The Franchise Memorandum

In another vicarious liability case, a Delaware Superior Court denied franchisor Hand and Stone’s motion to dismiss, allowing vicarious liability claims based on the alleged sexual misconduct of its franchisee’s former employee to go forward. Jane Doe v. Massage Envy Franchising, LLC, 2021 WL 62643 (Del. Super. Ct. Jan. 7, 2021). The plaintiff alleged she was sexually assaulted while receiving a massage by Massage Envy employee, Christopher Dorman. She further alleged that Dorman was previously employed by a franchisee of Hand and Stone, that Dorman had engaged in unreported sexual misconduct while employed by Hand and Stone’s franchisee, and that Hand and Stone recommended Dorman to Massage Envy for employment.

In its motion to dismiss, Hand and Stone argued that, as the franchisor, it was not liable for the acts of Dorman, an employee of its franchisee, because it did not control his day-to-day job responsibilities. Hand and Stone further argued that it could not be liable for the alleged conduct of Dorman occurring when he was no longer employed by its franchisee. Emphasizing the low standard needed to defeat a motion to dismiss, the court found it possible for an agency relationship to exist between Hand and Stone and Dorman as the plaintiff sufficiently pled that Hand and Stone had a role in the daily operations of its franchisee. Further, the court found that, even though the alleged sexual assault of the plaintiff did not occur while Dorman was employed by Hand and Stone’s franchisee, the plaintiff’s allegations that Hand and Stone failed its duty to report the sexual misconduct of Dorman, and that Hand and Stone recommended Dorman for employment at Massage Envy, could be “reasonably assumed to be consenting to Dorman's actions and ratifying Dorman's conduct.”