The Franchise Memorandum

A federal court in North Carolina denied a hotel franchisor’s motion to dismiss a customer’s breach of contract claim. Brittian v. Extended Stay America, 2024 WL 1841600 (W.D. N.C. Apr. 26, 2024). Plaintiff Latreass Brittian placed two reservations at an Extended Stay America hotel in Norcross, Georgia. During her first stay, Brittian complained of the hotel room’s condition and asked for a refund. Hotel staff offered Brittian a refund but then placed her on the hotel’s “Do Not Rent” list (the DNR List). During her second stay, hotel staff allowed Brittian to check into her room; however, the next day, the hotel locked Brittian out of her room, informed her that they could not accommodate her, and refused to refund her payment. Brittian, individually and on behalf of a nationwide class, sued the hotel operators and the franchisor, Extended Stay America (ESA), alleging several claims, including breach of contract, and attributing liability to ESA under an agency theory. ESA moved to dismiss Brittian’s breach of contract claim, arguing that (1) Brittian failed to allege that a contract existed between the parties, (2) ESA’s terms and conditions agreement allowed it to unilaterally cancel reservations, and (3) Brittian failed to allege that an agency relationship existed between ESA and the hotel operators.

The court denied ESA’s motion to dismiss. The court found that Brittian sufficiently alleged the existence of a valid contract, reasoning that when Brittian prepaid for the hotel room through ESA’s online reservation system she entered into a contract to exchange money for lodging. The court concluded that Brittian sufficiently alleged that ESA breached the central component of the contract by accepting Brittian’s money but denying her lodging or a refund. The court next reasoned that ESA could not rely on its terms and conditions agreement as a basis to unilaterally terminate a reservation. Finally, the court found that Brittian sufficiently alleged the existence of an agency relationship by showing that ESA controlled hotel operators’ employees by directing hotel staff to place complaining guests on the DNR list and deny them accommodation and by instituting a nationwide policy stating that prepaid reservations are not refundable.

*Leah Kanihan is a Summer Associate for Lathrop GPM who contributed to the writing of this post.