Choice Hotels may have misled investors about the current state of its business and financial condition allowing executives to sell $16 million worth pf stock at artificially inflated prices.

This is a securities fraud class action lawsuit against Choice Hotels and certain of its officers and directors.

Choice Hotels, along with its subsidiaries, operates as a hotel franchisor worldwide. It franchises lodging properties under the Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Extended Stay Hotel, Cambria Suites, and Flag Hotels brand names.

The class action complaint alleges that Choice Hotels issued a series of materially false and misleading statements concerning Choice Hotels, its business, operations and prospects. Unbeknownst to shareholders, the true facts were that Choice Hotels was experiencing a dramatic decrease in the number of new hotel franchise contracts such that it was not meeting internal expectations and would report slowing growth in this important business segment. Moreover, Choice Hotels was experiencing declining growth in its conversion of hotels to its system. Prior to the disclosure of the true facts about Choice Hotels, Choice Hotels insiders sold more than $16 million dollars of their personally-held shares to the unsuspecting public.

On July 25, 2006, after the markets closed, Choice Hotels revised their earnings guidance for 2006 downward and reported slowing new franchise growth and reduced hotel conversions. Upon this announcement, the price of Choice Hotels common stock fell $13.30 per share, or approximately 23%, to close at $45.55 per share, on heavy trading volume.