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This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer. Please contact me at Jim Butler at jbutler@jmbm.com or 310.201.3526.

Published on:

16 April 2021

See how JMBM’s Global Hospitality Group® can help you.

The recent ruling in Google v. Oracle has altered the definition of “fair use” when it comes to functional works such as code. While the use of existing creative works must still be transformative in order to avoid violating copyright laws, it will now be much easier to claim fair use when building on existing functional creations. JMBM’s Entertainment Litigation Chair Jeff Goldman explains the case below and discusses its potential impact on the hotel industry.

How does the Supreme Court’s Google v. Oracle case
impact the hotel industry (beyond software)?

by
Jeff Goldman, Chair, JMBM’s Entertainment Litigation Group

It was hyped as the “copyright case of the century.” Justice Clarence Thomas, in his dissent, frets that the majority “transforms the definition of ‘transformative’” use into nothing more than “a use that will help others ‘create new products’” — a “new definition” that “eviscerates copyright.” Google LLC v. Oracle America, Inc., dissent at 16-17. As an example of what might now be considered a “fair use,” Justice Thomas cites a “movie studio that converts a book into a film without permission[.]” Id. at 17.

Justice Thomas’s concern may be an overstatement. Whatever the repercussions of Google v. Oracle for the software industry, read in context, any attempt to apply its fair use analysis to works that are more creative than functional — like movies, books, and music — ought to fall flat. Nevertheless, various types of copyrighted works important to hotel operators may well be affected by the Court’s fair use analysis.

Copyright law basics

First, briefly, some background. Copyright law protects original “expression” that is fixed in some tangible medium (e.g., paper, film) but not “the ‘ideas’ that lay behind” that expression. Google at 13. The difference between an “idea,” and the “expression” of that idea, is often a difficult line to draw. One concept used to distinguish between idea and expression is that works, or parts of them, that are largely functional or utilitarian are closer to mere “ideas” than to protectable “expression.” Works — including computer code — that are purely functional or utilitarian are considered noncopyrightable ideas, rather than copyrightable expression. See RJ Control Consultants, Inc. v. Multiject, LLC, 981 F.3d 446, 457-58 (6th Cir. 2020). On the other hand, the threshold for copyrighrability is low; to be copyrightable, a work need only “possess some creative spark, ‘no matter how crude, humble or obvious’ it might be.” Feist Publications, Inc. v. Rural Telephone Service Co., Inc., 499 U.S. 340, 345 (1991) (quoting Professor Nimmer).

A copyright owner’s exclusive power over a copyrighted work is also subject to various limitations, including that “a copyright holder cannot prevent another person from making a ‘fair use’ of copyrighted material.” Google at 13, citing 17 U.S.C. § 107. Among the factors courts consider in the fair use analysis is how much the new work “transforms” the original work — a concept that courts have had trouble applying with any degree of consistency and predictability.

The Google case

The Google case centered on the protectability, and Google’s use, of a type of largely functional computer code called “declaring code.” The easy way for the Supreme Court to decide the case would have been to simply rule that Oracle’s “declaring code” was not copyrightable — as Google argued, and the district judge agreed (a ruling the Federal Circuit reversed). But it was clear from oral argument that the Court was having none of that. CONTINUE READING →

Published on:

08 April 2021

See how JMBM’s Global Hospitality Group® can help you.

The Treasury Department’s Financial Crimes Enforcement Network (FinCEN) is currently accepting public comments on a provision in the recently enacted Corporate Transparency Act (CTA) which requires some privately-held business entities to disclose ownership information directly to a law enforcement agency. Interested parties should consider commenting before the May 5th deadline, and companies who may be impacted should take this opportunity to review their anti-money laundering compliance programs. Vince Farhat and Samuel Buchman of JMBM’s White Collar Defense and Investigations Group have written an article detailing this legislation below.

FinCEN Seeks Comments on Ownership Disclosure Requirements in New Federal Anti-Money Laundering Law

by
Vince Farhat, Chair and Samuel Buchman, Associate
JMBM’s White Collar Defense & Investigations Group

On April 1, 2021, the Treasury Department’s Financial Crimes Enforcement Network (“FinCEN”) published an advance notice of proposed rulemaking giving companies and individuals the chance to comment on the new beneficial ownership disclosure requirements contained in the recently-enacted Corporate Transparency Act (“CTA”), which is part of the Anti-Money Laundering Act of 2020 (“AMLA”) included in the National Defense Authorization Act (“NDAA”). Under the CTA, some privately-held business entities will be required, for the first time, to disclose ownership information directly to a law enforcement agency. FinCEN is accepting public comments on the CTA disclosure requirements through May 5, 2021, and companies and other interested parties should consider commenting by this deadline to help shape the anticipated rulemaking process at this early stage. This article focuses on two specific legislative changes which could lead to an uptick in federal anti-money laundering enforcement: (1) the CTA beneficial ownership disclosure requirements; and (2) enhanced whistleblower incentives and protections under the AMLA. It is critical for companies to stay abreast of regulatory developments in order to maintain proper compliance with these changing enforcement rules.

