v. Hilton Worldwide Holdings Inc.

Background

K.R.D. sued Hilton Domestic Operating Company Inc. and HLT San Jose, LLC under the Trafficking Victims Protection Reauthorization Act (TVPRA). She alleges that a man trafficked her continuously from March 1, 2014, through December 31, 2016, including for more than a year at the San José DoubleTree hotel. According to the complaint, hotel staff saw signs such as K.R.D. arriving without possessions, men repeatedly entering and leaving her room for short periods, and her trafficker watching her from the parking lot.

K.R.D. alleges that HLT operated the hotel and that Hilton, the franchisor, shared in hotel profits and controlled or influenced room rates, booking, hiring, staffing, training, facilities, security, and trafficking-reporting policies. She asserted TVPRA claims under both a beneficiary theory and a perpetrator theory, and alleged that Hilton was directly liable and vicariously liable for HLT’s conduct. She later voluntarily dismissed claims against the other originally named Hilton entities.

Rule 12(b)(6) Standard

The defendants moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. At this stage, the court accepts well-pleaded factual allegations as true and views them favorably to the plaintiff, but does not accept unsupported legal conclusions.

Agency and Vicarious Liability

The court held that K.R.D. plausibly alleged an agency relationship between Hilton and HLT. Under federal common-law agency principles, an agency relationship may exist when one party agrees to act for another and the other retains control over the undertaking. A franchise relationship does not automatically create an agency relationship, but it also does not prevent vicarious liability when the franchisor acts as a principal and controls the business activities connected to the alleged injury.

The court found sufficient K.R.D.’s allegations that Hilton controlled aspects of the hotel closely related to the alleged trafficking, including room rates, the booking system, employment decisions, training, staffing, facilities, security, and trafficking policies. The court therefore concluded that Hilton could potentially be held vicariously liable for HLT’s alleged TVPRA violations.

Beneficiary Theory

The TVPRA allows a trafficking victim to sue someone who knowingly benefited financially or received something of value from participating in a venture that the person knew or should have known engaged in conduct violating the statute. The court held that K.R.D. plausibly alleged all required elements.

First, K.R.D. alleged that the defendants financially benefited from renting rooms to her trafficker over many months. Second, the court interpreted “participation in a venture” under the civil TVPRA provision to mean taking part in an association in fact that assisted, supported, or facilitated a sex-trafficking violation. The court held that K.R.D.’s allegations of a continuous business relationship—HLT repeatedly renting rooms to her trafficker for more than a year despite obvious signs of trafficking—were enough at the pleading stage. The court rejected the defendants’ argument that participation required a shared purpose to engage in sex trafficking.

The court found that the alleged signs of trafficking plausibly showed that HLT knew or should have known that its continuing relationship with the trafficker assisted, supported, or facilitated K.R.D.’s trafficking. The court also said it was plausible that hotel staff reported what they observed to Hilton because Hilton allegedly required reports about hotel operations and suspected criminal activity, including sex trafficking.

The court rejected K.R.D.’s separate theory that the Hilton-HLT hotel-operating venture itself supported beneficiary liability because the complaint did not allege facts showing that this franchisor-franchisee relationship assisted, supported, or facilitated her trafficking. The court nevertheless held that the continuous room-rental relationship with K.R.D.’s trafficker was sufficient to support the beneficiary claim.

Perpetrator Theory

The court also held that K.R.D. plausibly stated a perpetrator claim. This theory requires allegations of actual knowledge or reckless disregard of the fact that force, threats, fraud, or coercion would be used to cause a person to engage in commercial sex acts.

The court concluded that the alleged repeated room rentals, the visible trafficking indicators, the presence of numerous men entering and leaving the room, and the trafficker’s surveillance of K.R.D. plausibly supported an inference of actual knowledge or reckless disregard. The court further held that renting a room in which a trafficking victim was housed can constitute “harboring” under the TVPRA, which includes giving a person lodging or shelter. Because K.R.D. plausibly alleged that HLT harbored her with the required level of knowledge or disregard, and that HLT was Hilton’s agent, the court found that the allegations also supported Hilton’s vicarious liability under the perpetrator theory.

Other Motions and Disposition

The court granted K.R.D.’s motion to proceed under a pseudonym during pretrial proceedings. It also granted Hilton’s administrative motion to seal reply exhibits that would reveal K.R.D.’s identity.

The court denied Hilton’s motion for leave to file a supplemental brief based on reservation records. The court explained that a Rule 12(b)(6) motion generally cannot rely on material outside the pleadings, and that Hilton’s reservation records were not referenced extensively in the complaint and were not the basis of K.R.D.’s claims.

Judge P. Casey Pitts denied the defendants’ motion to dismiss. The court concluded that K.R.D.’s complaint adequately stated a TVPRA section 1595 claim against HLT under both beneficiary and perpetrator theories and adequately pleaded Hilton’s vicarious liability for HLT’s alleged violations.