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UNITED STATES DISTRICT COURTSOUTHERN DISTRICT OF NEW YORK

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v.

ECF CASEMADISON 92nd STREET ASSOCIATES, LLC,

Plaintiff, Civil Action No.: 13 CIV. ----

MARRIOTT INTERNATIONAL, INC., HOSTHOTELS & RESORTS, INC., DIAMONDROCKHOSPITALITY CO., and the NEW YORKHOTEL & MOTEL TRADES COUNCIL, AFL-CIO,

COMPLAINTAND DEMAND FOR JURy TRIAL

Defendants.

as and for its complaint against defendants Marriott International, Inc. ("Marriott"), Host Hotels

& Resorts, Inc. ("Host"), DiamondRock Hospitality Co. ("DiamondRock") (collectively, the

"Defendant Hotel Owners"), and the New York Hotel & Motel Trades Council, AFL-CIO (the

"Union") (together with the Defendant Hotel Owners, "Defendants"), alleges with knowledge of

its own acts and acts taking place in its presence and upon information and belief as to all other

matters, as follows:

SUMMARY OF THE ACTION

1. This case arises out of a fraudulent scheme and ongoing anticompetitive

conspiracy between and among Defendants - a labor organization and employers - to

eliminate non-union participants from the New York City hotel market by imposing unionization

on Madison and other owners of non-unionized hotels under Marriott's management. In the Fall

of 2002, Defendants abandoned the traditional arms-length labor-management relationship and

joined forces in a secret agreement in which Marriott agreed to grease the skids for the Union's

organizing campaign at certain Marriott-branded hotels (the "Non-Preferred Hotels"), including

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Case 1:13-cv-00291-CM Document 1 Filed 01/13/13 of 68

Host, DiamondRock, and Marriott; (d) guarantee the Union revenue from thousands of new

dues-paying hotel workers at the Non-Preferred Hotels; (e) secure for the Union's members

supra-competitive wages and benefits; (f) deprive the workers at the Preferred Hotels of their

associational rights under federal labor law; and (g) eliminate the choice non-union hotels offer

consumers in the Relevant Market (as defined below).

4. As a result of Defendants' fraudulent scheme and illegal conspiracy, Defendants

have been unjustly enriched by hundreds of millions of dollars, while Madison, the other owners

of Non-Preferred Hotels, and consumers have suffered tens of millions of dollars in harm.

5. Madison became a victim of Defendants' fraudulent scheme and illegal

conspiracy in 2002, when it was fraudulently induced to enter into a management agreement

entrusting the operation of its hotel located at 410 E. 92nd Street, New York, New York (the

"Hotel") to Marriott's affiliate and co-conspirator, Courtyard Management Corporation

("Courtyard"). Madison selected Courtyard to manage the Hotel under the "Courtyard by

Marriott" brand name because Courtyard and Marriott repeatedly assured Madison that Marriott

was a non-union company, that Courtyard would employ a non-union workforce at the Hotel,

and that as a result the Hotel would achieve higher occupancy rates, average daily room rates

("ADR"), and revenues per available room ("RevPAR") - the hotel industry's three key

performance metrics - under the Marriott brand than it would under management by any of

Marriott's competitors.

6. Madison did not know, and could not have known, at the time it entrusted the

Hotel to Courtyard, that Courtyard and Marriott had already entered into negotiations with the

Union which culminated in the Secret Agreement, guaranteeing that the workforce at the Hotel

would become unionized shortly after its opening and that the Hotel would therefore never meet

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the performance projections made by Courtyard and Marriott to induce Madison to enter into the

Management Agreement.

7. Immediately after the Hotel's opening, in August 2006, unbeknownst to Madison,

Courtyard and the Union forced unionization on the workers at the Hotel by using a coercive

card check and other tactics to rig a sham vote to clear the way for the Union to "represent" the

workers at the Hotel. After forcing unionization on the workers at the Hotel in accordance with

the Secret Agreement, Marriott and the Union further colluded to work out solely between

themselves a secret work rules agreement to govern the Hotel that had the purpose and effect of

raising the Hotel workers' pay and benefits above competitive levels and creating more jobs for

the Union's membership (the "Work Rules Agreement"). As a result of the Work Rules

Agreement, the number of permanent employees at the Hotel increased by more than forty seven

percent (47%); operating costs skyrocketed by more than $2 million annually; and the Hotel's

net operating income dropped by approximately fifty percent (50%) to $4 million per year.

8. Ultimately, due to the Hotel's abysmal financial performance over several years

as a result of the forced unionization of its workers by Defendants, Madison was driven into

bankruptcy, where the Hotel was sold for a fraction of its true value.

9. Madison now seeks compensatory damages in excess of $50 million, treble

damages, disgorgement of Defendants' unjust enrichment in excess of $350 million, and

injunctive relief from Defendants' continued violations of federal and state law. Madison asserts

claims under the Sherman Act, 15 U.S.c. §§ 1 et seq.; the Federal Racketeer Influenced and

Corrupt Organizations Act ("RICO"), 18 U.S.c. §§ 1961 et seq.; and the common law of New

York.

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THE PARTIES

10. Plaintiff Madison is a Delaware limited liability company, with its principal place

of business in New York, New York. Madison is the former owner of the Upper East Side

Courtyard by Marriott, located at 410 E. 92nd Street, New York, New York. Madison entered

into a management agreement with Courtyard on October 7, 2002 pursuant to which Courtyard

agreed to ensure the efficient and proper operation of the Hotel, and to manage the Hotel as a

"reasonable [and] prudent operator" (the "Management Agreement").

11. Defendant Marriott is a Delaware corporation with its principal place of business

in Bethesda, Maryland. Marriott is a hotel-management company and operates more than 3,700

properties in 74 countries under its broad brand portfolio, including Courtyard by Marriott.

12. Defendant Host spun off from Marriott in 1993, and currently owns, among other

properties, six hotels in New York City, including the Marriott Marquis and the New York

Marriott Downtown, formerly known as the Marriott Financial Center. Both hotels are operated

and managed by Marriott pursuant to a long-term management agreement between Host and

Marriott.

13. Defendant DiamondRock spun off from Marriott in 2005, and currently owns,

among other properties, four hotels in New York City, including the Courtyard Manhattan

Midtown East and Courtyard Manhattan Fifth Avenue, both of which are operated and managed

by Marriott pursuant to a long-term management agreement between DiamondRock and

Marriott. As part of the spin-off, DiamondRock took ownership of the Courtyard Manhattan

Midtown East and agreed to join the anticompetitive fraudulent scheme and illegal conspiracy

among Host, Marriott, and the Union, and accept the protection from unionization afforded by

the Secret Agreement. As consideration for the benefit of the Secret Agreement, DiamondRock

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agreed to use a Marriott subsidiary to manage the Manhattan Midtown East hotel.

14. Defendant Union is organized under the laws of the State of New York, and has

its principal place of business in New York, New York. The Union is the union of hotel workers

in the New York City metropolitan area, representing approximately 30,000 non-managerial

hotel employees.

THE CO-CONSPIRATORS

15. Certain known and unknown individuals and entities that are not named as

Defendants in this Complaint also participated as co-conspirators in the violations alleged and

performed acts and made statements during and in furtherance thereof.

16. Defendants' co-conspirators include among others Courtyard, which manages

hotels in New York City other than the Hotel including the Fifth A venue Courtyard and the

Third A venue Midtown Courtyard. Courtyard is a party to the Management Agreement.

17. The acts charged in the Complaint as having been performed by Defendants and

their co-conspirators were authorized, ordered, or performed by their directors, officers, agents,

employees, or representatives, while engaged in their employment or business duties and acting

within the scope of their actual, implied, or apparent authority.

JURISDICTION AND VENUE

18. This Court has subject matter jurisdiction over Madison's claims under the

Sherman Act pursuant to 28 U.S.c. §§ 1331 and 1337(a); over Madison's RICO claims pursuant

to 28 U.S.c. § 1331 and 18 U.S.c. § 1964(a); and over Madison's New York state law claims

pursuant to 28 U.S.c. § 1367.

19. Madison is entitled to sue for relief from Defendants' violation of the Sherman

Act pursuant to 15 U.S.c. § 15, and the RICO Act pursuant to 18 U.S.c. § 1964(c).

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20. Venue is proper in this District pursuant to 15 U.S.c. § 22, 18 U.S.c. § 1965(a),

and 28 U.S.c. § 1391(b).

21. Personal jurisdiction over all Defendants comports with the United States

Constitution and the New York long-arm statute, N.Y. C.P.L.R § 302.

THE RELEVANT MARKET

A. The Relevant Product Market

22. The hotel industry divides the hotel market in a geographic area into market

segments based on ADR. The market segments used by the hotel industry are: (i) Luxury (top

15% average room rates); (ii) Upscale (next 15% average room rates); (iii) Mid-scale (middle

30% average room rates); (iv) Economy (next 20% average room rates); and (v) Budget (lowest

20% average room rates).

23. The hotel industry further classifies hotels on the basis of size, location,

ownership, service, and quality. Size refers to the hotel's number of rooms; location refers to

whether it is located in the heart of a city, in the suburb of a city, near an airport, alongside a

highway, or in a tourist destination; ownership refers to whether it is a chain, operating under a

management contract or as a franchise, or independent, without an ownership or management

affiliation with other properties; service refers to whether it has a restaurant, lounge facilities,

meeting space, and other food and beverage services; and quality is a measure of the attributes of

the hotel, including its service, accommodations, and overall physical environment.

24. The hotel industry translates these market segments and hotel characteristics for

consumers using a one to five star rating system. Five stars refers to a luxury hotel with first-

class services and accommodations; four stars refers to a hotel in a prime location that offers

amenities like room service, valet parking, concierge service, and state-of-the-art business

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centers; three stars refers to hotels that provide convenience and comfort, with nice furnishings;

two stars refers to hotels that provide basic accommodations at affordable prices; and one star

refers to hotels and motels that provide simple accommodations that are typically located near

major highways.

25. While there are many factors that go into a consumer's decision, when selecting

hotels in a densely populated, large metropolitan area like New York City, consumers regard

hotels in the Upscale and Midscale classifications, or three- and four-star hotels, as reasonably

interchangeable and readily substituted for each other. Because these geographic markets are

typically undersupplied, with occupancy levels at or above eighty five percent (85%), consumers

must search city-wide and across multiple market classifications to find a room.

26. Because the hotel industry has experienced intense consolidation with a

substantial portion of the world's hotels now affiliated with a hotel chain, as opposed to

remaining independent, the majority of consumers increasingly restrict their search to branded

hotels. Consumer brand loyalty is further enhanced by hotel rewards programs that offer

frequent travelers rewards and other benefits for repeat stays. Branded and independent hotels

are therefore not reasonably interchangeable for each other, and are not easily and readily

substituted for each other by consumers.

27. Defendants' anticompetitive conduct has harmed competition In, among other

markets, the market for branded Luxury, Upscale, and Midscale (i.e., three to five star) hotels

(the "Relevant Product Market"). The overwhelming majority of the Preferred and Non-

Preferred Hotels compete for customers in the Relevant Product Market. In Manhattan, other

competitors in the Relevant Product Market include hotels owned, operated and/or managed by

Holiday Inn Hotels & Resorts, Hyatt Hotels & Resorts, and Hilton Hotels and Resorts.

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B. The Relevant Geographic Market

28. The borough of Manhattan ("Manhattan") is the relevant geographic market for

the Relevant Product Market (the "Relevant Geographic Market"). (The Relevant Product

Market in the Relevant Geographic Market is collectively referred to herein as the "Relevant

Market."). Consumers regard Manhattan as a separate and distinct hotel market. Consumers do

not view hotel rooms in areas outside of Manhattan as reasonably interchangeable with hotels in

Manhattan and easily and readily substituted for each other, because of the proximity of hotels in

Manhattan to the Financial District and tourist locations like Times Square, Central Park, and the

Empire State Building.

29. The elimination of the Hotel and the other Non-Preferred Hotels as non-union

competitors to the Defendant Hotel Owners in the Relevant Geographic Market would result in

harm to consumers and increased profit to the Defendant Hotel Owners.

FACTUAL BACKGROUND

A. In 2001, Marriott and Host Remain Close and Interdependent CorporateSiblings - But Also Competitors

30. Marriott was formed on October 8, 1993, when Marriott Corporation divided its

operations into two separate publicly traded companies: Host Marriott (the predecessor of

Defendant Hostl) and Marriott.

31. As part of the split, Host retained twenty four and one hundred and two of

Marriott Corporation's full-service and limited-service hotels, respectively, while Marriott

retained all of Marriott Corporation's management contracts, assumed control of its lodging

management and service operations, and retained several of Marriott Corporation's full-service

and limited-service hotels, including the New York Midtown East Courtyard by Marriott.

1 This Complaintuses "Host" to connotebothDefendantHost and its predecessor,HostMarriott.

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32. Despite the bifurcation of Marriott Corporation, a decade later Host and Marriott

remained interdependent Marriott-family operated businesses. Host's chairman, Richard E.

Marriott, was the younger brother of J.W. "Bill" Marriott Jr., the long-time chairman and chief

executive of Marriott. Members of the Marriott family owned approximately seven percent (7%)

of Host and fourteen percent (14%) of Marriott.

