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We are a worldwide network of attorneys that focus on hospitality, travel and tourism issues; a marketing conduit for suppliers of legal, safety and security solutions to reach hospitality developers and operators in need of those solutions; we mitigate critical incidents, injuries, litigation and liability within the hospitality industry, in the U.S. and abroad by facilitating the creation, collection, and dissemination of legal, safety and security information, products and services.

WEEKLY SPOTLIGHT

Attorney of the Week
Laner Muchin

Rob joined Laner Muchin in 1995 and has been a partner since 2003. His practice has been concentrated in defending employers in employment disputes and proceedings throughout the country, counseling employers on their day-to-day labor and employment issues, training management on a host of labor and employment topics, drafting and negotiating employment and non-competition agreements, drafting employee handbooks and corporate policy manuals, as well as handling collective bargaining negotiations, arbitrations, and a variety of other labor and employment matters on behalf of employers. In 2008, he was named one of the “40 Illinois Attorneys Under Forty to Watch” by the Chicago Daily Law Bulletin and Chicago Lawyer American Bar Association, Equal Employment Opportunity Section Illinois Restaurant Association, Advisory Council Member Illinois Hotel & Lodging Association Member HRMAC Member Played Number 1 singles and doubles on the Cornell Varsity Tennis Team from 1987-1991. He was captain of the team in his junior and senior years, and he earned ALL-IVY honors in his sophomore and senior years Selected for Cornell’s Quill and Dagger Senior Honor Society

Law Firm of the Week
Murchison & Cumming

Murchison & Cumming is an AV-rated AmLaw 500 “Go To” law firm for litigation in California and Nevada. We represent domestic and international businesses, insurers, professionals and individuals in litigated, non-litigated and transactional matters. With more than 80 attorneys in our six offices, we are large enough to provide clients with the resources of a large firm while ensuring the level of personalized service one would expect to receive from a small firm, including being able to respond quickly to client emergencies, cutting edge legal issues and developments in the law. We are known and respected trial attorneys and have an appellate record that includes precedent-setting decisions. Founded by R. Bruce Murchison in 1930, we value our reputation for excellence. Our attorneys have a history of service as leaders in a variety of legal, industry and community organizations, and are known for enjoying a high rate of success on summary judgment motions, at trial and on appeal. As a firm, we are committed to early evaluation and resolution of disputes, while at the same time being prepared to aggressively and effectively defend a case at trial.

Company of the Week
Rimkus Consulting Group

Rimkus Consulting Group is a world leader in forensic engineering and consulting with more than 60 offices across the United States, Canada, and the United Kingdom. For the past 35 years, Rimkus Consulting Group has been dedicated to the timely resolution of accidents, claims, and legal disputes. In order to meet today’s complex challenges, Rimkus provides more than 500 professional engineers, scientists, and consulting experts who offer real-world expertise that spans across a broad spectrum of public and private environments. At Rimkus, our clients can count on us for timely delivery, clear communications, and scientifically correct and reliable answers to some very complex questions. The forensic engineers and forensic consultants at Rimkus Consulting Group are experts in determining the causes of accidents.  We reconstruct these accidents and incidents to explain the events to our clients and, when called upon, to testify as expert witnesses at trial.  Our forensic engineers are experienced in virtually every engineering discipline, and we supplement their skills with a variety of experts from other disciplines.

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Our CONVERGE BLOG focuses on legal, safety, and security challenges for Hospitality, Travel, Travel Vendors and Corporate Travel Buyers as individuals and businesses.
Our blog features exclusive content from our contributors, who collectively represent the full spectrum of hospitality law, risk management and comprehensive duty of care solutions.

Life, Liberty, and a Gluten-Free Meal

Colonial Williamsburg Restaurant sued under the ADA for not allowing child to consume his home-prepared gluten-free meal.

The Governor’s Palace in Colonial Williamsburg, Virginia. A brick Colonial house with a courtyard, and former home of Thomas Jefferson.

The Americans with Disabilities Act (ADA) was enacted in 1990 to prevent discrimination against individuals with disabilities in all aspects of life. The Act has been applied to a variety of segments of our society, including building entrance designs, website displays, and workplace accommodations. Recently, a new twist to the Act arose when a 12-year-old boy visited a Colonial Williamsburg restaurant with his classmates on a school field trip.

