April 2, 2024
By: Thomas O’Connell
Citation:
S.C. v. Wyndham Hotels and Resorts, Inc., 728 F. Supp. 3d 771 (N.D. Ohio 2024)
Executive Summary:
In this reported decision, Judge James S. Gwin of the United States District Court for the Northern District of Ohio granted summary judgment in favor of the Defendants, Wyndham Hotels and Resorts, Inc., Days Inn Worldwide, Inc., Choice Hotels International, Inc., Red Roof Inns, Inc., and their corporate affiliates. The Plaintiff, S.C., brought claims under the Trafficking Victims Protection Reauthorization Act (TVPRA), 18 U.S.C. § 1595(a), alleging both direct and vicarious liability against the franchisors of hotels where she was allegedly trafficked. The court ruled that the Defendants did not have sufficient interaction with the trafficking venture to establish liability under the TVPRA.
Relevant Background:
The Plaintiff, S.C., alleged that she was trafficked for commercial sex at various hotels in Ohio from 2012 to 2019, beginning when she was 16 years old. She claimed that her traffickers regularly brought her to hotels franchised by the Defendants, including a Days Inn, a Comfort Inn, and a Red Roof Inn, where the trafficking took place. S.C. alleged that hotel staff ignored obvious signs of trafficking, such as visible injuries, frequent visits by older men, and excessive use of linens.
S.C. did not sue the traffickers or the hotel operators. Instead, she sought to hold the franchisors and their corporate parents liable, claiming they benefited financially from the alleged trafficking and failed to take adequate measures to prevent it. The Defendants moved for summary judgment, contending that they did not directly participate in the trafficking, had no knowledge of the specific events, and could not be held vicariously liable for the actions of franchisees.
Decision:
The court granted summary judgment in favor of the Defendants, addressing both direct and vicarious liability:
- The court ruled that “participation” under 18 U.S.C. § 1595(a) requires some form of interaction with the trafficking venture. Citing cases such as Doe v. Red Roof Inns, Inc., 21 F.4th 714 (11th Cir. 2021), the court noted that merely collecting franchise fees does not constitute “participation” in a trafficking venture. Thus, the court ruled that the Defendants, as franchisors, were too far removed from the daily operations of the franchisee-owned hotels to have participated in or controlled the alleged trafficking venture. It held that there was no evidence the franchisors had contact with the traffickers or received notice of trafficking involving the Plaintiff.
- The court rejected S.C.’s theories of liability based on actual agency, apparent agency, joint employer, and joint venture:
- Under Ohio law, agency depends on the principal’s right of control over daily operations. The court, applying the Restatement (Third) of Agency § 1.01, held that the franchisors’ quality control standards for branding purposes did not extend to day-to-day operational control, such as hiring or supervision supervision as required to establish an agency relationship under Ohio law.
- The court found no evidence that S.C. relied on any representations by the franchisors when brought to the hotels. Without reliance, apparent agency could not be established.
- The court noted that joint employment liability requires control over employment conditions, such as hiring, firing, and scheduling. It cited Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), and found no evidence that the franchisors exercised such control.
- The court dismissed this claim as it was raised for the first time in response to summary judgment, violating procedural rules under Celotex Corp. v. Catrett, 477 U.S. 317 (1986).
While acknowledging the hospitality industry’s vulnerability to trafficking, the court stressed that general knowledge of trafficking does not suffice to establish liability under the TVPRA.
Looking Forward:
This decision provides valuable lessons for franchisors regarding liability under the TVPRA:
- Franchisors should clearly delineate their relationships with franchisees to avoid vicarious liability. The court emphasized that brand standards alone do not create an agency relationship, but franchisors must avoid exercising significant control over daily franchisee operations that could suggest otherwise.
- Addressing human trafficking risks is essential. While general awareness of trafficking in the industry is not sufficient to establish liability, franchisors should implement robust anti-trafficking policies, train staff, and ensure franchisees adhere to such policies to demonstrate proactive efforts.
- Franchisors must ensure clarity in litigation procedures. Raising new theories late in litigation, as with the joint venture argument in this case, is unlikely to succeed and can undermine credibility.
By and large, this ruling shows the importance of distinguishing franchisors’ oversight from operational control while emphasizing the need for proactive measures to combat trafficking risks.