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Hotel Dispute Lawyer: Choice of law to govern hospitality contracts — New York, Florida, Texas, California and Maryland law

Hospitality Litigation, Arbitration & Dispute Resolution

Mark S. Adams is an experienced trial lawyer, partner, and senior member of JMBM's Global Hospitality Group®. In his more than 14 years with the Firm, Mark has created an international reputation as a Hotel Dispute Lawyer, handling litigation, arbitration and alternate dispute resolution in hundreds of matters affecting hotels, resorts, restaurants and other hospitality properties.

Why New York law is the governing law in so many hospitality agreements

There are many reasons why parties select the laws of a specific state to govern the interpretation and enforcement of contracts in the hospitality industry. Often, they select the laws of the state where the relevant hospitality property is located, or the laws where one or both of the parties reside. However, irrespective of those considerations, New York law is often chosen as the governing law for significant financial transactions and arrangements.

There are a number of factors that make New York law one of the most popular choices for governing law. These include the following:

  1. New York is a global financial and commercial hub, which logistically makes it a preferred jurisdiction for resolving disputes through negotiations, arbitration or litigation.
  2. New York has a well-established, highly respected legal structure that provides a level of predictability and stability crucial for dealing with complex contractual relationships within the hospitality industry.
  3. New York courts have established a robust and sophisticated body of case law. This provides clarity for parties entering into hotel contracts, offering guidance on various issues, including contractual interpretation, performance obligations, and potential liability. This well-defined legal landscape reduces uncertainty and potential disputes, fostering a more secure environment for hotel owners, management companies, and franchisees.
  4. The prominence of New York law in hotel contracts is linked to the state's role as a key center for international business transactions. Many hotel management and franchise agreements involve parties from different jurisdictions, and the familiarity and enforceability of New York law on a global scale make it a practical choice. This preference for New York law enhances the efficiency of negotiations and facilitates cooperation in the performance of the contractual obligations.

American and International jurisprudence is based largely on legal precedents, which are real life cases with well-reasoned opinions as to the outcomes. In light of my observations given above, New York has had both a longer tenure to establish legal precedents, generally, and particularly a greater volume of decided hotel cases. These legal precedents provide indispensable guidance on the potential or likely outcomes in pending disputes, i.e. greater predictability and certainty of outcome.

What other state laws are popular choices for controlling law in hospitality contracts? Why are New York, Florida, Texas, California and Maryland law chosen so often?

The popularity of New York, Florida, Texas, and California law in governing hotel contracts can be largely attributed to each of those states' population, economic significance, and transaction volume. However, these factors are enhanced by well-established legal systems, clarity in legal precedent, and global recognition. These factors collectively contribute to creating a favorable and stable environment for contractual relationships.

For the reasons given above, it is not uncommon for the parties to select, say, New York law to govern the transaction and any litigation, even though the hotel and the parties are in a different state. Those choice of law provisions are typically enforced. For example, we litigated a hotel dispute for a major hotel located in Boston that had a New York choice of law; an iconic resort and spa in Florida governed by New York law; and on another matter, two major resorts located in Acapulco, Mexico with New York choice of law.

Oftentimes, the brand mandates a choice of law and a place to litigate. For example, IHG generally requires Georgia law and venue in Atlanta, Georgia, where its headquarters are located, irrespective of where the hotel is located. That is more convenient for some of the senior IHG executives, but it also provides a home court advantage to IHG. Likewise, Marriott generally chooses Maryland law (which is extremely favorable to brands and operators) and often venue in Maryland.

The choice of governing law can have an important impact on the cost, strategies and outcome of disputes. Parties should give careful consideration to the state law selected.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.