The case, J.D. v. Colonial Williamsburg Foundation, was originally filed in the U.S. District Court for the Eastern District of Virginia and later appealed to the 4th Cir Ct. App. No 18-1725. In J.D., a 12-year-old boy with severe Celiac disease visited a restaurant with his classmates on a school field trip to Colonial Williamsburg. J.D.’s condition was so severe that even the slightest ingestion of gluten-based foods caused severe illness. On prior occasions, other restaurants had offered J.D. gluten-free meals that accidentally or unknowingly contained trace amounts of gluten, which caused J.D.’s symptoms to flare up. Because of this, J.D.’s parents decided that when J.D. had to eat out, they would prepare J.D.’s food for him, so that he could safely and comfortably eat without incident or fear of incident. Knowing that the field trip would require J.D. to eat at a restaurant, J.D.’s father (who also attended the field trip) brought a home-prepared meal for J.D. to eat while the rest of the class ordered its meals from the restaurant menu.

When the time came for lunch, the restaurant staff notified J.D. and his father that he was not allowed to consume outside prepared foods in the restaurant due to Virginia’s Health Code. In fact, Virginia’s Health Code prohibits food prepared in a private home from being used or offered for human consumption in a food establishment unless the home kitchen is inspected and regulated by the Virginia Department of Agriculture and Consumer Services. 12 Va. Admin Code § 5-421-270(B). However, as an accommodation, the restaurant advised J.D. that its chef would prepare J.D. a gluten-free meal of baked chicken and potatoes to meet his specific needs. The father declined the offer, stating that they did not want to risk kitchen mistakes, and he preferred J.D. eat his home-prepared meal. Left with the options of eating the chef-prepared meal, not eating, or eating outside the restaurant, J.D. and his father left the restaurant and ate the home-prepared meal separate from his classmates.

J.D. filed suit under §504 of Title III of the ADA, claiming that Colonial Williamsburg discriminated against him by excluding him from the restaurant and failing to modify its policy against the consumption of outside food. Defendants moved for summary judgment, and while the magistrate found a genuine dispute of material fact as to whether J.D. was disabled under the ADA, he recommended dismissal because J.D. failed to establish that he was discriminated against because of his disability. The District Court Judge adopted the magistrate’s recommendations and dismissed the case. Plaintiff appealed to dismissal to the 4th Cir.

An ADA claim requires a plaintiff to prove three elements: 1) that plaintiff is disabled under the meaning of the Act; 2) that the defendant operates a place of public accommodation; and 3) the defendant discriminated against him because of that disability. See Ariz. ex rel. Goddard v. Harkins Amusement Enters., Inc., 603 F.3d 666, 670 (9th Cir. 2010); Camarillo v. Carrols Corp., 518 F.3d 153, 156 (2d Cir. 2008). In this case, there was no dispute on the second element, so the Court looked only at elements 1 and 3.

Under §12102(1)(A) of the ADA, a disability is defined as any “physical or mental impairment that substantially limits one or more major life activities.” This is different from an impairment, which the Act defines as any physiological disorder or condition that affects one or more body systems, including digestive. 28 CFR §36.105(b)(1). The 4th Cir. noted that “‘[N]ot every impairment will constitute a disability within the meaning of this section,’ but it will meet the definition if ‘it substantially limits the ability of an individual to perform a major life activity as compared to most people in the general population.” Id. § 36.105(d)(1)(v). Eating is a major life activity. Id. § 36.105(c)(1)(i).” J.D. at 10. The court then explained that when deciding if the Celiac disease created a disability, it had to interpret the ADA language “broadly in favor of expansive coverage.” Id. Even though J.D. had no symptoms when he avoided gluten, this was immaterial in determining if a disability existed, because the Court was required to look at his condition when he consumed gluten. Id. With the evidence showing that J.D. had serious consequences to his health when he ingested gluten and that he had an unusually small margin for error in his diet, the Court felt that there was a material question of fact as to whether J.D. had a disability within the meaning of the ADA. Thus, consistent with the District Court ruling, the court did not decide that J.D. had proven a disability, but rather, felt it was up to the jury to decide.