33. In 2001, Host and Marriott continued to share a symbiotic relationship? Host's

hotels were almost exclusively operated and managed under Marriott brand names, including

Courtyard, Renaissance, Residence Inn, and Ritz-Carlton, and more than seventy percent (70%)

of Host's revenues were generated by Marriott brands.

34. Marriott, the world's largest hotel operator, derived a substantial portion of its

more than $10 billion in annual revenue from fees earned on management agreements with hotel

owners other than Host. However, Marriott's overall brand image - which is critically

important for consumer decision-making - depended on Marriott's continued operation and

management of certain signature hotels owned by Host, including the flagship Marriott Marquis

and the Marriott Financial Center.

35. Even though they maintained a close corporate relationship, Marriott and Host

had also become competitors by 2001. Because Marriott retained ownership of a number of the

Preferred Hotels following the bifurcation of Marriott Corporation, Host and Marriott competed

as rival hotel owners in several geographic markets, including New York City.

B. The September 11 Attacks Plunge Host and Marriott into Crisis

36. The September 11,2001 terrorist attacks on the World Trade Center and Pentagon

sparked a worldwide economic downturn, paralyzed the tourism industry in the United States,

2 Host andMarriotteven sharedthe samebusinessaddressof 10400FernwoodRoad inBethesda,Marylandat that time.

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and led to corporate flight from major metropolitan areas like New York City. The impact of

these events on Host and Marriott was profound.

37. Host immediately experienced significant declines in room rates and occupancy

levels, and its RevPAR plunged more than ten percent (10%) year-after-year following the

attacks. Host reported that it lost $23 million, or 12 cents per share, in the fourth quarter of

2001, in contrast to a profit of $279 million, or $1.14 per share, a year earlier. While Host's

revenue rose to $1.05 billion from $819 million, its total hotel operating costs and expenses

soared to $916 million from $189 million. Standard & Poor's and Moody's both lowered Host's

credit rating, concluding that Host's operating performance would continue to deteriorate in what

they anticipated would be a prolonged difficult lodging environment.

38. Marriott faced unprecedented challenges of its own in the wake of the September

11 attacks. By September 2002, the price of Marriott's stock had plummeted nearly thirty

percent (30%), and questions were mounting about its financial strength and management

practices.

39. For example, investors and industry analysts expressed concern about an off-

balance-sheet entity called CMB Joint Venture L.L.C., which owned and operated 120 Courtyard

hotels and was co-owned by Host and Marriott. Because the joint venture accounted for a

significant part of Marriott's earnings - it reportedly provided nearly thirteen percent (13%) of

Marriott's pre-tax earnings in 2001 - regulatory filings showing that the entity was technically

insolvent set off alarms about Marriott's financial health.

40. Marriott thought it found a solution to increase its revenues when it created a

company called Avendra in 2001, which was a joint venture among Marriott, Hyatt, and other

hotel operators. Avendra purportedly negotiated volume-discount purchases of $2 billion worth

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of hotel-industry goods ranging from linens and lighting fixtures to food and beverages.

However, one year after Avendra began to provide supplies to Marriott's hotels, one of

Marriott's largest hotel-owners, CTP Hotel Holdings, Inc., brought suit contending that Marriott

was guilty of mismanagement and had reaped millions of dollars in illegal profits through secret

kickback schemes, undisclosed self-dealing transactions, and other improper practices involving

Avendra. See CTF Hotel Holdings, Inc. v. Marriott Int'l, Inc., No. 02-271-SLR (D. Del. filed

3Apr. 12,2002).

41. Host and Marriott also faced mounting pressure from the Union and the public.

On September 11, the Host-owned Marriott World Trade Center was destroyed in the collapse of

the North and South Towers of the World Trade Center. The 22-story hotel, comprising 825

rooms and 26,000 square feet of meeting space, had employed more than 700 workers, all of

whom were represented by the Union. The displaced workers waged a months-long picket in

front of Marriott's flagship hotel, the non-union Marriott Marquis, handing out fliers calling for

an international boycott of all Marriott hotels to the thousands of people visiting Times Square

each day. The workers complained that Marriott had reneged on promises to find them jobs in

one of Marriott's other 2,300 hotels, paid them only four days of severance pay for each year

worked, and was hiring non-union employees at three new hotels scheduled to open in the

coming year under Marriott's operation and management. Union President Peter Ward,

responding to his members' complaints against Marriott, promised, "We'll go to work on these

guys."

On June 27, 2005, the parties agreed to dismiss CTF Holdings' lawsuit against Marriott in aconfidential settlement agreement. At approximately the same time, in the third quarter of 2005 Marriottpurchased thirteen hotels, owned by CTF Holdings and formerly operated by Marriot and its subsidiaries,for $381 million. See Marriott Int'l, Inc., 2005 Summary Annual Report 26 (2006).

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C. Marriott and Host Are Desperate to Avoid the Unionization of TheirSignature Manhattan Hotels

42. In the wake of these events, Marriott and Host were desperate to reduce the

pressure they felt from the public and the Union while also appeasing their respective

shareholders by showing strong profits from their businesses.

43. As a hotel owner, Host's profitability depends on the difference between its

hotels' revenues and expenses. In light of the depressed demand in the tourism industry

following September 11, the best way for Host to maintain profits was to decrease expenses,

especially at its signature properties.

44. As both a hotel-managing and hotel-owning company, Marriott could best

solidify profits by signing and maintaining hotels under long-term management agreements

which paid Marriott management fees for running the hotels' day-to-day operations, while also

trying to keep costs low at Marriott-owned properties.

45. Under Marriott's typical hotel management agreement, it would collect (a) a base

management fee, equal to anywhere from three percent (3%) to six percent (6%) of gross

revenues; (b) one percent (1%) to two percent (2%) of gross revenues for the costs associated

with advertising, marketing, and otherwise promoting the brand managing the hotel (regardless

of the actual use by or benefit to the hotel); (c) one-half percent (.5%) to one percent (1%) of

gross revenues for maintenance of a nationwide reservation system, over and above a charge for

each reservation made through the reservation system; and (d) an additional one-half percent

(.5%) or one percent (1%) of gross revenues in miscellaneous fees (collectively, the "Base

Fees").

46. Because Marriott's management agreements also require the hotel owner to pay

for all operating expenses of the hotel, fund all capital costs, and cover the costs of the hotel's

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employee payroll, insurance, and supplies, the Base Fees are pure profit to Marriott.

47. Marriott's management agreements also typically include incentive fee provisions

(the "Incentive Fee"). While the structure of the Incentive Fee varied, Marriott often earned ten

percent (10%) to twenty-five percent (25%) of the hotel's profits above and beyond a set

threshold.

48. The Base and Incentive Fee structure was extraordinarily lucrative to Marriott

even when it failed to make money for the hotel owner. For instance, in fiscal year 2002,

Marriott earned $379,000,000 in Base Fees and $162,000,000 in Incentive Fees from its

numerous lodging brands even though studies showed that hotel profitability in the first six-

months of 2002 dropped approximately twenty percent (20%).

49. Host's two most important properties in New York City at this time were the New

York Marriott Marquis (the "Marriott Marquis") and the New York Marriott Financial Center

(the "Financial Center"), both of which were managed by Marriott and were central to the

profitability of Marriott's hotel management business. The Marriott Marquis is the second

largest hotel in New York City - it features over 1,949 guestrooms, 3 restaurants, 49 floors, 55

meeting rooms, and over 100,000 square feet of meeting space. Using an industry-standard

formula for calculating value, the Marriott Marquis is estimated to have been worth upwards of

$2 billion at that time. The Marriott Financial Center, now known as the New York Marriott

Downtown, is located two blocks south of the World Trade Center site and features 490

guestrooms, 16 meeting rooms, and approximately 14,000 square feet of meeting space. It was

the first hotel near Ground Zero to reopen after the September 11th attacks. The Marriott

Financial Center is estimated to have been worth $225 million in 2002.

50. Host knew that the operating costs of a unionized hotel are substantially higher

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than those at an identical hotel with non-union labor, because labor costs - by far the largest

single expense for a hotel - are typically higher for unionized workers.

51. Operating a hotel under a union contract substantially increases its operating

costs, primarily as a result of the cost and expense of complying with burdensome union work

rules. These work rules typically narrowly define and restrict the number of tasks each employee

may perform, limit flexibility on scheduling, impose rigid rules for discipline and a seniority-

based termination system, and include a host of other provisions that hinder management

discretion and increase the costs of doing business.

52. Thus, in order to keep expenses low, Host was desperate to ensure that the

workforce at the Marriott Marquis and the Marriott Financial Center remained non-union. And

Marriott was desperate to maintain its profits from Host's two signature New York City hotels

by keeping its management and franchise fee agreements in place.

D. The Union Seeks to Achieve Market Dominance

53. Prior to 2001, to organize workers and become their legally certified bargaining

representative, the Union primarily focused on getting workers to sign authorization cards stating

that the worker wished to be represented by the Union and then invoking the election processes

of the National Labor Relations Board ("NLRB").

54. As companies became more effective in campaigning against the Union, making

its organizing campaigns less successful and more expensive, the Union followed a national

trend and turned to a new method of organizing: neutrality and card check agreements.

55. Under federal labor law, employers can insist on a secret-ballot election

administered by the NLRB, even when a majority of workers sign authorization cards asking for

recognition of a union as their bargaining agent.

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56. Thus, to avoid NLRB-administered elections - which one seruor AFL-CIO

official has described as a "death trap" - the Union began to pressure hotel owners and

managers to enter into so-called neutrality and card check agreements. Such agreements require

the employer to remain neutral as Union authorization cards are circulated, to provide other

organizing assistance to the Union, and to recognize the Union as the workers' exclusive

bargaining representative when a majority of workers sign authorization cards m favor of

unionization.

57. In reality, card-check neutrality is anything but neutral. Workers, by being

deprived of their employer's input, are denied their right to hear both sides on the issue of

unionization and then make an informed decision.

58. In July 2001, the Union cemented its strategy for organizing workers without

elections when the New York City Hotel Association, a professional trade association whose

membership includes 200 hotels in New York City, agreed to a neutrality and card check

agreement as part of its collective bargaining agreement with the Union (the "Neutrality/Card

Check Agreement"). The Neutrality/Card Check Agreement required signatory hotels to (a)

recognize the Union as the representative of its employees if a majority gave written

authorization to the Union to be their agent; (b) remain neutral and not try to influence its

employees' decision one way or another, in the event the Union conducted an organization

campaign among the signatory hotel's employees; and (c) grant the Union access to the signatory

hotel's property to meet with employees during the employees' non-working times.

59. While many New York City owners and managers signed onto the Neutrality/

Card Check Agreement, Marriott and Host did not. Because Marriot and Host owned, operated

or managed a large number of hotels in New York City, and had plans to expand further, the

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Union recognized that it could not achieve market dominance so long as the hotels it had

organized remained exposed to competition from non-Union hotels. The Union knew that it

could not achieve its goal of establishing supra-competitive wage rates for its members in a

competitive market because Union employers would aggressively resist incurring higher labor

costs and risk losing market share to their non-Union competitors. The Union concluded,

therefore, that unless it succeeded in organizing the workers at the hotels under Marriott and

Host's control, its leverage over hotel owners and managers - even those who employed Union

labor - would remain limited.

E. Host and Marriott Strike a Deal to Cooperate

60. To help boost its balance sheets, Host needed to ensure that the workers at the

Marriott Marquis and the Marriott Financial Center would not be unionized. Host, however,

recognized that it did not have sufficient power to make a deal directly with the Union. Host

owned only three hotels in New York City at the time - two of which it sought to protect - and

therefore it could not "deliver" workers to the Union. But Host did have the ability to extend its

management agreements with Marriott for the Marriott Marquis and the Marriott Financial

Center, and Host could also provide additional hotels for Marriott to manage under new

management agreements.

61. Unlike Host, Marriott had the power to swell the Union's ranks and add millions

of dollars in additional dues to its coffers by providing the Union access to the more than one

hundred hotels under Marriott's management and thousands of workers in its employ." But

Marriott did not stand to gain very much - and had much to lose - from sacrificing its

4 While whether to unionize or not is technically a determination made by employees, notemployers, by agreeing to provide assistance to the Union, Marriott could stack the deck against its ownemployees and safely guarantee the Union a successful organizing campaign and thousands of new dues-paying members.

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substantial employee roster to the Union merely for the sake of its close relationship with Host.

Marriott knew that hotels under union contracts had substantially higher operating costs,

drastically reducing each hotel's profits and thus Marriott's incentive fees. Marriott had also

long enjoyed an advantage over other hotel managers in the competition for lucrative

management contracts because of its reputation as a non-union company. Marriott could not

afford to sacrifice that competitive advantage in a deal with the Union.

62. Recognizing that they each had something the other wanted, Host and Marriott

conducted secret meetings and negotiations in mid-2002 in their shared office building in

Bethesda to come to a mutually-beneficial solution to their problems. The representatives at

these meetings discussed, negotiated, and agreed upon a specific strategy to harm and eliminate

their non-union competitors, including Madison, for the benefit of the conspiracy.

63. Specifically, Host agreed that in exchange for Marriott's assistance in convincing

the Union to protect the Marriott Marquis and Marriott Financial Center from unionization, Host

would retain Marriott as the manager of both properties, and would sign additional long term

management agreements with Marriott for the management of other hotels Host acquired in and

around that time period.

