Roughly a week after travelers were told to leave their rooms with little notice, the hotel chain Marriott International is saying it did what it had to do to protect them.
In court papers filed late Friday, Marriott said its former business partner, hospitality company Sonder, “attempted to leverage guest safety as a bargaining chip” to eke money out of Marriott as Sonder’s financial situation worsened.
Sonder, lawyers for Marriott alleged, threatened that “unless Marriott financed its wind-down, it would shut down hotel systems and leave thousands of guests locked out of their rooms mid-stay, without regard to whether those rooms contained medication, passports, personal effects, or other essentials and without regard to whether those guests would be left with no place to sleep.”
Representatives for Sonder did not immediately respond to a request for comment by Business Insider on Monday. The San Francisco company, which operated thousands of short-term rental units, including apartment-style and boutique hotel accommodations around the globe, officially filed for Chapter 7 liquidation proceedings on Friday.
On November 9 — the day before Sonder announced that it would file for bankruptcy protection and immediately wind down its US operations — Marriott had announced the termination of its licensing agreement with the company.
The move sparked chaos and confusion for blindsided guests, and many were forced to leave their accommodations with little warning. As Business Insider has reported, Marriott emailed guests staying at Sonder properties that Sunday and instructed them to vacate by 11 a.m. on Monday, November 10.
The two companies had an agreement that allowed Marriott Bonvoy members to book stays at Sonder’s properties directly through the hotel giant’s platforms.
Marriott said in the motion filed in Sonder’s bankruptcy case that it “had no choice” but to end this agreement after Sonder informed the hotel chain that it was “headed for an imminent free-fall liquidation and was about to abandon thousands of hotel guests across three continents.”
“Marriott acted to protect the safety, security, and welfare—and, frankly, basic dignity—of thousands of guests abandoned by Sonder,” Marriott’s attorneys said in the court filing.
Marriott, which said it’s “never collected or received payments for stays” at Sonders’ properties, said Sonder owes it at least $17.6 million.
According to Marriott’s motion, Sonder owes the hotel chain at least $17.6 million.
A ‘dire’ financial situation
Marriott’s lawyers said in the Friday motion that by November 7 — the day Marriott ended its partnership with Sonder — it “became clear” that the firm’s liquidity situation “was so dire that Sonder effectively had little to no cash.”
“The threat of an abrupt termination of Sonder’s operations coupled with the lack of any liquidity to pay essential operating costs—such as payroll or mission critical vendors—created an immediate risk to the health, safety, and welfare of thousands of guests,” the court filing says.
The motion said that on November 5, Marriott agreed to provide Sonder with about $1.5 million in funding for one week of Sonder’s US payroll and payroll taxes as part of an amendment to their loan agreement.
Marriott said the “ink was barely dry on the loan documentation” when Sonder sent Marriott a $50 million proposal for Marriott to “fund the entirety of Sonder’s wind-down costs.”
“Although Marriott agreed to review any actionable proposals provided to it, Marriott reiterated that it had no obligation to provide Sonder any additional or further funding, much less the considerable and unspecified funding previously requested,” the hotel chain’s attorneys wrote.
Sonder tried again, but with a $28 million proposal. When Marriott rejected that, the firm sent Marriott a revised proposal for $14.3 million in funding, which Marriott again declined, according to the court filing.
“Marriott emphasized its expectation that, should Sonder take steps to shut down operations, it should do so in a manner to protect guests, but Sonder ignored these requests,” Marriott’s attorneys wrote.
The court filing says Marriott “requested contact information for individuals responsible for operations and transitioning technology and related systems, but Sonder failed to take even this simple step to protect its own guests.”
Following the ending of its licensing agreement with Sonder, Marriott “immediately activated Emergency Measures to assist guests affected by Sonder’s threatened shutdown,” the motion says.
Marriott’s motion is seeking an order from the court that its emergency actions, which include rebooking guests to other properties, do not violate the automatic stay triggered by Sonder’s bankruptcy filing.
A hearing on the matter is scheduled for Tuesday.
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