The Court then looked at the third element; i.e., whether or not Colonial Williamsburg discriminated against J.D. According to 42 U.S.C. § 12182(b)(2)(A)(ii), discrimination is defined, “in part, as: a failure to make reasonable modifications in policies, practices, or procedures, when such modifications are necessary to afford such goods, services, facilities, privileges, advantages, or accommodations to individuals with disabilities, unless the entity can demonstrate that making such modifications would fundamentally alter the nature of such goods, services, [etc.].” Id. (emphasis in original)

The courts use a three-part test to determine if discrimination occurs. The three parts are: “(1) whether the requested modification is “necessary” for the disabled individual; (2) whether it is “reasonable”; and (3) whether it would “fundamentally alter the nature” of the public accommodation. Id., citing PGA Tour, Inc. v. Martin, 532 U.S. 661, 674 (2001), at 683 n.38.

The Court first looked at whether the modification [allowing him to eat his home-prepared meal] was necessary to provide J.D. with a “like experience” to non-disabled guests. This necessarily requires the court to make an individualized inquiry into the plaintiff’s specific circumstances and determine if the proposed accommodation addresses the disability, or if the accommodation creates a condition that extends beyond the person’s capacity. In this case, J.D.’s evidence showed that he repeatedly became ill when exposed to gluten from meals prepared at restaurants, even when they were purported to be gluten-fee. While the court did not make an ultimate decision on whether the modification of its rules was necessary, it did find that there was sufficient evidence presented to create a genuine dispute of fact on whether eating out is beyond J.D.’s capacity.

Second, where an accommodation is already in place, a plaintiff may still be entitled to something more if he can show that the accommodation does not account sufficiently for his disability.” J.D. at 16. In this case, the restaurant’s proposed accommodation was to prepare a gluten-free meal. Given J.D.’s history of illness from prior attempts at gluten-free restaurant meals, it became a question of fact as to whether or not the restaurant’s proposed accommodation was sufficient. “Indeed, a jury might well reject J.D.’s evidence about the severity of his gluten intolerance, and thus find that the protocols at [the restaurant] were sufficient to account for his disability. But in our view, J.D. has put forth enough evidence at this stage to raise a genuine dispute of material fact as to whether the proposed accommodation sufficiently accounts for his disability.” Id. at 17.

For the next step of its analysis, the 4th Cir. considered whether or not the restaurant’s proposed accommodation was reasonable or not. Indeed, “[f]acilities are not required to make any and all possible accommodations that would provide full and equal access to disabled patrons,” but “need only make accommodations that are reasonable.” Id. at 18. Citations omitted. Here, the court pointed out that the restaurant allowed guests to serve their own food if it is for babies or if they wanted to bring a cake in for large celebrations, provided the restaurant was given advance notice. The fact that J.D. may not have provided advance notice to the restaurant was dismissed as irrelevant to the court, because the lack of notice did not require additional staffing or create an unreasonable hardship in the restaurant’s operations. And when looking at the Health Code regulations the restaurant cited for its policy, the 4th Cir. noted that the prohibition on home-prepared foods was designed to prevent restaurants from serving food prepared in private homes. It did not prohibit customers from bringing in outside food. There was no evidence introduced that J.D.’s request would truly impose a safety concern or risk contamination of other foods. The court reasoned that if that were the case, the restaurant would not allow outside foods in other circumstances.

The Court ultimately ruled that decisions of reasonableness of accommodations are highly individualized, fact-specific for each case. As a result, they are decisions best left to a jury, who can judge the credibility of witnesses and weigh the importance of evidence.

Finally, the Court looked to the restaurant’s affirmative defense that allowing homemade meals fundamentally changes the restaurant experience. Under this defense, the defendant must prove that the Plaintiff’s request would fundamentally alter the nature of the program or services provided by the restaurant. Like the other issues, the court considered, this too was found to be a jury question. A jury “could reasonably find that accommodating the occasional request of someone with severe food sensitivities would not fundamentally alter the Tavern’s business model, especially if other family members purchase food or (as happened here) if the meals are already paid for as part of a group rate.” Id. at 23.

Impact of Ruling

Given the above, the 4th Cir. reversed the trial court’s dismissal and remanded it back to the District Court. The takeaways from the decision are striking.

First, it seems clear that the court is framing ADA cases such as this to be treated similarly to ordinary negligence cases. Those cases are almost always fact-specific and to be determined by a jury. If there is any credible evidence to support a claimant’s case, the court is likely to defer ruling to the jury.