64. Naturally, when conspirators enter into a conspiracy, they take steps to conceal

the existence of the conspiracy and its goals, strategies, and targets. Such conspiracies operate in

secret, and the conspiracy between Host and Marriot - horizontal competitors - is no different.

That Marriott and Host entered into such an agreement is confirmed by their subsequent conduct

- which is otherwise inexplicable.

65. Between 2002 and 2005, Host deepened its relationship with Marriott by retaining

Marriott as the manager of the Marriott Marquis, contracting with it to manage newly acquired

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properties, and abstaining from acquiring properties managed by Marriott's competitors. These

actions were contrary to Host's self-interest insofar as Host was under intense pressure from its

shareholders to diversify its brand portfolio, and reduce its dependence on and otherwise distance

itself from Marriott, in part because of a belief that Marriott was receiving overly favorable fees

and incentive payments for its management of Host's hotels. That Host failed to implement a

brand diversification strategy in response to these and other complaints - in 2002, 99 of Host's

122 hotels were still operated under a Marriott brand - is evidence that Marriott and Host had

agreed to become conspirators.

66. Marriott likewise acted against its self-interest by entering into the Secret

Agreement with the Union, which protected Host's signature and other hotels from unionization,

as detailed below. It is inconceivable that Marriott would have gratuitously conferred this

extraordinary benefit on Host - its rival hotel owner - without compensation.

F. Strange Bedfellows: Marriott Strikes a Secret Deal with the Union

67. Throughout the 1990s, Marriott was known within the hotel industry for its fierce

opposition to union labor. While most hotel workers in New York City were represented by the

Union, Marriott had theretofore successfully resisted numerous attempts by the Union to

organize the workers at hotels under its management. In fact, in the fall of2001, the Union had a

collective bargaining agreement with a majority of hotels in Manhattan, except for the Marriott

Marquis, the Marriott Financial Center, and the other Marriott-controlled Preferred Hotels.

68. On November 5, 2002 - less than a month after Madison and Courtyard entered

into the Management Agreement - Marriott presented the Union with a carefully crafted written

proposal calibrated to protect Host and Marriott's interests and entice the Union into joining the

conspiracy (annexed hereto as Exhibit A). The proposal was the culmination of negotiations

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between Marriott and the Union, and was sent by Marriott only after it had agreed with the

Union to the key terms of the conspiracy.

69. As part of the proposal, Marriott agreed to be bound by the Neutrality/Card Check

Agreement "for all properties it owns, manages or operates," except for (a) the LaGuardia

Marriott Hotel; (b) the Marriott Marquis; (c) the Marriott Financial Center; (d) the New York

Midtown East Courtyard by Marriott; and (e) "any properties owned, managed or operated by

Marriott prior to July 2001." As confirmed by the parties' subsequent conduct, Marriott offered

to provide the Union whatever assistance it needed to ensure the unionization of the workers at

the Non-Preferred Hotels, in exchange for the Union's abandonment of all efforts to unionize the

workers at the Marriott Marquis and Marriott Financial Center.

70. From the Defendants' perspective, the proposal worked: it ensured Host that the

Marriott Marquis and Marriott Financial Center would not be unionized; it secured for Marriott

the continued management of those brand-enhancing hotels; it guaranteed the Union thousands

of new dues-paying members and the market power necessary to obtain supra-competitive wages

for its members; and because it was a private agreement between the parties, Marriott retained

the ability to trade on its reputation as a non-union company to induce hotel owners to entrust the

operation of their hotels to Marriott, helping it secure future lucrative long-term management

agreements .. The proposal also benefitted Marriott as the owner of the New York Midtown East

Courtyard by Marriott and the LaGuardia Marriott Hotel by protecting them from the additional

costs of unionization.

71. It took from November 2002 to April 2003 to finalize the elements of the

conspiracy and what the fraudulent scheme would consist of in order to benefit all of the

Defendants. Nevertheless, on April 9, 2003, Marriott and the Union executed an identical

20


version of the November 5 proposal (the "Secret Agreement") (annexed hereto as Exhibit B). To

carry out the fraudulent scheme and illegal conspiracy created by the Secret Agreement, the

Defendants would do as follows:

72. First, Marriott would fraudulently induce a hotel owner to operate its hotel under

one of Marriott's brand names by falsely representing that Marriott would operate the hotel using

a non-union workforce, by providing unrealistic financial projections to the owner that assumed

the same, and by failing to disclose the existence of the Secret Agreement, a material omission.

Marriott purports to be a non-union company, but in truth few, if any, of the hotels that Marriott

has come to operate or manage since July 2001 have employed non-union workforces.

73. Next, Marriott executives would direct Marriott's affiliate responsible for the

management of the Non-Preferred Hotel to conceal the existence of the Secret Agreement from

the owner, and to act in accordance with the Secret Agreement by providing the Union with

organizing assistance at the Non-Preferred Hotel in accordance with the Neutrality/Card Check

Agreement and as otherwise necessary.

74. Then, Marriott and the Union would work together to force unionization on the

workers at the Non-Preferred Hotel, without disclosing to the workers the existence of the Secret

Agreement or the full nature and extent of the organizing assistance being provided by Marriott

to the Union.

75. After the Non-Preferred Hotel became unionized, Marriott would then sign a

work rules agreement with the Union which dictated the terms and conditions of employment for

union workers at the Non-Preferred Hotel. Each work rules agreement contained a number of

conditions which had the effect, as demonstrated by the work rules agreement between

Courtyard and the Union at Madison's hotel, of increasing unionized staffing levels at the Non-

21


Preferred Hotel, thus requiring more Union labor and increasing the Union's dues-paying ranks.

Marriott would also then pressure the owner of the Non-Preferred Hotel to sign an Owner's

Letter ratifying the agreement between Marriott and the Union and ensuring that Marriott and the

Union would remain in power at the Non-Preferred Hotel even if the owner sold the Non-

Preferred Hotel or broke its management agreement with Marriott.

76. Finally, even after a Non-Preferred Hotel was unionized, Marriott would continue

to conceal the existence of the Secret Agreement and the nature and extent of the organizing

assistance it provided to the Union.

77. In exchange for this cooperation, the Union would continue to protect the

Preferred Hotels from unionization, thus depriving the Preferred Hotels' employees of their right

to organize and, as discussed below, harming consumers by reducing the quality and quantity of

their choices in the Relevant Market.

78. The conduct Marriott agreed to undertake in the Secret Agreement is inconsistent

with the typical arms-length relationship between labor and management but completely

consistent with the relationship of participants in an unlawful, anti-competitive scheme. The

terms of the Secret Agreement make clear that Marriott agreed to advance the market dominance

objectives of the Union by facilitating union organizing of Marriott employees as long as the

Union refrained from organizing the workers at the Preferred Hotels. It was the quintessential

quid pro quo arrangement.

79. The agreement among the Defendants was not part of the collective bargaining

process which, under certain circumstances, may be protected by exemptions granted to labor

unions under the antitrust laws. Instead, the Secret Agreement involves an unlawful alliance

between the Union, itself a combination of competitors, and Marriott, an employer, for the

22


purpose of restraining competition and changing the terms and conditions of employment for

workers in the hotel industry. In exchange for higher wages and other benefits flowing to the

Union and its members, the Union conspired with Marriott and engaged in various tactics alleged

herein to injure Madison and other Non-Preferred Hotel owners with the ultimate goal of

eliminating non-union competition in the hotel industry. Put another way, the Union struck a

deal with Marriott in which Marriott effectively agreed to compensation and benefits packages

above the prevailing competitive levels for its workers at the Non-Preferred Hotels in exchange

for an agreement from the Union to use its resources to assist in the elimination of Madison and

other owners of Non-Preferred Hotels as non-union competitors and the protection of the

Preferred Hotels from unionization. The Union's conduct thus went well beyond that which is

protected under federal labor law.

80. Defendants thereafter engaged in a pattern of concerted practices to carry out the

fraudulent scheme and illegal conspiracy created by the Secret Agreement, all of which were

intended to protect the Preferred Hotels' profitability and raise the Non-Preferred Hotels' costs

of doing business in order to make it more difficult for the Non-Preferred Hotels to compete with

the Defendant Hotel Owners' Preferred Hotels, and to eliminate the Hotel and other Non-

Preferred Hotels as non-union competitors.

G. The Conspiracy's First Target: Madison

81. In 2001, Madison was formed to purchase and develop a first-class hotel on a

portion of the parcel of land located at 92nd Street and First Avenue in Manhattan. The location

presented a unique and valuable opportunity, in that it was underserved by hotels (despite a need

created by nearby hospitals and apartments too small to accommodate guests) and was one of the

few areas in the Upper East Side of Manhattan zoned to permit the construction and operation of

23


a hotel.

82. Following its acquisition of the above-referenced parcel of land, Madison sought

a branded hotel operator to handle the day-to-day executive, operational, and financial affairs of

the Hotel. Even though hotels operated and managed under a Marriott brand pay the hotel

industry's highest management fees, in early 2001 Madison entered into negotiations with

representatives of Courtyard and Marriott for Courtyard to manage the Hotel under the

"Courtyard by Marriott" brand name because of Marriott's reputation as the industry-leading

hotel operator.

83. Negotiations continued throughout 2001. Courtyard provided Madison with a

number of draft projections (so-called "pro formas") of the Hotel's performance under

Courtyard's superior management skills and ability to generate business. Madison was

impressed by Courtyard's projections, but after the attacks on September 11th, Marriott,

Courtyard, and Madison stepped away from the negotiating table until Spring 2002. Marriott

induced Madison to resume negotiations with, inter alia, promises of assistance with obtaining

financing or providing direct financing for the Hotel. Unbeknownst to Madison, Marriott had a

new agenda - offering the Union unrestricted opportunity to unionize the workers at certain

Marriott-managed hotels, including Madison's Hotel, in return for keeping the Preferred Hotels

union-free.

84. When negotiations over the terms and conditions of Courtyard's care for

Madison's hotel resumed, Madison asked Courtyard to provide it with Courtyard's final financial

projections for the Hotel. Madison needed to ensure that the Hotel would produce income

sufficient to repay Madison's investors and lender who would provide the funding for the

purchase of the land and the construction of the Hotel.

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85. To induce Madison to enter into the Management Agreement, Courtyard provided

Madison with the May 2002 pro forma - Courtyard's final multi-year projection of the financial

performance of the Hotel under its management. That projection of the profitability of the Hotel,

and thus Madison's ability to service the Hotel's debt, was based upon a non-union workforce of

47.5 employees.

86. That the Hotel's workforce would be non-union was reinforced in discussions

with Robert Mannon, a senior executive of Courtyard, who assisted Madison in finding financing

for the Hotel. In the course of discussions in Spring of 2002, Mannon explicitly reassured

Madison that Marriott was a non-union company and that the Hotel would have a non-union

workforce.

87. In reliance on the May 2002 pro forma and other representations made by

Courtyard and Marriott, on or about October 7, 2002, Madison executed the Management

Agreement, entrusting the operation of the Hotel to Courtyard. Less than a month later, Marriott

proffered a written agreement to the Union to complete the Secret Agreement.

88. Courtyard was given extraordinary control over management of the Hotel,

including purchasing all goods and services provided by the Hotel; setting room rates; employing

the Hotel's workers; providing all marketing, budgeting, and accounting services; and handling

funds belonging to Madison. Madison trusted Courtyard based on Madison's representations of

its expertise and skill, and its pledge in the Management Agreement that it would ensure the

"proper and efficient operation of the Hotel" and to act at all times and in all respects as "as a

reasonable [and] prudent operator of the Hotel, having regard for the status of the Hotel."

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H. The Hotel is Unionized with Marriott's Assistance

89. The fraudulent scheme created by the Secret Agreement is illustrated by, but not

limited to, the concerted effort between Courtyard, Marriott, and the Union to force unionization

on the workers at the Hotel.

90. An essential part of the fraudulent scheme was simply concealing the existence of

the Secret Agreement. Accordingly, even after Marriott and the Union executed the Secret

Agreement on April 9, 2003, guaranteeing that the Union would successfully organize the

workers at the Hotel following the Hotel's scheduled opening in 2006, Courtyard continued to

represent to Madison that Courtyard expected the Hotel would not have a unionized workforce.

91. Thereafter, in advance of the opening of the Hotel in August 2006 and through its

first months of operation, Courtyard and Marriott repeatedly provided the Union with organizing

assistance at the Hotel. For example, on May 12, 2006 and August 10, 2006, Nancy Lee,

Marriott's labor counsel, provided the Union with lists of the names, home addresses, phone

numbers, job titles, and rates of pay for the incoming employees of the Hotel, as well as lists of

their previous employers, seniority within the Hotel, and the benefits they received. Courtyard,

pursuant to Marriott's direction, granted Union representatives access to hotel property for

organizing in October 2006; refrained from taking any action or making any statement implying

opposition to the unionization; and transferred active Union members from other Non-Preferred

Hotels to staff the Hotel. Courtyard and Marriott concealed these acts of unlawful organizing

assistance from Madison.

