Exhibit 8.1
[Goodwin Procter LLP Letterhead]
November 7, 2001
La Quinta Corporation
La Quinta Properties, Inc.
909 Hidden Ridge, Suite 600
Irving, Texas 75038
Re: CERTAIN FEDERAL INCOME TAX MATTERS
Ladies and Gentlemen:
We have acted as counsel to La Quinta Corporation, a Delaware
corporation ("LQ Corporation"), and La Quinta Properties, Inc., a Delaware
corporation ("LQ Properties" and, together with LQ Corporation, "La Quinta"), in
connection with (a) the restructuring of La Quinta pursuant to the Agreement and
Plan of Merger by and among LQ Corporation, LQP Acquisition Corp., and LQ
Properties dated as of October 17, 2001 (together with the exhibits thereto, the
"Merger Agreement") as a result of which a portion of the outstanding shares of
common stock, par value $0.10 per share, of LQ Properties (the "LQP Common
Stock") would convert into shares of Class B common stock, par value $0.01 per
share, of LQ Properties in a transaction intended to qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(E) of the Internal
Revenue Code of 1986, as amended (the "Code"), a portion of the shares of LQP
Common Stock would be deemed contributed by the holders of shares of common
stock, par value $0.10 per share, of LQ Corporation (the "LQC Common Stock") to
LQ Corporation in a transaction intended to qualify as a tax-free transaction
described in Code Section 351(a), and the shares of LQP Common Stock owned (or
deemed owned) by LQ
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Corporation would convert into shares of Class A common stock, par value $0.01
per share, of LQ Properties in a transaction intended to qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(E) of the Code (the
"Restructuring"); (b) the contribution by LQ Properties of an exclusive,
perpetual, royalty-free license to use or sublicense the La Quinta(R) brand in
connection with franchised hotels (the "Franchise License") to a newly formed
Nevada limited liability company (the "Franchise LLC"), the contribution by LQ
Properties of ownership of the La Quinta(R) brand, subject to the aforementioned
license, to a second newly formed Nevada limited liability company (the "Brand
LLC"), and the subsequent contribution by LQ Properties of a portion of its
interest in each of the two limited liability companies (or "LLCs") to LQ
Corporation in exchange for shares of LQC Common Stock in transactions intended
to be tax-free under Sections 721(a) and 351(a) of the Code (as more fully
described below, the "Brand Transfer"); and (c) the preparation of a joint proxy
statement and prospectus on Form S-4 filed by LQ Properties (File No. 333-71840)
(together with all annexes thereto and as amended through the date hereof, the
"Registration Statement"). This opinion is being furnished pursuant to the
request of La Quinta.
On November 5, 1997, LQ Properties, then known as Santa Anita Realty
Enterprises, Inc. ("Santa Anita Realty"), merged (the "Santa Anita Merger") with
Meditrust, a Massachusetts business trust ("Meditrust's Predecessor"), with LQ
Properties as the surviving corporation. In connection with the Santa Anita
Merger, Santa Anita Realty changed its name to Meditrust Corporation, and LQ
Corporation, formerly known as Santa Anita Operating Company and the
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November 7, 2001
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stock of which was paired with the stock of Santa Anita Realty, changed its name
to Meditrust Operating Company. On June 20, 2001, LQ Properties, then known as
Meditrust Corporation, changed its name to La Quinta Properties, Inc., and LQ
Corporation, then known as Meditrust Operating Company, changed its name to La
Quinta Corporation.
This opinion relates to certain statements contained in the section of
the Registration Statement entitled "Material United States Federal Income Tax
Consequences of the Restructuring and Merger."
