July 01, 1999
Meetings & Conventions SEE YOU IN COURT July 1999 Current Issue
July 1999

See You In Court

In each of these recent cases, meeting sponsors, planners and suppliers found themselves mired in litigation. Could the conflicts have been avoided?

By Cheryl-Anne Sturken

An association fails to fill its room block, and the hotel demands payment for the portion that went unused. Trade show organizers are put off by the political climate of a host city, so they yank the convention and move it to a less volatile destination. A headquarters hotel changes management and walks a large group straight out the door. Shocking? Hardly.

Actions like these arise time and again in the meetings industry, often resulting in fierce legal battles. Planners who think "this could never happen to me" had better think again. Right now, courts are swamped with these types of cases. And the boilerplate contracts routinely used by planners and suppliers, with their many grey areas, provide fertile ground for even more lawsuits to clog the courts.

Some planners and suppliers, however, are wising up to the need for carefully written, well-worded contracts that clearly spell out the intentions of both parties.

"Contracts are getting longer and more detailed, 25 to 30 pages, as the meetings industry evolves," says Atlanta-based meetings attorney John Foster, of the law offices of Foster, Jensen & Gulley LLC. "Many people think, 'Oh God. This is terrible.' But what they don't realize is it keeps them out of trouble."

While contracts can't cover everything, they can go a long way toward heading trouble off at the pass.

The following recent case studies highlight the kind of legal snares in which planners can find themselves if plans go awry, circumstances change or feelings get heated. For each, we asked a lawyer for insight into how appropriate contractual language could have provided some relief.

Politics as usual?
The case: New Orleans hotels vs. the SHOT Show

At issue: On Oct. 30, 1998, the mayor of New Orleans, Marc M. Morial, filed suit in the Civil District Court of New Orleans against several gun manufacturers, trade groups and pawn shops, seeking to recover millions of dollars spent by the city to combat gun-related crime.

One of the trade associations named in the suit was the Newtown, Conn.-based National Shooting Sports Foundation Inc., whose four-day Shooting, Hunting, Outdoor Trade Show, or SHOT Show, was booked for January 2000 at New Orleans' Ernest N. Morial Convention Center. As a result of the mayor's suit, the group in March yanked its show and moved it to the Sands Expo Center in Las Vegas.

In turn, several of the city's major meeting hotels with which the SHOT Show had arranged for lodging announced their intention to sue for breach of contract. The hotels are expected to claim combined lost-revenue damages of about $1 million.

"Just because you don't like the politics of a place you are holding your show doesn't mean you can cancel," says attorney Lisa Sommer Devlin, of Phoenix-based O'Connor, Cavanagh, Anderson, Killingsworth & Beshears, who is representing several hotels in separate claims against the SHOT Show.

Steven M. Rudner, a Dallas-based hospitality attorney who is representing the Fairmont, one of the plaintiff hotels, adds, "It is becoming increasingly popular, almost an epidemic, for groups to cancel in order to take a political position. It fascinates me that groups feel they are immune to the consequences of such actions."

Robert Delfay, president of the National Shooting Sports Foundation and chairman of the SHOT Show, denies accusations of political grandstanding. "Pulling out of New Orleans is not an expression of our political belief or economic spite on our part," he says. "Our show simply would be a failure if we met in New Orleans because people would not go to a show in a city where they are being sued."

Delfay adds the SHOT Show's withdrawal followed months of hard deliberation. "When we pulled out of New Orleans, it was a difficult decision. We did not want to penalize hotels, restaurants and taxi cabs. But the mayor gave us no choice. Our members told us, 'If you go to New Orleans, we are not going.'"

The outcome: As yet undecided

How to protect yourself: Meeting groups hoping to secure contractual protection in the event that they voluntarily cancel because of a city's political actions will find themselves in rough waters at the bargaining table.

"There is no clause for political issues in meeting contracts," warns Rudner. "The hotel industry does not control the politics of a city. A hotel cannot possibly know who the mayor will be or what stand he will take, and any hotel that agrees to such a clause would be foolish."

According to Sommer Devlin, hotels have grown tired of meeting groups wielding a political conscience and will aggressively respond. "During the 1990s, many groups pulled out of Arizona because the state did not have Martin Luther King Day," she says. "Back then, hotel litigation was in its infancy, and a lot of groups got away with it. They thought that set a precedent. It didn't."

