A California federal court granted summary judgment in favor of Red Roof Inns, a hotel franchisor, on sex trafficking claims brought under the Trafficking Victims Protection Reauthorization Act, or TVPRA.
The plaintiff was allegedly trafficked by a third party at a Red Roof Inn location owned by a franchisee over a three-month period. It was undisputed the third party knew one of the individuals employed at the franchised hotel would allow the third party to use the hotel for trafficking activities. The plaintiff brought claims against the franchisor, claiming the franchisor was directly liable for her trafficking under the TVPRA’s perpetrator liability, beneficiary liability, and vicarious liability.
The court granted summary judgment in favor of the franchisor as to perpetrator liability, holding that the plaintiff did not provide sufficient evidence to prove that the franchised hotel’s employees knew about the alleged trafficking or that the employees reported the trafficking activities to the franchisor. Similarly, the court rejected beneficiary liability because the evidence did not demonstrate that the franchised hotel ever informed the franchisor about the alleged trafficking activity during the alleged trafficking.
Lastly, the court granted the franchisor’s motion for summary judgment as to vicarious liability. To establish vicarious liability, the plaintiff was required to show that the hotel franchisor and franchisee were in an agency relationship and that the employees of the hotel were liable under the TVPRA.
The franchise agreement stated the franchisee was granted a license to use Red Roof’s brand, logo and name in its operation of the hotel and that the franchisee’s agents, employees and successors, would act as independent contractors. The plaintiff argued there was an agency connection between the franchisor and franchisee because the franchisor handled the marketing for the franchised hotel, provided the online room reservation system, and provided the property management system that tracked the rooms for housekeeping.
The court disagreed, holding the franchisor-franchisee relationship does not necessarily create an agency relationship unless the franchisor exercises control over the franchisee’s day-to-day operation of the hotel, which was not the case in this instance.
Franchisors should review the terms of their franchise agreements with franchise counsel to ensure its provisions cannot be interpreted to create an agency relationship between the franchisor and franchisee, which may open the franchisor up to liability for these types of claims.
J.M. v. Red Roof Inns, Inc., No. 2:22-cv-00672-KJM-JDP, 2024 U.S. Dist. LEXIS 190967 (E.D. Cal. Oct. 18, 2024)
