Corporate Counsel Quotes David Phelps on Legal Impact of Coronavirus on Hospitality Industry

Corporate Counsel has quoted Akin Gump real estate partner David Phelps in the article “How Hospitality Industry Lawyers Are Working to Save Companies From COVID-19 Disaster,” which looks at the legal impact of the COVID-19 pandemic on the hospitality sector as well as some of the issues hospitality general counsel are facing.

According to the article, one industry executive says the current crisis is worse than the aftermath of the September 11 terrorist attacks or the financial crisis of 2008 and 2009. Some estimates, the article reports, say as many as 14 million jobs in leisure and hospitality are at risk.

While protecting the health and safety of employees and customers is considered a top priority, Phelps said general counsel should prepare for possible litigation from “third-party claims based on guests or employees coming down with COVID-19 and saying the company didn’t comply with CDC [Centers for Disease Control and Prevention] and OSHA requirements.”

Another issue to consider, the article says, is repurposing hotels and resorts into hospitals or quarantine areas, though it is important to make sure that is permitted under the terms of one’s loan, or if there are zoning and land use restrictions.

Phelps said he is currently helping one GC with a possible conversion of some properties into acute care facilities. The hotel company, he said, is considering doing this voluntarily, but it is possible that governments might co-opt facilities. That same client, he told the publication, is also being approached by developers who want to bring workers to the state, where there is no shelter-in-place order.

A huge concern, though, according to Phelps, “is will there be any compensation for loss of value because of any lingering negative effects or stigma of having been converted into a coronavirus hospital or acute care center?” He added, “That is what we are helping them with, and [about] how they should be communicating with lenders and hotel suppliers, and helping them decipher new rules and how to protect the hotels if they are required, or choose, to convert hotels for a short period of time.”