The Franchise Memorandum

Last month, the United States Court of Appeals for the Fourth Circuit affirmed the District of Maryland’s holding that a hotel franchisor was not responsible for a guest’s death at one of its franchised hotels. DiFederico v. Marriott Int’l, Inc., 2017 WL 444690 (4th Cir. Feb. 2, 2017). The guest was killed in the September 20, 2008 terrorist attack on the Marriott Islamabad, a hotel owned and operated by one of Marriott International’s franchisees. The guest’s family brought a wrongful death suit against Marriott but did not name the franchisee as a defendant. The Fourth Circuit affirmed the district court’s grant of summary judgment for Marriott, finding that it did not exercise sufficient control over the franchisee’s security procedures to be held liable for the guest’s death. The plaintiffs had earlier survived Marriott’s motion to dismiss.

The court first determined that since Pakistan law (essentially identical to Maryland law on this point) applied, the standard for franchisor liability would be whether Marriott had sufficient control over the instrumentality leading to the guest’s death. The court then conducted a detailed factual inquiry to determine what control Marriott exerted over the hotel’s security protocols. The court found that all of Marriott’s franchised hotels were required to meet its crisis management standards, which delineate the minimum security standards a franchised hotel must meet based on its level of threat risk, but were not required to use either the Crisis Plan or International Plan used by franchisor-managed units. Those plans were distributed by Marriott to franchised hotels as guidance. Notably, the plaintiffs did not allege that either adherence to or failure to meet any of the franchisor’s crisis management standards led to the guest’s death.

Finally, the court noted that Marriott franchisees were responsible for hiring, training, and managing their own security staff and that Marriott never trained the franchisee’s employees on how to respond to such a situation, never established a plan for such a situation, and never even reviewed the plan that the franchisee had developed. Based on this evidence, the court found that as a matter of law, the franchisee, not Marriott, had control over how hotel employees would respond to the attack that killed the guest.