Keeping Disputes Painless

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.


Mediation
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 differences.

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

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.


Litigation

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 fees.

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.