Hotel Online  Special Report

 After Five Years of Litigation Strategy Starwood
Prevails in Appeal of Woodley Road Decision


WHITE PLAINS, N.Y.- May 28, 2004 -- Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT) announced today that on Tuesday, May 25, the United States Court of Appeals for the Third Circuit handed down its decision substantially reversing the judgment of the trial court in a long running dispute between the owners of the former Sheraton Washington Hotel and Starwood's predecessor, ITT Sheraton, which had managed the hotel for many years. The dispute centered on Sheraton's handling of its centralized purchasing program, which it used to acquire furnishings, equipment, and operating supplies for Sheraton hotels at favorable prices. Following a 1999 trial in federal court in Delaware, a jury returned a verdict totaling approximately $50 million against Sheraton, which included $37.5 million in punitive damages. The trial judge subsequently reduced the punitive damages to approximately $17.4 million, for a total judgment against Sheraton of about $30 million. In reversing the result in the trial court, the Court of Appeals reduced the ultimate damage award to approximately $3.4 million, much of which related to matters that Starwood was unable to appeal for procedural reasons.

Sheraton's appeal challenged certain aspects of the judgment, primarily (i) the validity of a finding that Sheraton's conduct violated the Robinson-Patman Act, a federal antitrust statute; (ii) a $10.26 million award for breach of the management contract's "agency" provision; and (iii) the finding and amount of liability for punitive damages.

The court agreed with Sheraton and ruled that Sheraton was entitled to judgment on the Robinson-Patman Act claim. The court also threw out the $10.26 million award for breach of the agency provision. Finally, although the court agreed with Sheraton that the jury had been misinstructed on a crucial point regarding liability for punitive damages, it concluded that Sheraton's trial counsel had invited the error and therefore that the court could not overturn the punitive damages on that basis. The court did, nonetheless, slash the award of punitive damages from over $17 million to about $2 million. The trial counsel's error was the subject of a successful malpractice action in 2003.

"We are extremely pleased with this result," reported Ken Siegel, Starwood's General Counsel. "Although the Woodley Road case involved actions by Sheraton that predated Starwood's ownership, it has been a cloud on our management business. For the past 5 years, Starwood has worked very hard to overcome the negative image this case created by introducing innovative programs and offerings for our hotel owners. Coupled with an aggressive litigation strategy, we believe this approach has enabled Starwood to put Woodley Road behind us."

Questions about the decision may be directed to Starwood's appellate counsel, Andrew Frey (212-506-2635) or Kenneth Siegel (914-640-8500).

Starwood Hotels & Resorts Worldwide, Inc. is one of the leading hotel and leisure companies in the world with more than 750 properties in more than 80 countries and 110,000 employees at its owned and managed properties.

Starwood Hotels & Resorts Worldwide, Inc.
Also See: Strategic Hotel Capital Files Lawsuit Against Marriott International Inc. / Read the Entire 73 Page Complaint / August 2002
Case Review; Sheraton Liable to the Owners of the Former Sheraton Washington Hotel for $50 million, Including $37.5 million in Punitive Damages / Tuttle & Taylorís Hospitality Practice Group / March 2000
Woodley Road: The Global Hospitality Advisor interview with Don Winter, a qualified, first-hand insider's view / JMBM / Feb 2000
Thunder over Woodley Road - A first jury verdict focusing on the consequences for a hotel operator failing to meet its fiduciary duties to the hotel's owner / Jim Butler and Jeff Riffer / JMBM / Feb 1999

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