June 5, 2017
A recent the Law 360 story by Natalie Olivo, “Four Seasons Hotel’s $11M Fee Spat Sent to Arbitration,” reports that the owners of a Four Seasons-branded hotel in Los Angeles will have to arbitrate their request for the hotel chain to return an award of nearly $11 million in legal fees stemming from a contract dispute over split loyalties, after a California judge cited the companies’ arbitration agreement.
In sending Burton Way Hotels LLC’s fee request to arbitration, U.S. District Judge Philip S. Gutierrez noted that Ontario-based Four Seasons Hotels Ltd. has contended that the parties’ arbitration agreement covers the fee request, which should be decided by a new arbitration panel. In addition, Judge Gutierrez said, Burton Way has indicated that it was also willing to have the fee request decided in arbitration.
“In light of the clear language in the parties’ arbitration agreement providing for the arbitrators’ power to adjudicate the questions presented in Burton Way’s fees motion, and the parties’ mutual agreement to bring the fees motion before the new arbitration panel, the court concludes that the fees motion is to be decided by the new arbitrators pursuant to the parties’ arbitration agreement,” Judge Gutierrez said.
The award at issue was handed down in underlying arbitration that dismissed Burton Way’s claims accusing Four Seasons Hotels of breaching their deal for the exclusive use of the brand and ordering Burton Way to pay Four Seasons $10.2 million in fees and costs. However, after the Ninth Circuit vacated the award in October, Burton Way sought to have the payment returned, saying it is now owed more than $10.9 million with interest.
Neal Marder, an Akin Gump Strauss Hauer & Feld LLP attorney representing Burton Way, told Law360 that "we advised the court that Burton Way was comfortable with the panel deciding this issue so the decision was welcomed and not unexpected."
The dispute over Four Seasons' decision to manage and operate the nearby Regent Beverly Wilshire Hotel, which Burton Way says is a direct competitor, has been barreling back toward arbitration at least since Judge Gutierrez refused Burton Way's bid last month to void an agreement to arbitrate the dispute over a licensing deal under which Four Seasons has managed the Burton Way-owned Four Seasons Hotel Los Angeles since the late 1980s.
Burton Way had claimed the arbitration agreement was void because the hotel owner agreed to it only if a certain judge — who recused himself in January under a request from Burton Way alleging improper ex parte communications — was involved in the arbitration. But Judge Gutierrez instead ruled that the provisions did not reference the judge in a way that would render the agreement void now that he has recused himself.
Following Judge Gutierrez’s order declining to void the agreement, the parties have squared off over remaining issues in the dispute. Four Seasons in April told the court that Burton Way could not relitigate the entire contract case, arguing that the Ninth Circuit issued a very limited mandate for still-live issues to be contested when the case returns to arbitration.
According to Judge Gutierrez’s order, Four Seasons had noted that Burton Way’s fee request depends on a determination of which party is the “prevailing party,” which is a question reserved for the arbitrators.
While Burton Way had also agreed to arbitrate its fee request, the company claimed that Four Seasons was trying to keep the district court from ruling on the fees motion on the grounds that it has no jurisdiction under the parties’ arbitration agreement, while at the same time asking the court to rule on the scope of the Ninth Circuit’s order, rather than allowing both issues to be arbitrated.
The case is Burton Way Hotels Ltd. et al. v. Four Seasons Hotels Ltd., case number 2:11-cv-00303, in the U.S. District Court for the Central District of California.