Background

Congress enacted the NDAA on January 1, 2021. This year’s iteration of the NDAA gained notoriety when former President Trump vetoed the bill, taking issue with the bill’s failure to repeal Section 230 of the Communications Decency Act. However, following a veto override, the NDAA became law, marking the 59th consecutive year in which some form of the NDAA has been passed. This Section 230 scuffle diverted attention away from the AMLA, a separately named Act within the NDAA. The AMLA represents the most significant reform to anti-money laundering laws in two decades since the 2001 USA PATRIOT Act.

Among the AMLA’s sweeping reforms are efforts to strengthen FinCEN, extend the reach of the Bank Secrecy Act (“BSA”), and expand the Department of Justice and Treasury Department’s ability to subpoena foreign financial institutions.

In its advance notice of proposed rulemaking (“ANPR”), FinCEN requested comments on the new CTA beneficial ownership disclosure requirements. The comment period will last until May 5. The ANPR solicits comments on a variety of topics, including: definitions of the various ambiguous terms in the law; the disclosure procedure; determining the scope and content of the disclosures; the means by which entities will seek an exemption from the reporting requirements; and how the disclosures will be shared with state and local law enforcement and financial institutions. CONTINUE READING →

Published on:

5 April 2021

See how JMBM’s Global Hospitality Group® can help you.

Bob Braun recently wrote an article for Today’s Hotelier on the issues hotel owners should watch for when selling a property with a franchise agreement. He explores when sellers should start speaking to their franchisor during the sale process, what purchasers can expect when negotiating a new franchise agreement, how guarantees should be handled in a sale or transfer, and several other concerns that may arise when a branded hotel is sold.

On negotiating a franchise agreement, Bob notes:

“Franchise agreements are intentionally designed to be highly favorable to the brand, and brands are unwilling to make changes. That position is even more pronounced in a change of ownership…A purchaser should be aware that, absent special circumstances, brands rarely provide an area of protection to avoid competition, a ramp-up of fees, or other variations from their forms.”

Click here to read the full article. CONTINUE READING →

Published on:

23 March 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on ADA Compliance and Defense.

California has seen an explosion of ADA cases in the past few years, leading the state to impose strict pleading standards and high filing fees for serial litigants. Litigants have previously found their way around this by filing in federal court, but the courts have made it clear that they will decline supplemental jurisdiction in these instances. Martin Orlick, Chair of JMBM’s ADA Compliance & Defense Group, explains below.

California’s Central District tries to curb ADA lawsuits
by declining supplemental jurisdiction
over state law claims

by
Martin Orlick, Chair, JMBM’s ADA Compliance & Defense Group

Declining to exercise supplemental jurisdiction, the United States District Court Central District of California (Central District) is addressing high frequency litigants who file lawsuits in federal court alleging violations of the Americans with Disabilities Act (ADA).

The Central District has been inundated with ADA lawsuits by California plaintiffs. According to its Minutes of March 8, 2021 noted in James Shayler v. JPMorgan Chase Bank there were 419 ADA cases filed in the Central District in 2013, constituting 3 percent of the civil actions filed. Fast forward to 2019, when in the first six months alone, ADA lawsuits comprised 24 percent of its civil cases (1,868 matters). ADA cases filed in 2021 are on pace for even more.

Similar numbers of ADA cases are being filed in California’s Northern District which has seen a significant increase in ADA cases alleging 28 C.F.R. Section 36. 302 (e) hotel reservation lawsuits. In an effort to curb or streamline the plethora of ADA litigation, the Northern District recently revised its General Order 56. CONTINUE READING →

Published on:

19 March 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Development.

The survey standards for the American Land Title Association® (ALTA®)/ National Society of Professional Surveyors (NSPS) survey were updated in February 2021. Given how important this survey is to most commercial real estate transactions, it is crucial that investors understand its scope in order to avoid unnecessary costs and delays. JMBM associate Trevor Countryman has outlined these recent changes below.

New ALTA/NSPS Land Title
Survey Standards for 2021

by
Trevor Countryman

Every 5 years the survey standards for ALTA surveys are revised. ALTA surveys are the standard for the commercial real estate and hotel industry.

