Holiday Inns Inc. V Shelburne

576 So. 2d 322, 1991 Fla.App. Lexis 585 (1991) District Court of Appeals of Florida

FACTS

Holiday Inns, Inc. (Holiday Inns) is a franchisor that licenses franchisees to operate hotels using its trademarks and service marks. Holiday Inns licensed Hospitality Venture to operate a franchised hotel in Fort Pierce, Florida. The Rodeo Bar was located in the hotel.

The Fort Pierce Holiday Inn and Rodeo Bar did not have sufficient parking, so security guards posted in the Holiday Inn parking lot required Rodeo Bar patrons to park in vacant lots that surrounded the hotel but that were not owned by the hotel. The main duty of the guards was to keep the parking lot open for hotel guests. Two unarmed security guards were on duty on the night in question. One guard was drinking on the job, and the other was an untrained temporary fill-in.

The record disclosed that although the Rodeo Bar had a capacity of 240 people, the bar regularly admitted 270-300 people, with 50-75 people waiting outside. Fights occurred all the time in the bar and parking lots, and often there were three or four fights a night. Police reports involving 58 offences, including several weapon charges and battery and assault charges, had been filed during the previous 18 months.

On the night in question, the two groups involved in the altercation did not leave the Rodeo Bar until closing time. According to the record, these individuals exchanged remarks as they moved towards their respective vehicles in the vacant parking lots adjacent to the Holiday Inn. Ultimately, a fight erupted. The evidence shows that during the course of physical combat, Lester Carter of one group shot David Rice, Scott Turner, and Robert Shelburne of the other group. Rice died from his injuries.

Rice’s heirs, Turner, and Shelburne sued the Franchisee, Hospitality Venture and the Franchisor, Holiday Inns for damages. The trial court found Hospitality Ventures negligent for not providing sufficient security to prevent the foreseeable incident that took the life of Rice and injured Turner and Shelburne. The court also found that Hospitality Venture was the apparent agent of Holiday Inns, and therefore Holiday Inns was vicariously liable for its franchisee’s tortious conduct. Turner was awarded $3,825,000 for his injuries, Shelburne received $1 million, and Rice’s interests were awarded $1 million. Hospitality Venture and Holiday Inns appealed.

ISSUE

Are the franchisee and the franchisor liable?

COURT’S REASONING

A franchisee is always liable for its own tortious conduct. A franchisor may be held liable for the tortious conduct of a franchisee if the franchisee is the “apparent agent” of the franchisor. This “apparent agency” occurs when the franchisor misleads the public into believing that the franchise is really owned and operated by the franchisor, even though it is not. Here, the court held that Holiday Inns led the public into believing that its franchisees were part of Holiday Inns’ system and not independently owned businesses. The court held that Holiday Inns’ reservation system, as well as the signs at the Fort Pierce franchise hotel, gave this appearance to the public. Therefore, Holiday Inns is vicariously liable for the tortious conduct of its franchisee.

DECISION AND REMEDY

The court of appeals held that the franchisee was negligent, and that the franchisee was the apparent agent of the franchisor. The court affirmed the trial court’s judgement that found the defendants liable to the plaintiffs.

QUESTIONS:

1. What does the doctrine of apparent agency provide? How does it differ from actual agency?
2. Did Hospitality Venture act ethically in denying liability? Did Holiday Inns act ethically in denying liability?
3. Why do you think the plaintiffs included Holiday Inns as a defendant in their lawsuit? Do you think the damages that were awarded were warranted?

Answer rating: 100% (QA)

1 In such a contract there are two types of parties a principal who is the owner or employer and an agency which is a franchisee an employee or a representative of the principal When a contract is est... View the full answer