Most hotel contracts have a dispute resolution
clause, but this clause is often ignored by meeting planners
and their clients. It is only when a serious dispute arises
that a group may look for the very first time at the clause,
only to discover that even if the group has the stronger
argument in a dispute, the dispute resolution clause will make
things so inconvenient and expensive that it is cheaper for the
group to simply give in and pay the hotel what it wants.
Therefore, it is critically important that meeting planners
understand the various kinds of dispute resolution procedures
and how to amend dispute clauses to their maximum advantage.
On rare occasions, a hotel contract will state that before the
parties may go to arbitration or to court, they must first
engage in a mandatory period of mediation. Mediation typically
involves the parties hiring a professional mediator - typically
a lawyer who is specially trained in mediation techniques - by
the hour to help the parties try to resolve their various
The main problem with mediation is that it is non binding. Even
if the mediator makes a well-reasoned recommendation, either
party can simply choose to reject that recommendation.
Consequently, the parties can tie up many days of time in
mediation and still end up with nothing to show for it.
Arbitration involves a trial-like hearing held in front of a
professional arbitrator - typically a lawyer hired by both
parties who is specially trained in handling cases of a
particular kind. Unlike mediation, arbitration leads to a final
decision by the arbitrator that is binding for both parties.
Each party is allowed to call witnesses who testify under oath
and who are subject to cross-examination by the other side.
However, extensive pre-trial discovery and formal courtroom
rules typically do not apply to arbitration.
The conventional wisdom is that arbitration is cheaper and
faster than going to court and, in many cases, that is true.
Crowded court dockets in many parts of the country result in
judges not being able to hear a lawsuit for several months or
even years after it is filed. On the other hand, there is a
belief by some that when faced with a really close case,
arbitrators sometimes tend to "split the baby" and enter a
compromise decision in which neither party walks away happy.
The final dispute resolution method is litigation, which
involves filing a lawsuit with a court and having a judge or
jury decide the case. While the ultimate decision is binding,
it is relatively slow and very expensive. One of the most
expensive aspects of litigation is the pre-trial discovery
process, during which parties may pose scores of written
questions to the other side, demand that hundreds of relevant
documents be turned over to the opponent, and demand that
numerous witnesses be made to answer questions under oath in
deposition hearings. In some cases, an opponent may be buried
in so many discovery requests that he may give up and settle
the case simply to keep from going broke paying its own legal
The hotel will almost always insist that the location of
arbitration or litigation be in the city where the hotel is
located, since this means that the other party and its
witnesses have the inconvenience of traveling to the hotel's
city for each phase of the dispute resolution. However,
sometimes a provision stating that the prevailing party in
arbitration or in litigation gets its out-of-pocket costs and
attorney's fees paid by the losing party is missing from hotel
contracts. That is an important clause because a party's legal
fees can end up being more than the amount of money at stake in
the underlying dispute.
Ben Tesdahl, Esq. is an attorney concentrating in nonprofit, corporate, tax, and contract law, including meetings and convention law. He is with the law firm of Powers, Pyles, Sutter & Verville, P.C. in Washington, DC. He can be reached at (202) 466-6550 or at [email protected] The author wishes to thank Tony Cummins from The Meeting Department, LLC, for suggesting the topic in this column.