April 27, 2026|Franchise Frontlines
April 27, 2026 | U.S. District Court, District of New Jersey | Decisions on Motions to Dismiss and Transfer
Executive Summary
In two related decisions issued the same day, Judge Esther Salas of the District of New Jersey addressed claims brought under the Trafficking Victims Protection Reauthorization Act (“TVPRA”) against Wyndham Hotels & Resorts, Inc. and multiple franchisee operators. Plaintiffs alleged that they were trafficked at franchised hotel locations and that both the franchisor and franchisees knowingly benefited from and participated in trafficking ventures. Franchisee defendants moved to dismiss for lack of personal jurisdiction, arguing that their contacts with New Jersey—primarily through franchise relationships—were insufficient. Plaintiffs contended that the franchise relationships, including reporting obligations, payment structures, and brand oversight, created jurisdictional ties. The court held that while the franchisees purposefully availed themselves of New Jersey by entering into franchise relationships, the plaintiffs failed to establish that their claims arose out of those forum contacts. The court concluded that jurisdiction was lacking and transferred the cases to the districts where the alleged conduct occurred.
Relevant Background
Both cases arose from allegations that plaintiffs were victims of sex trafficking at franchised hotel properties operating under Wyndham-affiliated brands. The complaints alleged that franchisees owned and operated the specific hotel locations, while the Wyndham defendants exercised brand-level oversight, including policies, reporting systems, and monitoring of criminal activity. Plaintiffs asserted that the defendants knowingly benefited from trafficking activity through room rentals and failed to take action despite alleged indicators of trafficking.
In each case, the alleged trafficking occurred entirely outside New Jersey—primarily in Texas in one case and Missouri in the other. Nonetheless, plaintiffs filed suit in the District of New Jersey, asserting that jurisdiction was proper based on the franchise relationships between the franchisees and the New Jersey-based franchisor. These relationships included contractual obligations, royalty payments, operational reporting, and adherence to brand standards.
Franchisee defendants moved to dismiss for lack of personal jurisdiction, while the franchisor defendants separately challenged the sufficiency of the claims. The court addressed jurisdiction first, focusing on whether the franchisees could be haled into court in New Jersey based on their relationship with Wyndham.
Decision
The court applied the familiar three-part test for specific personal jurisdiction, beginning with whether the franchisees purposefully directed activities toward the forum. Relying on Burger King Corp. v. Rudzewicz, the court concluded that the franchisees did purposefully avail themselves of New Jersey by entering into ongoing franchise relationships with a New Jersey-based franchisor and engaging in continuing obligations tied to that forum.
However, the analysis did not end there. The court emphasized that the critical inquiry was whether the plaintiffs’ claims arose out of or related to those forum-directed activities. On that point, the court found the connection lacking. The alleged trafficking conduct—the core of the claims—occurred entirely in other states, and the plaintiffs failed to demonstrate a sufficient nexus between that conduct and the franchisees’ contacts with New Jersey.
The court rejected the argument that routine franchise-related contacts—such as payment processing, reporting obligations, and compliance with brand standards—were sufficient to establish specific jurisdiction. It explained that such contacts, while indicative of an ongoing business relationship, were too attenuated from the alleged trafficking activity to satisfy due process requirements. The court reiterated that jurisdiction must be based on each defendant’s own conduct tied to the forum, not merely the existence of a contractual relationship with a forum-based entity.
Having determined that the plaintiffs failed to satisfy the relatedness requirement, the court declined to exercise personal jurisdiction over the franchisee defendants. Rather than dismissing the claims outright, the court transferred the actions to the appropriate federal districts where the alleged trafficking occurred, emphasizing considerations of judicial economy and the practical realities of litigating claims tied to out-of-state conduct.
Looking Forward
These decisions reinforce an important limitation on efforts to expand jurisdiction over franchise systems based solely on brand relationships. While courts may recognize that franchisees establish meaningful contacts with a franchisor’s home forum, those contacts do not automatically subject franchisees to jurisdiction for claims arising from conduct occurring elsewhere.
For franchisors, the rulings provide a useful boundary on the increasingly common theory that centralized brand oversight and systemwide standards create jurisdiction wherever the franchisor is located. The court’s analysis makes clear that the existence of franchise agreements, reporting obligations, and revenue-sharing structures—standing alone—does not establish the required connection between the forum and the underlying claims.
At the same time, the decisions reflect the continued scrutiny of franchisor-franchisee relationships in the TVPRA context. Plaintiffs continue to rely on allegations of systemwide knowledge, monitoring, and brand control to support both liability and jurisdictional theories. While those allegations did not carry the day here on jurisdictional grounds, they remain a central feature of these cases and will continue to shape how courts evaluate franchisor exposure.
From a practical standpoint, these rulings also highlight the likelihood of venue disputes and case transfers in multi-defendant franchise litigation. Where claims arise from localized conduct at specific franchise locations, courts may be inclined to shift cases to jurisdictions with a more direct connection to the alleged events. This dynamic can influence litigation strategy, discovery scope, and overall case management.
Ultimately, these decisions illustrate that while franchise relationships create meaningful legal connections, those connections are not limitless. Courts will continue to require a concrete nexus between the forum and the alleged misconduct, even in cases involving complex, multi-entity franchise systems.
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 Partner at Buchalter LLP 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.
