On October 19, 2011, Innkeepers USA Trust, et al., filed a motion with the US Bankruptcy Court for the Southern District of New York to approve a settlement it reached with Cerberus Series Four Holdings, LLC (Cerberus) and Chatham Lodging Trust (Chatham). The agreement will settle a dispute between the parties surrounding the failed acquisition of certain subsidiaries of Innkeepers based on a material adverse effect (MAE) clause. Cerberus and Chatham have agreed to pay $1.02 billion for the Innkeepers subsidiaries, which is lower than the $1.12 billion purchase price originally agreed to and includes assumption of less debt. If this matter had been fully litigated, it would have been instructive as to the Bankruptcy Court's interpretation of a MAE clause.

The settlement requires the Bankruptcy Court's approval, with a hearing on the matter scheduled for October 21, 2011.

To learn more about the issues surrounding the Innkeepers/Cerberus litigation, including the parties' claims regarding the occurrence of a MAE, see Practice Note, In Dispute: Innkeepers.