Litigation as the Method of Dispute Resolution for Hospitality Cases

The Pros and Cons of Litigation Compared to Mediation, Expert Determination and Arbitration

By Albert Pucciarelli Partner, McElroy Deutsch Mulvaney & Carpenter, LLP | October 30, 2016

In my three prior articles on alternative dispute resolution, I discussed mediation, expert determination and arbitration. Resorting to the court system may be necessary only because the parties in their agreements did not provide for the resolution of disputes by one of the three alternative dispute mechanisms. Even so, as the dispute devolves to one that the parties will not resolve by negotiation alone, they may at any time agree to mediate, submit the matter to an expert or arbitrate.

If the dispute has taken on a level of severity so that the parties are not able even to agree to some form of alternative dispute resolution, they or either of them may resort to the courts as the only way forward. For reasons stated below, it is rare that taking the matter to the county, state or federal court house is better than the alternatives, but there simply may be no choice.

Litigation (civil, as opposed to criminal) commences with the 'plaintiff' filing in court, and then serving on (presenting to) the other party, the 'defendant', a summons and complaint summoning the other party to respond within a period of time established in the local law (typically 20 or 30 days), and then ultimately to appear before a judge or a judge and jury who will decide the matter. But there is a lot of activity between serving the summons and complaint and the rendering of a decision (by the judge) or verdict (by the jury) – the pretrial discovery phase, about which more is said below.

The threshold question in litigation is the jurisdiction of the court. 'Jurisdiction' essentially means that the court has legal power over the defendant and the subject matter to decide the matter in question. In the case of a dispute involving a hotel, the obvious place for the lawsuit is a court in the same location as the hotel.

But even then, there are choices of courts in any one location – typically a municipal court, a county court, a state court and a federal district court – so the appropriate court must be chosen. In addition, the parties may have consented to jurisdiction elsewhere.

For example, in the case of a dispute between a hotel management company and the hotel owner, the management agreement may have provided, as is frequently the case, that the owner consents to jurisdiction in a state selected in the agreement by the management company, typically its 'home state' (where its headquarters is located). Federal court is often preferred because of the perception that federal judges are the best judges for dealing with sophisticated commercial disputes and their calendars are more efficiently managed.

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