September 04, 2025|Publications
September 4, 2025 | United States District Court, Northern District of California | Unpublished Opinion
(Note: The discussion below focuses on the franchisor, Hilton Domestic Operating Company Inc., not the franchisee HLT San Jose, LLC.)
Executive Summary
In an unpublished opinion, Judge P. Casey Pitts of the Northern District of California denied Hilton’s motion to dismiss claims brought under the Trafficking Victims Protection Reauthorization Act (“TVPRA”), 18 U.S.C. § 1595. Relying on multiple interpretations of the statute’s undefined language—including “participation in a venture,” “venture,” and “harboring”—the Court concluded that plaintiff plausibly alleged Hilton’s vicarious liability for its franchisee’s conduct. Plaintiff argued Hilton knew or should have known of trafficking at a franchised DoubleTree hotel, while Hilton contended the statute required specific allegations of actual knowledge or participation. The Court sided with plaintiff at the pleading stage, holding that allegations of Hilton’s operational control and reporting requirements were sufficient to proceed.
Relevant Background
The plaintiff, identified as K.R.D., alleged that from 2014 through 2016 she was trafficked at the San José DoubleTree hotel. The hotel was operated by Hilton’s franchisee, HLT San Jose, LLC, under a franchise agreement with Hilton Domestic Operating Company Inc. According to the complaint, hotel staff allegedly observed repeated signs of trafficking, including large numbers of short-term visitors to her room, her lack of possessions, and her trafficker surveilling her from the parking lot. Plaintiff further alleged these were “open and obvious” red flags that staff failed to act upon.
The complaint also alleged that Hilton exercised significant control over the San José DoubleTree’s operations, including its booking system, employee training, staffing, facilities, and security, and that staff were required to escalate suspected trafficking or other criminal activity to Hilton corporate. Plaintiff alleged Hilton monitored industry warnings, news, and customer reviews regarding trafficking risks at hotels.
Hilton moved to dismiss under Rule 12(b)(6), arguing the complaint did not plausibly allege Hilton’s participation in a trafficking venture or its actual knowledge of unlawful conduct. Plaintiff opposed, pursuing both direct and vicarious liability theories under the statute.
Decision
The statutory backdrop is critical. Congress first enacted the Trafficking Victims Protection Act in 2000 to create new federal criminal offenses targeting trafficking. In 2003, Congress added a civil cause of action allowing victims to sue perpetrators. In 2008, Congress amended the law again to expand civil liability to those who “knowingly benefit” from a trafficking venture that they “knew or should have known” violated the Act. Yet the statute left undefined several key terms—“participation in a venture,” “venture,” and “harboring.” Courts since 2008 have grappled with these terms, often diverging in their interpretations and broadening their scope.
Against this backdrop, the Court first addressed whether Hilton could be held vicariously liable for its franchisee’s conduct. Applying federal common law of agency, the Court emphasized that while franchising does not automatically create an agency relationship, liability may arise where a franchisor exerts control over the specific operations tied to the alleged harm. In this case, mere allegations of Hilton’s oversight of booking, staffing, training, and reporting procedures were deemed sufficient at the pleading stage.
On beneficiary liability under section 1595, the Court addressed all three elements as to the franchisee and then explained how Hilton remains in the case. First, “knowingly benefitted” requires only that defendants knowingly received a financial benefit, which room revenue satisfies. Second, “participation in a venture” was read not as a joint criminal enterprise but as taking part in a business relationship that provided the means for trafficking—in this case, renting rooms to traffickers over an extended period. Third, on the “knew or should have known” element, the Court found that allegations of “open and obvious” red flags were enough to plausibly plead constructive knowledge against the franchisee. For Hilton, the Court allowed the claim to proceed both because an agency theory would impute the franchisee’s knowledge to Hilton and because Hilton allegedly required staff to report suspected trafficking to corporate, creating a reasonable inference that knowledge traveled “up the chain”. The Court also noted that plaintiff’s alternative theory of a “joint franchisor–franchisee venture” did not independently establish beneficiary liability because the complaint lacked allegations showing that the franchising relationship itself facilitated trafficking.
On the knowledge element more broadly, the Court rejected Hilton’s contention that staff at most could have suspected prostitution. Viewing the allegations collectively—short-duration male visitors at odd hours, plaintiff’s lack of belongings, the alleged placement of rooms to facilitate customer flow, and the trafficker’s surveillance from the parking lot—the Court held it was plausible the franchisee, and therefore Hilton, should have recognized the situation as trafficking.
Finally, the Court addressed perpetrator liability under section 1591. Hilton argued that “harboring” should be defined narrowly to require concealment, relying on immigration cases. The Court declined, instead selecting one dictionary meaning of “harbor”—to provide shelter or lodging—and concluded that renting rooms to a trafficker that housed a victim could constitute harboring under section 1591. Because the complaint alleged the franchisee knowingly rented rooms in the face of obvious indicators and did so for more than a year, perpetrator liability was plausibly pled against the franchisee—and, via agency, against Hilton.
Looking Forward
This case illustrates the consequences of statutory vagueness under the TVPRA. To deny Hilton’s motion to dismiss, the Court was required to supply definitions for terms Congress left undefined, each time expanding the statute’s reach. Specifically:
- The Court broadened “participation in a venture” under section 1595, rejecting the narrower definition in the criminal statute and holding that renting a room to traffickers could qualify—while at the same time denying Hilton’s request to introduce reservation records that might have tested whether rooms were in fact rented to traffickers.
- The Court treated “venture” to mean essentially any ongoing business relationship between two parties, regardless of whether they shared a criminal purpose.
- The Court construed “harboring” by adopting a dictionary definition—“to provide shelter or lodging”—rather than limiting it to concealment, thereby bringing the ordinary act of renting a hotel room within the statute’s scope.
At the motion to dismiss stage, it is not surprising that a court interprets ambiguities in favor of plaintiffs. The problem is that the statute’s vague drafting now places franchisors in an untenable position. Unless Congress clarifies the meaning of these key terms, franchisors may face a difficult choice: significantly increase engagement in anti-trafficking measures—strengthening prevention but driving up compliance costs that will eventually flow into royalty structures—or reduce oversight to limit liability exposure, which weakens prevention and risks dilution of brand standards. Either outcome leaves franchisors carrying unintended burdens created by Congress’s drafting gaps, and neither outcome reflects the statute’s intended purpose of encouraging broader prevention. Simply stated, the TVPRA is now broken.
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.
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