Hotel Law Blog

27 February 2024

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

The better way to resolve hotel contract disputes:
Judicial Reference or Arbitration?

Hotel Management Agreements & Franchise Agreements

by

Mark S. Adams, Hotel Dispute Lawyer
Partner & Senior Member
JMBM’s Global Hospitality Group®

Judicial Reference is a procedure similar in many ways to binding arbitration. For convenience, we may sometimes use the word “Reference” interchangeably with “Judicial Reference.”

The parties may agree to use this procedure before or after a dispute arises, and may specify various elements of the procedure such as the skills of a retired judge to serve as the referee. Like arbitration, Judicial Reference is effective (even in states like California) to waive jury trial and avoid the risk of runaway jury verdicts. A Judicial Reference comes with a procedural advantage that arbitration cannot match: the right to appeal. With a Reference, the parties retain the appellate rights that they forfeit when they opt for arbitration.

The current prevailing choice is arbitration.

The hotel industry has been an innovator in the use of alternative dispute resolution to resolve disputes arising out of significant hotel contracts such as hotel management agreements, hotel franchise agreements, joint ventures, and even financing arrangements. Overwhelmingly, the industry has opted for binding arbitration. Proponents of arbitration claim that, compared to traditional court trials, arbitration can be faster, more private, impose experience or other qualifications on the arbitrator, and avoid a jury trial (with the potential for runaway verdicts). Many experts believe that the compelling “advantage” is avoiding jury trials, but there may be a better way to accomplish these objectives. See, Critical considerations for hospitality litigation, arbitration & alternate dispute resolution clauses in hotel contracts.

Using the right dispute resolution tool for each type of dispute.

Arbitration may be a quick fix for resolving questions about budget overruns or minor operational hiccups. Its efficiency shines in low-stakes situations where swift resolution is paramount. However, when it comes to major contractual breaches, misinterpretations, or significant financial losses, Judicial Reference emerges as the clear best choice. The stakes in hotel contracts often demand a more robust and transparent solution – one that Judicial Reference demonstrably delivers. So let’s take a look at the details of Judicial Reference. CONTINUE READING →

17 January 2024

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

Critical considerations for hospitality litigation, arbitration &
alternate dispute resolution clauses in hotel contracts

Hotel Management Agreements & Franchise Agreements

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, jury trials, and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants, and other hospitality properties. But not every matter should, or does, end up in litigation. Mark also provides pre-litigation strategic advice to avoid litigation and optimize a client’s position for settlement where possible.

What is the difference between “Litigation” and “Dispute Resolution”?

In many circles, the term “litigation” refers to the process that starts with the filing of a lawsuit in the traditional court system and includes all that follows until a final resolution. This more restrictive definition does not include arbitration or other alternative dispute mechanisms.

In other circles, however, “litigation” has a much broader meaning which includes the first definition of court litigation. This second meaning includes all methods of dispute resolution and refers to the entire progression of a dispute from reviewing and advising on pre-contract drafting, through the first disagreement, preparing correspondence, and on to negotiations to amicably resolve issues. It also encompasses all related matters in the dispute from notice of default, strategic positioning for a lawsuit or other action, and engaging in dispute resolution by any procedure such as filing and then prosecuting or defending a lawsuit, arbitration, mediation, or judicial reference (see below).

We generally use “litigation” in the second, broadest meaning of all stages of any dispute and any type of dispute resolution process. In this article, we will specifically name a particular means of dispute resolution where it may provide greater clarity.

Dispute arbitration compared to court trials and judicial reference

Binding arbitration is the dispute resolution mechanism embodied in most hospitality contracts, particularly hotel management or operating agreements and hotel franchise agreements. The choice of binding arbitration may have profound effects on the process and outcome of the dispute. As a result, many parties opt out of arbitration, or attempt to opt out of it. The Pros and Cons of arbitration vs. court trials are summarized below:

Arbitration:

Pros:  Almost always a faster resolution, typically private and confidential proceedings, parties can choose arbitrators, avoids jury trials of complex business issues and the potential for runaway verdicts. Arbitration is favored by strong public policy behind the Federal Arbitration Act and most state arbitration statutes.

Cons:  Extremely limited appeal options, if any, less formal discovery, potential for biased arbitrators (e.g., frequent flyer customers), binding decisions, now offers little savings in cost – can be outrageously expensive. Without mutual agreement, a dispute can only be forced into arbitration when the parties have signed a binding arbitration agreement before the dispute arises, or, the parties sign such an agreement for the particular dispute after it arises.

Court Trials:

 Pros: Adherence to legal procedures, comprehensive discovery, public record, right to appeal.

 Cons: Lengthy process, high discovery costs, less control over timing, potential for complex rules and delays, jury trial waivers may not be enforceable in many jurisdictions (such as California) except when arbitration or judicial reference is provided.

Judicial Reference (or “Reference”) – A better alternative dispute resolution process with the best of both arbitration and court litigation?

Although it is less well known than arbitration or traditional court litigation, in states like California, there is another process that offers the best of both worlds. Many of our most experienced litigation attorneys believe that judicial reference deserves thoughtful consideration for hospitality contractual provisions for the dispute resolution process. CONTINUE READING →