IRAC-style brief of S.J. v. Choice Hotels Int’l, Inc., 473 F. Supp. 3d 147 (E.D.N.Y. 2020) CaseMine

Issue

Whether the franchisor hotel brands (Choice Hotels, Wyndham, Howard Johnson) can be held liable (1) under the TVPRA (18 U.S.C. § 1595) for knowingly benefiting from a sex-trafficking “venture” they knew or should have known about, (2) under New York Social Services Law § 483-bb for knowingly advancing or profiting from sex trafficking, and (3) under state common-law negligence (directly or vicariously) for failing to train, supervise, or otherwise guard against trafficking on franchisee premises.

Rule(s)

  • TVPRA (18 U.S.C. § 1595)
    • A civil plaintiff must show (i) a defendant “knowingly benefit, financially or by receiving anything of value,” (ii) from participating in a “venture,” (iii) that the defendant “knew or should have known has engaged in an act in violation of” the trafficking statutes. CaseMine+1
    • Some courts have read in an extra element (knowledge of trafficking acts), but the district court here rejects importing § 1591’s mens rea into § 1595. CaseMine
    • The “should have known” standard cannot be satisfied merely by general awareness that trafficking sometimes occurs; the defendant must have (or should have had) knowledge of a particular trafficking venture. CaseMine

  • N.Y. Social Services Law § 483-bb
    • Under § 483-bb(c), a victim may bring a civil action against someone who “knowingly advances or profits from, or whoever should have known he or she was advancing or profiting from, an act” in violation of certain sex-trafficking penal statutes. CaseMine+1
    • But the court emphasizes that the statute only became effective January 19, 2016, and it would be a new remedial right (not purely retrospective). CaseMine
  • Negligence / Common Law Duty
    • To plead negligence, the plaintiff must show: (1) duty, (2) breach, (3) causation, (4) damages. CaseMine
    • Vicarious liability via agency requires showing that the franchisor exerted such control over day-to-day operations of the franchisee that the separate corporate existence is a fiction. CaseMine
    • Under New York law, a franchisor generally is not the agent of a franchisee absent extraordinary control. CaseMine
    • The existence of a duty in tort may depend on foreseeability; criminal acts by third parties do not always negate duty if the intervening act was itself foreseeable. CaseMine

Application

  • TVPRA Claim
    • The plaintiff alleged that the franchisor defendants obtained a share of gross revenues (including from rooms used in trafficking) and controlled brand standards (training, policies, inspections) and should have known that trafficking was likely to occur in franchise hotels. CaseMine+1
    • However, the court holds that these allegations do not sufficiently show that the franchisors had knowledge (or constructive knowledge) of the specific trafficking venture. General awareness or industry-wide problems is insufficient under § 1595. CaseMine
    • Likewise, the attempt to impose vicarious liability under the TVPRA fails because (a) New York law generally precludes an agency relationship between franchisor and franchisee, and (b) the allegations fall short of showing control so pervasive as to render the franchisee’s independence nonexistent. CaseMine
    • Accordingly, the TVPRA claim is dismissed as to the franchisors. CaseMine
  • § 483-bb Claim
    • Because the alleged trafficking occurred from 2006 to 2009, well before § 483-bb’s effective date (2016), the court finds that applying the statute would be retroactive, and declines to do so. CaseMine
    • Therefore, the § 483-bb claim is dismissed. CaseMine
  • Negligence Claim
    • Vicarious liability: The plaintiff’s attempt to hold franchisors vicariously liable fails for the same reasons as under the TVPRA — no plausible agency relationship alleged. CaseMine
    • Direct negligence: The court is willing to assume that the franchisors owe a duty, because (i) the foreseeability of sex trafficking on hotel premises is well known, (ii) the franchisors themselves have recognized the problem, and (iii) their statements (and business practices) implicate an interest in safety. CaseMine
    • The court declines to dismiss the direct negligence claim at this stage (i.e., refuses to grant the motion to dismiss that part). CaseMine

Conclusion (Holding)

The court grants in part and denies in part the franchisor defendants’ motion to dismiss:

  • The TVPRA claim against the franchisors is dismissed as to all (because the plaintiff failed to allege that they had requisite knowledge of a specific trafficking venture or exercised control sufficient for vicarious liability). CaseMine
  • The § 483-bb claim is dismissed because it cannot be applied retroactively to the period during which the plaintiff’s trafficking occurred. CaseMine
  • The negligence claim survives in part (the direct negligence theory is allowed to proceed), although vicarious liability (via agency) is dismissed. CaseMine