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COURT WATCH

By Susan H. Morton and David W. Oppenheim
August 26, 2003

Franchisor Did Not Commit Fraud Concerning Transfer Approval

The Kentucky Court of Appeals has recently affirmed a trial court's decision to grant summary judgment in favor of a franchisor against the purchaser of one Holiday Inn hotel franchise where the purchaser alleged that it purchased the franchise based on the franchisor's oral representations that it would approve the transfer unconditionally, but the franchisor later conditioned approval on renovation of the hotel. Rivermont Inn, Inc. v. Bass Hotels and Resorts, Inc. and Holiday Hospitality Franchising, Inc., 2003 WL 1786650 (Ky. App. 2003).

Rivermont Inn, Inc. ('Rivermont') purchased an existing Holiday Inn hotel in Louisville, KY, from one of Bass Hotels and Resorts, Inc. ('Bass') and Holiday Hospitality Franchising, Inc.'s ('Holiday') existing franchisees. (Rivermont already operated another Holiday Inn franchise in Indiana.) Rivermont intended to continue to operate the hotel as a Holiday Inn. However, the franchise agreement for the location provided that, although the franchises were transferable, Holiday had the right to approve or disapprove of the transfer.

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