Second, it is important to note that the Health Code Regulation relied upon by the restaurant does not expressly state that it is designed to prohibit the serving of food, rather than customers bringing in food. This ruling places restaurants in a difficult position of having to choose between enforcing written regulations and agreeing to proposed individual modifications as necessitated by the ADA. Restaurant staffers are not trained in legal analysis, and it seems untenable that a waiter or manager would have to interpret the intent of a health regulation. Forcing a restaurant to make such interpretation exposes a restaurant to more litigation because the parties cannot know if it is proper to violate the regulations based on its language. Indeed, the Dissent correctly notes that the de facto result of this ruling is that “Restaurants must either allow patrons to consume food prepared outside their premises or must justify their refusal at a costly trial.” J.D. at 32. Both the disabled parties and the restaurant industry would be better served if the Health Regulation was written clearly to prohibit serving versus bringing in outside foods, and the restaurant could rely upon the code as written.

Finally, it seems clear that the Courts are taking an expansive view of the ADA’s coverage. Rather than draw bright line tests that disabled persons and businesses can plan for, individualized assessments on a case-by-case basis must be made. This is likely to result in inconsistent applications where some modifications are allowed but possibly similar modifications are not allowed. As the dissent in J.D. notes, “[t]he majority’s rule means that a patron’s demand that he be allowed to eat outside food will sometimes be reasonable and other times not. This puts managers in the middle of a difficult line-drawing exercise: What criteria are they supposed to use in navigating the tension between the ADA’s requirements and public health law? Which privately prepared meals must they allow and which may they refuse? The majority wouldn’t even require advance notice from customers in J.D.’s position, meaning that managers will have to evaluate the disruption and the safety hazard of a customer’s outside meal on the fly, with the specter of litigation hanging overhead.” J.D. at 31.

If you have any questions about this ruling, its impact on restaurant operations, or how it may impact your business, the attorneys at KPM LAW are ready for your call.

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Hospitality Cyber Threats Are Alive & Well – Lessons From Recent Incidents

The data incident involving the Starwood guest database was one of the most significant data security incidents in recent years. Publicly announced on November 30, 2018, the details revealed in the days and weeks following the announcement contain some striking reminders and new lessons for the hospitality industry. Here are some of the key facts of the incident:

  • Marriott acquired Starwood in September of 2016, but Marriott continued to operate Starwood’s guest database separately from Marriott’s until a few weeks after the breach incident was announced.
  • The unauthorized intrusion into Starwood’s database occurred in 2014, but was not discovered by Starwood nor by Marriott later during the course of its acquisition of Starwood.
  • The guest information compromised in the incident included name, address, phone number, email address, passport number, preferred guest account information, date of birth, gender, arrival and departure information, reservation date, and communication preference, and in some instances, payment card numbers and expiration dates. It was ultimately reported by Marriott’s forensic assessment provider the 383 million records were affected.

These facts underscore several crucial considerations for hotel companies regarding how guest data is collected, secured and retained. Some of these considerations aren’t ones that our industry normally associates with data security concerns. Here are some of the key takeaways:

  1. Data Security/Privacy is a Critical Due Diligence Consideration. In any merger or acquisition there are due diligence checklist items for the surviving entity. In the case of the Marriott/Starwood transaction the security breach of Starwood’s database was not discovered prior to closing, but had it been, the implications for the deal could have been extremely significant. At the very least, action could have been taken to remediate the compromise at that time. In this day and age, cyber due diligence should be part of any merger or acquisition.
  2. Retention of Large Amounts of Personal Information Carries Risk. Personal data is valuable for many reasons, but that value has to be balanced against the risk that accumulated caches of personal data become rich targets for data thieves. For example, there were over 5 million unique unencrypted passport numbers and more than 20 million encrypted passport numbers that were compromised over the course of the Starwood data incident. The value to Starwood and Marriott of retaining that passport information is unclear, but the liability of replacing more than 25 million passports is enormous.
  3. With GDPR and CCPA, the Definition of Protected Data Has Expanded. Before the effective date of the General Data Protection Regulation (GDPR) in May of 2018, most of the data involved in the Starwood incident would not have enjoyed any special protection. Under U.S. state law in most jurisdictions, even today, a person’s name, address, phone number, and email address are not considered Personally Identifiable Information or “PII.” However, GDPR and the new California Consumer Privacy Act (CCPA) (effective January 1, 2020) have greatly expanded the scope of protected personal data to include virtually any item of information that can be used to identify an individual. A name, address, phone number or e-mail address are indisputably “personal data” under the GDPR.
  4. Guest Reservation Systems Are Vulnerable On Both Ends. In branded hotels, franchise agreements always require that the hotels utilize the brand’s reservation and management system, including brand-mandated hardware, software, portals and connections. This arrangement gives data thieves multiple targets from which to select when seeking to steal guest information. The Wyndham data incident of 2008/2010 was the first notable attack on a brand’s central guest information database. While most hotel guest information data incidents in the past decade have occurred at individual hotels or discrete groups of properties, the Starwood incident proves that a brand’s guest information database is still vulnerable.

