Atrium TRS LLC and affiliates have filed suit against John Q. Hammons Hotels Management Co. LLC, claiming JQH Hotels CEO Jacquie Dowdy violated a management contract by appointing herself to the company's top post and attorney Greggory Groves as general counsel.
Atrium, led by principal Jonathan Eilian, in 2005 entered a minority shareholder buyout of $132 million of JQH Hotels stock, effectively privatizing the company, according to
Springfield Business Journal archives.
The suit, filed July 20 in Delaware Chancery Court, claims Atrium has a contractual right to approve senior position changes at JQH Hotels, and the investor group claims Dowdy hasn't adhered to the contract since taking over as CEO in late 2010 after founder John Q. Hammons stepped down due to health issues, according to a report from
Law360.com.
The suit also claims Dowdy diverted Hammons' $200,000 salary to herself and directed the company to pay more than $1 million in bonuses to employees after waving performance requirements, in violation of the contract agreement, according to the report.
The suit calls for an injunction preventing Dowdy from acting as CEO of JQH Hotels and removing Groves as general counsel. It also seeks an injunction that would allow Atrium to appoint its choice of president for JQH Hotels, as well as damages related to Dowdy's salary and the employee bonuses.
Groves could not be reached for comment this morning. Sheri Smith of Publicis PR, who handles public relations for JQH Hotels, e-mailed a statement on behalf of the Springfield company.
"The company has received a copy of the complaint and has engaged counsel to aggressively defend against the baseless allegations brought by Atrium TRS LLC, the other Atrium groups and Jonathan Eilian, its principal," the JQH Hotels statement said. "The company will establish in court that the company has not violated the terms of the management services agreement.
"Under the leadership of Jacqueline A. Dowdy, the company has effectively managed the hotels in its portfolio."
Atrium's attorneys - Scott Edelman, Alan Stone and Jed Schwartz of Milbank Tweed Hadley & McCloy LLP and David Teklits and Kevin Coen of Morris Nichols Arsht & Tunnell LLP - could not be reached for comment by deadline.
Hammons stepped out of the day-to-day operations in
October 2010, and Dowdy - who held Hammons' power of attorney - took the reins. In the subsequent fallout, several executives, including longtime JQH Hotels executive Scott Tarwater, left the company.
In April, a
suit filed by Rogers Funding LLC claimed Dowdy had inflated Hammons' and his trust's net worth by $1 billion when refinancing a loan for a Rogers, Ark., hotel and convention center. Scottsdale, Ariz.-based Rogers Funding also is led by Eilian. The suit claims the net worth and assets are actually less than $400 million, and Rogers Funding - which purchased the loan for the development - said the misrepresentation could trigger a loan default with Barclays Capital Real Estate Inc.
According to a statement from the Springfield hotel company provided this morning by Smith, JQH Hotels in June filed a countersuit.
"Although no court has determined that a default has occurred, Rogers Funding LLC has taken steps against (JQH Hotels), which may only be taken after a default has occurred. The company has filed (the countersuit) in an effort to vindicate the company and to firmly establish that the company is not in default and that the actions taken by Rogers Funding are baseless and without merit," the statement said.
