Plaintiff Boston East bought the Captain Daniel Stone Inn in Brunswick Maine from Saco on 2013, two years after Saco itself had acquired the property from one of its borrowers. Over four months of diligence, Boston East claims it was never informed of significant problems in the HVAC and sprinkler systems at the inn by Saco. Boston East obtained a loan from Saco to make the purchase. Boston East says that is invested over $2.8 million on renovations and upgrades to convert the inn into a high-end boutique hotel, which it rebranded as “The Daniel Hotel,” with an interior restaurant branded as “Coast Bar + Bistro.” Boston East asserts that, through its considerable advertising and promotional efforts, these brands have acquired trademark status and have become famous.
When two separate instances of HVAC pipe failures in the summer of 2019 caused the hotel to shut down during the peak season, Boston East fell behind on its payments to vendors and upon its loans., and the company filed for Chapter 11 bankruptcy in January 2020. This bankruptcy was dismissed a month later, after which Saco offered to hold off on foreclosure proceedings if Boston East agreed to forgo refiling for bankruptcy and instead market the hotel for sale. According to Boston East, Saco was aware that sale of the hotel would likely take some time, as Saco had taken 23 months in 2011 to find a buyer and Maine (like the rest of the country) was at that point entering into the COVID pandemic, which would necessarily impact travel, lodging and real estate sales. Nevertheless, despite knowing that Boston East would expend considerable resources maintaining and running the hotel while seeking a buyer, Saco determined in July to foreclose, and in August Saco changed the locks on the property and placed it with an auction house, co-defendant Tranzon Auction Proprties to auction the property. The auction is scheduled for today, September 17th. According to Boston East, in marketing the hotel, the defendants wrongfully used, and tarnished, the marks used by Boston East in running the hotel. Boston East brings counts for common law trademark infringement, false designation of origin, unfair competition and trademark dilution under the Lanham Act, trademark dilution under Massachusetts G.L. c. 110H § 13, violation of the Federal Trade Commission Act through unfair and deceptive practices, violation of c. 93A, conversion in connection with the retention of Boston East property that was in the hotel when the locks were changed, breach of contract, detrimental reliance and violation of the implied covenant of good faith and fair dealing.