92. As a result of Courtyard and Marriott's unlawful organizing assistance, a material

number of employees newly transferred to or hired by Courtyard to work at the Hotel signed

cards in favor of unionization. These cards resulted in a "card count" procedure in October

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2006, only two months after the Hotel opened, that placed the units in which these employees

worked under the prevailing collective bargaining agreement.

93. After forcing unionization on the workers at the Hotel in accordance with the

Secret Agreement, Courtyard and the Union further colluded to work out a secret work rules

agreement to govern their pay, benefits, and working conditions (the "Work Rules Agreement")

(annexed hereto as Exhibit C). The Work Rules Agreement created a labyrinthine network of

rules and regulations which had the effect of driving up the Hotel's operating costs by making it

exceptionally difficult to reduce staffing.

94. For example, the Work Rules Agreement provided that the doormen at the Hotel

would automatically and unconditionally be paid two (2) hours of overtime each day to

compensate them for the possibility that they would (whether or not they in fact had to) walk 150

feet from the front entrance of the Hotel to hail taxis. Maintenance employees were guaranteed

an additional $25 per day that they had to shovel snow or sweep leaves while on duty, regardless

of the amount of work performed. Likewise, housekeeping employees were guaranteed an

additional $25 per day that they had to deliver food to, or clean up after, a meeting held in one of

the Hotel's meeting rooms. It also provided that all employees absent on disability would be

replaced at nearly double the cost, whether or not there was work for them to perform, and

created a "General Clean Mechanic" position whose sole job description was to "general clean

guest rooms and make any necessary repairs" - tasks which were already performed by existing

housekeeping and maintenance employees.

95. All of this was intended to create more jobs for the Union's members.

96. Courtyard did not notify Madison that it was agreeing to the Work Rules

Agreement with the Union, and did not involve Madison in the negotiating process. In fact,

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Courtyard failed to even inform Madison that the workforce at the Hotel had been unionized for

more than five months. Even after Courtyard finally admitted in March 2007 that the workers at

the Hotel had been unionized, Courtyard fraudulently concealed that the Union's successful

organizing campaign at the Hotel had been conducted with Courtyard's and Marriott's assistance

in accordance with the Secret Agreement, and continued to conceal the terms of the Work Rules

Agreement it had negotiated with the Union. The existence of the Work Rules Agreement was

not disclosed to Madison until April 9, 2009.

I. Marriott Attempts to Cleanse the Fraud: the Owner's Letter, Non-disturbance Agreement, and the Estoppel Certificate

97. In 2007, Madison sought a $62 million refinancing of the Hotel and requested that

Courtyard give its consent to encumber the Hotel, as required by the terms of the Management

Agreement.

98. Seeing that it had leverage over Madison, Courtyard, pursuant to Marriott's

direction, imposed the following conditions on its cooperation and consent to the refinancing:

First, Madison's execution of an "Owner's Letter" agreeing that, in the event Courtyard ceased

managing the Hotel for any reason, Madison would require Courtyard's successor to recognize

the Union as the exclusive bargaining representative for the Hotel workers and abide by the

terms of the Union's labor agreements with Marriott; second, Madison's lender's execution of a

Non-disturbance Agreement guaranteeing that it would not interfere with or otherwise disturb

Courtyard's rights under the Management Agreement even if the lender foreclosed on the Hotel;

and third, Madison's execution of an estoppel certificate representing that Courtyard was not in

breach of the Management Agreement at that time.

99. By insisting on Madison's execution of the Owner's Letter, Courtyard sought to

fraudulently induce Madison to ratify and adopt the terms of the Work Rules Agreement, in

28


order to confer a further benefit on the Union - the guarantee that the Work Rules Agreement

would survive Courtyard's management term, to immunize Courtyard from liability for having

agreed to it in the first place, and to eliminate Madison's incentive to terminate Courtyard and

put the Hotel under the management of one of Courtyard's competitors. Madison refused to

execute the Owner's Letter.

100. Courtyard insisted on Madison's lender's execution of the Non-disturbance

Agreement for similar reasons. Coerced into believing that it was required to do so by the

Management Agreement, Madison signed the Non-disturbance Agreement.

101. Courtyard further sought to cleanse the fraud it previously perpetrated on

Madison by obtaining an estoppel certificate from Madison in 2008. That letter stated that:

To the best knowledge of [Madison], (i) there is no existing Default orEvent of Default by either [Madison] or [Courtyard/Marriott] under theManagement Agreement, and (ii) no event has occurred which, with thegiving of notice or passage of time or both, would constitute a Default orEvent of Default by either [Madison] or [Courtyard/Marriott] under theManagement Agreement.

102. Madison, unaware at the time of Courtyard's fraudulent conduct and other

breaches of the Management Agreement, due to Courtyard and Marriott's fraudulent

concealment of same, executed the estoppel certificate in favor of Courtyard in the spring of

2008.103. Had Madison known of Courtyard and Marriott's efforts to conceal the Secret

Agreement, the Work Rules Agreement, and Courtyard's efforts to assist the Union in organizing

the Hotel, as well as Courtyard's other breaches of the Management Agreement, Madison would

not have executed the Non-disturbance Agreement or the estoppel certificate.

J. The Conspiracy Continues: Marriott and the Union Force Unionization onthe Workers at Other Non-Preferred Hotels

104. Once Marriott and the Union had successfully organized the workers at the Hotel,

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they turned their attention to other Non-Preferred Hotels. From at least November 2002 and

continuing until the present, both dates being approximate and inclusive, Defendants have

carried out the fraudulent scheme and illegal conspiracy described above at numerous Non-

Preferred Hotels, including the Courtyard Times Square South and the Courtyard Fifth Avenue

hotels.

105. Marriott has assisted the Union with organizing the workers at the Non-Preferred

Hotels by, among other things:

a. giving the Union information about hotel employees, including theirnames, employment status (i.e., full vs. part-time), job classification,department, and address;

b. giving the Union access and use of hotel property for organizing;

c. refraining from taking any action or making any statement that impliedopposition to the unionization of the hotel's employees;

d. hiring only pro-Union employees to staff the Non-Preferred Hotels; and

e. transferring existing Union members from other Non-Preferred Hotels tostaff the Non-Preferred Hotel.

106. As a result of Marriott's fraudulently-concealed assistance, workers at the Non-

Preferred hotels have been induced to enter into a compulsory agency relationship with the

Union that deprived them of their right to negotiate privately and individually with Marriott

regarding the terms and conditions of their employment. At the same time, the Non-Preferred

Hotels have been subjected to a collective bargaining agreement with the Union that included

onerous work rules, increased staffing requirements, and unaffordable pay scales.

K. The Deal Holds: the Marriott Marquis and the Marriott Financial CenterRemain Union-Free

107. As of the date of the filing of this Complaint, at least 160 hotels in Manhattan

employed workforces organized by the Union, including the Carlyle, the Four Seasons, the

30


Hilton New York, the InterContinental Times Square, the Mandarin Oriental, the Ritz-Carlton

Central Park, and the Waldorf-Astoria.

108. Nearly all of the Marriott Marquis's and Marriott Financial Center's peer hotels,

including the only hotel in New York City larger than the Marriott Marquis, employ workforces

organized by the Union. Indeed, nearly every major hotel brand's crown-jewel hotel in New

York City has become unionized. In total, approximately seventy five percent (75%) of the hotel

industry in New York City is under contract with the Union.

109. The Marriott Marquis and the Marriott Financial Center, however, remain

protected by the Secret Agreement. Consequently, from at least November 2002 and continuing

until the present, both dates being approximate and inclusive, the Union has made no attempt to

organize the workers at the Preferred Hotels, depriving them of their right to organize and

receive the benefits associated with collective bargaining agreements and unionization.

INJURY TO COMPETITION AND ANTITRUST INJURY

110. The relevant product market for purposes of this action consists of (1) hotel rooms

marketed to the general public; and (2) the services provided by hotel workers, including the

duties and responsibilities that constitute an essential part of the product market described in (1)

(the "Relevant Market").

111. The relevant geographic market for purposes of this action is New York City.

112. By virtue of their power to control prices and exclude competition in the Relevant

Market, the Defendants at all relevant times possessed market power in the Relevant Market.

113. Defendants' unlawful conduct has injured, and threatens to continue to injure,

competition in the Relevant Market. Consumers, including guests at the Preferred and Non-

Preferred Hotels, have been and will continue to be forced to pay higher prices for hotel rooms

31


and suffer reductions in quality, and to be deprived of a free, unfettered competitive market in

the provision of hotel rooms. The Non-Preferred Hotels' position as among the few remaining

successful non-Union competitors in the Relevant Market has been and continues to be

undermined by Defendants' anticompetitive conduct.

114. Madison is an actual competitor of Marriott and Host and a purchaser of the labor

of hotel workers in the Relevant Market. As such, Madison has suffered antitrust injury as a

result of Defendants' anticompetitive conduct, including paying higher than competitive wages

for the services of hotel workers in the Relevant Market resulting from the inflated wages

Marriott agreed to pay to Union members pursuant to the conspiracy as well as the loss of actual

and potential customers, lost profits, and the loss of business goodwill resulting from the

unionization of the workers at the Hotel. Madison has been deprived of the opportunity to freely

compete in the marketplace with Marriott and Host as a direct result of Defendants' unlawful

conduct.

DAMAGES

115. As a direct and proximate result of Defendants' fraudulent scheme and illegal

conspiracy, as detailed above, Madison has suffered enormous damages.

116. By forcing unionization on the Hotel's workers and further colluding with the

Union to subject the Hotel to the burdensome and one-sided Work Rules Agreement, Marriott

drove the labor costs of the Hotel to unsustainable levels, ultimately forcing Madison to declare

bankruptcy.

117. On May 30,2012, following a bankruptcy auction of the Hotel, Madison sold the

Hotel to RLJ Lodging Trust for $82 million, a minimum - and the only - bid submitted in

anticipation of the auction. The $82 million was a fire sale price. Had the Hotel been sold

32


outside of bankruptcy and not in a distressed auction, the Hotel would have commanded a sales

price far in excess of $82 million.

118. The Non-disturbance Agreement, which Marriott directed Courtyard to obtain _

and which ensured that Courtyard would continue to manage the Hotel as a Union shop under the

Work Rules Agreement - further drove down the market value of the Hotel. Had Madison

known of Courtyard and Marriott's efforts to conceal the Secret Agreement, the Work Rules

Agreement, and Courtyard's efforts to assist the Union in organizing the Hotel, as well as

Courtyard's other breaches of the Management Agreement, Madison would not have executed

the Non-disturbance Agreement and would have terminated the Management Agreement. Had

the Hotel been sold in a non-Bankruptcy forum free of the encumbrance of the Management

Agreement and Courtyard's continued management, the Hotel would have commanded a sales

price of not less than $100 million.

119. Madison was further damaged by the Defendants' wrongful scheme because it

was forced to pay to its lender $16 million in late fees and other penalties as part of the

bankruptcy liquidation, and an additional $3 million in administrative fees.

120. Madison's damages were foreseeable and within the contemplation of the parties

at the time the Management Agreement was negotiated and signed.

121. In contrast to the substantial damages Madison incurred as a result of the

Defendants' fraudulent scheme and illegal conspiracy, the Defendants were enormously enriched

by it. The Defendant Hotel Owners, as owners of the Preferred Hotels, were spared the costs and

burden of unionization at the Preferred Hotels because of the fraudulent scheme and illegal

conspiracy, resulting in inflated hotel valuations, revenues, and profits from November 2002

until the present.

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122. Marriott, as manager of the Marriott Marquis and Marriott Financial Center,

retained its management contracts with those hotels as consideration for the fraudulent scheme

and illegal conspiracy and earned hundreds of millions of dollars in management and incentive

fees. Marriott also secured additional management contracts and collected millions of dollars in

management and incentive fees from other Non-Preferred Hotels based on Marriott's false

representations that non-union labor would be employed under Marriott's management, in

furtherance of the fraudulent scheme and illegal conspiracy.

123. The Union gained millions of dollars in additional dues from the thousands of

new dues-paying members Marriott coerced into unionization pursuant to the fraudulent scheme

and illegal conspiracy.

124. In total, and subject to amendment after discovery and trial, the Defendants

benefitted in excess of$350 million from the fraudulent scheme and illegal conspiracy.

FRAUDULENT CONCEALMENT

125. Madison had neither actual nor constructive knowledge of the facts supporting its

claims for relief despite diligence in trying to discover the pertinent facts.

126. Madison did not discover, and could not have discovered through the exercise of

reasonable diligence, the existence of the conspiracy alleged herein until October 2009, when the

Union responded to a subpoena issued by Madison in connection with its pending action against

Courtyard in New York State Supreme Court, Index No. 602762/09. Defendants engaged in a

secret conspiracy that did not give rise to facts that would put Madison on inquiry notice that

there was a conspiracy to impose increased labor costs on the competitors of the Defendant Hotel

Owners.

127. Defendants' fraudulent concealment of the Secret Agreement from the owners of

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the Non-Preferred Hotels was critically important to the success of the Defendants' illegal

scheme.

