May 07, 2025|Franchise Frontlines
May 7, 2025 | North Carolina Court of Appeals | Published Decision
Executive Summary
In Carter v. Home2 Suites by Hilton Charlotte I-77 South, 2025 WL 1317286 (N.C. Ct. App. May 7, 2025), the North Carolina Court of Appeals reversed the trial court and held that Hilton Worldwide Holdings, Inc., the parent holding company for Hilton-branded hotel systems, was not subject to personal jurisdiction in North Carolina. The plaintiff brought claims for wrongful eviction, breach of contract, and illegal sales tax arising from her stay at a franchised Home2 Suites hotel. She argued that Hilton Worldwide was subject to jurisdiction because the franchisee allegedly used the franchisor’s reservation system and because Hilton Worldwide purportedly controlled Hilton Franchise Holding LLC. The Court of Appeals rejected each basis and held that the record contained no competent evidence showing minimum contacts. The court found Hilton Worldwide had no operational presence in North Carolina, was not a party to the franchise agreement, had no employees or real property in the state, and did not control the franchisor or the franchisee. The decision provides important guidance for franchisors and parent holding companies regarding maintaining corporate separateness and defending against jurisdictional overreach in lawsuits involving local franchisees.
Relevant Background
The plaintiff stayed at a Home2 Suites hotel in Charlotte, North Carolina, operated by TWC Charlotte II LLC under a franchise agreement with Hilton Franchise Holding LLC. According to the allegations, the plaintiff claimed she was wrongfully evicted, charged improper sales tax, and subjected to contractual violations during her stay. She sued both the local hotel entity and Hilton Worldwide Holdings, Inc., which she characterized as the “controlling company” of the Hilton brand. Hilton Worldwide moved to dismiss for lack of personal jurisdiction and submitted a sworn affidavit establishing that it is a Delaware corporation headquartered in Virginia, is a parent holding company, has no employees, does not own or lease property in North Carolina, is not registered to do business in North Carolina, and is not a party to any franchise agreement related to the hotel. The franchise agreement attached to the affidavit showed that Hilton Franchise Holding LLC—not Hilton Worldwide—granted the franchise, provided the reservation system, and maintained the contractual relationship with the franchisee. The plaintiff offered no affidavits or evidence in opposition and relied primarily on the franchise agreement and an unverified screenshot from a website suggesting Hilton Worldwide was a “controlling company.” The trial court denied Hilton Worldwide’s motion, finding that the plaintiff’s claims “arose out of her use of the Reservation System,” that the franchisee was “required to use” that system, and that Hilton Worldwide was the franchisor’s “controlling company.” Hilton Worldwide appealed.
Decision
The Court of Appeals first held that although a denial of a motion to dismiss is ordinarily interlocutory, North Carolina law authorizes immediate appeal when the ruling concerns minimum contacts for personal jurisdiction. Carter, 2025 WL 1317286, at *2.
Turning to the merits, the court held that several of the trial court’s factual findings were unsupported by competent evidence. Finding of Fact 16—that the plaintiff’s claims arose out of her use of the reservation system—was rejected because “nowhere in Plaintiff’s complaint does she reference a Reservation System” and nothing in the franchise agreement tied the plaintiff’s claims to that system. Id. at *3. Similarly, the finding that Hilton Worldwide was the “controlling company” of Hilton Franchise Holding LLC was based solely on an unsworn screenshot, which the Court of Appeals held was “not admissible to controvert” a sworn affidavit. Id. at *4.
Even considering supported findings, the court held that Hilton Worldwide lacked the minimum contacts required under the Due Process Clause. The court emphasized that Hilton Worldwide “is not incorporated in North Carolina, is not headquartered in North Carolina, has no employees in North Carolina (or elsewhere), is not registered or licensed to do business in the State, does not hold title to or lease any real property,” and “is not a party to the Franchise Agreement.” Id. at *6. Although the trial court found that Hilton Franchise Holding LLC was an affiliate of Hilton Worldwide, the Court of Appeals reiterated that “when a subsidiary of a foreign corporation is carrying on business in a particular jurisdiction, the parent is not automatically subject to jurisdiction in the state.” Id. (quoting Ash v. Burnham Corp., 80 N.C. App. 459, 462 (1986)). There was no evidence that Hilton Franchise Holding LLC or the franchisee operated as an alter ego of Hilton Worldwide or lacked independence.
The court also rejected the argument that use of franchisor systems could establish jurisdiction over the parent. The franchise agreement required the franchisee to “participate in and use the Reservation Service” and to “give first priority” to reservations referred through the system, but the agreement also expressly contemplated the use of other methods for reservations. Id. at *3. The court held that even if reservation systems played a role in hotel operations, there was no evidence linking the plaintiff’s eviction or contract claims to that system, and no evidence that Hilton Worldwide “provided, controlled, managed, maintained, or operated” the reservation service. Id.
Because the plaintiff “failed to carry her burden to show that personal jurisdiction exists,” and because the exercise of jurisdiction over Hilton Worldwide would offend due process, the Court of Appeals reversed the trial court’s order. Id. at *6.
Looking Forward
This decision reinforces key principles that franchisors, parent holding companies, and national brands may consider when structuring franchise systems and responding to litigation. The court’s insistence on corporate separateness underscores the value of clearly delineated roles among franchise entities, especially where parent companies do not participate in franchise agreements or local operations. The case also illustrates how plaintiffs may attempt to expand jurisdiction through references to brand websites, reservation systems, or online data, and how courts will scrutinize such assertions when evaluating minimum contacts. Maintaining accurate records demonstrating that the franchisor, parent company, and local franchisee operate independently and that the franchisor’s systems are provided contractually through the franchisee can be critical in defeating personal jurisdiction arguments. Additionally, the court’s rejection of trial court findings based on unsupported assumptions provides reassurance that appellate courts continue to guard against efforts to conflate franchisors and franchisees based solely on brand affiliation. For franchisors seeking to minimize exposure to out-of-state litigation, this case highlights the importance of retaining contractual distance, avoiding direct control over franchisee operations, and ensuring that parent companies remain distinct from franchising subsidiaries both structurally and operationally.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
