By Josh Schneiderman and Michelle Emeterio
Hotels are, for obvious reasons, afflicted more than most businesses by the involuntary sex trade, which is a form of human trafficking. Hotel operators and franchisors alike condemn the problem, yet it persists despite their efforts to combat it.
The industry has not settled on a uniform approach to this societal malady, let alone how to avoid opening themselves up to liability. Under the Trafficking Victims Protection Reauthorization Act (TVPRA), third parties such as hotel operators and franchisors can be considered “beneficiaries” of trafficking schemes. As seen in the slew of TVPRA lawsuits, the law allows victims to sue not only their perpetrators, but also direct and indirect beneficiaries who knew or should have known of the trafficking. According to the U.S. Department of Justice, the TVPRA is meant to encourage “increased collaboration between government and private industry in efforts to prevent and combat human trafficking.” Yet the cases seem to imply that those who do more to address the issue, not less, have greater legal exposure.
That is, franchisor defendants will not be dismissed from lawsuits if the plaintiff can show that they (1) could plausibly have known of the trafficking, or (2) controlled or were engaged in the day-to-day operations of hotel staff who should have known. Although well intentioned, this may disincentivize the private-industry collaboration that the TVPRA was meant to promote.
In one example, S.C. v. Hilton Franchise Holding LLC, the plaintiff alleged that Hilton (as well as hotel operators and several individuals) participated in or benefited from trafficking that started when S.C. was 16 and included more than 150 visits to the same Las Vegas Hampton Inn. According to the plaintiff, it would have been clear to any reasonable person that she was a minor, was in sexual attire inappropriate for her age and the weather, and that she would always leave in the same car, driven by older people, after repeat encounters with older men who would stay just long enough to meet with her and “leave behind a room with used condoms in the trash and soiled sheets,” yet hotel staff never attempted to evict the men she was visiting or call the police.
Hilton argued that S.C.’s complaint failed to identify a venture between the traffickers and Hilton, and that Hilton does not control hotel employees “other than maintaining brand standards consistent with a typical franchise agreement.” But the court concluded that Hilton may have known of the trafficking because employees could have seen the victim was underage and being trafficked and because Hilton required employees to inform Hilton of suspected criminal activity. The court also noted that Hilton could have been an indirect beneficiary by controlling employees and day-to-day operations such as: (1) requiring all online bookings to use Hilton’s central reservation system; (2) requiring employees to report criminal activity to Hilton; (3) setting and enforcing exacting standards for hotel operations; (4) retaining the ability to override hiring decisions or dictate a management company; (5) setting standards for room pricing; and (6) setting standards for employee responsibilities, salary, and training.
However, the court said that without more, the following facts alone did not suffice: (1) seeing a suspicious pattern of room rentals; and (2) having general notice about the prevalence of trafficking at its hotels but failing to adequately train staff to prevent it. This is because these facts alone would not reveal the person’s age or whether her encounters at the hotel were under force or coercion, and because the TVPRA does not require hotels or their franchisors to affirmatively stop sex trafficking. Instead, the duty imposed by the beneficiary-liability portion of the TVPRA is to refrain from benefiting from participation in a venture one knew or should have known has engaged in trafficking.
Other courts in at least the Third, Sixth, Ninth, Tenth and Eleventh circuits have likewise indicated that the TVPRA does not require hotels or their franchisors to affirmatively stop sex trafficking. According to at least one court, facts such as failing to monitor hotel systems for indicators of trafficking or provide training to employees did not amount to participation under the TVPRA. Meanwhile, plaintiff allegations of willful blindness seem to fall flat, with courts focusing on the law’s “knew or should have known” standard.
How can the industry come together to address human trafficking when efforts such as employee training and mandatory reporting are disincentivized by the threat of a lawsuit? Lawmakers should take a close look at what they might do to better encourage industry collaboration. The authors of this article do not presume to know the best approach but note that safe harbor provisions often work in other contexts. Perhaps there is an avenue for law enforcement and private industry to come together to determine certain standards, software and procedures for spotting and preventing sex trafficking that, if met, provide some insulation for hotels and franchisors who endeavor to do the right thing.
The TVPRA has been reauthorized every few years. Perhaps the next reauthorization can provide such an opportunity. Until then, the specifics of each business’s approach should be considered thoughtfully and with counsel.
The opinions expressed in this article are those of the authors and not those of their firm and colleagues.
Josh Schneiderman is corporate and securities partner and the managing partner of Snell & Wilmer’s Los Angeles office. His practice focuses on mergers and acquisitions, securities and franchise counseling.
Michelle Emeterio is an intellectual property associate in Snell & Wilmer’s Orange County office. Her practice focuses on trademark, copyright and franchise counseling.
This is a contributed piece to Hotel Business, authored by an industry professional. The thoughts expressed are the perspective of the bylined individual.