128. Among other things, Defendants and their co-conspirators actively, intentionally,

and fraudulently concealed the existence of the Secret Agreement and the resulting illegal

conspiracy from Madison by one or more of the following affirmative acts, including acts in

furtherance of the conspiracy:

a. Conducting covert meetings in 2002 in which the key terms of the SecretAgreement were discussed and agreed to;

b. Instructing members of the conspiracy not to divulge the existence of theconspiracy to others not in the conspiracy;

c. Confining the unlawful conspiracy to a small number of people and keyofficials at each Defendant company;

d. Avoiding references in documents to the Secret Agreement;

e. Intentionally concealing the negotiation and execution of the SecretAgreement from Madison both before and after Madison and Courtyardexecuted the Management Agreement;

f. Intentionally concealing a secret set of pro forma projections predictingthe performance of the Hotel that Courtyard prepared for internal useimmediately after Marriott and the Union executed the Secret Agreement;

g. Intentionally misrepresenting the likelihood of the unionization of theworkers at the Hotel prior to its opening in August 2006;

h. Inducing Madison to obtain the Non-disturbance Agreement and toexecute the estoppel certificate in connection therewith;

1. Intentionally concealing the acts of organizing assistance provided byCourtyard to the Union in connection with the Union's unionization of theworkers at the Hotel, including the acts described herein;

J. Intentionally concealing the negotiation and execution of the Work RulesAgreement from Madison;

k. Intentionally misrepresenting to Madison that Marriott could not negotiatehotel-specific agreements with the Union to reduce Madison's labor costs

35


despite the existence of the hotel-specific Secret Agreement and the WorkRules Agreement at the time Nancy Lee made these misrepresentations toMadison; and

I. Intentionally frustrating Madison's ability to investigate Defendants'wrongdoing by, among other things, failing to disclose the laboragreement governing the terms and conditions of employment of theworkers at the Hotel.

129. Consequently, Madison did not discover, and could not have discovered through

the exercise of reasonable diligence, the facts giving rise to its unjust enrichment, tortious

interference with contract, fraud, and aiding and abetting fraud claims until October 2009.

CLAIMS FOR RELIEF

COUNT ISherman Act: Violation of 15 U.S.C. § 1 et seq.

(All Defendants)

130. Madison realleges and incorporates by reference paragraphs 1-129 as set forth

above.

131. Section 1 of the Sherman Act provides that "[ e]very contract, combination in the

form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several

States, or with foreign nations, is declared to be illegal." 15 U.S.C. § 1 (2004).

132. As detailed above, Defendants have joined together in a continuing anti-

competitive conspiracy to eliminate the Non-Preferred Hotels as non-union competitors of the

Defendant Hotel Owners in the Relevant Market, and to obtain supra-competitive wages for

union employees by consolidating market power in the Union. The Defendants have done so

through a conspiracy and various oral and written agreements, including the Secret Agreement,

in furtherance thereof.

133. Though the Secret Agreement was between Marriott and the Union, it was not a

part of the collective bargaining process. To the contrary, the overall conspiracy involves the

36


provision of assistance by the Union to Marriott, an employer, in restraining competition in the

Relevant Market in which Marriott competes in exchange for Marriott's assistance in obtaining

for the Union market density and the ability to raise wages to supra-competitive levels.

134. The conspiracy and combination, therefore, are comprised of three parts: (i) a

horizontal agreement between Union members who compete among themselves for wages and

other benefits of employment, their leadership, and the Union itself; and (ii) a horizontal

agreement between Host and Marriott, and later joined by DiamondRock, to protect the Preferred

Hotels from unionization and impose higher costs on the Non-Preferred Hotels; which are

facilitated by (iii) a vertical conspiracy and combination between Marriott and the Union.

135. A union by definition is a horizontal conspiracy of workers who have agreed to

act in concert to assert their collective bargaining power to obtain higher prices for their labor.

Unions co-exist with antitrust law by way of an exemption, but that exemption does not apply

when a union combines with non-labor groups. United States v. Hutcheson, 312 U.S. 219, 232

(1941). Here, the conduct of the Union is not exempt because it agreed in a vertical conspiracy

and combination with Marriott, a non-labor employer, to restrain competition in the Relevant

Market.

136. Host and Marriott, later joined by DiamondRock, formed a second horizontal

conspiracy when they conspired and acted in concert to eliminate the Non-Preferred Hotels as

non-union competitors in the Relevant Market.

137. The conspiracy as alleged herein consists of continuing agreements,

understandings and concerted action between and among Defendants and their co-conspirators in

furtherance of which Defendants raised, fixed or maintained the price of hotel workers' services

in the Relevant Market with the principle aim of eliminating the Non-Preferred Hotels as non-

37


union competitors in the Relevant Market. Defendants' conspiracy constitutes a per se violation

of Section 1 of the Sherman Act, 15 u.s.c. § l.

138. In addition, the purpose and effect of Defendants' conspiracy is to unreasonably

restrain trade and competition in the Relevant Market. The agreements among and between

Defendants, including the Secret Agreement, are therefore contracts, combinations, and/or

conspiracies that unreasonably restrain trade in violation of Section 1 of the Sherman Act, 15

U.S.c. § 1.

139. By imposing significantly increased labor costs on their competitor Non-Preferred

Hotels, including Madison, the Defendant Hotel Owners have harmed consumers by forcing

them to pay higher prices for hotel rooms and/or suffer reductions in hotel quality and service,

and by depriving them of a free, unfettered competitive market in the provision of hotel rooms.

140. Each of these combinations and conspiracies has caused significant harm to

competition in the Relevant Market, including, without limitation, the effects described above.

141. There is no legitimate, pro-competitive business justification for the agreements

between and among the Defendants, including the Secret Agreement, which outweighs their

harmful effect. Even if there were some conceivable justification, the agreements are broader

than necessary to achieve such a purpose.

142. The Defendants' conduct occurred in and has had a substantial effect on interstate

commerce. The Defendant Hotel Owners are owners, operators, and/or managers of full-service

and limited-service hotels, located around the world, that provide lodging facilities to customers

on a short-term basis. Hotels in New York City, including the Preferred and Non-Preferred

Hotels, service a large number of interstate clients, and therefore they are engaged in interstate

commerce.

38


143. As a direct competitor of the Defendant Hotel Owners that was targeted and

damages by Defendants' anti-competitive conduct, and as a purchaser of services from hotel

workers in the Relevant Market, Madison has suffered substantial and continuing injuries and

has standing to bring this claim.

144. Madison is entitled to recover treble damages under Section 5 of the Clayton Act,

15 U.S.C. § 15, and to injunctive relief under Section 16 of the Clayton Act, 15 U.S.c. § 26.

COVNTIIRICO: Violation of 18 V.S.c. § 1962(c)

(All Defendants)


above.

146. Section 1962(c) of Title 18 of the United States Code makes it illegal for "any

person employed by or associated with any enterprise engaged in, or the activities of which

affect, interstate or foreign commerce, to conduct or participate, directly or indirectly, in the

conduct of such enterprise's affairs through a pattern of racketeering activity or collection of

unlawful debt."

147. Defendants and their co-conspirators' collective association constitutes an

association-in-fact enterprise engaged in and affecting interstate and foreign commerce within

the meaning of "enterprise" as defined in 18 U.S.c. § 1961(4). It is composed of each of the

Defendants and their co-conspirators. From at least November 2002 and continuing until the

present, both dates being approximate and inclusive, each Defendant and each co-conspirator

was a member of the enterprise. The illegal enterprise is structured through the Secret and

Management Agreements, oral agreements between the Defendants, and the corporate ownership

of Courtyard by Marriott.

148. From at least November 2002 and continuing until the present, both dates being

approximate and inclusive, Defendants and their co-conspirators have associated together and

39


with others for the purpose of, among other things, executing a scheme to defraud through a

pattern of racketeering by committing the predicate acts of mail fraud within the meaning of 18

U.S.c. § 1341, wire fraud within the meaning of 18 U.S.c. § 1343, and "pay[ing], lend[ing], or

deliver[ing]" "money or other thing of value" to a labor organization in violation of the Labor

Management Relations Act ("LMRA"), 29 U.S.c. § 186.

149. Among other things, the enterprise transacts business through the use of the

United States mail and private interstate mail carrier, and the use of interstate telephone wires.

150. Each of the Defendants and their co-conspirators is a "person" within the meaning

of 18 U.S.c. § 1961(3), and is separate and distinct from the enterprise. While each of the

Defendants and their co-conspirators has perpetrated particular racketeering acts, they are

separate and distinct entities from the enterprise.

151. The pattern of racketeering activity alleged below is distinct from the enterprise,

in that each act of racketeering activity is a separate offense committed by an entity or individual

while the enterprise is an association of entities and individuals. Every member of the enterprise

participated in the process of corrupting the Union; depriving the workers at the Preferred and

Non-Preferred Hotels of their associational rights under federal labor law; defrauding the owners

of the Non-Preferred Hotels; defrauding the workers at the Preferred and Non-Preferred Hotels;

and harming the consumer by reducing the quality and quantity of his choice of hotel rooms.

The common purpose of the enterprise was to impose unionization on the Non-Preferred Hotels,

thereby ensuring Marriott's continued management of the Preferred Hotels, allowing Marriott to

secure lucrative long-term management contracts and reap artificially inflated management fees;

to protect the Preferred Hotels from unionization; and to allow the Union to collect dues from as

many workers as possible and gain sufficient market density to enable it to obtain supra-

competitive wages for its members.

152. To further their goals, members of the enterprise engaged in various forms of

wrongful activity, including: (a) violations of § 302 of the LMRA; (b) mail fraud; and (c) wire

fraud.

40


153. By reason of the pattern of racketeering perpetrated by Defendants, as members

of the enterprise, Madison has been injured and has lost millions of dollars. Defendants' pattern

of racketeering activity was a proximate cause of the injuries that Madison has suffered.


approximate and inclusive, within the Southern District of New York, Defendants, as members

of the enterprise, did knowingly, willfully, and unlawfully conduct and participate, directly and

indirectly, in the conduct of the affairs of the enterprise through a pattern of racketeering activity.

155. The racketeering acts set out below, and others, all had the same pattern and

similar purpose of defrauding Madison and other owners of the Non-Preferred Hotels and

imposing significantly increased labor costs on them for the benefit of Defendants and their co-

conspirators. Each racketeering act was related, had a similar purpose, involved the same or

similar participants and methods of commission, and had similar results affecting Madison and

the other owners of the Non-Preferred Hotels. The racketeering acts of mail and wire fraud were

also related to each other in that they were part of the enterprise's goal to fraudulently induce

Madison and the other owners of the Non-Preferred Hotels to entrust the operation and

management of the Non-Preferred Hotels to Marriott or its affiliates or subsidiaries.

156. Defendants' wrongful conduct has been and remains part of their ongoing course

of business and constitutes a continuing threat to the property of Madison and other owners of

Non-Preferred Hotels. Without the repeated acts of mail and wire fraud and violations of § 302

of the LMRA. Defendants' fraudulent scheme and illegal conspiracy would not have succeeded.

157. For the purpose of executing the fraudulent scheme and illegal conspiracy, and

attempting to do so, Defendants knowingly and recklessly placed and caused to be placed in the

United States mail and private interstate carrier mail, or took or received therefrom, matters or

things to be sent to or delivered by the United States mail and private interstate carriers,

consisting of, among other things, false and misleading projections of profitability based on

information they knew to be untrue; assurances that Marriott would operate the hotels with a

non-union workforce; and communications which failed to disclose the terms of the Secret

41


Agreement, a material omission. It was reasonably foreseeable that these mailings would take

place in furtherance of the illegal scheme.

158. Defendants engaged in wire fraud, in violation of 18 U.S.c. § 1343, by, among

other things, knowingly and recklessly transmitting or causing to be transmitted by means of

wire communications, in interstate and foreign commerce, false and misleading projections of

profitability based on information they knew to be untrue; assurances that Marriott would

operate the hotels with a non-union workforce; and communications which failed to disclose the

terms of the Secret Agreement, a material omission.

159. The pattern of racketeering activity through which the affairs of the enterprise

were conducted and in which the Defendants and others participated includes the following:

Acts of Mail Fraud

160. Defendants committed the predicate act of mail fraud under 18 U.S.C. § 1341 by

using the United States mail and private interstate carriers in furtherance of their fraudulent

scheme and illegal conspiracy, including by exchanging the Secret Agreement with one another

through the United States mail and private interstate carriers.

16l. On or about June 6, 2002, Jesse Louis, Area Vice President of Lodging

Development at Marriott, sent to Madison's John Lesher, via Airborne Express ', a letter

attaching a pro forma, dated May 8, 2002, which made material false representations regarding

the projected performance of the Hotel for the first ten years of operation. The projections were

materially false and misleading because they assumed a non-union workforce. As a result of

Madison's receipt of the May 8, 2002 pro forma and the representations contained therein,

Madison entered into the Management Agreement. By facilitating their fraudulent scheme and

illegal conspiracy by directing Courtyard, their co-conspirator, to send material false information

through the private interstate carrier, Defendants violated 18 U.S.c. § 134l.


5 Private interstatecarrier acquired by DHL Expressin 2003.

42


approximate and inclusive, Defendants have made material false representations to other owners

of Non-Preferred Hotels for the purpose and with the effect of inducing those owners to entrust

the operation of their hotels to Marriott. Defendants have committed the predicate act of mail

fraud under 18 U.S.c. § 1341 by using the United States mail and private interstate carriers in

furtherance of their fraudulent scheme and illegal conspiracy, including by sending the owners of

Non-Preferred Hotels correspondence which included material false representations regarding

the projected profitability of their Non-Preferred Hotel and the likelihood that it would become

unionized, and material omissions by failing to disclose to existence of the Secret Agreement to

Madison.

