The Franchise Memorandum

A federal district court in Utah last week denied summary judgment for the defendant franchisor in a case involving a Legionnaires’ disease outbreak at a franchised hotel. Licari v. Best Western International, Inc., et al., 2013 U.S. Dist. LEXIS 97725 (D. Utah July 12, 2013). The court found that the plaintiff, who became ill after staying at the hotel, could proceed against the franchisor on two agency-based liability theories. First, the court found enough evidence to suggest that the franchisee was an “actual agent” of the franchisor. The most significant evidence in that regard was the “detailed requirements for the day-to-day maintenance and operation of the hotel,” including how the buildings, grounds, and public areas should be kept, the housekeeping department, and how guest rooms and bathrooms should be maintained. The franchisor’s right to conduct inspections also was cited. These facts were enough to support a potential jury finding of “control” in the court’s view. The court also denied summary judgment on the theory of apparent authority. To support this claim, the plaintiff had alleged that a road sign with the franchisor’s brand had been instrumental in her decision to spend the night at that particular hotel, and that the road sign did not contain any statement that the unit was independently owned and operated.