Law360: NY Appellate Court Reverses Times Square Hotel Ruling

December 6, 2022 – Law360 reports that Brewer client M&C New York LLC, owner of the former Novotel Times Square Hotel, has prevailed in its appeal of a lower court ruling that dismissed a breach of contract lawsuit against the hotel's former manager, hotel operator Accor Management US Inc. 

According to the report, "The appellate court favored hotel owner M&C New York (Times Square) LLC's argument that it had complied with the provisions of its hotel management agreement with operator Accor Management US Inc. when it issued an April 2019 notice of default due to the manager's alleged negligent accounting, misuse of hotel funds, unsupported payments and fee overcharges. The appeals court also rejected Accor's claims that it was protected by a safe harbor provision in section 14.3 of the hotel management agreement." 

Counsel for M&C New York, William A. Brewer III, told Law360 the decision paves the way for a trial, which is expected to shed light on Accor's management of the former Novotel Times Square. 

“This case underscores the principles that govern the relationship between owners and management companies,” says Brewer. “Our client believes Accor sought protections to which it was not entitled – and failed in its obligations to manage the property in owner’s best interest. This case is a cautionary tale for owners throughout the Accor system, and we are eager to proceed to trial.”

Read the report (subscription required). 

Brewer Partner Cecelia Fanelli Comments on Controversial LA Ordinance

August 11, 2022 – Law360 interviewed Brewer, Attorneys & Counselors Partner Cecelia Fanelli about the implications of a proposed Los Angeles ordinance that would require hotels to house homeless people in vacant rooms. The Los Angeles City Council recently voted to put the proposed ordinance on the ballot, leaving it up to voters to decide whether to approve the measure.

Fanelli said the proposed ordinance raises many concerns, including placing hospitality workers outside of their traditional role, charging them to provide “nightly social services” for homeless people in hotel rooms.  

"The ordinance also raises the issue of an overreach into the affairs of private businesses by the government, and it also potentially places into jeopardy the insurance coverage of hotels and motels given the change in their risk profile. Those costs would likely be passed on to consumers," Fanelli said.

"If it begins in Los Angeles, there's nothing to say that similar initiatives wouldn't be instituted in other cities," she added.

To read more, click here.

William Brewer Writes About the Responsibilities of Hotel Owners and Management Companies for Hotel Business Review

Managing Partner William Brewer wrote an article for Hotel Business Review published on July 26, 2020, titled “History Lesson: Owners and Management Companies Weigh Responsibilities and Risks in Response to COVID-19.”  

In part, Brewer writes: “Today, the chain brand hotel companies (e.g., Marriott, Hilton, IHG, etc.) represent 69% of the rooms in supply. They do so through a variety of brands, spread over different price strata, offering different levels of facilities and services to their guests. Although the traveling public may not realize it, the brands rarely own any of the hotels within their 'chain' of distribution. Rather, the owner of the hotel is either a licensee or the principal who has contracted for the asset to be managed by the brand. This was not always so.” 

Amidst the coronavirus pandemic, Brewer writes that, "In times of uncertainty, the fiduciary obligations of every hotel operator should take on increased significance. As the pandemic continues to wreak economic havoc globally, and with a possible continued recession around the corner, hotel operators have a legal responsibility to their owners to give immediate attention to particular issues that may arise over the course of the hotel's operation and management. A failure to uphold these duties may result in an owner's loss of trust and confidence in the operator's management, and operators who breach their fiduciary duties will entitle owners to terminate their hotel management agreements with immediate effect."

Brewer is a frequent contributor to Hotel Business Review, and serves as featured “guest author” of the publication. Visit the publication and most recent article here.

Starwood Hotels & Resorts Announces Major Victory in Multi-Million Dollar Dispute

May 11, 2006 – Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT) announced today a major victory in an arbitration relating to the ownership and management of two Westin hotels. A three-member arbitration panel issued a unanimous ruling on April 28, finding that Starwood and Westin Hotels Limited Partnership (“WHLP”) had prevailed in a 17-month long arbitration proceeding and were not liable for any portion of the more than $200 million Kalmia Investors, LLC (“Kalmia”) alleged as damages to the WHLP partnership in which it is an investor.

Kalmia asserted numerous claims against WHLP, Starwood and Westin Realty Corporation ("Westin Realty"), the general partner of WHLP, and sought lost profits, disgorgement of management fees, punitive damages and the alleged lost value from the sale of the two hotels in question.

The panel denied Kalmia's claims, stating, "Kalmia failed to carry its burden of proving, separately or in combination, misconduct (by Starwood, WHLP, or Westin Realty) violative of any contractual, fiduciary or other legal duty owed to Kalmia by those parties," and that, “the total damages sought by Kalmia were inflated, unsupported, and lacking in credibility.” The panel also characterized Kalmia's main theory of damages as “entirely speculative and highly improbable.”

“This is an important victory for us," said Kenneth S. Siegel, Chief Administrative Officer and General Counsel of Starwood Hotels. "This ruling is a major validation of Starwood's business practices and proves that we honored our duties to all parties involved and acted in the utmost good faith. We look forward to continuing to successfully manage the Westin St. Francis Hotel and the Westin Michigan Avenue Hotel.”

“The panel’s decision vindicates Starwood's management of these two great hotels," said William A. Brewer III, partner at Bickel & Brewer and lead defense counsel for Starwood. “We are pleased that the panel agreed and denied Kalmia's claims in all respects.”

To read more, click here.