Acts of Wire Fraud

163. In the Spring of 2002, Robert Mannon made material false representations on

behalf of Courtyard and the Defendants, by interstate wire transmission, to wit, by phone call,

assuring Madison that the Hotel would not be unionized. As a result of the representations made

by Mannon during that phone conversation and in other communications, Madison entered into

the Management Agreement. By facilitating their fraudulent scheme and illegal conspiracy by

directing Mannon to send material false information through interstate wire transmissions,

Defendants violated 18 U.S.C. § 1343.

164. On or about January 30, 2003, Jesse Luis, a Marriott vice president, made

material false representations on behalf of Courtyard and the Defendants by interstate wire

transmission in an e-mail containing Courtyard's false pro forma showing 47.5 non-union

employees. The pro forma was materially false and misleading because Courtyard knew the

Secret Agreement guaranteed that the hotel would employ union labor. As a result of the

representations made by Luis on behalf of Courtyard during that wire transmission, Madison

continued to entrust the operation of the Hotel to Courtyard. By facilitating their fraudulent

scheme and illegal conspiracy by directing Luis to send material false information through

interstate wire transmission, Defendants violated 18 U.S.c. § 1343.

165. On or about June 29, 2006, Madison received, by interstate wire transmission, a

43


letter from Courtyard which made material false representations regarding the likelihood of

unionization at the Hotel. Courtyard stated to Madison that it intended to open and operate the

Hotel with a non-union workforce. Courtyard's statement was materially false and misleading

because Courtyard knew the Secret Agreement required it to provide organizing assistance to the

Union sufficient to guarantee that the workers at the Hotel would be unionized. As a result of

the representations made by Courtyard during that wire transmission, Madison continued to

entrust the operation of the Hotel to Courtyard. By facilitating their fraudulent scheme and

illegal conspiracy by directing Courtyard to send material false information through interstate

wire transmission, Defendants violated 18 U.S.c. § 1343.

166. To the extent proof of reliance is legally required, in engagmg in the

aforementioned mail and wire fraud, Defendants knew that Madison would reasonably rely on

Marriott's representations and omissions which would result in Madison entering into the

Management Agreement and entrusting the operation of the Hotel to Marriott or one of its

affiliates or subsidiaries.


approximate and inclusive, Defendants have made material false representations to other owners

of Non-Preferred Hotels for the purpose and with the effect of inducing those owners to entrust

the operation of their hotels to Marriott. Defendants have committed the predicate act of wire

fraud under 18 U.S.c. § 1343 by using the interstate wire transmissions in furtherance of their

fraudulent scheme and illegal conspiracy, including by sending the owners of Non-Preferred

Hotels email correspondence which included material false representations regarding the

projected profitability of their Non-Preferred Hotel and the likelihood that it would become

unionized, and material omissions by failing to disclose to existence of the Secret Agreement.

168. From at least May 12, 2006 through August 10, 2006, Marriott sent e-mails and

facsimile transmissions to the Union providing lists of the names, addresses, phone numbers, job

titles, and rates of pay for the employees of the Hotel to assist the Union pursuant to the Secret

Agreement. For example:

44


a. On May 12, 2006, at Nancy Lee's direction, Kim Mowry, her assistant,

sent a fax and email to Michael Simo, Vice President and Regional

Director of the Union, which included a document containing the names,

addresses, phone numbers, job titles, and rates of pay for the associates at

the Hotel. The fax was sent from Washington, D.C. and received by

Michael Simo in New York, New York.

b. On August 10, 2006, Nancy Lee sent an email to Richard Maroko,

General Counsel to the Union, containing "a roster of associates who will

be in the bargaining unit, as well as their addresses, phone numbers, job

titles, and rates of pay," as well as "a list of associates and their previous

employer."

These e-mails and transmissions facilitated the Defendants' fraudulent scheme and illegal

conspiracy through interstate wire transmission, in violation of 18 U.S.c. § 1343.

169. Moreover, insofar as every bank deposit of funds obtained from Madison in

violation of 18 U.s.c. §§ 1341 and 1343 (including transfers to Marriott's own account from the

account Courtyard maintains for Madison) furthered Defendants' ability to conduct their

fraudulent schemes directed at Madison and the Non-Preferred Hotels, such bank deposits

constitute money laundering transactions in violation of 18 U.S.c. § 1956(a)(l)(A)(i) and are

therefore predicate acts within the meaning of 18 U.S.c. § 1961(l)(B).

Violations of § 302 of the LMRA

170. Section 302(a) of the LMRA makes it unlawful for an employer to deliver "any

money or thing of value ... to any labor organization," except for that prohibited by § 302(c).

Section 302(b)(l) makes it unlawful for a union to demand or receive anything prohibited by §

302(a).

171. The Secret Agreement establishes a quid pro quo, for all intents and purposes and

as confirmed by the parties' subsequent conduct, whereby the Defendant Hotel Owners agreed to

recognize the Union as the exclusive bargaining agent for any hotel they began to own, operate

45


or manage after July 2001 and to provide the Union with valuable organizing assistance in

exchange for its commitment not to organize the workers at any hotel they owned, operated or

managed before july 2001.

172. The Union obtained from Marriott or its affiliates or subsidiaries a "thing of

value" not permitted by § 302(c). Marriott's agreement to abide by the Neutrality/Card Check

Agreement and provide other organizing assistance to the Union at the Non-Preferred Hotels

guaranteed that the Union's organizing campaign at those hotels would be successful. As noted

above, Marriott had at its disposal a number of tools to ensure that the Union's organizing

campaign would be successful, including hiring pro-Union employees at Non-Preferred Hotels,

and transferring existing Union members from other Non-Preferred Hotels. The Union valued

the Secret Agreement because it was expected that, among other things, it would reduce the cost

of organizing campaigns at the Non-Preferred Hotels and would result in an increase in dues for

the Union. The Secret Agreement thus violates the plain language of § 302(b)(1) of the LMRA.


approximate and inclusive, Marriott and its affiliates and subsidiaries provided valuable

organizing assistance to the Union at the Hotel, to wit by providing lists of the names, home

addresses, phone numbers, job titles, and rates of pay for the incoming employees of the Hotel;

lists of their previous employers, seniority within the Hotel, and the benefits they received;

access to hotel property for organizing; transferring active Union members from other Non-

Preferred Hotels to staff the Hotel; and refraining from taking any action or making any

statement implying opposition to the unionization. The organizing assistance was objectively

useful to the Union because, among other things, it permitted the Union to target employees

during organizing campaigns, to send organizers to employees' homes, and to do so without the

interference or influence of Marriott. The organizing assistance was also subjectively valuable

because the Union desired it and believed it to be valuable. Marriott provided the organizing

assistance to the Union in each case with the purpose and intent of improperly influencing the

Union.

46



approximate and inclusive, Marriott and its affiliates and subsidiaries provided valuable

organizing assistance to the Union at numerous Non-Preferred Hotels, including information

regarding nonunion employees of the Non-Preferred Hotels and access to and use of the Non-

Preferred Hotels' property for organizing, in violation of § 302(b)(l) of the LMRA. The

organizing assistance was objectively useful to the Union because, among other things, it

permitted the Union to target employees during organizing campaigns, to send organizers to

employees' homes, and to do so without the interference or influence of Marriott. The

organizing assistance was also subjectively valuable because the Union desired it and believed it

to be valuable. Marriott provided the organizing assistance to the Union in each case with the

purpose and intent of improperly influencing the Union.

Scheme Affects Interstate Commerce

175. Marriott owns, operates, and/or manages thousands of full-service and limited-

service hotels, located around the world, that provide lodging facilities to customers on a short-

term basis.

176. Host owns more than 100 full-service and limited-service hotels, located around

the world, that provide lodging facilities to customers on a short-term basis.

177. DiamondRock owns 27 full-service and limited-service hotels, located around the

country, that provide lodging facilities to customers on a short-term basis.

178. Hotels in New York City, including the Preferred and Non-Preferred Hotels,

service a large number of interstate clients, and therefore they are engaged in interstate

commerce.

179. During the period of this Complaint, the conduct of Defendants and their co-

conspirators has taken place in and affected the interstate commerce ofthe United States.

180. The conduct of Defendants and their co-conspirators has directly, substantially

and foreseeably restrained such trade and commerce.

47


Madison has been Harmed

181. Marriott's violations of § 302 of the LMRA and the mail and wire fraud statutes

were a proximate cause of the injuries that Madison has suffered. By reason of the Defendants'

pattern of fraudulent conduct, Madison has lost in excess of $34 million due to the Hotel's

depressed sale price at the bankruptcy auction, penalties paid to Madison's creditor as a result of

a foreclosure, excessive labor costs and inflated management fees, in addition to as yet

undetermined additional monetary damages.

182. Under 18 U.S.c. § 1964(c), Madison is entitled to treble their general and special

compensatory damages, plus interest, costs and attorneys' fees.

COUNT IIIRICO: Violation of 18 U.S.c. § 1962(d)

(All Defendants)


above.

184. Apart from constructing and carrying out the fraudulent scheme detailed above,

Defendants conspired to violate RICO, constituting a separate violation of RICO under 18

U.S.C. § 1962(d).

185. The fraudulent scheme, as described above, alleges a violation of RICO in and of

itself.

186. It was the object of the conspiracy that the Defendants and their co-conspirators,

both known and unknown, would violate RICO, as alleged in Count II.

187. The Defendants agreed to participate in such racketeering activity and the affairs

of the enterprise knowing the nature of the conspiracy and that the conspiracy extended to others.

188. In furtherance of the conspiracy, the Defendants performed a number of overt

acts, including those alleged above. The Defendants organized and implemented the scheme,

and ensured it continued uninterrupted, by concealing the Secret Agreement and the organizing

assistance provided by Marriott to the Union in accordance therewith from the owners of the

48


Non-Preferred Hotels, including Madison.

189. As a direct, proximate, foreseeable and natural result of Defendants' fraudulent

scheme, Madison and the other owners of the Non-Preferred Hotels were injured. Because

Madison paid significantly higher labor costs than they would have absent Defendants'

fraudulent scheme and illegal conspiracy, Madison is a direct victim of Defendants' wrongful

and unlawful conduct.

190. The pattern of racketeering activity, as described above, is continuous, ongoing

and will continue unless Defendants are enjoined from continuing their racketeering practices.

Defendants have consistently demonstrated their unwillingness to discontinue the illegal

practices described above, and they continue their pattern of racketeering as of the filing of this

Complaint.

19l. Under 18 U.S.c. § 1964( c), Plaintiff and the other owners of the Non-Preferred

Hotels are entitled to treble their general and special compensatory damages, plus interest, costs

and attorneys' fees.

192. As a direct and proximate result of Defendants' racketeering activities, Madison is

entitled to an order, in accordance with the 18 U.S.c. § 1964(c), enjoining and prohibiting

Defendants from further engaging in their unlawful conduct.

COUNT IVUnjust EnrichmentlRestitution

(All Defendants)


above.

194. The Defendants unjustly received and retained benefits at the expense of Madison

after Marriott fraudulently induced Madison to enter into the Management Agreement by making

material false representations regarding the non-unionization of the Hotel workforce.

195. The Defendants also unjustly received and retained benefits at the expense of

Madison after they acted in concert with the Union, in furtherance of the fraudulent scheme and

49


illegal conspiracy, to organize the workers at the Hotel.

196. The Defendant Hotel Owners, as owners, operators and/or managers of the

Preferred Hotels, were spared the costs and burden of unionization at the Preferred Hotels

because of the fraudulent scheme and illegal conspiracy, resulting in inflated hotel valuations,

revenues, and profits.

197. Marriott, as manager of the Marriott Marquis and Marriott Financial Center,

retained its management contracts with those hotels as consideration for the fraudulent scheme

and illegal conspiracy, and earned millions of dollars in management and incentive fees.

Marriott also secured additional management contracts and collected millions of dollars in

management and incentive fees from other Non-Preferred Hotels based on Marriott's false

representations that non-union labor would be employed under Marriott's management, in

furtherance of the fraudulent scheme and illegal conspiracy.

198. The Union gained millions of dollars in additional dues from the thousands of

new dues-paying members Marriott coerced into unionization pursuant to the fraudulent scheme

and illegal conspiracy.

199. But for Marriott's agreement to assist the Union with organizing the workers at

the Non-Preferred Hotels, in exchange for the Union's commitment not to organize the workers

at the Preferred Hotel, the workers at the Hotel would not have been unionized.

200. Madison's detriment and the Defendant Hotel Owners' enrichment are traceable

to, and resulted directly and proximately from, the fraudulent scheme, illegal conspiracy and

other unlawful conduct described above.

201. Under the common law doctrine of unjust enrichment, it would be unjust and

inequitable for the Defendant Hotel Owners to retain any value they obtained as a result of their

wrongful conduct.

202. Madison is accordingly entitled to full restitution of the in excess of $350 million

in which Defendants have been unjustly enriched at Madison's expense, and any additional

amount proven at trial.

50


COUNT VTortious Interference with Contract

(Marriott)


above.