2018 also saw a rash of low-tech social engineering attacks against individual hotels, and this type of attack has continued into 2019. Criminals commence these attacks by posing as brand systems support personnel and making phone calls to hotel employees. The employees are asked to provide their login credentials for the reservation management system.

Cybercriminal: Hello, I’m calling from [brand] system support. We’re having difficulty with the reservation process on your end, and we need to check it. Can you please log in for me?
Employee: Sure. [Logs in]
Cybercriminal: We’re still having an issue. Can you please give me your username and password so I can try it on our end.
Employee: No problem. My username is … and my password is …

Using the stolen credentials, the criminal remotely accesses the reservation management system and retrieved information about recent guest bookings, including guest names, addresses, phone numbers, reservation dates, and partial payment card information. Although the systems typically show only partial credit card number, in some cases the criminals are able to unmask the obscured numbers.

The criminal then calls guests with future reservations:

Cybercriminal: Hello, I’m calling from [hotel name] regarding your reservation from to [check-out date]. We’re having a problem processing your credit card. The last four numbers are [XXXX]. Could you please provide me with your full credit card information, including security code, so we can get that taken care of.

Because the criminal has accurate information about the reservation, the guest is more likely to fall for the scam. Once the guest has supplied the card information, the criminal quickly racks up fraudulent charges. Fortunately, most guests don’t trust these calls, but they are bad for the reputation of the hotel and brand. Depending on what information is exposed, the unauthorized access to the reservation management system may legally be considered a data breach that requires notification to affected individuals and regulators.

To help protect your organization from these types of social engineering attacks:

  • Change employee passwords at frequent intervals.
  • Alert employees to this type of attack and train them in how to respond.
  • If possible, implement multi-factor authentication for any access to the reservation management system.
  • Audit which employees have access to the reservation management system and disable access for employees who have no business need for it, including employees who have been terminated or who have changed roles.
  • Protect partial payment card information so obscured numbers can’t be unmasked.

This article is part of our Conference Materials Library and has a PowerPoint counterpart that can be accessed in the Resource Libary.

HospitalityLawyer.com® provides numerous resources to all sponsors and attendees of The Hospitality Law Conference: Series 2.0 (Houston and Washington D.C.). If you have attended one of our conferences in the last 12 months you can access our Travel Risk Library, Conference Materials Library, ADA Risk Library, Electronic Journal, Rooms Chronicle and more, by creating an account. Our libraries are filled with white papers and presentations by industry leaders, hotel and restaurant experts, and hotel and restaurant lawyers. Click here to create an account or, if you already have an account, click here to login.

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Use of Surcharges and Best Tips to Avoid False Advertising and Other Consumer Claims

Due to a myriad of legislative and court decisions, some restaurants particularly in California have elected to add a surcharge to their receipts to defray increased costs incurred over the last several years. 

The increased costs of operating a restaurant can be attributed to minimum wage increases, healthcare, paid sick leave, restrictive scheduling, cost of food and supplies and increase pay equity between traditionally tipped employees and heart of the house employees.  As such, these surcharges need to be analyzed for taxation purposes and legality as to how they are implemented. 

A. Tax and Wage Implications

First let us think about how surcharges affect a company from a tax and reporting perspective. Starting in 1994, many restaurants have benefited from being allowed to apply a general business credit toward a portion of the employer’s Social Security and Medicare taxes paid with respect to their employees’ cash tip earnings (IRC 45 B). However, the policy set forth in Rev. Rule 2012-18 means that the credit would not apply with respect to surcharges, because these mandatory charges do not qualify as tips. 

