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Approaching Dispute Resolution In Your Hotel Contracts

October 8, 2021
Reading time: 7 min

The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

In this video, you'll learn what formal and informal dispute resolution are, how to navigate both, and what to address in your dispute resolution clause, and + more!

Check out what Barbara Dunn (Partner at Barnes & Thornburg LLP, representing groups) and Lisa Sommer Devlin (Devlin Law Firm, P.C. representing hotels) have to say in Legalease With the Ladies- powered by HopSkip!

Video Transcript:
Approaching dispute resolution in your hotel contracts

Barbara: Hi, I’m Barbara Dunn, an attorney that works with groups in connection with their meetings travel and hospitality contracts.

Lisa: And I’m Lisa Sommer Devlin, an attorney that represents hotels and resorts regarding convention and group-related contract matters.

Barbara: And together, we're Legalese with the Ladies powered by HopSkip.

Lisa: In this video we're going to talk about Dispute Resolution. If you have a contract that doesn't say anything about what happens if the parties are in a dispute, that means that they're going to have to go to court if they're unable to reach an amicable resolution. Many contracts include specific clauses as to dispute resolution to provide guidance for what will happen. Some of those clauses simply say what state's law will apply. Usually if there's nothing about that in the contract the law would say that the law of the state where the event is supposed to happen would be the applicable law. But parties can always agree on a different state's law if they'd like to.

They also can agree on what court might have jurisdiction over the event or they can agree on alternate dispute resolution methods. Typically, that would either be mediation, which is a formal kind of settlement negotiation meeting, or arbitration. I personally really like arbitration instead of going to court. For the first reason, court resolution takes a long time. In most states, it'll take you two to three years to get to a trial simply because of court backlogs. And that backlog has only gotten longer as a result of COVID 19. Courts that were closed in 2020 are going to have to make up all of those days that were lost, for trials, motions other kinds of things. And under the law criminal cases get preference because of speedy trial requirements.

So, if you are going to court over a contract dispute, you're going to be waiting a long time to get a resolution. And many of us have heard that old saying, ‘Justice delayed is justice denied.’ And I really agree with that. When you're in a commercial dispute setting you want to get a resolution as soon as possible. Which is why I like to include arbitration clauses. Arbitration can be done in many different fashions but there are professional arbitration companies that have trained arbitrators that essentially serve as a private judge. The parties agree to resolve their dispute by going to arbitration similar to Judge Judy only with usually a former judge and it's like a mini trial. You sit in a conference room instead of a courtroom, but you still have formalities like a trial.

There’re witnesses, there's documents, there's all those kinds of things that happen and then the arbitrator can issue an award. It can be either a reasoned award where they give their reasons for why they ruled as they did or they can just simply say who won and who lost. A lot of people think that arbitrators split the baby, they kind of end up somewhere in the middle. That's not been my experience. Most professional arbitrators are retired judges. They take their obligations very seriously and they give the parties a good hearing and they come up with a good result. I like arbitration. I think that's the way to go, I know some people disagree. Barbara, what do you like to recommend to your clients?

Barbara: Thanks Lisa. Well, first and foremost informal dispute resolution as I know you agree really is important. And it really does boil down to the parties properly communicating what in fact is in dispute. No surprise to our listeners today that most disputes involve money and the payment of money whether that be for attrition fees or cancellation or anything along those lines. So, it is important for the parties to articulate that dispute. I encourage my clients to notify the hotel if there are charges. Let's say it was a meeting that occurred and the group has charges that it's disputing that it notifies the hotel in writing of the disputed charges. But most importantly pay the undisputed charges. That's always important, because nothing's going to get you into a pickle quicker than not paying undisputed charges, so, that's first and foremost.

As to the type of resolution, I was representing a range of groups from non-profits to for-profits. So, every company, every organization has a different thought and strategy. Many of my clients their in-house council might prefer arbitration or prefer litigation. So, from my standpoint, again that informal dispute resolution is the best. Honestly, I’d rather keep dispute resolution beyond that silent. Because we don't know what the dispute is going to be tomorrow and we're agreeing in the contract to tie our hands today to that dispute that we don't know what it is tomorrow. Having said that, I know it's important to the hotels and again it may be important to the groups.

One thing to note about arbitration is that it's private. So, typically it's a private filing there's not necessarily a public notice of a filing contrast that with litigation, when in fact filings are typically public in that way. I bring this up to say that certainly I know it's never the hotel's desire to sue a group. And certainly, a lot of groups will say, ‘Hey if you sue us, I'm going to take to the airwaves and tell everybody that you're a bad hotel.’ You know that's not always the case, but it does boil down to that. So, I think having a dispute resolution provision that is acceptable to the group and the hotel is a good strategy. That might mean just leaving it at informal dispute resolution and then later saying to the parties hey let's agree to mediate or let's agree to arbitrate.