204. As described above, Marriott conspired with the Union and the other Defendant

Hotel Owners to impose a unionized workforce and significantly increased labor costs on

Madison and other owners of the Non-Preferred Hotels.

205. Marriott carried out and furthered the fraudulent scheme and illegal conspiracy by

directing Courtyard, its affiliate, to assist the Union with organizing the workers at the Hotel.

206. Madison and Courtyard were parties to the Management Agreement, pursuant to

which Courtyard was responsible for the "efficient and proper operation of the Hotel" and was

obligated to operate the Hotel as "reasonable [and] prudent operator."

207. By directly providing the Union with organizing assistance, and by directing

Courtyard to provide the same, Marriott interfered with and disrupted the contractual relationship

between Madison and Courtyard by defeating the parties' expectation that Courtyard would

operate the Hotel as a "reasonable [and] prudent operator" for the benefit of the Hotel, rather

than for its own benefit and the benefit of the Defendants. As a result, Madison overpaid for

labor at the Hotel, received lower profits on the operation of the Hotel than they otherwise would

have, and were damaged thereby.

208. Marriott acted with knowledge that its interference or disruption of Madison's

contractual relationship with Courtyard was certain or substantially certain to result from

Courtyard's assistance of the Union with organizing the workers at the Hotel.

COUNT VIFraud

(Marriott)


above.

51


210. Marriott's fraudulent acts set forth above constitute knowing false statements

made to Madison for the purpose of inducing Madison to enter into (a) the Management

Agreement and entrust the operation of the Hotel to Courtyard, and (b) the estoppel certificate

and Non-disturbance Agreement to cleanse the conspiracy, which were essential to the

furtherance and operation of the fraudulent scheme and illegal conspiracy. Marriott's false

statements or statements made misleading by material omissions include, but are not limited to

(a) its failure to disclose to Madison the terms of the Secret Agreement; and (b) its

representations, both before and after the execution of the Secret Agreement, that the workforce

of the Hotel would be non-unionized.

211. Madison justifiably relied on the statements made by Marriott.

212. Madison has suffered an injury as a result of Marriott's fraudulent actions.

COUNT VIIAiding and Abetting Fraud

(DiamondRock, Host, and the Union)


above.

214. The Union knew of the fraud perpetrated by Marriott on Madison and provided

substantial assistance to Marriott to advance the commission of the fraud by virtue of

negotiating, being direct beneficiaries of and subsequently carrying out its business pursuant to

the terms of the Secret Agreement.

215. As a result of the Union's actions, Marriott was able to successfully induce

Madison to enter into the Management, $62 million refinancing, and Non-disturbance

Agreements, and to entrust the operation of the Hotel to Courtyard.

216. DiamondRock knew of the fraud perpetrated by Marriott on Madison and

provided substantial assistance to Marriott to advance the commission of the fraud by virtue of

being direct beneficiaries of and subsequently carrying out its business pursuant to the terms of

the Secret Agreement.

52


217. As a result of DiamondRock's actions, Marriott was able to successfully induce

Madison to enter into the $62 million refinancing of the Hotel and execute the Non-disturbance

Agreement for the Defendants' benefit.

218. Host knew of the fraud perpetrated by Marriott on Madison and provided

substantial assistance to Marriott to advance the commission of the fraud by virtue of

negotiating, being direct beneficiaries of and subsequently carrying out its business pursuant to

the terms of the Secret Agreement.

219. As a result of the Host's actions, Marriott was able to successfully induce

Madison to enter into the Management, $62 million refinancing, and Non-disturbance

Agreements, and to entrust the operation of the Hotel to Courtyard.

220. Madison suffered injury as a result of entrusting the operation of its Hotel to

Courtyard.

PRAYER FOR RELIEF

WHEREFORE, plaintiff prays:

1. That Madison recovers in excess of $50 million in compensatory damages,

including treble damages as provided by law, and any additional damages determined to have

been sustained using such damage methodologies as may be appropriate at trial;

2. That Defendants be disgorged of their unjust enrichment in excess of $350

million;

3. That joint and several judgments in favor of plaintiff be entered against

Defendants, and each of them;

4. That Defendants be enjoined from continuing the unlawful scheme and

conspiracy alleged herein and other appropriate injunctive relief;

5. That Madison recover its costs of this suit, including reasonable attorneys' fees, as

provided by law; and

6. That Madison be granted such other, further, and different relief as the nature of

the case may require or as may be deemed just and proper by this Court.

53


DEMAND FOR JURY TRIAL

Madison hereby demands a jury trial as provided by Rule 38(a) of the Federal Rules of

Civil Procedure.

Dated: January 14,2013 Respectfully submitted,BOIES, SCHILLER & FLEXNER LLP

By:Nicholas A. Gravante Jr. (NG4411)575 Lexington Avenue7th FloorNew York, New York 10022Tel.: (212) 446-2300Fax: (212) 446-2350

Helen M. Maher (HM6379)Jeremy C. Vest (JV8586)333 Main StreetArmonk, New York 10504Tel.: (914) 749-8200Fax: (914) 749-8300

54


EXHIBIT A


j II.! ,. I ti..:. TIC,)) 1..:... _.... ~••...•..•.

MARRlOTTINTERNATIONAL - LAWDEPARTh1ENTLABOR SECTION :

MARRIOTT Th"TERNATIONAL HEADQUARTERS1 MARRlOlT DRIVE, DEPARTl\1El','T "#52/923.22

WASHINGTON, D.C, 20058:. 301-380-2910301-380-5189 fax

DATE:

FACSIMILE COVER SHEET:

o. /1 !r!J/O~ ,In ,ci?t1 vI ...5;/11.0

rtf~) 9:f'1- '50t'

TO:

FAX NUMBER:

FROM:

__ ~_ Nancy C. Lee, (301) 380-2910Senior Vice President andAssociate General Counsel

IGm L. Mowry (301) 380-7324Administrative Assistant

COMMENTS:

TOTAL NUMBER OF PAGES INCLUDING THE CPVER SHEET.

IF YOU DO NOT RECEIVE AIL PAGES, PLEASE CALL SENnER AS SOON AS'POSSIBLE.

IMPORTANT NOTICE:

;This information contained in thi$ faCliimilc tmnsmission is protected by the attorney-client and/or the anomey workproduct privilege. It is strictly confidcnriaJ and i5 in1enllCl16Q1cly (or the use of the rccy>icnl idenlified above. If youare not the intended recipient, you arc hereby notified that reading, copying, or distributing this lrmIsmimon isprohibited. The sender hat not waived ally app!iC3ble privilege by sending the. &l:CompllnyiDgmmsmission. If you

- have received chi&\nInSmiltal in ertQr, please notifylhc sender by ~Iephonc call, eollect, and rerum this ttansmisoion in.its entirely by maiL All postage will \J~ reimbursed. Thank )IOu. ;

CONFIDENTIALHTC00964


\\\A\arrlott ~_:;_p~_r~_~~_n~_e::_~_~~_.:_r~~_r~~n(_._;-- ~_.~~_~~_n~_.~~_~_~·'~_~..(._.._~n_iJr_.~_~_

November 5, 2002

N.):'1(~·C. LeeSerucr Vice Pecsrdcm a~cA~5nri<:l[e Cenera! CC:.ir!!Il!!

Phone: 301/38( •..291(:I"Jl(.: J01!J.80..6n7

Internet: n~ncy lee@:TiCirrio::.C:o."

Peter Ward, PresidentNew York Hotcl & Motel Trades Council707-09 glh AvenueNew York; New York 10036

Dear Peter:

I. This letter sets forth the Agreement between! Marriott International. Inc.("Marriott") and the New York Hotel & Motel Trades Council (HUnion") regarding theinterpretation and application to Marriott lodging propertiesiwithin the five boroughs ofNew York City of the neutrality and card check agreement (the "Neutrality/Card CheckAgreement") made a part of the Industry-Wide Agreement tHlW An) between the Unionand the Hotel Association of New York City, Inc. effective iJuly 2001. This Agreementmay be modified only in a signed writing specifically between Marriott and the Union.This Agreement will not be deemed modified by later ameadments or modifications tothe IW A to which any Marriott properties may be signatory, This Agreement survivesthe expiration of the IWA. The office of the Impartial thainnan shall resolve anydisputes arising out of this Agreement or the matters discus¥d herein in accordance withthe usual scope and procedure of the rwA arbitration provisions and judicial review oflabor arbitration awards. i

2. Marriott shall include any and all' affiliaies, subsidiaries and parentcompanies. Maniott lodging properties shall be deemed td include all hotel properties.Except as set forth below, Marriott accepts the NeutralitYlCard Check Agreement asincorporated into the 200 I IWA for all properties it owns, manages or operates.

3. The Neutrality/Card Check agreement will not be applicable to theI

following properties which were in operation prior to July '2001: the LaGuardia MarriottHotel; the New York Manion Marquis Hotel; the New Y~rk Marriott Financial CenterHotel; and the New York Midtown East Courtyard by Marriott. Nor will it be applicableto any properties owned, managed or operated by Marriott ~rior to July 2001.

4. Effective no earlier than January I, 2004, the Neutrality/Card CheckAgreement will govern the New York Brooklyn Marriott Hotel.



Please confirm your agreement by signing in the space provided belowand returning a fully executed copy of this letter 1.0 me.

NCLk1m

ACCEPTED AND APPROVED:

By:Peter Ward, PresidentNew York Hotel & Motel Trades Council

Date: _

CONFIDENTIAL HTC 00966


\~A\aI11Otl M<lrrlott Inl.m.lion.l, Inc. MamoU DriveCorporale He.clquarter! Walhin(:lon, D.C. 20058

. ,,-----:...-...:-...:.--.--~~-Bhavono S. BOrJ:sSenlgr Counoel]01/380-4995301/380~727 faxIntemec bh'YjI"".bogg>@m.rriotl.L"Om

November 5, 2002

Peter Ward, PresidentNew York Hotel &Mote) Trades Council707~09 8th AvenueNew York, New York 10036

Dear Peter:

1. This Jetter sets forth the Agreement between Marriott International, Inc.("Marnott'') and the New York Hotel & Motel Trades Council (''Union'') regarding the:interpretation and application to Marriott lodging properties within the five boroughs ofNew York City of the neutrality and card check agreement (the "Neutrality/Card CheckAgreement") made a part of the Industry-Wide Agreement (uN{ A'') between the Unionand the Hotel Association of New York City, Inc. effective July 2001. This Agreementmay be modified only in II signed writing specifically between Marriott and the Union.This Agreement will not be deemed modified by later amendments or modifications tothe IWA to which any Maniott properties may be signatory. This Agreement survivesthe expiration of the IWA. The office of the Impartial Chairman shall resolve anydisputes arising out of this Agreement or the matters discussed herein in accordance withthe usual scope and procedure of the IWA arbitration provisions and judicial review oflabor arbitration awards.

2. Marriott shall include any and all affiliates, subsidiaries and parentcompanies. Marriott lodging properties shall be deemed to include all hotel properties.Except as set forth below, Marriott accepts the Neutrality/Card Check Agreement asincorporated into the 2001 IWA for all properties it owns, manages or operates.

3. The Neutrality/Card Check agreement will not be applicable to the'following properties which were in operation prior to July 2001: the LaGuardia MarriottHotel; the New York Marriott Marquis Hotel; the New York Marriott Financial CenterHotel; and the New York Midtown East Courtyard byMarriott. Nor will it be applicableto any properties owned, managed or operated by Marriott prior to July 2001.

4. Effective no earlier than January I, 2004, the Neutrality/Card CheckAgreement will govern the New York Brooklyn Marriott Hotel.



Please confirm your agreement by signing in the: space provided belowand returning a fully executed copy of this letter to me.

Very truly yours,

1:J~t~NCL:klm

ACCEPTED AND APPROVED:

By:Peter Ward, PresidentNew York Hotel &Motel Trades Council

Date: _

CONFIDENTIAL HTC00968


EXHIBITB


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April 9, 2003

Brendan M. KeeganExecutive Vice PresidentHuman ResourcesPhone: 301/38(1.1010Fax: 301/3804229

Peter Ward, PresidentNew York Hotel &Motel Trades Council707-09 8th AvenueNew York, New York 10036

Dear Peter:

1. This letter sets forth the Agreement between Marriott International, Inc.("Marriott") and the New York Hotel & Motel Trades Council ("Union") regarding theinterpretation and application to Marriott lodging properties within the five boroughs ofNew York City of the neutrality and card check agreement (the "Neutrality/Card CheckAgreement") made a part of the Industry-Wide Agreement ("IWA") between the Unionand the Hotel Association of New York City, Inc. effective July 2001. This Agreementmay be modified only in a signed writing specifically between Marriott and the Union.This Agreement will not be deemed modified by later "amendments or modifications tothe IWA to which any Marriott properties may be signatory. This Agreement survivesthe expiration of the IWA. The office of the Impartial Chairman shall resolve anydisputes arising out of this Agreement or the matters discussed herein in accordance withthe usual scope and procedure of the IWA arbitration provisions and judicial review oflabor arbitration awards.

2. Marriott shall include any and all affiliates, subsidiaries and parentcompanies. Marriott lodging properties shall be deemed to include all hotel properties.Except as set forth below, Marriott accepts the Neutrality/Card Check Agreement asincorporated into the 2001 rwA for all properties it owns, manages or operates.

