Virgin Hotels San Francisco v. 250 Fourth Development CA1/3

BACKGROUND

In 2010, Ganendra Singh — Owner’s principal shareholder — heard Richard Branson — the Virgin Group’s founder — say in a speech at a conference that he planned to open 20 hotels in the next two years. Singh and Raul Leal — Virgin’s CEO — discussed Virgin’s interest in managing the 1 Hotel. Leal told Singh that Virgin’s hotels would have cross-marketing opportunities with Virgin Airlines. Owner and Virgin negotiated two contracts over 10 months. The first, a “Technical Services and Pre-Opening Services Agreement” (TSA), governed their relationship before the Hotel opened. The second, a “Hotel Management Agreement” (HMA), governed day-to-day operations afterwards. The TSA entrusted Owner with the Hotel’s “design, development and construction” in “accordance” with Virgin’s brand standards, and it required Virgin to provide Owner with “Technical Services necessary or reasonably required” for Owner to meet the standards. Virgin also had to provide “Pre-Opening Services” — including staffing and marketing of the Hotel — starting nine months before opening. In the HMA, Virgin agreed to manage the Hotel for 20 years in exchange for a management fee. It had “discretion and…