Starwood 2004 Annual Report Download - page 115

STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
AND STARWOOD HOTELS & RESORTS
NOTES TO FINANCIAL STATEMENTS Ì (Continued)
judgment seeking dismissal of all claims pending in the BRC Action. On August 24, 2004, Intelnet agreed to
sever and dismiss with prejudice the BRC Action in its entirety, with the condition that if its claims in the
First Suit are reinstated on appeal, the BRC Action will be reinstated. On August 19, 2004, Intelnet Ñled a
notice of appeal with respect to the First Suit. The Company has accrued for the expected legal costs
associated with the dispute and does not expect that the resolution will have a material adverse eÅect on the
consolidated results of operations, Ñnancial position or cash Öows.
In November 2001, the Corporation, Sheraton Corp., and Sheraton Holding commenced a separate
litigation in the United States District Court for the District of New Jersey, asserting claims arising under
RICO as well as fraud claims against the principals of Intelnet. The case was subsequently dismissed by the
court on the grounds that it was brought subsequent to the running of the statute of limitations. An appeal was
Ñled and in April 2004 the Court of Appeals aÇrmed the District Court's dismissal of the claims.
In July 2000, the Company Ñled suit in New York City against Aoki Corporation (""Aoki'') and certain
other related and unrelated entities regarding Starwood's management of nine hotels in the United States and
Canada owned by Aoki and/or such other entities. Starwood is seeking to enforce the management
agreements relating to these hotels and the rights Starwood acquired in connection with the purchase of those
agreements from Aoki in 1995. In addition, Starwood seeks monetary damages and other relief for defendants'
fraud, breach of contract, negligence, breach of duty of good faith and fair dealing, and other alleged acts of
wrongdoing.
In October 2000, Aoki and the other defendants in the lawsuit described above Ñled an action in New
York state court against Starwood claiming that policies and practices constitute breaches of its contractual
and Ñduciary duties with respect to fees and cost allocations relating to central reservations, the SPG program,
and marketing and sales initiatives; Starwood's purchasing practices, and the receipt of rebates; cross-selling
and other joint marketing and promotional programs undertaken by Starwood; and Starwood's management
and accounting practices regarding the hotels, including the extent to which Starwood responded to the
owners' prior demands for information and documents.
During 2001, the parties to both lawsuits participated in a mediation, which resulted in a May 2002
settlement between Starwood and the owners of two of the hotels. On October 14, 2004, the remaining parties
to both lawsuits executed a Stipulation of Settlement, which was approved by the Court. As a result, both
actions have been dismissed.
Starwood Asia PaciÑc Management Pte Ltd and Starwood Hotels and Resorts Worldwide, Inc. are
Defendants in Suit No. 961 of 2002/C commenced by Asia Hotel Investments Ltd (""AHIL'') in the High
Court of Singapore. In connection with its interest in the acquisition of a majority stake in a hotel in Bangkok,
Thailand, AHIL considered Starwood as a potential operator of the hotel and the parties signed a
ConÑdentiality and Non-Circumvention Agreement (the ""AHIL Agreement'') in December of 2001. The
AHIL Agreement placed certain restrictions on Starwood's dealings as they related to the hotel. AHIL proved
unsuccessful in its acquisition attempt and Starwood was contacted by the successful bidder to manage the
hotel as a Westin and a management contract was signed. AHIL is alleging that the new owner of the majority
stake could not have completed the acquisition of that stake without an agreement by Starwood to operate the
hotel as a Westin and that Starwood's agreement to do so was in violation of the AHIL Agreement.
AHIL brought suit in the trial court in Singapore and claimed loss of proÑts of approximately
US$54 million. However, at the time of the trial AHIL reduced its claim to one of loss of chance and asked
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