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Friday, June 14, 2024 | Back issues
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Marriott Fights Hawaii Hotel Takeover

HONOLULU (CN) - Marriott Hotels claims a competitor executed a "forceful and hostile takeover" of the Marriott's new luxury hotel in Honolulu, hacking into its computers and sending "dozens of hired security guards" to commandeer the hotel and "ransack" it for proprietary information.

Marriott claims its rival went so far as to cut off Marriott labels from hotel towels and paste over the trade name on the little toiletry bottles.

Marriott Hotel Services sues Aqua Hotels and Resorts and W. Christian Oles, Marriot's own head of security at the Waikiki Edition Hotel, who allegedly cooperated with Aqua.

Marriott says it was managing the hotel for its owner under a 30-year contract. It was the first Marriott Hotel to open under the new Edition brand. Marriott says it expected to collect $65 million in management fees over the 30 years, with the right to two 10-year extensions.

However, "It had been publicly reported that Marriott was at odds with the hotel's owner and that their disputes would be decided by a New York Court," according to the federal complaint. "After learning of the dispute between Marriott and the owner, Aqua saw a multimillion-dollar opportunity."

In its alarming 55-page complaint, Marriott claims Aqua, which manages 17 "midlevel" hotels in Hawaii, felt that it could not compete with the luxury Waikiki Edition, which opened in September 2010.

"Aqua commended a takeover plan," according to the federal complaint.

"It covertly enlisted the aid of Marriott's head of security at The Waikiki Edition, Christian Oles, to assist with the takeover. And it engaged a computer consultant to crack Marriott's passwords and access the hotel's computers once on property. The takeover was planned and executed by Aqua's senior management, led by Aqua's founder and chairman, Michael V. Paulin, Aqua's CEO and president, Benjamin Rafter, and Aqua's vice president of finance, William R. Farnsworth Jr.

"With Oles acting as Aqua's 'inside man,' the takeover was initially planned for August 27, 2011. Plans changed when Oles advised Aqua's takeover team that Marriott's lawyers were at the hotel that day in connection with litigation concerning The Waikiki Edition that was pending in New York. Apparently afraid that the lawyers would interfere with the takeover, they waited for Marriott's lawyers to leave, and then proceeded. Aqua planted senior executives as fake guests of the hotel on the evening of August, 27, 2011, and waited for nightfall.

"At approximately 2:30 a.m. on August 28, 2011, Aqua's management team entered the hotel, flanked by dozens of hired security guards. Although Oles was not ordinarily scheduled to work that night, he had traded shifts with another employee in order to facilitate and assist with the takeover. His first step was to hand over to Aqua the keys to the offices of Marriott's managers.

"The Aqua team immediately began cracking into the hotel's computers and printing Marriott's proprietary information. They also ransacked Marriott's paper files, seeking competitively sensitive information about Marriott guests and potential sales leads that they wished to exploit and convert to Aqua.

"At the same time, the Aqua team assembled all of Marriott's employees present at the hotel in the hotel lobby and told them that the hotel was under new management. It was now to be called the 'Modern Honolulu' and to be managed by Aqua. The Aqua security guards escorted Marriott's top managers, with the exception of Christian Oles, off the property and told them not to return. They advised the remaining employees that they would have to sign on with Aqua or face termination.

"Three days later Marriott obtained a temporary restraining order ('TRO') from a New York court requiring Marriott's return to management. Aqua refused to comply. Even after the court-imposed deadline requiring Marriott's return, Aqua instructed its security guards to block Marriott and its attorneys from entering the hotel. This action afforded the owner time to file for bankruptcy, staying the TRO and allowing Aqua additional days with unfettered access to Marriott's proprietary and confidential files until a Hawai'i federal bankruptcy judge stepped in a week later.

"As a result of Aqua's action, Marriott has suffered significant harm. Its hotel management agreement, worth more than $65 million dollars, has been effectively stolen by a direct competitor; its sensitive proprietary information has been ransacked; and its guests, group customers, and employees have been poached. The takeover has created a cloud of controversy around Marriott's nascent Edition brand, severely damaging both that brand and Marriott's reputation and goodwill, which it has painstakingly developed through decades of expert hotel management and superior customer service. Defendants' action constitute clear violations and federal and state law, and Marriott prays this court for relief."

Marriot claims the takeover wreaked havoc, that one guest wrote of the experience: "With the crazy level of room noises, we decided to change hotels. Trying to check out, the lobby was a MADHOUSE of people at 11 a.m. Sunday morning. Security guards (we counted about 25) were all over, like some third world country coup, surrounding the perimeter of the building and inside the PACKED LOUD lobby. ... Want to have a TERRIBLE experience at a 'luxury' hotel that has a new and VERY DISHONEST management? Then you'll stay at whatever the new name is at 1775 Ala Moana Blvd. in Honolulu."

Marriott says that another guest wrote that employees donned mismatched outfits, "Edition" tags on towels were cut off and toiletry bottles got covered with "Modern" stickers.

Marriott wants its proprietary information returned, imposition of a constructive trust on the hotel's income, disgorgement, an injunction and treble damages for unfair competition, tortious interference, civil conspiracy and computer fraud and abuse.

It is represented by Paul Alston with Alston Hunt Floyd & Ing.

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