Surcharges like a service charge are a taxable event. The sales tax is imposed upon the retailer for the privilege of selling tangible personal property. “Gross receipts” provides that the taxable gross receipts include all amounts received with respect to the sale, with no deduction for the cost of the property sold, materials used, labor or service cost, or any other expense of the retailer passed on to the customer. Any expense of a restaurant passed on to customers in the form of a surcharge must be included in taxable gross receipts. Since there are no specific sales and use tax exemptions for a surcharge imposed, retailers may not claim the cost of the surcharge as a deduction on their Sales and Use Tax return. Therefore, a separate surcharge on customer bills must include the surcharge amount in the calculation of tax.

To the extent, a company elects to distribute a surcharge to its employees, the surcharge will be treated and must be reported as Salaries and Wages on the business tax return. Another issue to consider is that an employer who pays out a portion of the surcharges to employees may have to recalculate its employees’ overtime rates (if the employees work more than 40 hours in a week or 8 hours a day for businesses in California). As any distributed surcharges are wages, that money would count toward an employee’s regular rate of pay and therefore must be factored into the overtime rate calculation.

B. Claims Asserted

Starting in 2017 comments by several City Attorneys, as well as some letters, have raised issues concerning surcharges. Specifically, some City Attorneys have raised the manner under which surcharges are communicated to customers. Also in 2017, there were 16 cases filed in San Diego, California asserting the illegality of the surcharges and the manner of disclosure generally. These lawsuits claimed these restaurants were in violation of consumer protection laws including false advertising, unfair competition and misrepresenting the prices on their menus. It was further claimed that a failure to clearly and conspicuously communicate a surcharge might render the stated price of a food item untrue and misleading under California law. The San Diego City Attorney has made some statements that such charges are being investigated and may result in prosecution under the guise of consumer protection for false advertising. These lawsuits sought restitution, injunctive relief, civil penalties, punitive damages and attorneys’ fees.

In a ruling on November 16, 2018, a San Diego Superior Court Judge ruled in granting judgment for the restaurant at issue that the “undisputed evidence establishes that the surcharge is not unlawful as a matter of law.” Further, the Court concluded the restaurant “made adequate and non-misleading disclosures about the surcharge.” Subsequent judgments were entered in favor of other restaurants by the same judge in December 2018 and January 2019 based on the November 2018 ruling; whereby the ruling of the Court was adopted as to the legality of the use of surcharges by restaurants. In February 2019, a federal judge also granted summary judgment concerning identical allegations concerning the use of a surcharge.

C. Prevention Tips

As a result, even though surcharges are a legal and allowable option to help defray the recent increases in costs, there are some approaches that should be considered to avoid potential litigation. There are no regulations or laws that state how a restaurant should specifically and clearly disclose the existence of a surcharge. However, to try and prevent the filing of an adverse claim, it would be prudent that a company discloses up front that the items for example a meal (food and drink item(s)) is subject to a surcharge and state the percentage of the surcharge on the menu, in a prominent sign or posting, on web pages, as well as on advertising materials either electronic or paper. Also even though not specifically required, it would be prudent that the disclosure stand alone and not be contained in a statement about other aspects of the business. Some companies have elected to highlight the disclosure in a different or larger font or color as a means to try and alleviate concerns raised by governmental entities. That said, there is no mandatory way that a surcharge should be disclosed to a customer. In summary, there is no legislative or statutory guidance as to how a surcharge should be disclosed.

There is no requirement that a sign be used to disclose a surcharge but having a surcharge disclosure sign is another means of avoiding a consumer claim. If a restaurant elects to use signage, there is also no requirement about the size of font on any sign posted in a restaurant about a surcharge. Hospitality companies who elect to use a sign should consider a sign about a surcharge and percentage where patrons are likely to see it as they enter the restaurant. A sign no smaller than 10 inches wide by 10 inches high or a horizontal strip marker no smaller than 10 ½ inches wide by 1 ¼ inches high bearing the surcharge information in at least a 36-point font would arguably comply with the “conspicuous” requirements. Also, if a fair amount of the business is take-out or occurs at a register, the placing of a disclosure sign at the register would likewise be another preventive step for notice purposes.

As to menus, any statement as to surcharges should be separate from other information. Some restaurants have elected to use bold font, a different color or italics. However, none of this is required. It is merely one option. In addition, the font as to the disclosure should not be smaller than other items printed on menus or electronic media and certainly at least the size of the menu items and the prices. These steps should help defray any claims that the restaurant did not clearly and conspicuously disclose the existence of a surcharge.

