Meetings & Conventions SEE YOU IN COURT July
1999
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?"
C.A.S.
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.”
C.A.S.
Back to
Current Issue indexM&C
Home PageCurrent
Issue |
Events Calendar |
Newsline |
Incentive News |
Meetings Market
ReportEditorial
Libraries |
CVB Links |
Reader Survey |
Hot Dates |
Contact M&C