The Third Circuit Court of Appeals vacated in part a summary judgment order in favor of Holiday Hospitality Franchising LLC (HHF), holding that a “non-renewal” clause in a hotel franchise agreement violated the New Jersey Franchise Practices Act (NJFPA) and therefore was not a bar to Scion Hotels LLC’s wrongful nonrenewal claim. Scion Hotels LLC v. Holiday Hospitality Franchising LLC, 2025 WL 2170322 (3d Cir. July 31, 2025).
Scion purchased a Holiday Inn hotel near Newark Airport in 2019 and entered into a franchise agreement with HHF that was expressly “non-renewable.” When HHF declined to renew in 2021, Scion sued, alleging wrongful nonrenewal, constructive termination, and imposition of unreasonable standards of performance under the NJFPA. The district court granted summary judgment to HHF on all claims.
On appeal, the Third Circuit held that the agreement’s “non-renewal” clause was unenforceable because it functioned as an impermissible release of HHF’s statutory obligation to show “good cause” for nonrenewal. The NJFPA requires a franchisor to show “good cause” for nonrenewal, and prohibits franchisors from requiring franchisees to agree to releases that relieve franchisors of liability imposed by the NJFPA. Thus, the court found the non-renewal provision in the franchise agreement unenforceable. The court also found there was a genuine dispute of material fact regarding whether HHF had good cause to not renew the franchise agreement, so the court vacated summary judgment on the wrongful nonrenewal claim and also vacated the district court’s ruling that Scion could not recover damages, reasoning that if Scion prevails on its wrongful nonrenewal claim, then HHF may be liable for costs Scion incurred resulting from the nonrenewal.