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Dispute Resolution

Navigating Hotel Contract Dispute Resolution

In this video, you’ll learn the difference between formal and informal dispute resolution, how to navigate both, what to address in your dispute resolution clause, and more!

Experts

Barbara Dunn (representing Groups) Partner at Barnes & Thornburg, LLP

Lisa Sommer Devlin (representing Hotels) Devlin Law Firm, P.C.

Overview

  • Dispute resolution is a contract clause that outlines how the parties will resolve their dispute. If there is not a dispute resolution provision in the contract the parties will be required to resolve any disputes in court.
  • Alternatively, the parties have the option of agreeing in their contract to various forms of Dispute Resolution processes.
  • This could include mediation, in which a third-party mediator is hired by the parties to help them reach agreement on their dispute. It could also include arbitration, which is a private hearing process.
  • An arbitration is like a “mini trial” with witnesses and exhibits, but instead of the outcome being decided by a judge or jury, the case is decided by an arbitrator or panel of arbitrators. So, by agreeing to arbitrate, a party is giving up some rights it would have in a court case.
  • In most states, the parties to a court case or arbitration pay their own attorney fees. Some states have laws that allow or even require the judge to award attorney fees to one party or another.
  • The parties can agree in their contract that the losing party will be required to pay the winning party’s attorney fees. This can be especially important in disputes involving smaller amounts. If the parties are arguing over $50,000 and it costs $30,000 in attorney fees to arbitrate the matter (or $100,000 in fees for a court case) the winning party will not be fully compensated if it is not paid its attorney fees.

Group Perspective

  • Before agreeing to a particular method of resolving a dispute, groups should consult with their legal counsel to ensure the specified method is in their best interest.
  • While most disputes arising out of hotel contracts can be resolved with any formal dispute resolution, it can be advantageous to agree on a method of dispute resolution.
  • A “cooling off” period is a good idea for both the group and the hotel – a period of 30 days, for example – for the parties to work together informally to resolve disputes.
  • Groups should never withhold payment of undisputed charges after a meeting; instead, they should pay the undisputed charges first and then advise the hotel in writing as to the disputed charges, the basis for the dispute and the proposed resolution of such disputed charges.
  • Given that most disputes between hotels and groups involve the payment of money, a “prevailing party attorney’s fees” provision (i.e., losing party pays winning party’s attorney’s fees plus their own attorney’s fees) often benefits the hotel more than it does the group but, as noted above, groups should consult with their legal counsel before accepting such a provision.

Hotel Perspective

  • Many hotel companies use arbitration for its convenience, and costs savings.
  • Choosing an arbitrator who is a retired judge is like having a court case decided by a judge without a jury, which is commonly done in commercial disputes.
  • Arbitrations can be resolved much faster than court cases, so the parties are not facing uncertainty about their obligations for an extended period.
  • Arbitrations are private proceedings, so the parties’ dispute will not be publicized.
  • While appeal of an arbitration award is very limited, it also does not set a legal precedent, so if the outcome is not favorable, it will not be used against the party in future cases.
  • Attorney fee recovery encourages settlement, as a party will be more likely to compromise if it may be required to pay its own and the other side’s attorney fees if it loses.
  • Attorney fee recovery is fair to both parties, and makes the winning party “whole.”
  • Because of the time and expense of court litigation, many legitimate claims are not pursued because it is not cost effective to do so.