Michael P. Chipko

Max Billek (Partner-New Jersey) and Mike Chipko (Partner-New Jersey) obtained an order granting summary judgment to the firm’s client, a third-party defendant and hotel management company, involving a franchise dispute. The hotel management company initiated a breach of contract action against its franchisee for the unilateral and untimely termination of a franchise agreement. Franchisee then filed a Third-Party Complaint for indemnification against the company, arguing that its mismanagement, including acts of embezzlement, had forced the franchisee to shut down its operation in breach of the franchise agreement. Before that, a termination agreement and release was entered into between the parties and a new management company retained. The termination agreement contained a Texas choice of law provision. In bringing the Third-Party Complaint, franchisee argued that pursuant to Texas law, the termination agreement and release were ineffective as to the indemnification claims because the embezzlement and fraud of workers hired by the management company were not covered within the scope of the release. The court first agreed that there was no discernable conflict between New Jersey and Texas law and therefore New Jersey law would govern the termination agreement, and found that the indemnification claims were within the scope of the release and any prior obligations of the management company had been terminated in their entirety. In doing so, the court further found that the franchisee’s interpretation of the release conflicted with unambiguous terms of the agreement that would have rendered the entire contract meaningless. Accordingly the matter was dismissed with prejudice.