The Franchise Memorandum

A federal court in Ohio denied G6 Hospitality and Wyndham’s motions to dismiss claims that they are vicariously liable for federal sex trafficking claims brought against their franchisees. H.H. v. G6 Hospitality, LLC, 2019 WL 6682152 (S.D. Ohio Dec. 6, 2019). H.H., the sex trafficking victim, alleged that she was trafficked for a period of five months at various Columbus area hotels within G6 and Wyndham’s franchise systems. H.H. claimed that the hotels were or should have been aware of the sex trafficking after seeing various items or witnessing certain events, and the hotels did nothing to prevent it.

The court denied G6 and Wyndham’s motions to dismiss. The court noted that the Trafficking Victims Protection Reauthorization Act creates civil liability not just for sex traffickers but also for “beneficiaries,” which includes persons who knew or should have known about the trafficking, participated, and benefited financially. The court first determined that H.H. had stated a claim against the franchisee hotels under the Act based on the following facts: the hotel repeatedly rented rooms where the sex trafficking occurred; the hotels were paid by H.H.’s trafficker; hotel staff found certain items that were sexual in nature; hotel staff found H.H. physically restrained and begging for help; online reviews about the trafficking scheme at the hotel were publically available; and the hotels failed to train employees or implement policies to stop trafficking. The court then determined that it could not dismiss the vicarious liability claims against G6 and Wyndham because G6 and Wyndham shared profits with their franchisee hotels and set certain policies and standards for hotel employees, training, building maintenance, operating, and prices while conducting inspections to maintain those policies and standards. The shared nature of the profits and “common policies and practices” constituted sufficient allegations of control for H.H. to have pleaded a joint employer relationship establishing vicarious liability for the sex trafficking claims.