Associations Score Victory in Hotel Contract Case.

A recent district court case, Hyatt Corporation v. Women's International Bowling Congress, ruled decisively against a hotel claiming breach of contract for an association's failure to fill all rooms booked for its convention. Here, Jefferson C. Glassie summarizes the details of the case.

Associations can claim a major judicial victory in a case recently decided in the U.S. District Court for the Western District of New York. In Hyatt Corporation v. Women's International Bowling Congress, Hyatt Regency Buffalo had taken the Women's International Bowling Congress (WIBC) to court, suing for attrition damages in the amount of $172,900 for alleged failure to pick up sufficient rooms from a 4,735-room block. Hyatt alleged breach of contract in the organization's failure to fill all the rooms. However, because there was no attrition clause in the contract, the court ruled decisively against Hyatt and granted summary judgment in favor of WIBC.

The case

Hyatt claimed damages for breach of contract and "detrimental reliance" against WIBC for failure to pay for a block of rooms that Hyatt agreed to make available to members in connection with WIBC's Annual Meeting and Championship Tournament held in Buffalo, New York, in 1996. White the agreement between the hotel and WIBC contained a cancellation provision, it, did not include an attrition clause. Hyatt's efforts to add an attrition clause subsequently were not agreed to by WIBC. The agreement also failed to designate a cut-off date by which rooms would ordinarily be released (generally 30 days prior to the scheduled event) for general resale, but the court did not take this into account as a significant factor. WIBC asserted that it was only responsible for rooms that were actually reserved out of the block for WIBC directors, staff, and VIPs, and that room reservations for attendees were clearly to be made and paid for separately. In addition, WIBC contended that Hyatt had not held the entire block of rooms but, rather, had filled nearly 500 of the rooms by reselling them to other customers.

The decision

The court viewed the issue as whether Hyatt's requirement to hold a block of rooms for WIBC absent any attrition clause obligated WIBC to pay for the entire block of rooms regardless of whether the rooms were occupied. Finding that a valid contract existed, the court held that the only promise supported by consideration was Hyatt's agreement to "hold a block of rooms for possible use by WIBC convention attendees and tournament participants, in return for WIBC's promise to take reasonable efforts in good faith to make other necessary arrangements to hold the 1996 WIBC convention in Buffalo."

The court clearly found that Hyatt assumed the risk of loss in the event that all rooms were not reserved and that WIBC had met its contractual obligations by using best efforts to make arrangements necessary to hold the convention in Buffalo and by promoting the Hyatt as a convention hotel. The court also noted that the Hyatt had incentive to enter into such an agreement--because it would benefit financially from additional business other than the revenue generated by just the sleeping rooms themselves--and found nothing in the agreement to support Hyatt's contention that WIBC impliedly promised to be financially responsible for the rooms. The court specifically noted the absence of an attrition clause and the use of contract terms such as hold, estimate, and picked-up to indicate that the rooms were not guaranteed for payment as reserved rooms by WIBC. Consequently, the court found it clear that further efforts would need to be taken by attendees in order to actually reserve rooms for the convention. The c ourt also noted, given convention cancellation damages of only about $20,000, that it would make no sense for Hyatt to be able to recover more than eight times that amount if some rooms simply were not used.

The implications

As has been clear under legal court precedent for many years, associations are not liable for failure to use all rooms in a room block without a binding attrition clause. Thus, hotels should not be able to make claims for damages due to low pickup without such a provision. If the meeting is canceled and cancellation damages are incurred, the association would be responsible, as it would be for slippage under a valid attrition provision. Nonetheless, associations should continue to use extreme caution in signing hotel contracts and to take all reasonable steps to reduce potential damages. Use of a mitigation clause, a relatively new provision that can further reduce risk, should also be considered. (See the February 1999 issue's "Legal" column, "Increasing Your Protection Against Attrition Fees.")

Jefferson C. Glassie and Jerald A. Jacobs are partners at Jenner & Block, Washington, D.C. Jacobs edits this column.