Question: HAMLIN v. MOTEL 6, 2000 OHIO APP. LEXIS 2439 (JUNE 9, 2000)

FACTS Plaintiffs Abby Fogt and Mary Carter worked at a Motel 6 franchise located in Troy, Ohio. The franchise was owed by BVP, Inc., and the motel was managed by Lisa Serafini. Plaintiffs alleged that they were sexually harassed, assaulted, and abused by Serafini during their employment. Plaintiffs informed Motel 6, the franchisor, of their allegations. Both testified at trial that they were told to "keep it quiet" and that Motel 6 would conduct an on-site investigation. The Director of Franchise Operations for Motel 6 admitted in a deposition that he had received a call from someone complaining of sexual harassment at the Troy Motel 6, that he had told the caller that he would speak to the franchise owner about the matter, that he did refer the complaint to the franchise owner, and that he did not follow up on the complaint. Plaintiffs filed suit against the franchisor, Motel 6, alleging that:

(1) an actual or apparent agency relationship existed between Motel 6 and BVP such that Motel 6 should be held liable for the actions of its franchisee; and

(2) that Motel 6 had voluntarily assumed a duty of care to investigate sexual harassment complaints made by employees of its franchisees.

The trial court granted summary judgment to Motel 6. Plaintiffs appealed. DECISION The appellate court rejected plaintiffs' argument that an actual agency relationship existed between Motel 6 and BVP, stating: "The key factor in determining the existence of an agency relationship is the right of control vested in the principal." The court noted that the franchise agreement at issue here, at first glance, appeared to give Motel 6 the right to control employment decisions for its franchisees. The franchise agreement provided that Motel 6 had the authority to approve any manager with authority over the "day-to-day" operations of its franchisees and that Motel 6 could terminate the franchise of any franchisee who did not "comply promptly" with the standards contained in its confidential manuals.

The manuals specifically stated that Motel 6 "will not tolerate discrimination or the appearance of discrimination of any kind" with regard to either employment practices or room availability. The manuals also stated that employees "may" be dismissed for "offending, disrupting, or harassing guests or fellow employees" at the franchisee's discretion. However, the franchise agreement also specifically stated that the franchisee is "solely responsible" for all employment decisions, including firing, hiring, training, wages, and discipline. BVP did not ask Motel 6 for assistance in making employment decisions and Motel 6 did not involve itself with such issues.

The appellate court concluded that Motel 6 did not have the right to control employment decisions of the franchisee. The court thus rejected plaintiffs' claim that Motel 6 was liable under an actual agency theory. Even when actual agency does not exist, "apparent agency may be conferred if the principal holds its agent out to the public as possessing sufficient authority to act on its behalf and the person dealing with the agent knew these facts and, acting in good faith, had reason to believe that the agent possessed the necessary authority." Here, however, plaintiffs had both testified that they knew that Motel 6 did not own the motel, that BVP was their employer, that Motel 6 was not involved with employee discipline, and that Serafini made the hiring and firing decisions at the Troy franchise. Thus, no apparent agency relationship existed here either. The appellate court concluded, however, that the statements made by the Director of Franchise Operations for Motel 6 raised a genuine issue of material fact with regard to plaintiffs' claim that Motel 6 voluntarily assumed the duty of investigating and rectifying the alleged harassment.

The court also found that there was a genuine issue of fact as to whether Motel 6 exercised ordinary care in carrying out this duty (assuming such a duty existed). While a jury might find that Motel 6 did exercise ordinary care by referring the complaint to the franchisee, the jury might instead find that the Motel 6 was obligated to do something more. The appellate court thus reversed the trial court's grant of summary judgment to Motel 6 and remanded the case for further proceedings on the issue of whether Motel 6, a franchisor, voluntarily assumed a duty to investigate sexual harassment complaints made by employees of its franchisee. The court affirmed the lower court's rulings on the agency arguments.