But I think it's important to have at least a placeholder in there on the informal side and I think in particular, Lisa, you and I have dealt over the years on a variety of disputes across the table, having that cooling off period, I think is really important. Because often in the heat of the moment things are said or done in haste and that isn't necessarily the way they want it to be. I think often that let it marinate, right the cooler heads prevail, let time go as a good strategy for dispute resolution. And I know Lisa certainly the hotels spent a lot of time and money over dispute resolution arbitration and they would also prefer informal dispute resolution.

Lisa: I don't disagree with Barbara on informal dispute resolution. I think that's a great way to get things done. Many clauses will say that the parties agree to submit the matter to their senior management. I just like to have something specific in the contract, because I always joke that, once the parties are mad at each other they're never going to agree on anything. So, if you've gone through that informal dispute resolution and can't reach an agreement and one party says let's arbitrate, the other party is going to say anything you want to do I don't want to do. So, that's why I like to include a clause. Another thing to think about in your dispute resolution is whether or not you want to address attorney's fees.

I again promote using attorney's fee recovery clauses, because that way the party who wins in the dispute whichever side it is gets reimbursed for their fees. And then they are completely reimbursed for everything that they put into it. In most states. there are variations, but in most states if you don't say anything about attorney's fees then each side pays their own fees. So, if you win 100,000 but it cost you 50,000 in arbitration or court fees to get there, you're only gonna net $50,000 unless you have a recovery of attorney’s fees. So, that's something I like to include although I know other people are more sensitive to including attorney's fees. Barbara, what do you like to do?

Barbara: Yes, Lisa so as you mentioned in the general rule in most states is that each party pays their own attorney's fees. And I tell my group clients that's the way you really want it. If you really want to gamble on attorney’s fees with the risk that you might have to pay twice, your attorney's fees and the hotel's attorney's fees. Where I see this come up isn't at the courtroom level or the arbitration hearing level, it's at the settlement level. It's the parties working toward reaching a number. Let's say it's a dollar amount in dispute. And the hotel might move down and the group move up, but at some point, the parties are going to say, ‘Look I don't have to move up or down anymore. I can sue you tomorrow I can go to arbitration tomorrow. Judge Judy will declare you're the winner I’m the loser. So, you better pay more money now to avoid a dispute later.’

And that strong-arm tactic is something that happens and I acknowledge that it can happen both ways. Because typically the prevailing party attorney's fees clause does run both ways. But I also remind my group clients that again most disputes involve money, and in many cases the hotel might be deemed to be the winner. Even if they're not going to recover the full amount, let's say it's a cancellation fee or an attrition fee situation. If they recover even a portion of that amount, that might deem them to be the winner. Therefore, you're the loser and you've got to pay twice. I agree that that risk is there as a way as well as you mentioned Lisa for the party's incentive for the parties to settle. But I've seen it used in that manner and that's been problematic for groups.

Lisa: So, as you've gone through our videos, you've probably seen that Barbara and I agree more than we disagree on hotel contracting matters. But in this case, you can see that we have different views for differing reasons. This is something that you're going to need to review with your own personal counsel to determine what's going to be best for you and your position. It may not be the same in every contract that you enter. It may depend on a lot of different factors. But you need to keep in mind that all of these things are things that you should be consciously considering not just ignoring your contract.

Barbara: And Lisa just in closing, I would say that you know in many of the disputes that come up in our industry certainly those arising out of COVID 19. When I flip to the contract, I’m not necessarily looking at the force major clause I’m looking for an arbitration clause. I’m looking for a prevailing party attorney's clause, because that also sets the stage. So, I can't agree with Lisa more that you need to talk with your legal eagle that help you formulate what the best dispute resolution provision would be for your organization and work to negotiate that in the contract.

This has been Legalese with the Ladies powered by HopSkip. Please leave your comments and feedback below and feel free to subscribe to our channel. We look forward to being with you again.

The information provided in this video does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information in this video may not constitute the most up-to-date legal or other information. Readers of this website should contact their attorney to obtain advice with respect to any particular legal matter.

Interested in learning more about contract terms and contract clauses in your hotel contracts? 
Check out the HopSkip Contract Clause Education Center, created by Barbara Dunn and Lisa Sommer Devlin, and become a hotel contracts expert!
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