“Contempt If I Ever Saw It”: OYO Hotels Burned by Judge

A judge is blasting OYO Hotels for its actions at a Times Square hotel, where a dispute is raging between the company and its former manager, Highgate Hotels.

On Tuesday, a judge found OYO Hotels in contempt after violating a previous order, Crain’s reported. The decision puts OYO on the hook for legal fees in the dispute, which could fall in the six-figure range when determined next week.

The judge pulled no punches in finding OYO in contempt for firing the property’s manager and dozens of unionized employees, despite an order not to do so.

“I don’t even know what more you could do to be in contempt. I really don’t,” New York state Supreme Court Judge Andrea Masley said. “This is contempt if I ever saw it.”

The judge also admonished OYO for not adhering to a contract that dictated how the company and Highgate would go their separate ways.

OYO did not respond to a request for comment about the contempt finding or the dispute with Highgate.

In early August, OYO allegedly blindsided the property manager Highgate with a notice canceling its contract, according to a lawsuit filed by Highgate. The cancellation attempt came four years ahead of schedule and included the citation of issues related to an entirely different property Highgate operates.

The 10-year management agreement entitled Highgate to a 3.25 percent cut of the 208-key hotel’s gross revenue. OYO is supposed to provide working capital to the property, which Highgate described as “well-performing.”

OYO disagreed with Highgate’s characterization of performance in the termination notice. The hotel owner said it plans to welcome a new property manager, though at the moment, that property manager appears to be OYO.

Terminating Highgate’s contract could be a way for OYO to cut expenses and boost earnings before an expected initial public offering.

OYO, backed by SoftBank, bought Motel 6 from Blackstone for $525 million and is preparing an IPO that could value the company at $8 billion.

— Holden Walter-Warner