War of attrition
The case: Hyatt Hotels Corp. vs. the Women's International Bowling Congress of Milwaukee

At issue: In a suit filed in September 1997 in the Federal District Court of Buffalo, N.Y., Hyatt sued the WIBC for failing to pick up 100 percent of the 4,735-room block it secured at the Hyatt Regency Buffalo for its citywide 1996 convention and two-month-long bowling tournament. The congress picked up 2,285 rooms, less than half the original block. Hyatt is demanding the WIBC pay $100,000, representing anticipated lost room revenue.

This case speaks to the issue of attrition, a legal hot button in the meetings arena. A typical attrition clause specifies how many reserved rooms can go unused without the meeting organizer having to pay for them, and how much money they do have to pay for any unused rooms above that number. As such, it shifts the risk of low pickup from the hotel to the meeting group.

The WIBC is represented by Foster of Foster, Jensen & Gulley, who says the group did not include an attrition clause in its contract with the Hyatt Regency Buffalo because the issue of attrition simply had "never come up before" for the 75-year-old association. Instead, says Foster, the WIBC relied on the strength of its negotiations with the hotel sales team and verbally emphasized that because of the nature of the bowling tournament — many matches would be played in Buffalo's outlying suburbs, possibly resulting in low pickup at city hotels — the group could not guarantee attendees' reservations.

"The issue here is whether a hotel can hold a group responsible for unused, unreserved rooms if there is no contract stating so," says Foster. "Historically, meeting sponsors have never been expected to pay for unreserved or unused rooms unless the contract explicitly says the sponsor agrees to do so."

Peter Connolly, senior vice president and general counsel for Hyatt Hotels Corp., in Chicago, views the scenario differently. "The contract was drafted by the customer, not us," he says. "It was an absolute commitment to buy rooms. What it boils down to is they said [guests] were coming, our hotel blocked the rooms, and they didn't [come]."

Attorney Jonathan Howe of Chicago- and Washington, D.C.-based Howe & Hutton Ltd. has been retained by Hyatt to represent its Buffalo property. "The WIBC was offered an attrition clause; they refused. They were offered a cutoff date; they refused," Howe says. "This was their contract, written by them…and signed by them. We gave them everything they wanted. They had all of Buffalo anticipating a big-time return."

Complicating matters, the contract was signed in May 1993, three years before the tournament. By the time the event rolled around, the original salespeople had left the property. "Everyone who negotiated the contract was long gone," says Foster. "The new people at the hotel pick up the file and go, 'Gee, we have all these people and all these rooms. We'll send them a bill.'" Foster adds one former salesperson was located and deposed in favor of his client.

The outcome: A ruling is expected late next month.

How to protect yourself: Lawyers for both sides agree this case could have been avoided if an attrition clause were included in the contract, clearly spelling out the expectations of both parties.

"If we were drafting the contract today, we'd offer an attrition clause and include a scheduled room-block review, where we would meet regularly with the meeting planner to go over commitment and make any adjustment," says Connolly.

Howe adds, "Every contract should reflect the understanding of the parties. It's to no one's benefit when there is a failure of communication or a failure to meet expectations."

On this point, Foster concurs with his rivals. "The only way to protect yourself is to make sure your expectations are included in the contract. Because if it ain't on the page, it ain't on the stage."

The domino effect
The case: Hilton Washington & Towers, Washington, D.C., and the National Postal Forum, Fairfax, Va., vs. Marriott Wardman Park, Washington, D.C.

At issue: In a suit filed with the American Arbitration Association in Atlanta earlier this year, Hilton Washington & Towers and the National Postal Forum, in separate claims, sought damages against the owners of the Marriott Wardman Park, the headquarters hotel for the NPF's August 1998 convention. Six months before the event, Marriott said the property no longer was available because management decided to begin a major renovation.

The ensuing lawsuit charged Marriott's action not only forced the NPF to relocate its event but also caused the group to renege on its contractual obligations with the Hilton, where it had rooms held. The suit therefore asserted Marriott, not the NPF, should pay the damages claimed by Hilton.

Michael Genick, NPF executive director, notes that when the group contracted with the Marriott, the property was managed by Sheraton, which was not named in the suit.

Hilton is represented by Sommer Devlin, who says, "This meeting was the only one on Marriott's books that involved multiple hotels at the time of the renovation. They could have moved the renovation a few weeks earlier." She adds Hilton "requested cancellation damages but also understood it wasn't the NPF's fault, so they agreed to work together to seek damages."

Representatives of the owners of the Marriott Wardman Park did not return phone calls for this story.