In rendering the following opinions, we have reviewed the Registration
Statement and the descriptions set forth therein of LQ Properties and its
current and proposed investments and activities, the Restructuring, and the
Brand Transfer. We also have examined (i) the Certificate of Incorporation and
the Bylaws of LQ Properties, each as amended and restated, (ii) the Merger
Agreement, (iii) the Form of Contribution Agreement in Respect of La Quinta
Franchise LLC by and between LQ Corporation and LQ Properties (together with the
exhibits thereto, the "Franchise LLC Contribution Agreement"), (iv) the Form of
Contribution Agreement in Respect of La Quinta Brand LLC by and between LQ
Corporation and LQ Properties (together with the exhibits thereto, the "Brand
LLC Contribution Agreement"), (v) the Form of Trademark License Agreement by and
between LQ Properties and the Franchise LLC (the "License Agreement"), (vi) the
Form of La Quinta Corporation Contribution and Exchange Agreement by and between
LQ Corporation and LQ Properties (the "Exchange Agreement" and, together with
the Franchise
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LLC Contribution Agreement, the Brand LLC Contribution Agreement, and the
License Agreement, the "Brand Transfer Agreements"), (vii) an Officer's
Certificate dated February 3, 2000, delivered by LQ Properties in connection
with the filing of a registration statement on Form S-3, (viii) LQ
Properties' federal income tax returns for each of its taxable years ended
December 31, 1994, 1995, 1996, 1997, 1998, 1999, and 2000 as filed on Forms
1120-REIT, and (viii) such other records, certificates, and documents as we
have deemed necessary or appropriate for purposes of rendering the opinions
set forth herein. The foregoing documents, including the Registration
Statement, are referred to herein as the "Documents."
In rendering our opinions, we have relied upon certain factual
representations of LQ Properties and LQ Corporation set forth in a
representation letter (the "Officer's Certificate") delivered to us in
connection with our rendering of this opinion regarding (i) the manner in
which LQ Properties has been owned and operated and will be owned and
operated, (ii) the Restructuring and (iii) the Brand Transfer. We also have
relied on the statements contained in the Documents regarding the operation
and ownership of LQ Properties, Meditrust's Predecessor and their affiliates,
the Restructuring, and the Brand Transfer. We have neither independently
investigated nor verified such representations or statements. We assume that
such representations and statements are true, correct, complete, and not
breached and will continue to be so through the Restructuring and, to the
extent such representations and statements relate to LQ Properties'
qualification as a real estate investment trust under the Code, thereafter,
and that no actions that are inconsistent with
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such representations and statements will be taken. We have also assumed that
all representations and statements made "to the best of the knowledge and
belief" of any person(s) or party(ies) or with similar qualification are and
will be true, correct and complete as if made without such qualification, and
that factual representations in the Officer's Certificate relating to LQ
Properties' qualification as a real estate investment trust that are limited
to current or past facts will continue to be true, correct and complete as if
not so limited. However, we are not aware of any facts or circumstances
contrary to or inconsistent with such representations and statements. In
addition, we have assumed that (i) the Restructuring and Brand Transfer will
be consummated in accordance with, respectively, the Merger Agreement and the
Brand Transfer Agreements and as described in the Registration Statement
(including satisfaction of all covenants and conditions to the obligations of
the parties without amendment or waiver thereof); (ii) the merger of LQP
Acquisition Corp. with and into LQP Properties pursuant to the Merger
Agreement will qualify as a merger under the applicable laws of the State of
Delaware; (iii) the Franchise LLC and the Brand LLC will be duly formed and
organized limited liability companies under the applicable laws of the State
of Nevada; (iv) each of LQ Corporation, LQP Acquisition Corp., and LQ
Properties will comply with all reporting obligations with respect to the
Restructuring and the Brand Transfer required under the Code and the Treasury
regulations thereunder; and (iv) the Merger Agreement, the Brand Transfer
Agreements (when executed), and all other documents and instruments referred
to therein or in the Registration Statement are valid and binding in
accordance with their terms.
