sheraton LLC and Westin are the agents of Plaintiffs, with all attendant duties and responsibilities of agency, including fiduciary duties. 234. In addition, those contracts establish AOPs surrounding the Sheraton Chicago and Westin Times Square. 235. Starwood and Sheraton LLC entered into valid contracts with Cityfront and Dream Team guaranteeing Sheraton's and Westin's performance of their duties set out in the Sheraton Contract and the Westin Contract. 236. Marriott, by reason of its due diligence regarding the proposed merger and on notice from Starwood, knew about Starwood's, Sheraton LLC's, Sheraton's and Westin's contractual duties to Plaintiffs. 237. Marriott knowingly and intentionally interfered with the Sheraton Contract, the Westin Contract and the three guaranty contracts by proposing a merger, the method and terms 52 54 of 64
  55. 55. of which have caused Starwood and the Starwood affiliates Sheraton, Sheraton LLC and Westin to breach their express and implied obligations to Plaintiffs. 238. By reason of Marriott's tortious interference, the Hotels' business will be lost and/or diverted — with little or no likelihood of being recovered — resulting in injury to Plaintiffs, which may be difficult if not impossible to quantify with reasonable precision and therefore for which no adequate remedy exists at law. 239. By reason of Marriott's tortious interference, Plaintiffs also have been damaged in an amount to be determined at trial, plus interest. 240. The foregoing actions of Marriott were wanton, willful and malicious. Plaintiffs therefore are entitled to an award of compensatory damages in an amount to be determined at trial and punitive damages in the amount of at least three times the amount of compensatory damages. THIRTEENTH CAUSE OF ACTION (Unjust Enrichment) (Plaintiffs Against All Defendants) 241. Plaintiffs repeat and reallege the allegations contained in paragraphs 1 through 240 above as if fully set forth herein. 242. The Sheraton Contract is a valid and enforceable contract between Starwood and Cityfront for the management of the Sheraton Chicago. 243. The Westin Contract is a valid and enforceable contract between Starwood and Dream Team for the management of the Westin Times Square. 244. As alleged herein, Defendants have engaged in self-dealing at the expense of Plaintiffs and have stated their intention to continue to engage in their wrongful conduct to the detriment of the Plaintiffs. As a direct result of their wrongful conduct, Defendants have been 53 55 of 64

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