The most recent revisions to the ALTA survey standards took effect on February 23rd, 2021. All new ALTA surveys and any updates to existing ALTA surveys will now need to comply with the revised standards.

Click here for a redline showing the changes for the 2021 ALTA survey standards.

Overall, there were not many substantial edits to the ALTA survey standards for 2021, but below is quick summary of some of the most significant changes: CONTINUE READING →

Published on:

20 February 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Finance.

Hotel finance lawyer: PACE Financing is now mainstream

About five years ago, my partner David Sudeck, a senior member of JMBM’s Global Hospitality Group®, spoke at a hotel industry conference about the attractive features of PACE financing as an innovative financing technique. David has extensive experience with virtually all kinds of real estate financing from senior debt to joint ventures. At the time, he had just finished working on a hotel financing that included components of a senior construction loan from a private lender, Mello Roos community facilities district financing, EB-5 financing, and PACE Financing. Few people in the audience at the conference had heard about PACE financing, and there were a lot of questions about its characteristics.

Over the past five years, PACE financing has gained wider acceptance, and moved from a novel or creative technique to a widely-accepted practical solution to financings. It has gained traction with both lenders and borrowers. But its gradual increasing use was accelerated by the COVID pandemic and resulting lockdowns, and near collapse in many segments of the hospitality industry. The accompanying deficiency of construction and other financing since March 2020, supercharged the importance and use of PACE Financing. Over the past few months alone, David Sudeck and his team have worked, on the lender and borrower-side of transactions, on more than a dozen PACE financing transactions. The largest that we have worked on, more than $40 million of PACE financing, closed just a few weeks ago.

At this point, most owners and developers are considering PACE financing as part of their capital stack for development, for renovation, and for rescue capital (more on this below). And more and more lenders have been approving PACE as a part of the capital stack. Why, you ask?

Why PACE financing can be attractive:

PACE financing takes the form of a voluntary tax assessment on real property, having the same features and priority as an ad valorem real property tax (typically paid only twice per year, when real property taxes are paid). Here are some of the features that may be negotiated which can make it attractive financing: CONTINUE READING →

Published on:

19 February 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on Hotel Finance.

The Global Hospitality Group® just hosted a very timely webinar discussing the state of the hotel and CMBS industries. Our program featured senior representatives from Argentic, Greystone, and Situs – three of the largest CMBS special servicers with the most distressed hotel debt – as well as leading data and analytics firm Trepp, HREC’s runway capital program, Manhattan Hospitality for hotel industry perspectives, and our own hospitality workouts and receivership expert to break down the current state of the distressed hotels market and CMBS special servicing.

Two of our panelists, Jack Westergom of Manhattan Hospitality Advisors and Manus Clancy of analytics firm Trepp, presented slides packed with useful information, and we wanted to make them available to those who were not able to attend the program. Jack’s update on the state of hotel industry, and Manus’ state of the CMBS industry presentation are both available for download below.

CONTINUE READING →

Published on:

16 February 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on ADA Compliance and Defense.

For many years, businesses classed as public accommodations under the ADA have been the subject of “cookie-cutter” complaints that allege discriminatory conditions without providing any specific examples. Thousands of nearly identical complaints have been filed in federal courts nationwide, and their lack of detail makes it difficult for courts to provide a remedy that will prevent future harm. Martin Orlick, Chair of JMBM’s ADA Compliance & Defense Group, summarizes the recent decision in Whitaker v. Tesla Motors which may put an end to these fill-in-the-blank cases.

Whitaker v. Tesla Motors – the end of
cookie-cutter ADA complaints?

by
Martin Orlick, Chair, JMBM’s ADA Compliance & Defense Group

In a unanimous published opinion, the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) affirmed the District Court’s dismissal of Whitaker v. Tesla Motors, for failure to state a claim of an action under Title III of the Americans with Disabilities Act (ADA). This case may have broad application for ADA defense lawyers because very similar “form” complaints are used widely in Southern California. According to the Ninth Circuit, these complaints are defective. There are literally hundreds, if not thousands, of virtually identical Complaints on Federal Court dockets in California and across the country.

About Whitaker v. Tesla Motors

Brian Whitaker, whose complaint states he uses a wheelchair for mobility, is a “tester” who visits businesses to ascertain whether their facilities comply with the ADA. Whitaker files lawsuits against those he determines are non-compliant, using complaints that are little more than a “fill-in-the-blanks” form.

