FDD Items 3 & 4 · 2024 filing

Scottish Inns, Red Carpet Inn, Master Hosts Inns, Passport Inn, Downtowner Inns litigation history

What Scottish Inns, Red Carpet Inn, Master Hosts Inns, Passport Inn, Downtowner Inns disclosed about lawsuits, arbitrations and bankruptcy in the 2024 Franchise Disclosure Document. Item 3 lists the material legal actions a franchisor must report; Item 4 covers bankruptcy. This is the franchisor's own disclosure, not a court record, and not legal advice.

Items 3 (litigation) & 4 (bankruptcy) at a glance

What the filing discloses

Cases disclosed: 8; Item 3, as counted in the filing

Largest settlement, franchisor's own cases: None stated

Bankruptcy (Item 4): None; Franchisor, parent, predecessor or officer

Filing year: 2024; Disclosures cover the prior ten years

Extracted from the 2024 Franchise Disclosure Document

Item 3: litigation

1 concluded 1981 SEC enforcement action against affiliate Red Carpet Inns International (settled via consent injunction, pre-dates current ownership involvement); 7 franchisor-initiated suits 2021-2023 against franchisees for trademark infringement and past-due fees/liquidated damages, one resulting in judgment with collection efforts ongoing.

Item 3 (litigation) · 8 matters disclosed

Litigation cases

The franchisor

Concluded (1)

Hospitality International, Inc. v Lodging and Trade, L.L.C., and Ahmed Mubarak
concluded
Brought by the franchisor · filed 2023-09-20 · Superior Court of Dekalb County · 23CV8367
“(7) Hospitality International, Inc. v Lodging and Trade, L.L.C., and Ahmed Mubarak, Superior Court of Dekalb County C.A. 23CV8367; filed September20, 2023. Claim for past due fees. Judgment was obtained. Collection efforts are being taken. (Greenwood, IN).”Page 12 of the 2024 FDD, Item 3

Status not stated in the filing (6)

Hospitality International, Inc. v Carney’s Point Hospitality, LLC, Shailesh Shah and Alpeshkumar Patel
Brought by the franchisor · filed 2023-02-24 · Superior Court of Dekalb County · 23CV2489
“(5) Hospitality International, Inc. v Carney’s Point Hospitality, LLC, Shailesh Shah and Alpeshkumar Patel, Superior Court of Dekalb County, C.A. No.23CV2489; filed February 24,2023. Claim for past due fees.”Page 12 of the 2024 FDD, Item 3
Hospitality International, Inc. v Shree Sai Hospitality, LLC
Brought by the franchisor · filed 2023-02-24 · Superior Court of Dekalb County · 23CV 2494 (printed “C.A. No 23CV 2494:”, with a space inside the number)
“(6) Hospitality International, Inc. v Shree Sai Hospitality, LLC, Superior Court of Dekalb County, C.A. No 23CV 2494: filed February 24,2023. Laim for past due fees.”Page 12 of the 2024 FDD, Item 3
Hospitality International, Inc. v BM Hospitality, LLC
Brought by the franchisor · filed 2022-08-03 · United States District Court, District of New Jersey · 1:22-cv-04891 (printed “CA No.1:22-cv-04891”)
“(4) Hospitality International, Inc. v BM Hospitality, LLC, United States District Court, District of New Jersey, CA No.1:22-cv-04891; filed- 8/3/2022; Claim for trademark infringement and damages.”Page 12 of the 2024 FDD, Item 3
Hospitality International, Inc. v Kartik Hospitality, LLC and Kartik Patel
Brought by the franchisor · filed 2022-06-15 · Superior Court of Dekalb County · 22CV5611 (printed “C A. No. 22CV5611”)
“(3) Hospitality International, Inc. v Kartik Hospitality, LLC and Kartik Patel, Superior Court of Dekalb County, C A. No. 22CV5611; filed- 6/15/2022; Claim for past due fees and liquidated damages.”Page 12 of the 2024 FDD, Item 3
Hospitality International, Inc. v C&M, LLC and Bella A. Patel
Brought by the franchisor · filed 2021-04-27 · Superior Court of Dekalb County · 21CV3767
“(2) Hospitality International, Inc. v C&M, LLC and Bella A. Patel, Superior Court of Dekalb County, C.A. 21CV3767; filed -4/27/2021; Claim for past due fees and liquidated damages.”Page 12 of the 2024 FDD, Item 3
Hospitality International, Inc. v Lake Erie Lodge, Inc. and Hassan “Harry” Muhammed
Brought by the franchisor · filed 2021-11-05 · U. S. District Court for the Western District of Pennsylvania · 1-21-cv-305
“(1) Hospitality International, Inc. v Lake Erie Lodge, Inc. and Hassan “Harry” Muhammed, U. S. District Court for the Western District of Pennsylvania, C.A. 1-21- cv-305; filing date- 11/5/2021; Claim for trademark infringement.”Page 12 of the 2024 FDD, Item 3

Parent, affiliates, master franchisor and subfranchisor

Concluded (1)

Securities and Exchange Commission v. Perpetual Energy Products, Incorporated, et al.
concluded
Government or regulatory action · Red Carpet Inns International, Inc. (“RCII”) - Item 1 says Hospitality “is owned by” RCII and in the next sentence calls RCII an “affiliate”; see count_note · filed 1981-10-13 · United States District Court, Central District of California · 81 5308 LTL (Kx) (printed thus, with spaces where the docket would carry hyphens)
“In Securities and Exchange Commission v. Perpetual Energy Products, Incorporated, et al., Civil Action No. 81 5308 LTL (Kx), United States District Court, Central District of California, filed on October 13, 1981, the Securities and Exchange Commission brought an action under Sections 10(b) and 12(q) of the Securities Exchange Act of 1934 against a number of defendants, including Red Carpet Inns International, Inc.”Page 11 of the 2024 FDD, Item 3
Outcome: “On or about May 22, 1982, Red Carpet Inns International, Inc. settled the matter by consenting to the entry of a Final Judgment of Permanent Injunction wherein it and those acting for it were permanently enjoined, in connection with the purchase or sale of securities, from knowingly employing any scheme to defraud, from engaging in any act which would operate as a deceit” (page 12)

Item 3 lists the litigation the franchisor must disclose; a matter against a parent, an affiliate or a named officer is not a matter against the franchisor, and pending claims are allegations, not findings.

Before you weigh a lawsuit

How to read Item 3

A franchisor must disclose pending actions and any material civil action involving the franchise relationship, plus convictions or civil judgments for fraud, unfair or deceptive practices, or franchise-law violations, going back ten years. A case the franchisor brought against a franchisee counts too. Item 3 does not include every dispute: settled claims below the materiality line and matters resolved in private arbitration can be absent.

Questions worth asking current and former franchisees, using the contact list in Item 20:

Were you, or anyone you know in the system, party to a dispute with the franchisor?
Was it resolved by settlement, arbitration or a court, and on what terms?
Has the number of disputes gone up or down since you signed?

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