Marchionda v. Embassy Suites Franchise, LLC
359 F. Supp. 3d 681 (2018)
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Rule of Law:
A hotel franchisor does not owe a duty of care to a franchisee's guest unless it retains significant day-to-day control over the franchisee's operations. However, a hotel owner/franchisee, as an innkeeper, owes a non-delegable duty of reasonable care to its guests, and claims for punitive damages may proceed to trial if there is a genuine issue of fact regarding willful and wanton disregard for guest safety.
Facts:
- From April 9-11, 2014, Cheri Marchionda was a business-travel guest at the Embassy Suites on the River Hotel.
- On the evening of April 9, Christopher LaPointe, another hotel guest, approached Marchionda at the hotel bar, and the bartender, Amy Nicholson, told Marchionda that LaPointe was 'harmless.'
- On the evening of April 10, LaPointe, visibly intoxicated, joined Marchionda and her co-workers at the hotel bar, was served multiple alcoholic beverages, and after Marchionda left, told Nicholson, 'The night's not over yet.'
- Around midnight on April 10, LaPointe went to the front desk and asked for a key to Marchionda's room (732), and Hotel manager Libby Hennings directed night manager Carol LeMay to issue the key without requiring LaPointe to produce identification.
- LaPointe used the key, which disengaged the deadbolt, but Marchionda's interior security latch prevented full entry; LaPointe then called the front desk, and maintenance engineer Anthony Caligiuri was directed to assist him in entering the room, which he did.
- In the early morning hours of April 11, LaPointe sexually assaulted Marchionda in her room.
- LaPointe was later arrested and pled guilty to third-degree burglary and third-degree sexual assault.
- The Hotel was operated by Atrium TRS III, LP (Atrium, the franchisee) under a franchise license agreement (FLA) with Embassy Suites Franchise, LLC (Embassy Suites, the franchisor, a Hilton entity), and Atrium had a management services agreement (MSA) with John Q. Hammons Hotels Management, LLC (Hammons).
Procedural Posture:
- On June 15, 2015, Cheri Marchionda filed a two-count complaint (Count One for negligence, gross negligence, recklessness, and willful wanton and outrageous conduct; Count Two for punitive damages) in the U.S. District Court for New Jersey against multiple defendants including Embassy Suites Franchise, LLC, Hilton Worldwide, Hilton Worldwide Holdings, Inc., John Q. Hammons Hotels Management, LLC, and Atrium TRS III, LP.
- On December 29, 2015, the case was transferred to the U.S. District Court for the Southern District of Iowa on the parties' joint motion.
- On February 19, 2016, certain Defendants moved to dismiss Embassy Suites Management, LLC, Hilton Worldwide Holdings, Inc., Hilton Worldwide, Inc., and John Q. Hammons Hotels, Inc.
- Marchionda subsequently amended her complaint, adding Hilton Franchise Holding, LLC as a successor in interest.
- Defendants were granted leave by the court to file a third-party complaint against Christopher LaPointe.
- On July 12, 2016, John Q. Hammons Hotels Management, LLC filed notice of bankruptcy, leading to a stay of the case until February 21, 2017.
- On August 23, 2017, the Court denied Defendants' motion to dismiss and granted third-party defendant LaPointe's motion to strike the third-party complaint; Marchionda's motion to strike was denied as moot.
- Marchionda filed stipulations of dismissal for Embassy Suites Management, LLC on July 5, 2017, and for John Q. Hammons Hotels, Inc. on February 23, 2018.
- On March 2, 2018, Atrium TRS III, LP, Embassy Suites Franchise, LLC, Hilton Worldwide, Inc., and Hilton Worldwide Holdings, Inc. filed a motion for summary judgment on Count One (negligence), arguing no duty of care; Hilton, Atrium, and Hammons also moved for summary judgment on Count Two (punitive damages), asserting no evidence of willful and wanton conduct.
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Issue:
1. Does a hotel franchisor owe a duty of care to a guest of its franchisee for a third-party assault under a retained control theory or ostensible agency? 2. Does a hotel owner/franchisee owe a non-delegable duty of care to its guest for a third-party assault, and is there sufficient evidence to allow a claim for punitive damages against the owner and its management company to proceed?
Opinions:
Majority - James E. Gritzner, Senior Judge
No, Hilton (Embassy Suites Franchise, LLC, Hilton Worldwide Holdings, Inc., and Hilton Worldwide, Inc.) did not owe Marchionda a duty of care. Applying the 'retained control test' from Hoffnagle v. McDonald's Corp., the court found that Hilton's control over the franchisee (Atrium) was limited to ensuring brand uniformity and compliance with Brand Standards, not the day-to-day operational details, hiring/firing of staff, or specific guest room key policies. Such general oversight and inspection rights are insufficient to impose a duty of care. The court also rejected Marchionda's 'ostensible agency' theory, distinguishing the franchisor-franchisee relationship from hospital-doctor vicarious liability cases because the FLA explicitly disclaimed an agency relationship and Atrium was required to identify itself as an independent entity. Additionally, the claim for failure to train or supervise Hammons' employees was dismissed as it requires a servant or agency relationship which was not found to exist with Hilton. Yes, Atrium TRS III, LP (the hotel owner/franchisee) did owe Marchionda a non-delegable duty of care as an innkeeper. Unlike Hilton, Atrium's role as the owner and franchisee aligns with those who possessed the land in Hoffnagle and thus retained control over daily operations. The FLA expressly made Atrium responsible for Hotel management, staff, and guest safety, and obligated it to indemnify the franchisor for guest injuries. As an innkeeper, Atrium owed a special relationship duty to protect guests from unreasonable risk of physical harm, including third-party acts, under Restatement (Second) of Torts § 314A. The court found that Marchionda presented sufficient evidence to create a genuine issue of material fact regarding foreseeability and breach of this duty, specifically citing the lack of oversight of key control policies and the negligent actions of hotel employees in providing a key to an intoxicated guest without identification and then assisting him in bypassing the security latch. Yes, the claim for punitive damages against Atrium TRS III, LP and John Q. Hammons Hotels Management, LLC will proceed to trial. The court determined that Marchionda presented a 'submissible case' on the issue of Atrium's and Hammons' liability. Considering the allegations that hotel employees (under Hammons' management and Atrium's ultimate responsibility) negligently provided a room key to an intoxicated guest and then assisted him in bypassing a security latch, a genuine issue of fact exists as to whether their conduct constituted 'willful and wanton disregard for the rights or safety of another,' as required for punitive damages under Iowa Code § 668A.1(1)(a). The court concluded it was premature to dismiss the punitive damages claim at the summary judgment stage and would reevaluate its submissibility after evidence presentation at trial.
Analysis:
This case provides crucial guidance on the allocation of premises liability between franchisors, franchisees, and management companies within the hospitality industry. It clarifies that merely setting brand standards does not create a duty of care for a franchisor, reinforcing the need for direct, day-to-day operational control to establish liability. Conversely, the ruling emphasizes the non-delegable duty of hotel owners as innkeepers, underscoring their inherent responsibility for guest safety regardless of management agreements. The decision also illustrates the judicial reluctance to grant summary judgment on punitive damages claims when sufficient evidence of potentially willful and wanton conduct, particularly related to safety protocols and employee actions, raises genuine issues of material fact for a jury.