In this case, Whitaker visited a Tesla dealership and alleged its service counters denied him full and equal access and “created difficulty and discomfort”. He further alleged that Tesla’s failure to provide accessible service counters prevented him from returning to the dealership. CONTINUE READING →

Published on:

02 February 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on ADA Compliance and Defense.

As we’ve discussed in previous blogs, there has been an uptick in lawsuits filed against hotels alleging a failure to list accessible features on their website as required by the ADA. While many of these cases have been successfully defended in federal courts, new filings continue to surge and many plaintiffs are turning to state courts which have different requirements for dismissal. Martin Orlick, Chair of JMBM’s ADA Compliance & Defense Group, explains why we should expect these cases to continue in 2021 and what hotels should be looking out for.

Hotels must list accessible features on the web or risk being sued

by
Martin Orlick, Chair, JMBM’s ADA Compliance & Defense Group

We previously warned the hotel industry of the inevitable explosion of ADA website lawsuit filed against hotels. Well, that time is here.

In 2020, we saw a surge of lawsuits filed against those in the hotel industry, alleging the failure to comply with 28 C.F.R. Section 36.302 (e) of the Americans with Disabilities Act (ADA), which requires hotels to list their accessible features on their websites as well as on the websites of online travel agencies (OTAs) such as Travelocity, Orbitz, hotels.com, etc. We expect this surge of lawsuits to continue well into 2021.

Whether you are a national “flag” or the owner of a small portfolio of hotels, the 2010 ADA’s, C.F.R. Section 36.302 (e) applies to your hotel properties and websites. This section of the ADA has been effective since March 15, 2012 and requires hotels to describe accessible features in hotels and guest rooms offered through its reservations services in enough detail to reasonably permit individuals with disabilities to assess independently whether a hotel or guest room meets their accessibility needs. CONTINUE READING →

Published on:

08 January 2021

See how JMBM’s Global Hospitality Group® can help you.
Click here for the latest articles on the coronavirus.

We have a new PPP Loan authorization bill out of Washington, after months of political wrangling. Congress could have done more, but they did provide for up to $2,000,000 in additional forgivable loans per borrower, along with provisions which specifically cater to the hospitality industry.

As Jay Thompson and other members of our Corporate team write below, Congress has made obtaining a PPP loan and getting forgiveness for that loan easier. They have also expanded the definition of what can be an “eligible expense” upon which to base a PPP loan, and they have allowed for the issuance of a PPP Loan to a borrower in bankruptcy as part of a restructure of the borrower’s business. The Small Business Administration wasted no time in starting to issue interim rules interpreting the new law, and we will probably see one or two more before they produce a working application form.

COVID Relief Bill: Changes to the Paycheck Protection Program and New Lending Terms

by
Jay Thompson, Vanessa Han and Marianne Martin

On December 27, 2020, the President signed the Consolidated Appropriations Act, 2021 (“2021 Act”), which contains the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act (“Economic Aid Act”). The acts contain changes to the Paycheck Protection Program (“PPP”) that are intended to limit assistance to small businesses that need the financial support. The following highlights the impact of the 2021 Act and the Economic Aid Act on PPP loans.

Tax Treatment of the Paycheck Protection Program Loans

The 2021 Act provides for special tax treatment in Division N, Section 276 for forgiveness of loans granted pursuant to the original Paycheck Protection Program under the CARES Act (“Existing PPP Loans”) and any new PPP loans (“New PPP Loans”) under the Economic Aid Act.

The Economic Aid Act provides that any loan forgiveness under either the Existing PPP Loan Program or the New PPP Loan Program (collectively, the “PPP Program Loans”) shall not be treated as gross income to the recipient for tax purposes or the recipient’s partners or shareholders. Further, all costs that were considered in calculating a PPP loan (salaries, rent and utilities) are still eligible to be used as deductions against gross income of a PPP loan applicant even if it receives loan forgiveness. The IRS had previously issued a ruling that the costs could not be considered as offsets to income if loan forgiveness had been granted to the taxpayer and those costs were used to calculate the Existing PPP Loan.

Specifically, the PPP Program Loans are subject to the following tax treatment:

  • No amount shall be included in the gross income of a recipient by reason of forgiveness of a PPP Program Loan.
  • No deduction shall be denied, no tax attribute shall be reduced and no basis increase shall be denied as the result of the exclusion of the forgiveness amount under a PPP Program Loan from the recipient’s gross income.
  • Neither the partners in a partnership nor the shareholders of an S corporation shall have to recognize any gross income by reason of forgiveness of a PPP Program Loan.
  • The partners in a partnership and the shareholders of an S corporation shall be entitled to their distributive share of any costs giving rise to forgiveness under either of the PPP Program Loans.

CONTINUE READING →

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