3. The Neutrality/Card Check agreement will not be applicable to thefollowing properties whieh were in operation prior to July 2001: the LaGuardia Marriott .Hotel; the New York Marriott Marquis Hotel; the New York Marriott Financial CenterHotel; and the New York Midtown East Courtyard by Marriott. Nor will it be applicableto any properties owned, managed or operated by Marriott prior to July 2001.

4. Effective no earlier than January 1, 2004, the Neutrality/Card CheckAgreement will govern the New York Brooklyn Marriott HoteL



Peter WardApril 9, 2003Page 2

Please confirm your agreement by signing in the space provided below andreturning a fully executed copy of this letter to me.

Very truly yours,

is~ f1I/. !lud,,--Brendan M. Keegan

BMK:klm

ACC~ APPROVED:

BY:J.~tNew.YJrk Hrel & Motel Trades Council

Date: LJb:j/0)



EXHIBIT C


MEMORANDUM OF AGREEMENT

AGREEMENT made by the New York Hotel & Motel Trades Council, AFL-CIOCUnion") and Courtyard Management Corporation ("Employer"), the employer of thebargaining unit employees at the Upper Eastside Courtyard on 92Dd Street ("Hotel").

WHEREAS, the Office of the Impartial Chairperson conducted an independent cardcount on October 4,2006, (Award 2006-09CC), the result of which was the designationof the Union as the exclusive collective bargaining representative of employees inclassifications covered by Schedule A of the Industry Wide Agreement, but excludingSupervisors and Administrative employees; Guest Service Representatives; NightAuditors; HosUHostesses; Life Guards; Pool Treatment employees; Massage Therapists;Specialty Spa personnel and Loss Prevention Officers;

WHEREAS, the Hote! and Union have negotiated in good faith over the issues resolvedbelow;

NOW, THEREFORE, IT IS AGREED:

1. Adoption of rw A: As of March 31, 2007, the Employer agrees to assume, adoptand be bound by all terms and conditions, both economic and non-economic, ofthe Industry Wide Agreement between the Union and Hotel Association of NewYork City, Inc., which, by its terms, became effective July 1, 2006 ("IW A"),except as expressly modified herein. Unless otherwise specified, March 31, 2007shall be the effective date of this Agreement.

2. No Reduction: No current employee shall suffer a reduction in hourly or weeklywages, benefits, or fringe benefits as a result of this Agreement.

3. Wage Rate Step Ul1: Notwithstanding anything to the contrary in Article 6(C) ofthe rwA, current employees shall be paid no less than 100% of the rwA ScheduleA rate after one (1) year of employment with Employer. Employees hired on orafter the effective date of this Memorandum of Agreement ("MOA") shall be paidin accordance with Article 6(c).

4. Meeting Room: The Employer has represented it will not operate a restaurant orprepare food on premises. It is therefore agreed that Housekeeping Attendants(Housemen/women) shall perform set-up, refresh, and break-down in conjunctionwith food delivered to guests using the Hotel's meeting roorn(s). AnyHousekeeping Attendant who performs such services during his/her shift shall bepaid an additional twenty-five dollars ($25), which sum is subject to IWAincreases to wages or wage-related items, in addition to his/her other wages. Suchwork shall be offered in accordance with seniority to the Housekeeping



Attendants otherwise working at the time the service is required. Employeeswhose work-load is consistently affected as the result of the absence of aHousekeeping Attendant who performs such work shall have their workloadadjusted downward to maintain regular work hours. It is further understood thatsuch employees shall work at a reasonable pace during regularly scheduled hoursand shall not be disciplined or otherwise adversely affected as a result of failure tomeet a quota or similar standard caused by the absence of the HousekeepingAttendant. Notwithstanding the above, the parties agree that if during anyone (1)year period the total gross meeting room food & beverage revenue exceeds eighthundred and fifty thousand dollars ($850,000), the Employer will meet with theUnion to negotiate appropriate terms and conditions. Absent agreement, thebanquet terms and conditions of the rwA shall apply.

5. Health Club Attendant: The Health Club Attendant shall be included under theSchedule A bold heading of Housekeeping and shall be compensated at theHousekeeping Attendant rate of pay. It is further agreed that HousekeepingAttendants may perform the duties of the Health Club Attendant when such anattendant is not scheduled or is on vacation or ill. The Health Club Attendant mayalso be requested to perform cleaning duties in public space areas when his/herduties in the Health Club permit or when a manager so requests. Suchcombination jobs are subject to the requirements of Article 22(b) of the IWA, e.g.,the Health Club Attendant may not perform the duties of the HousekeepingAttendant when a Housekeeping Attendant is on layoff or reduced work week,and a Housekeeping Attendant may not perform the duties of the Health ClubAttendant while a Health Club Attendant is on layoffor reduced work week.

6. Cameras: The Employer may install non-hidden surveillance cameras for thepurpose of ensuring employee and guest safety, provided they are not particularlydirected at individual employees and provided further they cannot viewrestrooms, locker-rooms, or break/meal rooms.

7. General Clean Mechanic: The Employer shall create the position of GeneralClean Mechanic. The responsibilities of the General Clean Mechanic shall be togeneral clean guest rooms and make any necessary repairs to the Guest Roomswhich s/he is assigned to clean. Such position shall be compensated at theSchedule A Maintenance Employee rate. For seniority purposes, the GeneralClean Mechanic shall be included in the Maintenance Mechanic seniority list.

8. Snow/Ice/Leaf Removal: In return for the extra duty of snow or ice shoveling orleaf removal, Maintenance Mechanics shall be paid an additional twenty-fivedollar ($25) per day, which sum is subject to IWA increases to wages or wage-related items, for each day snow or ice shoveling or leaf removal work isperformed.

9. Bellpersons and Doorpersons: Because Bell and Door staff may be required to goto 2nd Avenue to hail cabs, all Bell or Door staff shall be paid at twice the regular~{



hourly rate of pay for two (2) hours, each day, regardless of how little or muchtime is spent hailing cabs. Such additional compensation shall be added to theregular rate for purposes of determining overtime and premium pal rates. Whenmanagers and/or supervisors also assist in the hailing of cabs at 2° Avenue, thisshall not be deemed a violation of any provision of the IWA or MOA, providedany tips or gratuities received as a result shall be paid to the Bell or Dooremployees working during the shift in which the tip or gratuity was paid by theguest. If no Hotel employee hails cabs from locations other than directly in frontof the Hotel at any point, the parties agree to meet and discuss the appropriate rateof pay for bell and door staff.

10. Checking Guest Baggage: Front Desk employees and managers may check guestluggage into the luggage storage room if no Bell or Door staff is available,provided no Bell or Door staff is on layoff or reduced work week. Any tips orgratuities received as a result shall be paid to the Bell or Door employees workingduring the shift in which the tip or gratuity was paid by the guest.

11. Coffee Station: The Hotel has a fixed coffee station, from which coffee and hotwater are available to guests in the morning. Non-bargaining unit employees andManagement shall service the coffee station.

12. Minibar: The Hotel has expressed its intent to add minbars to guest rooms whichwill only require two (2) to three (3) hours of work per week to stock, service andmaintain. For the period ending two (2) years from date the minibars are placedin the rooms (which is expected to be summer, 2007), the Hotel may subcontractthe work to a wholly independent third party and Article 45 of the rwA shall notapply to same. After such two (2) year period, unless the Contractor hasnegotiated an agreement with the Union, Article 45 of the IWA shall beapplicable. The Hotel further acknowledges that such work is fairly claimablebargaining unit work and that this Paragraph shall not act as a waiver of same.The Union reserves the right to negotiate if the presence of the minibars has acognizable effect on the workload of Room Attendants. The Hotel will notify theUnion when the first minibar is placed into a room.

13. Amenities: Any amenities currently delivered to rooms by non-bargaining unitpersonnel may continue to be delivered by non-bargaining unit personnel.

14. Schedules: The parties agree that beginning April 9, 2007, the Hotel will, for allclassifications, except Bell/Door staff, post schedules for which employees canbid in order of seniority. Bell/Door schedules will continue to be assigned as theyare now, in seniority order, recognizing preferences for days off. This systemshall remain in effect only as long as all members of the Bell/Door staff wish tofollow this model. The Hotel shall not be required to pay sixth and seventh dayovertime pay where such pay would be required only as a result of the schedulesBell/Door staff have chosen to work.



15. Health Benefits: Employees who currently participate in the Hotel's health planshall be entitled to elect, at the employee's sale discretion, within thirty (30) daysof the Effective Date of this Agreement, to either continue in the Hotel's plan ortransfer to the New York Hotel and Motel Trades Council and Hotel Associationof New York City, Inc. Health Benefits Funds ("Industry Plan"), subject to and inaccordance with the terms of each such plan. Each employee must make his/herelection on the form provided by the Health Benefits Fund with a copy providedto the Hotel (a copy of the form is attached hereto as Exhibit "A"). Anyemployee who fails to make an election within those thirty (30) days will continueto receive benefits pursuant to the Hotel's plan. Employees who continue toreceive benefits under the Hotel's plan shall be entitled to the same benefits as areoffered to non-bargaining unit employees at that Hotel, and Employer retains theright to modify any aspects of its plan, including cost, at any time, which changeshall not be deemed a violation of Paragraph 2. Employees who initially elect to,or by default, continue receiving benefits under the Hotel plan may thereafterswitch, at any time, to the Industry Plan, upon thirty (30) days notice and aftercompleting the appropriate forms referred to herein. No employee who receivesbenefits under the Industry Plan may switch to the Hotel's plan. Hotelcontributions to the Industry Plan will commence immediately after the thirty (30)day election period only for those who are covered by the Industry Plan. TheHotel shall ensure that there is no gap in coverage for any employee under anycircumstances. Any employee hired after the date of this Agreement, or who iscurrently an employee but not receiving benefits under the Hotel's plan, will becovered solely under the Industry Plan.

16. Pension Benefits: Employees who currently participate in the Hotel's 401(k)and/or Profit Sharing plan shall be entitled to elect, at the employee's salediscretion, within thirty (30) days of the Effective Date of this Agreement, toeither continue in the Hotel's plan or transfer to the New York Hotel and MotelTrades Council and Hotel Association of New York City, Inc. Pension Fund and401(k) Plan (collectively "Industry Pension Plan"), subject to and in accordancewith the terms of each such plans. Each employee must make his/her election onthe form provided by the Pension and Benefit Funds with a copy provided to theHotel (a copy of the form is attached hereto as Exhibit "B"). Any employee whofails to make an election within those thirty (30) days will continue to receivebenefits pursuant to the Hotel's plan. Employees who continue to receive benefitsunder the Hotel's plan shall be entitled to the same benefits as are offered to non-bargaining unit employees at the Hate! and any such change in such benefits shallnot be deemed a violation of Paragraph 2. Employees who initially elect to, or bydefault, continue receiving benefits under the Hotel plan may not thereafter switchto the Industry Pension Plan. No employee who receives benefits under theIndustry Pension Plan may switch to the Hotel's plan. Hotel contributions to theIndustry Pension Plan will commence one (1) year after the thirty (30) dayejection period only for those who are covered by the Industry Pension Plan.Employees shall be immediately eligible to participate in the Industry 401(k)jPlan. Any employee hired hereafter, or who is currently an employee but not

.~

4



receiving benefits under the Hotel's plan, will be covered solely under theIndustry Pension Plan.

17. Other IWA Benefit Plans: Effective May 1,2007, the Employer shall participatein and contribute to all other Benefit Funds as set forth in the IWA.

18. Existing Fringe Benefits: Except as otherwise provided in Paragraph 19, allfringe benefit plans or programs offered by the Employer shall continue to beavailable to bargaining unit employees so long as they continue to be offered bythe Employer to any of its non-union employees, including: credit union,Christmas Club, room rate, gift shop, food and beverage discounts, length ofservice awards, and Savings Bonds. Participation in such plans and programsshall be subject to the terms and conditions that apply to non-union employees ofthe Employer, as may be modified or terminated on a non-discriminatory basis.

19. Tuition Reimbursement Plan: Employees who currently participate in theEmployer's tuition reimbursement plan as of the effective date of this Agreementmay continue to participate until completion of any courses in which they arecurrently enrolled. A list of such employees shall be provided to the Union withinten (10) days of ratification of this Agreement along with a copy of the summaryplan description and similar material. Such employees shall receive all benefitsand coverage thereunder without discrimination due to Union membership, in fullconformity with the benefits and coverage provided non-bargaining unitemployees and subject to terms as may exist under the plan, includingamendment. Subject to the preceding sentence, any changes to the plan shall bewithin the discretion of the Employer and shall not be subject to negotiations withthe Union.

20. Arbitration: Any and all disputes between the parties or regarding theinterpretation of application of this Agreement shall be submitted to the Office ofthe Impartial Chairperson as set forth in the grievance and arbitration provisionsof the IWA, the entirety of which are incorporated herein by reference.

NtW YORK HOTEL & MOTELTRADES COUNCIL, AFL-CIO

COURTY ARD MANAGEMENTCORPORATION

1) CkNanCytrfJMich i 0

Vice-Pr ident & RegionalDirector

Senior Vice President andDeputy General Counsel

JDate Date

5



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