Legal Proceedings

9 Months Ended

Sep. 30, 2016

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

10.  Legal Proceedings

Moses, et al. v. Apple Hospitality REIT, Inc., et al.

As previously reported in the 2015 Form 10-K, on April 22, 2014, Plaintiff Susan Moses, purportedly a shareholder of Apple REIT Seven, Inc. (“Apple Seven”) and Apple REIT Eight, Inc. (“Apple Eight”), now part of the Company, filed a class action against the Company and several individual directors on behalf of all then-existing shareholders and former shareholders of Apple Seven and Apple Eight, now part of the Company, who purchased additional shares under the Apple REITs’ Dividend Reinvestment Plans (“DRIP”) between July 17, 2007 and February 12, 2014 (Susan Moses, et al. v. Apple Hospitality REIT, Inc., et al., 14-CV-3131 (DLI)(SMG)).  

On March 9, 2015, the Court entered a Memorandum and Order dismissing all claims.  On April 6, 2015, Plaintiff filed a Second Amended Class Action Complaint asserting a breach of contract claim.  Defendants moved to dismiss the Second Amended Complaint on April 29, 2015 and briefing on the motion was completed on May 27, 2015.  On September 30, 2016, the Court denied defendants’ Motion to Dismiss the breach of contract claim and dismissed the claim for breach of an implied covenant of good faith and fair dealing.  Defendants filed their Answer on October 14, 2016 and an initial conference is scheduled for February 7, 2017.

The Company believes that Plaintiff’s claims are without merit and intends to defend this case vigorously.  At this time, the Company cannot reasonably predict the outcome of these proceedings or provide a reasonable estimate of the possible loss or range of loss due to these proceedings, if any.

Quinn v. Knight, et al.

On July 19, 2016, a purported shareholder of Apple Ten, now part of the Company, commenced a derivative action in the United States District Court for the Eastern District of Virginia, captioned and numbered Quinn v. Knight, et al, Case No. 3:16-cv-610 (the "Complaint").  The Complaint names as defendants the members of Apple Ten's board of directors (the "Directors"), certain officers of Apple Ten and the Company (collectively, the "Officers"), the Company and, as a nominal defendant, Apple Ten.  The Complaint makes various allegations against the Directors, the Officers and the Company, including that (i) the Directors breached their fiduciary duties of loyalty and good faith in approving the merger by, among other things, a conflicted process that favored certain insiders and including materially false, incomplete and misleading statements in the definitive joint proxy statement/prospectus in connection with the merger and (ii) the Company and the Officers aided and abetted those alleged breaches of fiduciary duty.  The Complaint sought to enjoin the shareholder vote on the merger, and currently seeks damages, rescission, costs and attorney's fees.  On July 22, 2016, plaintiff filed a motion for expedited proceedings.  On August 5, 2016, the Court scheduled a hearing for August 26, 2016 on the plaintiff's motion to enjoin the shareholder vote on the merger.  Plaintiff's motion for preliminary injunction was denied following the hearing on August 26, 2016 and the shareholder vote on the merger occurred as originally scheduled on August 31, 2016.  On November 2, 2016, the parties reached an agreement in principle to settle the litigation for $32 million, which settlement remains subject to final court approval.  The Company has included the settlement amount in accounts payable and other liabilities in its consolidated balance sheet as of September 30, 2016 and in transaction costs in the Company’s consolidated statements of operations.  The Company anticipates that, should the settlement be completed, approximately $10 million to $15 million of the settlement amount would be funded from insurance proceeds and other parties to the settlement.  Since specific amounts have not been agreed to at this time these anticipated amounts have not been recognized in the Company’s financial statements.