8 January 2024
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Hotel Dispute Lawyer: Choice of law to govern hospitality contracts — New York, Florida, Texas, California and Maryland law
Hospitality Litigation, Arbitration & Dispute Resolution
by
Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®
Mark S. Adams is an experienced trial lawyer, partner, and senior member of JMBM’s Global Hospitality Group®. In his more than 14 years with the Firm, Mark has created an international reputation as a Hotel Dispute Lawyer, handling litigation, arbitration and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants and other hospitality properties.
Why New York law is the governing law in so many hospitality agreements
There are many reasons why parties select the laws of a specific state to govern the interpretation and enforcement of contracts in the hospitality industry. Often, they select the laws of the state where the relevant hospitality property is located, or the laws where one or both of the parties reside. However, irrespective of those considerations, New York law is often chosen as the governing law for significant financial transactions and arrangements.
There are a number of factors that make New York law one of the most popular choices for governing law. These include the following:
- New York is a global financial and commercial hub, which logistically makes it a preferred jurisdiction for resolving disputes through negotiations, arbitration or litigation.
- New York has a well-established, highly respected legal structure that provides a level of predictability and stability crucial for dealing with complex contractual relationships within the hospitality industry.
- New York courts have established a robust and sophisticated body of case law. This provides clarity for parties entering into hotel contracts, offering guidance on various issues, including contractual interpretation, performance obligations, and potential liability. This well-defined legal landscape reduces uncertainty and potential disputes, fostering a more secure environment for hotel owners, management companies, and franchisees.
- The prominence of New York law in hotel contracts is linked to the state’s role as a key center for international business transactions. Many hotel management and franchise agreements involve parties from different jurisdictions, and the familiarity and enforceability of New York law on a global scale make it a practical choice. This preference for New York law enhances the efficiency of negotiations and facilitates cooperation in the performance of the contractual obligations.
American and International jurisprudence is based largely on legal precedents, which are real life cases with well-reasoned opinions as to the outcomes. In light of my observations given above, New York has had both a longer tenure to establish legal precedents, generally, and particularly a greater volume of decided hotel cases. These legal precedents provide indispensable guidance on the potential or likely outcomes in pending disputes, i.e. greater predictability and certainty of outcome.
What other state laws are popular choices for controlling law in hospitality contracts? Why are New York, Florida, Texas, California and Maryland law chosen so often?
The popularity of New York, Florida, Texas, and California law in governing hotel contracts can be largely attributed to each of those states’ population, economic significance, and transaction volume. However, these factors are enhanced by well-established legal systems, clarity in legal precedent, and global recognition. These factors collectively contribute to creating a favorable and stable environment for contractual relationships.
For the reasons given above, it is not uncommon for the parties to select, say, New York law to govern the transaction and any litigation, even though the hotel and the parties are in a different state. Those choice of law provisions are typically enforced. For example, we litigated a hotel dispute for a major hotel located in Boston that had a New York choice of law; an iconic resort and spa in Florida governed by New York law; and on another matter, two major resorts located in Acapulco, Mexico with New York choice of law.
Oftentimes, the brand mandates a choice of law and a place to litigate. For example, IHG generally requires Georgia law and venue in Atlanta, Georgia, where its headquarters are located, irrespective of where the hotel is located. That is more convenient for some of the senior IHG executives, but it also provides a home court advantage to IHG. Likewise, Marriott generally chooses Maryland law (which is extremely favorable to brands and operators) and often venue in Maryland.
The choice of governing law can have an important impact on the cost, strategies and outcome of disputes. Parties should give careful consideration to the state law selected.
For more information about Hospitality Dispute Resolution, you can find below some links to selected articles by Mark S. Adams:
The better way to resolve hotel contract disputes: Judicial Reference or Arbitration?
Should New York law govern your hospitality contract? How about Texas, California or Florida law?
Meet Mark S. Adams, Hotel Dispute Lawyer – Hospitality Litigation, Arbitration & Dispute Resolution
How Pennsylvania Resort Fees Settlements Could Play Out for US Hotel Industry
Disclosing Mandatory Resort Fees – What Hoteliers Need to Know
Force Majeure – Contract provisions and governing law are important
History & origins of Force Majeure as a contract defense
JMBM’s Global Hospitality Group® announces 5th edition of The HMA & Franchise Agreement Handbook
Hotel Lawyer on HMAs: “The shrinking terms of hotel management agreements”
Mark S. Adams, Hotel Dispute Lawyer, is an experienced trial lawyer and a senior member of JMBM’s Global Hospitality Group®. A primary focus of Mark’s practice is devoted to representing clients on hundreds of matters involving Hospitality Litigation, Arbitration & Dispute Resolution – from avoiding litigation to conducting complex, multi-state litigation, arbitration, and mediation.
Mark’s expertise is grounded on business litigation involving contracts, corporate and partnership disputes, and hospitality disputes and litigation. On behalf of hotel and resort owners, Mark has successfully litigated the termination of long-term, no-cut, hotel management agreements, franchise agreements, fiduciary duty issues, investor-owner disputes, TOT assessments, and more. He has wide-ranging trial experience in a variety of commercial disputes, including complex multi-party litigation and class actions. He has tried numerous cases in state courts, federal courts, and in domestic and international arbitrations, and is a frequent author and speaker on trial practice. Mark’s trial wins have been covered by Forbes, Reuters, and other publications. He has obtained two of California’s annual 50 largest jury verdicts in the same year.
Mark has taken or defended nearly 1,000 depositions throughout North America, Europe, and the Middle East. He has been quoted as an expert on noncompete agreements in the Wall Street Journal. For more information, contact Mark at 949.623.7230 or markadams@jmbm.com.
This is Jim Butler, author of www.HotelLawBlog.com and founding partner of JMBM and JMBM’s Global Hospitality Group®. We provide business and legal advice to hotel owners, developers, independent operators and investors. This advice covers critical hotel issues such as hotel purchase, sale, development, financing, franchise, management, ADA, and IP matters. We also have compelling experience in hotel litigation, union avoidance and union negotiations, and cybersecurity & data privacy.
JMBM’s Global Hospitality Group® has been involved in more than $125 billion of hotel transactions and more than 4,700 hotel properties located around the globe. Contact me at +1-310-201-3526 or jbutler@jmbm.com to discuss how we can help.
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