Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—DDC: District of Columbia Federal Court Lacked Jurisdiction Over Hotel Franchisor and Georgia Hotel, (Jan 21, 2013)

By Peter Reap, J.D., LLM

The federal district court for the District of Columbia lacked personal jurisdiction over the franchisor of Holiday Inn hotels, a licensing company, and the franchisee of a Georgia hotel for purposes of a suit brought by Glynda Myers, a District of Columbia resident who was injured at the Georgia hotel and brought suit, the court determined (Glynda Myers v. Holiday Inns, Inc., January 16, 2013, Contreras, R.). The suit was transferred to the federal district court in Savannah, Georgia.

Myers brought suit against Holiday Inns, Inc. (“HHI”), a corporation licensed to do business in the District; the Island Group, LLC, a franchisee of the Holiday Inn located in Georgia; and Holiday Hospitality Franchising, Inc. (“HHFI”), a licensing corporation. She alleged negligence that resulted in physical injury.

Specifically, Myers alleged that Island Group was liable under a respondeat superior theory of negligence for the acts of its employees, and that both HHI and HHFI were liable as controlling entities of Island Group. The defendants asserted that this court must dismiss the plaintiff’s negligence claim for lack of personal jurisdiction or, alternatively, improper venue.

Personal Jurisdiction

For jurisdiction over a defendant to be conferred upon this court, the most critical inquiry was whether the defendant’s contacts with the forum were of such a quality and nature that they manifested a deliberate and voluntary association with the forum. The burden belonged to the plaintiff to establish that such personal jurisdiction over the defendant exists.

Under International Shoe and Burger King, this inquiry required asking whether the defendants were transacting business in the District. Because both HHI and HHFI cannot be said to have transacted business in the District, and because all events occurred in a jurisdiction other than the District, personal jurisdiction was lacking in this case, the court held.

Myers alleged that because HHI advertised in the District, this was sufficient for “doing business” under the District of Columbia long arm statute. But historically, advertisements have not been sufficient to establish personal jurisdiction, the court noted.

Myers relied on Shoppers Food Warehouse v. Moreno 746 A.2d 320, 326 (D.C. 2000) to claim that the defendants purposefully availed themselves of the District forum, but that case fundamentally differed from the present case. In Shoppers Food Warehouse, the court answered the question of whether advertisements placed by a nonresident corporation for a chain of stores, some of which were located in or near the District, established an appropriate nexus for personal jurisdiction. The court found that the supermarket chain “conducted ‘purposeful, affirmative activity’ within the District of Columbia,” by purposefully directing advertisements for its Maryland and Virginia stores at a potential customer base in the District of Columbia.

Unlike the supermarket chain in Shoppers Food Warehouse, the defendants here cannot be said to have advertised for the Georgia franchise in the District, the court decided. The advertisements in question did not encourage District residents to stay at the Island Group Holiday Inn. Certainly, advertisements for any District Holiday Inn franchise were insufficient to create a jurisdictional nexus between Atlanta, Georgia and the District of Columbia, or to reflect purposeful activity in the District relating to the Georgia franchise, the court reasoned.

Whereas it was reasonable in Shoppers Food Warehouse for the defendants to anticipate that their advertisements would induce customers into shopping there, the defendants here did not engage in such related advertising. It would thus be unreasonable to conclude that a Georgia corporation is similarly situated to the corporation in Shoppers Food Warehouse, according to the court.

Myers further alleged that the defendants purposefully availed themselves of the District because they “contracted” with the Yellow Pages and other District newspapers. However, Myers did not conclusively establish that the ads in both the Yellow Pages and the newspapers were directed toward the Georgia hotel. Instead, those ads were directed toward a local Holiday Inn franchise. Further, Myers did not establish who placed the ads (e.g., it could have been a local franchisee); without more, the plaintiff does not allege enough facts that allow for the presumption that the defendants transacted business in the District.

Even assuming arguendo that the defendants were transacting business in the District, Myers could not show that a duty of care arose from the defendants’ advertisements, according to the court. Myers had the status of an invitee when she was staying at the Georgia hotel, and this status was not contingent upon the advertisements. Thus, advertising in the District did not constitute “purposeful availment” of the benefits or privileges of this forum such that the defendant could reasonably anticipate being haled before a court in the District on a claim related to the allegedly negligent maintenance of a hotel far outside of this jurisdiction. Myers did not allege facts that demonstrated that defendants’ contacts with the District were substantial and continuous such that subjecting the defendant to litigation here would not offend notions of fair play and substantial justice.

Finally, Myers did not allege sufficient facts to conclude that HHI has a management relationship with Island Group, therefore making Island Group subject to HHI’s advertisements. Again, Myers did not even establish that HHI placed the advertisements in question.

HHFI was merely a licensing company. HHFI had no ownership interest in or financial control over, does not provide funds for operating expenses or managers’ salaries, and does not own, operate, manage, maintain, control policies or management of HHI or Island Group; there was no agency relationship, according to the court. Thus, not only could the court not exercise personal jurisdiction over defendants HHI and HHFI, it could not exercise personal jurisdiction over the defendant Island Group either.

Transfer

While this court lacked personal jurisdiction over Island Group, a federal district court in Georgia would be able to rightfully exercise jurisdiction. The defendants conceded that Myers could, if she wished, bring suit in a Georgia court.

The defendants were located in Georgia, the acts comprising the basis of the plaintiff’s complaint occurred in Georgia, the witnesses to the occurrence lived and worked in Georgia, and Georgia law should govern the present case, the court decided.

Although defendants moved for dismissal, generally, the practice in this District was to, in the “interest of justice,” transfer cases to the appropriate judicial district rather than dismiss such cases for improper venue. Thus, Myers’ case was transferred to the Georgia federal court.

The case is Civil Action No. 1:11-cv-1948 (RC).

Attorneys: Glynda Myers, pro se. Paul Raymond Pearson (Law Offices of Roger S. Mackey) for Holiday Inn, Inc.

Companies: Holiday Inns, Inc.; the Island Group, LLC; Holiday Hospitality Franchising, Inc.

Cases: FranchisingDistribution DistrictofColumbiaNews