Doe v. Scottsdale Inns LLC

1

Jane Doe, Plaintiff, v. Scottsdale Inns LLC, et al., Defendants.

No. CV-23-00759-PHX-JJT

United States District Court, D. Arizona

July 22, 2024

ORDER

Honorable John J. Tuchi, United States District Judge

At issue is Defendant Wyndham Hotels & Resorts, Inc.'s (Wyndham) Motion to Dismiss (Doc. 32, MTD), to which Plaintiff Jane Doe filed a Response (Doc. 39, Resp.) and Wyndham filed a Reply (Doc. 40, Reply). For the reasons set forth below, the Court grants Wyndham's Motion to Dismiss in part.

I. BACKGROUND

In the Amended Complaint (Doc. 10, FAC), Plaintiff alleges the following facts. Plaintiff was a victim of sex trafficking that occurred at a Howard Johnson hotel location in Scottsdale, Arizona (Howard Johnson) from February to May of 2013. (FAC ¶ 24.) The Howard Johnson was owned and operated by Defendant Scottsdale Inn, LLC, as a franchisee of Wyndham. (FAC ¶ 3.) Plaintiff claims that all Defendants were “aware of the important role that hotels play in the proliferation of sex trafficking . . . that occurs at their properties.” (FAC ¶ 15.) Plaintiff also claims that all Defendants were aware of policies and procedures recommended by national and local organizations to combat sex trafficking. (FAC ¶¶ 17-18.) These policies were intended to help hotels identify indicators of sex trafficking, which include: individuals avoiding eye contact and interaction with others, individuals having no control over or possession of money or identification, individuals dressing inappropriately for their age or having lower quality clothing compared to others in their party, possession of bulk sexual paraphernalia such as condoms or lubricant, and use of large amounts of cash or prepaid cards, among other indicators. (FAC ¶ 18.) These policies “were not in place or were not enforced at the Howard Johnson.” (FAC ¶ 19.)

During the time Plaintiff stayed at the Howard Johnson, there were a number of signs she was being trafficked. (FAC ¶ 25-29.) The hotel rooms she stayed in were frequently paid for with cash or prepaid card. (FAC ¶ 25.) Plaintiff dressed provocatively and avoided eye contact and interactions with others during check in. (FAC ¶ 25.) The “Do Not Disturb” sign was used constantly. (FAC ¶ 26.) Plaintiff requested additional towels and linens but denied staff entry into the room and refused cleaning services for multiple days. (FAC ¶ 27.) When staff were allowed in the room, they “would have seen” large quantities of cash and sex paraphernalia such as condoms, lubricant, and lotion. (FAC ¶ 28.) Additionally, there was “heavy foot traffic” in and out of Plaintiff's room at unusual hours involving men who were not hotel guests and were present for brief periods of time. (FAC ¶ 29.)

Wyndham and Scottsdale Inn's relationship was governed by a franchise agreement, which included certain reporting requirements and set forth the manner and means by which Scottsdale Inn was required to manage the Howard Johnson. (FAC ¶¶ 34, 36, 40.) However, Wyndham failed to enforce the policies and procedures it enacted to prevent trafficking from occurring at the Howard Johnson. (FAC ¶ 30.) Despise “obvious signs” of human trafficking, Defendants failed to recognize, stop, or report the trafficking happening at the Howard Johnson. (FAC ¶ 31.) Because of these “obvious signs,” Scottsdale Inn should have reported the sex trafficking to Wyndham. (FAC ¶ 37.)

In further describing the relationship between Wyndham and Scottsdale Inn, Plaintiff alleges that Wyndham shared profits with Scottsdale Inn, standardized employee training, standardized rules of operation, controlled pricing and reservations, conducted regular inspections, and provided an online booking platform for the Howard Johnson. (FAC ¶¶ 45, 81.) Wyndham also retained control over customer safety at the Howard Johnson, specifically regarding detection of and response to human trafficking. (FAC ¶ 53.) If Scottsdale Inn failed to comply with the requirements set forth by Wyndham, Wyndham had the right to terminate the franchise agreement. (FAC ¶ 81.)

