March 29, 2024
By: Thomas O’Connell
Citation:
A.M. v. Wyndham Hotels & Resorts, Inc., 2024 WL (S.D. Ohio Mar. 29, 2024)
Executive Summary:
Chief Judge Algenon L. Marbley of the United States District Court for the Southern District of Ohio denied the defendant’s motion to dismiss and motion to transfer venue in this case. The plaintiff, a minor who was a victim of sex trafficking, brought claims under the Child Abuse Victims Rights Act (CAVRA) and the Trafficking Victims Protection Reauthorization Act (TVPRA). The court determined the plaintiff sufficiently alleged her claims, including elements of knowing benefit, participation in a business venture, and constructive knowledge by the defendant franchisor, Wyndham Hotels & Resorts, Inc.
Relevant Background:
The plaintiff, identified as A.M., alleged that as a minor, she was trafficked for commercial sex at hotels operated by franchisees of Wyndham Hotels & Resorts. She claimed that Wyndham benefited financially through rental revenues and exerted control over franchisees’ operations, including branding, employee training, and marketing. The plaintiff pointed to “red flags,” such as cash payments for extended stays, high volumes of male visitors, and inadequate employee training, as indicators of trafficking that Wyndham either knew or should have known about.
Under 18 U.S.C. § 2255(a), the plaintiff claimed that she was harmed as a minor by acts involving criminal trafficking. She further asserted that under 18 U.S.C. § 1595(a), Wyndham participated in a trafficking venture and knowingly benefited from it. Wyndham moved to dismiss on the grounds that it lacked sufficient control or involvement in the alleged trafficking and sought to transfer venue under 28 U.S.C. § 1404(a), arguing that a different forum would be more appropriate.
Decision:
The court denied Wyndham’s motions and addressed the following issues:
- The court found the plaintiff sufficiently alleged that she was a victim under CAVRA and TVPRA. Specifically, she met the statutory requirements under 18 U.S.C. § 1591(a) and § 1595(a) by alleging that Wyndham knowingly benefited financially from its franchisees’ operations and had constructive knowledge of trafficking activities.
- The court interpreted Ricchio v. McLean, 853 F.3d 553 (1st Cir. 2017), to support the principle that constructive knowledge of trafficking can suffice under TVPRA. The plaintiff’s allegations of visible “red flags” were deemed sufficient to infer constructive knowledge.
- The court considered the plaintiff’s claims of Wyndham’s operational control over franchisees, referencing the Restatement (Third) of Agency § 1.01. It held that these allegations sufficiently supported an inference of an agency relationship. The plaintiff also argued Wyndham acted as a joint employer by controlling employee training and benefits, consistent with the reasoning in Doe S.W. v. Lorain-Elyria Motel, Inc., 2020 WL 1244192 (S.D. Ohio 2020).
- The court rejected Wyndham’s motion to transfer venue under 28 U.S.C. § 1404(a), stating the plaintiff’s chosen forum was appropriate given the location of the alleged harm. It also dismissed procedural objections related to service, noting that the plaintiff demonstrated good cause for any delays.
- The court rejected Wyndham’s argument that a franchisor-franchisee relationship alone shields it from liability, emphasizing that control over daily operations and participation in franchisees’ business ventures could establish liability under federal law.
Looking Forward:
This case shows significant legal principles for the franchise industry at large, particularly as it relates to evolving interpretations of vicarious liability and constructive knowledge under federal anti-trafficking laws. Two key takeaways emerge from the Court’s decision:
- The Court’s analysis of agency and joint employer theories underscores the importance of clear franchise agreements. While franchisors often seek to maintain uniform branding and operational standards, this decision demonstrates that such measures can blur the lines between a franchise and agency relationship, exposing franchisors to significant liability under the TVPRA. Franchisors should reevaluate the extent of their control over day-to-day franchisee operations to minimize risks.
- Conversely, this case highlights the growing expectation that franchisors proactively implement and enforce anti-trafficking policies. The Court’s emphasis on “red flags” as evidence of constructive knowledge reinforces the need for franchisors to develop training programs and monitoring systems to detect and address trafficking risks at franchisee-operated properties.
As seen in other cases, such as Doe S.W. v. Lorain-Elyria Motel, Inc., courts are increasingly willing to attribute liability to franchisors when their franchisees’ actions or inactions contribute to trafficking or other illegal activities. Hence, franchisors should use this decision as an opportunity to review compliance practices and adopt robust policies to mitigate risks and demonstrate good faith efforts to prevent trafficking-related harms.