Many San Francisco restaurants implemented a surcharge (i.e., an extra fee or cost) on the goods or services they sell to customers to cover, in whole or in part, the expense of complying with the Health Care Security Ordinance passed in 2008. This surcharge was specifically designated to defray the costs of the local healthcare ordinance. Some restaurants faced litigation and penalties when these surcharges were not utilized to pay for the cost of health care. There is now a requirement in San Francisco that the business on an annual basis disclose: 1) the amount collected from the surcharge for covered employee health care and 2) the amount spent on covered employee health care. Therefore, based on these lessons learned, if a company elects to impose a surcharge, it should consider disclosing it in a broad manner rather than designating it for a particular cost item. A more specific designation could subject the retailer to show that the surcharge collected must be only used for that item e.g., the cost of health care to employees. As a result, a broad designation of the surcharge would be a good preventive measure. The broader the language, the more flexibility the company has in how to utilize the money collected from the surcharge.

D. Summary Recommendations

Overall, surcharges are legal as supported by the recent court ruling. However, hospitality should implement surcharges with an eye toward prevention of any claims for consumer fraud, false advertising, unfair business practices or improper utilization of the surcharge. A company has wide discretion as to how it discloses and communicates the use of a surcharge but the disclosure should be sufficiently conspicuous to a reasonable consumer.

If a company elects to implement a surcharge, at a minimum the fact that there is a surcharge must be disclosed on the receipt as “SURCHARGE” and sales tax must be charged on all service charges and any separate surcharge line item, regardless of any amount that might be paid to the employees.

Herein is a summary of steps that a company should consider implementing, even though not currently required or mandated, as a means to prevent a legal claim:

  • If a sign is utilized, take steps to place the sign at an entrance and/or at a check out area, disclosing the surcharge
  • The use of the words “mandate” or “mandatory” when describing the surcharge, while not illegal, has been misinterpreted and has been criticized by some customers and political officials.
  • Disclose the surcharge on menus, on websites and in advertisements, both paper and electronic, when the prices are disclosed
  • Make sure the disclosure on the menu is at least the same font and size as the menu items and prices
  • Keep any rationale as to the reason for the surcharge as broad as possible, e.g., to defray the increased cost of operations

Also, it is important to consult with your tax advisor or tax attorney to determine the proper method of taxing surcharges and paying your employees if a portion of the surcharge is distributed to the employees. It is also highly recommended to consult with qualified legal counsel concerning any questions about surcharges and how to disclose them to customers.


This article is part of our Conference Materials Library and has a PowerPoint counterpart that can be accessed in the Resource Libary.

HospitalityLawyer.com® provides numerous resources to all sponsors and attendees of The Hospitality Law Conference: Series 2.0 (Houston and Washington D.C.). If you have attended one of our conferences in the last 12 months you can access our Travel Risk Library, Conference Materials Library, ADA Risk Library, Electronic Journal, Rooms Chronicle and more, by creating an account. Our libraries are filled with white papers and presentations by industry leaders, hotel and restaurant experts, and hotel and restaurant lawyers. Click here to create an account or, if you already have an account, click here to login.

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A Discussion of the Reptile Trial Strategy Through The Lens of the Erin Andrews v. Marriott International Lawsuit

I. WHAT IS THE REPTILE THEORY/STRATEGY?

Reptile: The 2009 Manual of the Plaintiff’s Revolution, authored by Don Keenan and David Ball, was published in 2009. This book is offered exclusively to plaintiff’s lawyers and provides a strategy for plaintiff’s attorneys in most stages of litigation. The Reptile theory is derived from a model of the brain created by Paul Maclean, a neuroscientist. Maclean’s model is based on the concept that the three parts of the brain developed through evolution, and he coined the phrase “Triune Brain.” One of those three parts, the Reptilian Complex, is the oldest part of the brain. This is where Keenan and Ball begin the development of the Reptile Trial Strategy. According to Reptile, the reptilian brain controls our basic life functions, such as breathing, hunger and survival and instinctively overpowers the cognitive and emotional parts of the brain when those life functions become threatened. It thrives on evolution, and therefore maximizes “survival advantages” and minimizes “survival dangers.”

Utilizing the Reptile Trial Strategy requires presenting each case in a way that shifts each juror’s brain into survival mode and motivates each juror to decide a case in a way that will reduce or eliminate the danger, thereby protecting himself, his family, and the community. A verdict that enhances individual and community safety is the antidote to the defendant’s dangerous conduct, and jurors will take advantage of this opportunity to lessen the danger. The goal is to create a mindset for the jurors that causes each to decide a case based on the potential harms and losses that could have resulted from the defendant’s dangerous conduct and not based on the actual damages suffered by the plaintiff.

