Contract – Misrepresentation

Where a complaint has been filed over the conveyance of a leasehold interest in commercial property, the plaintiff cannot prove a breach of contract or any actionable fraud, so the defendants should be awarded summary judgment.

“In 2012, Doyle Back Bay LLC (‘DBB’) conveyed its leasehold interest in commercial property at 154 Berkeley Street in Boston (‘the Property’) to a joint venture created by Headquarters Hotel LLC (‘Headquarters’), also known as Saunders Hotel Group, for $90 million. DBB’s sole shareholder and member, Doyle US Holdings Inc. (‘Doyle US’), asserts claims against Headquarters and one of its managers, Gary Saunders (‘Saunders’), arising out of that transaction. Doyle US asserts that Headquarters concealed, and Doyle US only recently learned, that defendants made material misrepresentations to DBB during that transaction. …

“Count I of the Amended Complaint alleges that Headquarters breached §18.7 of the [Estate for Years Agreement (EYA)] by invoking the [right of first offer (ROFO)] and by secretly agreeing to receive $6.5 million more for DBB’s interest than Headquarters paid to DBB. Notably, §18.7 does not expand the parties’ obligations under the EYA, but expressly requires the parties ‘to pursue in good faith and with due diligence the purposes set forth’ in the EYA, ‘including all acts required … by the terms’ of the EYA.

“In Count II, based on the same alleged conduct, Doyle US alleges a breach of the implied covenant of good faith and fair dealing. …

“Because §18.7 and the implied covenant do not expand or create rights ‘not otherwise provided’ by the original contract, … I must begin my analysis of both Counts I and II by revisiting the parties’ obligations under the EYA related to the ROFO. The EYA gave Headquarters the right to exercise the ROFO to purchase DBB’s interest in the Property, to negotiate a purchase price for DBB’s interest that was different from the price DBB initially proposed, and to propose that the purchaser of DBB’s interest would be an entity (here, the Joint Venture) other than Headquarters. In regard to the exercise of the ROFO, DBB was aware that it was on the opposite side of the negotiating table from Headquarters. There was nothing wrong with Headquarters trying to persuade DBB to take a lower price or different terms for Headquarters to purchase DBB’s interest. Nothing in the EYA required Headquarters to tell DBB if it had another deal in its back pocket and, if it did, what the terms of that deal were. In short, the material facts do not demonstrate that Headquarters breached any term of the EYA. Accordingly, Headquarters is entitled to judgment on Counts I and II of the Amended Complaint. …

“Count III asserts a fraud claim based on defendants’ failure to disclose to DBB that Loews [Hotels and Resorts] would pay $96.5 million for DBB’s interest. It also asserts fraud based on Saunders’ representation that $90 million was the highest market value for DBB’s interest when he knew that Loews would pay $6.5 million more. …

“To the extent Doyle US’s fraud claim depends on an omission — defendants’ failure to disclose the terms of Headquarters’ deal with Loews (i.e. that it would pay $94.5 million and $2 million in additional consideration) — Doyle US must be able to prove that Headquarters had ‘a duty requiring disclosure.’ … Here, there is no basis to find that Headquarters had any duty to disclose the terms of its deal with Loews. As described above, Headquarters had no contractual duty to make such a disclosure, … and it owed DBB no fiduciary or other duty; indeed, in exercising the ROFO, Headquarters and DBB were both sophisticated commercial competitors.

“To the extent the fraud claim depends on material misstatements by Saunders during or in conjunction with the conversation on December 11, 2012, DBB did not rely on those representations in deciding to accept Headquarters counteroffer of $90 million in cash soon. Nor would it have been reasonable for DBB to rely on Saunders’ representations. Saunders was on the opposite side of a large business transaction and he was negotiating against DBB. Saunders’ alleged false statement was on a matter of opinion — real estate valuation — on which reasonable people could differ and on which DBB had already formulated an opinion. DBB was a sophisticated real estate holder, had consulted valuation experts of its own, had made its own assessment of the fair market value of its interest under the EYA, and presented the decision to its experienced board. It would not have been reasonable for DBB to rely on a valuation opinion offered by Saunders. Headquarters is entitled to judgment on Count III.

“The count brought under G.L.c. 93A (Count IV) is derivative of the fraud claim. Where plaintiff cannot prevail on its fraud claim, it has no basis to assert a claim under G.L.c. 93A. …

“Defendants Headquarters Hotel LLC and Gary Saunders’ Motion for Summary Judgment (Docket #31) is allowed. Plaintiff Doyle US Holdings Inc.’s Cross-Motion for Summary Judgment (Docket #37) is denied. Judgment shall enter for defendant.”

Doyle US Holdings Inc. v. Headquarters Hotel LLC, et al. (Lawyers Weekly No. 09-028-25) (10 pages) (Krupp, J.) (Suffolk Superior Court) (Civil No. 23-65-BLS1) (Feb. 12, 2025).

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