Plaintiff has brought this suit alleging that each Defendant violated the Trafficking Victim Protection Reauthorization Act (TVPRA), 18 U.S.C. § 1595. Wyndham now moves to dismiss the claim against it under Federal Rule of Civil Procedure 12(b)(6).

II. LEGAL STANDARD

Rule 12(b)(6) is designed to “test[] the legal sufficiency of a claim.” Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). A dismissal under Rule 12(b)(6) for failure to state a claim can be based on either: (1) the lack of a cognizable legal theory; or (2) the absence of sufficient factual allegations to support a cognizable legal theory. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). When analyzing a complaint for failure to state a claim, the well-pled factual allegations are taken as true and construed in the light most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). A plaintiff must allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a ‘probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.

“While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (cleaned up and citations omitted).

Legal conclusions couched as factual allegations are not entitled to the assumption of truth and therefore are insufficient to defeat a motion to dismiss for failure to state a claim. Iqbal, 556 U.S. at 679-80. However, “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and that ‘recovery is very remote and unlikely.'” Twombly, 550 U.S. at 556 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

III. ANALYSIS

Plaintiff brings her claim under the TVPRA, which sets forth that “an individual who is a victim of a violation of this chapter may bring a civil action against the perpetrator (or whoever knowingly benefits, or attempts or conspires to benefit, financially or by receiving anything of value from participation in a venture which that person knew or should have known has engaged in an act in violation of this chapter).” 18 U.S.C. § 1595(a). Under this single cause of action, Plaintiff advances two theories with respect to Wyndham: (1) Wyndham is directly liable for violating the TVPRA as a beneficiary, and (2) Wyndham is vicariously liable for its franchisee's violations of the TVPRA.

A. Direct Liability

To state a claim under a § 1595(a) beneficiary theory, a plaintiff must allege facts from which the Court can reasonably infer that a defendant (1) “knowingly benefit[ted] financially or by receiving anything of value,” (2) from participation in a venture, (3) which the defendant “knew or should have known has engaged in” sex trafficking. See 18 U.S.C. § 1595(a). Wyndham does not contest the first element.

1. Participation in a Venture

Wyndham first argues that Plaintiff failed to sufficiently allege Wyndham's participation in a venture. (Mot. at 6-7.) In Plaintiff's Response, she relies on two separate venture theories: (1) Wyndham participated in a venture with Plaintiff's sex traffickers (Venture 1), and (2) Wyndham participated in a commercial venture with Scottsdale Inn via their operation of the Howard Johnson (Venture 2). (Resp. at 7-9.)

a. Venture 1

Under Venture 1, Plaintiff asserts that Wyndham participated in a venture with traffickers “through direct involvement in the hotel.” (Resp. at 8.) Specifically, she alleges that Wyndham was “directly involved” because it controlled the reservation system the franchisee used and the policies regarding payment method and identification. (FAC ¶¶ 52-54, Resp. at 8.) To support this theory Plaintiff cites M.A. v. Wyndham Hotels & Resorts, Inc., 425 F.Supp.3d 959, 971 (S.D. Ohio Oct. 7, 2019), for the proposition that a franchisor “participates in a venture” with traffickers if it is directly involved in hotel operations related to trafficking. But the M.A. court focused its “participation” analysis on the hotel defendants. See M.A., 425 F.Supp.3d at 968, 970 (stating that “[t]he question is whether the Defendant hotels were participating in that venture through ‘renting rooms to the sex trafficking venture,'” and noting that the plaintiff alleged “the hotels repeatedly rented rooms and thereby ‘participated in the trafficking.'”) The plaintiff in M.A. adequately alleged that the hotel defendants rented rooms to people it should have known were engaged in sex trafficking. Id. at 971. Here, however, Plaintiff alleges only that Wyndham “acted jointly to rent rooms at the Howard Johnson [by] retaining control over reservation systems and policies, training, and protocols.” (FAC ¶ 52.) The Eleventh Circuit has held that similar allegations were insufficient to show participation in a venture. See Doe #1 v. Red Roof Inns, Inc., 21 F.4th 714, 726-27 (11th Cir. 2021) (concluding that allegations that the franchisors “‘owned, managed, supervised, operated, oversaw, controlled the operation of, and/or were inextricably connected to the renting of rooms' at the hotels. . . . do nothing...