Three major questions in Reptile, which plaintiff’s counsel must answer for the jurors, are:

  • How likely was it that the act or omission would hurt someone?
  • How much harm could it have caused?
  • How much harm could it cause in other kinds of situations?

The formula provided is that to employ the reptile strategy: safety rule + danger = reptile. In other words, they try to prove that there was a safety rule in place. The safety rule was proper and reasonable. The defendant chose to violate the safety rule. Every wrongful defendant act derives from a choice to violate a safety rule.

The six characteristics that each safety rule must have to promote the reptile strategy is:

  • It must prevent danger.
  • It must protect people in a wide variety of situations, not just someone in the plaintiff’s position.
  • It must be in clear English.
  • It must explicitly state what a person must or must not do.
  • It must be practical and easy for someone in the Defendant’s position to have followed.
  • It must be one that the defendant will either agree with or reveal him or herself as stupid, careless or dishonest for disagreeing with.

II. ERIN ANDREWS v. MARRIOTT INTERNATIONAL, INC., ET AL

Nationally known sports reporter Erin Andrews filed suit in the Circuit Court of Nashville, Davidson County, Tennessee in December of 2011 against Marriott International, Michael David Barrett (the Stalker), West End Hotel Partners LLC (hotel franchisee), and Windsor Capital Group (hotel management). She sought $75,000,000 in total damages. Marriott International was dismissed before the trial. The case went to trial in February of 2016. The jury returned a verdict in favor of Andrews with a total award of $55,000,000.00. The jury assigned 51% liability to Barrett. The two hotel companies were jointly responsible for 49% or $26 million.

The case stemmed from an incident at a Nashville Marriott hotel in 2008. Ms. Andrews, an ESPN reporter at the time, was in Nashville covering a college football game. Barrett was an insurance agent who targeted Andrews because she was “trending” on the internet for the purpose of taking videos of Andrews to sell to TMZ, a celebrity gossip site, and/or post on the internet for profit.

Barrett succeeded in this endeavor and captured approximately five minutes of film of Andrews, while she was nude, by placing a video camera in the peephole of her hotel room door. He tried to sell the video to TMZ, which refused, and he then posted the video on the internet. It spread from there. He pleaded guilty to stalking charges, was convicted and sentenced to 2.5 years. Plaintiff’s counsel effectively used the Reptile strategy in discovery, voir dire and at trial.

III. DEFENSES TO THE REPTILE STRATEGY

The counterpart presentation of this article will provide key points in developing a defense plan to the Reptile strategy beginning in discovery, including what to expect from plaintiff’s counsel and preparing defense witnesses for depositions, in limine motions, thoughts about “re-priming” a jury during voir dire, jury instructions, more witness preparation for trial and consideration of using reverse Reptile tactic in specific situations involving comparative fault.

See David C. Marshall, Lizards and Snakes in the Courtroom, For the Defense, April 2013 at 64-69, 74-75.
See David Ball & Don Keenan, Reptile: The 2009 Manual of the Plaintiff’s Revolution.


AUTHORS

David Eaton
David Eaton is a founding shareholder of the firm and practices in the Nashville, Tennessee office. He practices in Kentucky, Mississippi, North Carolina, and Tennessee and focuses in the areas of long-term care defense and general liability claims. As an advisor to health care providers, David has worked closely with nursing home staffs and personnel in the strategy and development of the defenses of cases prior to and through trials. David received a Bachelor of Arts degree in English from Nicholls State University in 1995 and a Doctor of Jurisprudence from Mississippi College School of Law in 2000.

Michael Phillips
Michael Phillips is a founding shareholder with Hagwood and Tipton and president of the firm’s Executive Committee. Michael oversees staff in both the Jackson, Mississippi, and Hillsborough, North Carolina, offices.A significant portion of Michael’s cases involves the defense of physicians, nurses, hospitals, nursing homes, assisted living facilities and other health care providers. He handles all phases of the litigation process – with a particular emphasis on trial – and has defended claims against nursing homes and assisted living facilities in Mississippi, Tennessee, Alabama and North Carolina. Michael also has extensive experience in the areas of complex defense litigation involving premises security/liability, insurance coverage and general insurance defense.


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