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Further Developments in Ritz-Carlton Case

U.S. Court Declares that Indonesian Owners Entitled to Terminate Management Agreement with Marriott Hotels.

(5/3/2008) As reported on Balidiscovery.com in February 2008, Karang Mas Sejahtera (KMS), the Indonesian owners of the Ritz-Carlton Bali Resort & Spa, were awarded US$10 million in damages by a Maryland Federal (U.S.) jury who found the that Marriott International, who own the Ritz-Carlton brand, had violated a non-competition exclusivity agreement by participating in the development of a second hotel in Bali, the Bulgari Resort. [See: U.S. Jury Awards US$10 to Ritz-Carlton Bali Owners]

In a subsequent ruling by the Federal Court in Maryland dated on April 25, 2008, and issued on April 29, 2008, the judges ruled on a number of post-trial motions filed on behalf of the Indonesian owners:

• The Court denied “Marriott’s motion in all respects,” except as regards issuing a final ruling on Marriott’s assertion that the punitive damage award of US$10 million was excessive.

• The Court granted the Indonesian owner’s request for declaratory relief which opens the way for Karang Mas Sejahtera (KMS) to, at its option, terminate its relationship with Ritz-Carlton.

• The Court denied KMS’ request for “disgorgement and forfeiture” of fees paid by them to Ritz-Carlton.

In rejecting the request for a refund of management fees paid to Ritz-Carlton by KMS, the Court nonetheless did declare that the Indonesian owners are entitled to end the Operating Agreement with Marriott/Ritz-Carlton. It should be noted, however, that it is both unclear and uncertain if KMS’ intention is to exercise its right to end its relationship with Ritz-Carlton.

A further hearing in the case, set for this Summer, will adjudicate whether or not the February jury award of US$382,304 in compensatory damages will be sufficient to meet the attorney fees incurred by KMS in bringing the matter before the U.S. Courts.

Marriott is also expected to appeal the case before the Courts.