Q: We have a major corporate client with a contract providing that, if we breach the contract, the client must give us at least 30 days' written notice and an opportunity to cure any alleged breach. A month ago, the client gave us the 30 days' notice, stating that we failed to offer the lowest rates and fares in every case, as required by the contract. So for the past 30 days, we have documented every offer and carefully shown that we have been complying with our obligations. Nevertheless, the client claimed that some travelers have found lower fares, which we think is untrue, and the client terminated the contract. Normally we would just acquiesce, but this is such a big client that we may want to pursue our legal remedies. What can we realistically do?
A: You can take the position that the client breached the contract by improperly terminating, and then you can threaten to sue for damages. Although the client would probably not continue the contract, the client may agree to compensate you for some or even all of your loss.
You can also sue the client for breach of contract. Although agency suits against corporate clients are extremely rare and undoubtedly affect your reputation, there could be enough money at stake that your agency's survival would hang in the balance.
In litigation, the burden of proof would be on you to show that you did not breach the contract; i.e., that you always offered the lowest fares. That would be difficult to prove, especially because years will probably pass before the case gets to trial.
All business-to-business lawsuits that involve issue of fact, such as whether you offered the lowest fares, are extremely expensive. In a case such as this, you would probably need expert witnesses, and there would have to be a very extensive documentary record to develop.
In courts in the U.S., you cannot recover your attorney's fees from the other side if you win a lawsuit for breach of contract, except in rare instances where state statutes authorize such award, unless your contract provides for attorney's fees to be awarded to the prevailing party.
Most corporate account contracts provide that, in litigation, the prevailing party will be entitled to reasonable attorney's fees. However, you should never go into litigation counting on getting your attorney's fees paid by the opposing party, as the overwhelming majority of business-to-business suits are settled before trial, so there is no "prevailing party."
Even in a case where one party wins a judgment, the judge sometimes declines to award attorney's fees anyway. Finally, no matter how confident that you are going into a case, you could still lose, as all court litigation carries risks.
A less expensive and time-consuming method of redress would be mediation or arbitration, which are collectively known as "alternative dispute resolution." Many travel management contracts provide for alternative dispute resolution, especially those where services will be performed in more than one country.
Alternative dispute resolution can achieve the same outcome as court litigation, and it can be much cheaper, especially if the mediator or arbitrator knows the travel business, like the travel agent arbiter does. For a sample clause choosing the travel agent arbiter as the arbitration forum, go to www.pestronk.com/arbiterclause.html.
Mark Pestronk is a Washington-based lawyer specializing in travel law. To submit a question for Legal Briefs, email him at [email protected].