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By Jim Butler and the Global Hospitality Group®

Author of www.HotelLawBlog.com

June 2015

In a 5-4 opinion rendered on June 22, 2015, the United States Supreme Court held that a Los Angeles municipal code provision violates the US Constitution's Fourth Amendment prohibition on unreasonable search and seizures. The invalidated LA Code provision requires hotel operators to make guest records available to the police upon request. This case may be significant because many cities throughout the country have similar laws, and they are now all constitutionally suspect. On the other hand, for reasons discussed below, most hotel operators will probably not care to challenge a records request, and there are expedient alternatives available to cities and police, including administrative subpoenas. See below to access the full Supreme Court opinion in City of Los Angeles v. Patel.

Read on to learn more about the Los Angeles City code's  provisions, the history of the challenge in the District Court, appeals to the Ninth Circuit, and the US Supreme Court's decision.

Los Angeles Municipal Code §41.49

Los Angeles Municipal Code §41.49 requires hotel operators to gather and record information about their guests, including name, address, number of people in the party, automobile description and license, arrival and departure time, room assignment, rate charged for the room and information about payment. Specific information is also required for guests paying with cash or renting a room for less than 12 hours, and for guests registering with a kiosk.

For a period of 90 days, hotel operators are required to keep the relevant guest information on the hotel premises or an adjacent office.

The law states that hotel guest records "shall be made available to any officer of the Los Angeles Police Department for inspection" and makes it a misdemeanor for any hotel operator to fail to make the guess records available for police inspection. This misdemeanor is punishable by up to 6 months in jail and a $1,000 fine.

Lawsuit filed and initial ruling for City of Los Angeles

Suit was filed in 2003 against the City of Los Angeles, claiming that the law was unconstitutional on its face - in other words that the statute itself is invalid as opposed to invalid in the way it is applied. It was stipulated that the complaining parties had been subjected to mandatory record inspections under the ordinance without consent or a warrant.

After a bench trial, the Federal District Court ruled for the City of Los Angeles on the basis that the respondents "lacked a reasonable expectation of privacy in the records subject to inspection."

On an appeal, the Ninth Circuit initially affirmed the District Court holding for the City on the same grounds. However, in a complete turnaround, the Ninth Circuit subsequently decided to rehear the case sitting en banc and then it reversed its earlier decision.

The Ninth Circuit's second opinion

Sitting as a panel, the Ninth Circuit reversed its earlier position, and made the following findings:

  • A police officer's nonconsensual inspection of hotel records under §41.49 is a Fourth Amendment "search"
  • The business records referred to are the hotel's private property
  • The hotel therefore has the right to exclude others from prying into such records

The searches authorized by the statute are unreasonable and the statue is unconstitutional on its face because these inspections do not afford an opportunity to obtain judicial review of the reasonableness of the demand before incurring penalties.

The US Supreme Court decision - City of Los Angeles v Patel

This opinion will be an interesting one for Constitutional Law students interested in Fourth Amendment search and seizure. If you would like to see a copy of the complete opinion, please click City of Los Angeles v. Patel, No. 13-1175, Slip Opinion (U.S June 22, 2015).

A large part of the opinion discusses when a statute, like LA's in this case, can be attacked as "facially" unconstitutional - in other words when the law itself is void without regard to how it is applied to a case in question. It also analyzes various types of warrantless searches that may be upheld, such as in cases of "special need" which it also sometimes refers to as "administrative searches."

The Court finds that the search in question is such an administrative search, but that it lacks "an opportunity to obtain precompliance review before a neutral decisionmaker." The Court held that this was a fatal weakness, saying:

A hotel owner who refuses to give an officer access to his or her registry can be arrested on the spot. The Court has held that business owners cannot reasonably be put to this kind of choice.

And the Court further says:

Absent an opportunity for precompliance review, the ordinance creates an intolerable risk that searches authorized by it will exceed statutory limits, or be used as a pretext to harass hotel operators and their guests.

Important takeaways for hotel operators

For pragmatic hotel operators, here are some takeaways from the Court opinion:

  • The Court's opinion has no impact on the (valid) requirement of the City law that hotel operators gather and maintain the required guest information.
  • Most business people will provide the requested information without a warrant or other legal process.
  • Police will avoid Fourth Amendment problems, if they get a warrant - including an ex parte warrant - or even an administrative subpoena. The opinion says that administrative subpoenas are typically a simple form, can be issued by the individual seeking the records and does not require probable cause.

It will be interesting to see if this opinion has any significant effect on the hotel industry. If the Court is right that most operators will comply with requests without challenge, the impact will likely be limited to very unique circumstances where there is a special reason an operator feels harassed or uncomfortable about a requested inspection. But, now we have the US Supreme Court's guidance on this issue!

This is Jim Butler, author of www.HotelLawBlog.com and hotel lawyer, signing off. We've done more than $71 billion of hotel transactions and have developed innovative solutions to unlock value from hotels. Who's your hotel lawyer?

About Jim Butler

Jim Butler is a founding partner of JMBM, and the founder and chairman of JMBM's Global Hospitality Group® and Chinese Investment Group™. He is recognized as one of the top hotel lawyers in the world and has authored or co-authored The HMA & Franchise Agreement Handbook, How to Buy a Hotel Handbook, and The Lenders Handbook. Jim has led the Global Hospitality Group® in more than $68 billion of hotel transactional experience, involving more than 1,500 hotel properties located around the globe. Jim has more than 30 years of experience representing and advising Asian investors, with a particular emphasis on Chinese investors in the last five years given the dramatic increase of outbound investments by Chinese nationals and companies into the United States.+1-310-201-3526 or jbutler@jmbm.com.

Contact: Jim Butler

jbutler@jmbm.com / +1-310-201-3526

About JMBM

Our Perspective. We represent hotel owners, developers and investors. We have helped our clients find business and legal solutions for more than $68 billion of hotel transactions, involving more than 1,500 properties all over the world. For more information, please contact Jim Butler at jbutler@jmbm.com or +1 (310) 201-3526.

Jim Butler is a founding partner of JMBM, and Chairman of its Global Hospitality Group® and Chinese Investment Group™. Jim is one of the top hospitality attorneys in the world. GOOGLE "hotel lawyer" and you will see why. Jim and his team are more than "just" great hotel lawyers. They are also hospitality consultants and business advisors. They are deal makers. They can help find the right operator or capital provider. They know who to call and how to reach them.

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