NEW YORK— The increasingly litigious nature of the lodging arena and how it impacts property owners, managers, franchisors and shareholders came under intense industry scrutiny last week when Bickel & Brewer and Cornell University School of Hotel Administration kicked off its Fifth Annual Hospitality Law Institute here. At the conclusion of the first full day of panel discussions and presentations on Oct. 24, the prevailing picture drawn by the meeting’s featured speakers seemed to show much of the recent legal wrangling besetting the industry could be traced to three specific areas of contention: acknowledgement and acceptance of fiduciary responsibilities (as an agent); fuller disclosure and greater transparency in contractual dealings; and the application of “common sense” to matters of common law. Notably, the day’s line-up of session topics closely reflected many of the same arguments, claims and controversies wracking today’s hospitality business scene, including: a discussion of ownership rights and responsibilities vis-à-vis collected customer information; the changing face of— and format for— doing business in a post-9/11 world; and conflicting interests pitting hotel ownership against management entities. Fittingly, each of these fertile fields of lodging-industry litigation came in for a degree of pre-session examination when Bickel & Brewer Partner James Renard, Hotel Capital Advisors Principal Simon Turner, and William Wallace— partner with Milbank, Tweed, Hadley & McCloy— briefly reviewed some of the seminal cases impacting the hotel scene. Beginning with Woolley v. Embassy Suites (’91), this recapitulation extended through Government Guarantee Fund of Finland v. Hyatt Corp. (’96), 2660 Woodley Road JV v. IIT Sheraton (’98), Empire Holdings v. Radisson Hotels (’99) right up to this year’s spate of suits brought against Marriott International. Specifically, the panelists maintained Woolley v. Embassy Suites case was one of the first to establish the “agent” relationship a management firm has to its ownership entity, with the key aspect being an “agency agreement” is open to termination at any time by either participating party… though it did not delve into what might constitute wrongful termination and the damages such an action elicits. They then contended this agency relationship was further underwritten by findings of 2660 Woodley Road v. ITT Sheraton, which went on to clearly confirm the fiduciary responsibilities inherent to such a relationship. And as for the recent quartet of filings against Marriott, the panelists suggested they were driven to a great extent by matters of transparency and disclosure, with a possible catalyst being today’s climate of growing mistrust of most anything corporate— particularly “aggressive” accounting procedures. Finally, the thought was raised that while it has primarily been the owner/manager relationship (so far) drawing the most attention, it stands to reason there may soon be a renewed inspection of franchisor/franchisee agreements as well. To this end, it was suggested that— in several instances— it could be established there is a similar “agency” kinship is this arena as well.