In rendering the opinions set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as
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copies, (iv) the conformity of final documents to all documents submitted to us
as drafts, (v) the conformity in all material respects of the executed Brand
Transfer Agreements, when so executed, to the copies thereof submitted to us as
of the date of this opinion, (vi) the authority and capacity of the individual
or individuals who executed any such documents on behalf of any person, (vii)
the accuracy and completeness of all records made available to us, (viii) the
factual accuracy of all representations, warranties and other statements made by
all parties, and (ix) the continued accuracy of all documents, certificates,
warranties and covenants on which we have relied in rendering the opinions set
forth below and that were given or dated earlier than the date of this letter,
insofar as relevant to the opinions set forth herein, from such earlier date
through and including the date of this letter. In addition, we have assumed the
accuracy of the opinions of counsel of La Quinta and of Meditrust's Predecessor,
each dated November 5, 1997, regarding the qualification of LQ Properties and of
Meditrust's Predecessor as a REIT and related matters.
I. ANALYSIS AND DISCUSSION.
A. General.
LQ Properties currently owns multiple trademarks (collectively, the "La
Quinta(R) Brand"), subject to three existing licenses granted to subsidiaries of
LQ Corporation (the "Existing Licenses"). Prior to the effective time of the
Restructuring, LQ Properties and LQ Corporation will form the Franchise LLC as a
Nevada limited liability company to which LQ Properties will contribute the
Franchise License in exchange for substantially all of the interests
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in the Franchise LLC. Concurrently, LQ Properties and LQ Corporation will form
the Brand LLC to which LQ Properties will contribute its ownership of the La
Quinta(R) Brand, subject to the Franchise License and to the Existing
Licenses,(1) in exchange for substantially all of the interests in the Brand
LLC. LQ Corporation will contribute cash or property to each of the Franchise
LLC and the Brand LLC in exchange for a non-de minimis interest in,
respectively, the Franchise LLC and the Brand LLC. Each of the Franchise LLC and
the Brand LLC will license or sublicense, as applicable, its rights to the La
Quinta(R) Brand to LQ Corporation or a subsidiary thereof in return for royalty
payments, in each case on arm's length terms. One day after the Restructuring
and in connection therewith, LQ Properties will contribute a portion of its
interests in the Franchise LLC and the Brand LLC to LQ Corporation in exchange
for shares of LQC Common Stock. The aforementioned transactions will occur
pursuant to the terms of the Merger Agreement, the Franchise LLC Contribution
Agreement, the Brand LLC Contribution Agreement, and the Exchange Agreement and
are intended to be tax-free under Sections 721(a) and 351(a) of the Code.
B. Eligibility for Non-Recognition of Gain Treatment.
Subject to certain exceptions not relevant here, Code Section 721(a)
provides that no gain or loss shall be recognized to a partnership or to any of
its partners upon a contribution of property to the partnership in exchange for
an interest in the partnership. We are of the opinion
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(1) Prior to and in contemplation of the formation of the Franchise LLC and
the Brand LLC, and in contemplation of the Brand Transfer generally, LQ
Properties will cause the Existing Licenses to be amended and restated.
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that the transfer of the Franchise License to the Franchise LLC in exchange for
interests in the Franchise LLC by LQ Properties should qualify for
non-recognition treatment under Code Section 721(a), and the Registration
Statement reflects that opinion. We note, however, that the Internal Revenue
Service has previously asserted in Rev. Rul. 69-156, 1969-1 C.B. 101, that the
transfer of a non-exclusive license to use a patent would not be treated as a
"transfer" of property for purposes of Section 351 of the Code. The Internal
Revenue Service stated that the transfer of patent rights in exchange for stock
could not qualify under Code Section 351 unless the transfer consisted of all
substantial rights to the patent and would otherwise constitute a sale or
exchange of property rather than a license. Given the broadly analogous language
and statutory scheme of Code Sections 721 and 351, the courts have generally
looked to the precedents in the Section 351 area in construing the requirements
of Code Section 721. SEE, E.G., STAFFORD v. UNITED STATES, 611 F.2d 990 (5th
Cir. 1980). In the present case, the transfer of the Franchise License to the
Franchise LLC would not qualify as a sale or exchange for tax purposes. Code
Section 1253(a); and STOKELY USA, INC. v. COMM'R, 100 T.C. 439 (1993).