The outcome: In April, the arbitration board ruled Marriott Wardman Park would be required to pay the damages owed Hilton.

How to protect yourself: The contracts in this case contained liquidated damage clauses, but they were poorly worded, according to Sommer Devlin. "People are always insisting on damage clauses without knowing how they work. A poorly worded damage clause can land you in court." She advises that when meetings involve multiple properties, the planner should include a clause in each contract stating the success of the meeting depends on each contracted property's fulfilling its obligations.

Change of heart
The case: A large San Diego hotel vs. a large U.S.-based equipment manufacturer (neither side can be named)

At issue: The equipment manufacturer had scheduled a series of product launches at the property and booked 18,000 room nights over the course of several weeks. However, a general downturn in the market and other factors caused the manufacturer to rethink its new product and cancel the event less than four months in advance. The property wanted compensation, but there was no cancellation clause in the contract.

A contractual provision required the property's claim to be settled by the American Arbitration Association, normally a speedier alternative to the court system. But the process took seven months to get started.

"The problems arose because the contract's arbitration clause was inarticulate. As a result, it took months just to find three arbitrators," says Howe, whose services were enlisted by the manufacturer when the process got stalled.

The outcome: The company settled with the property.

How to protect yourself: "Because the arbitration terms weren't clearly spelled out, this case took forever," said Howe, who suggests focusing on three points in the contract.
• Where arbitration will be held • How arbitration panelists will be selected • A requirement that both sides will exchange lists of witnesses and documents to be introduced.

Lisa Grimaldi contributed additional reporting for this story. LEGAL HOT SPOTS
Some slip-ups commonly found in planner-supplier contracts:

Typographical errors
The group negotiated for 10 percent allowable attrition, but a legal assistant inadvertently typed "100." A stroke of luck on the planner's part? Forget it, says Dallas-based hospitality attorney Steven M. Rudner. "The law takes into account mutual or unilateral mistakes. Do not fight to have the clause read in your interest in court, because it won't be," he says.

Attrition owed on resold rooms
A group failing to meet its room block can expect to pay attrition, but does it still have to pay when the rooms are resold to other customers? Atlanta-based meetings attorney John Foster, of Foster, Jensen & Gulley LLC, says a hotel that bills a client for unsold rooms without giving credit for the ones it resells can be seen as "double-dipping" or penalizing the client. Rudner, however, says giving credit alone is not the solution: "We are better off if we negotiate for attrition and cancellation that we can live with, including a smart amount for resold rooms."

Hospitality suites/alcohol liability
"Planners should be very cautious with hospitality suites, where the hotel provides the liquor and there is no one serving it," says Phoenix-based attorney Lisa Sommer Devlin of O'Connor, Cavanagh, Anderson, Killingsworth & Beshears. She advises planners to leave alcohol responsibilities to hotels and catering companies that are licensed to serve alcohol, provide trained bartenders and carry the required insurance. "The planner will have one less thing to monitor. Besides, the risk is so great, why take the chance?"


Inoculations AGAINST THE Y2K BUG
It’s Jan. 1, 2000, Day One of that big product launch guaranteed to propel the company into the next century. But there’s one problem: Everything from sleeping rooms to meeting space and food and beverage requirements seems to have been wiped off the reservations system.

Smart planners are pushing for contractual clauses that leave them some legal recourse if a hotel’s computer system suddenly goes belly-up. “Meeting planners should make sure they have an indemnification clause broad enough to cover any Y2K problems that could impact their meeting,” says industry attorney Kim A. Zeitlin of Zeitlin & Dorn in Washington, D.C.

However, most meeting contracts for the January 2000 period have been signed and on the books for a number of years, long before Y2K became the abbreviation du jour, notes attorney James M. Goldberg of Washington, D.C.-based Goldberg & Associates. He suggests planners contact the meeting venue and ask for a Y2K-compliance statement. “It doesn’t hurt to send a letter to hotels, or any other vendors for that matter, asking them to certify that they have taken steps to be Y2K compliant,” says Goldberg, adding planners should be on guard about events booked throughout early 2000, not just that first week.

According to Atlanta-based meetings attorney John Foster of Foster, Jensen & Gulley LLC, many hotels are not willing to give contractual guarantees to meeting groups on the Y2K issue. However, “planners should have clauses in their contracts that deal with inconvenience operating systems, safety systems whether they are related to Y2K or not,” he says. “Hotels still have a duty to perform their job and can be sued for negligence.”


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