When to Use Expert Determination in Hotel Disputes

By Albert Pucciarelli Partner, McElroy Deutsch Mulvaney & Carpenter, LLP | January 29, 2017

There are three options in alternative dispute resolution. Mediation, arbitration and expert determination. The third option – expert determination – whereby the parties who have been unable to resolve a dispute generally concerning a specific, technical matter, look to a specifically qualified individual to decide the matter for them.

These disputes generally involve a technical issue, one that is limited in its scope and implications for the overall contract. Even among parties such as owners and management companies that have the best working relationships, issues arise that may cause discord if left unresolved. Expert determination is a method to efficiently and quickly lay the dispute to rest before it can erode the relationship or paralyze the operation of the hotel.

Defining Expert Resolution

If parties disagree on technical matters (as opposed to more legally-centered issues such as allegations of mismanagement or failure to comply with brand standards), they may decide either in advance by having 'expert determination' drafted into their contract or in an 'ad hoc' manner to jointly appoint a professional to render a binding opinion on the matter.

This expert should be someone with specific and extensive knowledge in the technical subject matter, such as a CPA in respect of financial accounting matters or an engineer in respect of a matter involving the need to upgrade HVAC systems. The question to be decided should be carefully crafted by the parties as should the degree of latitude that the expert may exercise in reaching a decision.

If the dispute is monetary, the parties may also agree to 'baseball arbitration' whereby the expert is required to choose the position of one of the parties as correct or left free to determine the correct remunerative value. In any case, the parties should agree either in the contract calling for expert resolution or in their subsequent agreement that the expert's decision is binding and unappealable, except for 'manifest error'.

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