The issue addressed in Rev. Rul. 69-156 was subsequently litigated in
E.I. DUPONT DE NEMOURS & CO. v. UNITED STATES, 471 F.2d 1211 (Ct. Cl. 1973). The
Court of Claims in DUPONT rejected the Internal Revenue Service's attempt to
import a "sale or exchange" requirement into Code Section 351(a), and held that
the transfer of a non-exclusive license to use a patent to a wholly-owned
foreign subsidiary by the taxpayer-licensor was eligible for non-recognition
under Section 351(a) of the Code. Subsequently, the Internal Revenue Service
itself expressed
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reservations about the continuing viability of Rev. Rul. 69-156, G.C.M. 37,178
(June 24, 1977) and G.C.M. 36,922 (November 16, 1976), and commentators have
generally agreed that DUPONT was correctly decided.(2) In fact, in a 1998 Field
Service Advice the National Office of the Internal Revenue Service concluded
that a transfer of a non-exclusive license to use certain manufacturing
technology to a partnership qualified as a "contribution of property" for
purposes of Code Section 721(a), stating that a court would be "very likely" to
accept the rationale of the DUPONT case. Field Service Advice (October 7, 1998),
1998 FSA LEXIS 266. While a Field Service Advice generally cannot be cited as
precedent, Code Section 6110(k)(3), it is nonetheless indicative of the Internal
Revenue Service's current thinking in the area.
II. OPINION
Based upon and subject to the foregoing, and provided that LQ
Properties continues to meet the applicable asset composition, source of income,
shareholder diversification, and other requirements of the Code necessary for a
corporation to qualify as a real estate investment trust, we affirm the opinions
specifically ascribed to Goodwin Procter LLP in the section of the Registration
Statement entitled "Material United States Federal Income Tax Consequences of
the Restructuring and Merger," as limited and qualified by the discussion in
such section of the Registration Statement, as the opinions of Goodwin Procter
LLP.
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(2) SEE, E.G., J. Clifton Fleming, Jr., DOMESTIC SECTION 351 TRANSFERS OF
INTELLECTUAL PROPERTY: LAW AS IT IS VS. THE LAW AS THE COMMISSIONER
WOULD PREFER IT TO BE, 16 J. Corp. Tax'n 99 (1989). Congress actually
passed legislation in 1999 that would have amended Code Sections 351
and 721 to explicitly adopt the DUPONT standard, although President
Clinton vetoed the bill for unrelated reasons. Financial Freedom Act of
1999, H.R. 2488, section 1513.
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We will not review on a continuing basis LQ Properties' compliance with
the Documents or assumptions set forth above, or the representations set forth
in the Officer's Certificate. Accordingly, no assurance can be given that the
actual results of LQ Properties operations for any given taxable year will
satisfy the requirements for qualification and taxation as a real estate
investment trust under the Code. The ability of LQ Properties to continue to
meet the requirements for qualification and taxation as a real estate investment
trust will be dependent upon LQ Properties' ability to continue to meet in each
year the applicable asset composition, source of income, shareholder
diversification, distribution, and other requirements of the Code necessary for
a corporation to qualify as a real estate investment trust. The foregoing
opinions are limited to the federal income tax matters addressed herein, and no
other opinion is rendered with respect to other federal tax matters or to any
issues arising out of the tax laws of any state or locality. You should
recognize that our opinions are not binding on a court or the Internal Revenue
Service and that a court or the Internal Revenue Service may disagree with the
opinions contained herein. Although we believe that our opinions would be
sustained if challenged, there can be no assurance that this will be the case.
The discussion and conclusions set forth above are based upon current provisions
of the Code and the Income Tax Regulations and Procedure and Administration
Regulations promulgated thereunder and existing administrative and judicial
interpretations thereof, all of which are subject to change. Changes in
applicable law could adversely affect our opinions.
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This opinion is being provided to you in connection with the filing of
the Registration Statement and may not be relied upon by any other person or
used for any other purpose without our prior written consent.
We consent to being named as counsel to La Quinta in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of a copy of this opinion letter as an exhibit to the Registration
Statement.
Very truly yours,
/s/ GOODWIN PROCTER LLP
GOODWIN PROCTER LLP