February 27, 1996

Client Memo: Franchisor Liability Under the ADA

Arnold & Porter Article

As you may be aware, the Department of Justice recently sued both Days Inns of America, Inc. ("Days Inn") and its parent Hospitality Franchise Systems, Inc. ("HFS"), as well as individual Days Inn franchisees and others, for alleged violations of the Americans With Disabilities Act ("ADA").1 The Justice Department claimed, in five separate lawsuits challenging the construction of five hotels in the Days Inn chain, that the defendants failed to provide the access for persons with disabilities required under Title III of the ADA, which governs all places of "public accommodation."2
The Justice Department filed the suits following an 18-month investigation of 28 newly built Days Inn hotels in 17 states. According to the Department, all of the hotels investigated failed to comply with the ADA, but 23 of the 28 have engaged in negotiations with the Department to avoid litigation. In each of the suits filed against the remaining five hotels, the Department is seeking an order requiring Days Inn and HFS, as well as the individual owner, architect, and general contractor of the building, to correct each violation and pay a civil penalty of up to $50,000 for the first offense. The ADA authorizes penalties of up to $100,000 for any subsequent violations found in a separate action.
The suits against Days Inn and HFS are remarkable because they are the first challenges to the construction and design of a building that the government has filed under the ADA. They are also remarkable in that they include as defendants the franchisor and parent of the owner/operators of the buildings at issue. For all franchisors, the suits signal a warning of potential ADA liability that may not previously have been contemplated.
According to the Justice Department, Days Inn and HFS were named as defendants because they controlled or participated in the design and construction of each of the hotels at issue. Their alleged participation included preparing standard plans for the new buildings and, in many cases, reviewing and approving specific hotel plans prior to their construction and conducting follow-up inspections and approval of the completed facilities. It is this control or participation -- not derivative responsibility -- that the Justice Department asserts as the basis for the alleged liability of Days Inn and HFS.
In response to the Justice Department's suits, Days Inn has filed its own suit in federal court seeking a declaration that its franchisees, rather than it or HFS, are the proper defendants under the ADA. The outcome of that action may mark an important first step in determining whether, and to what extent, Title III of the ADA governs franchisors.
In describing the conduct deemed unlawful with respect to a place of public accommodation, Section 302 of the ADA states that:
It shall be discriminatory to subject an individual or class of individuals on the basis of a disability or disabilities of such individual or class, directly, or through contractual, licensing, or other arrangements, to a denial of the opportunity of the individual or class to participate in or benefit from the goods, services, facilities, privileges, advantages, or accommodations of an entity.3
This language suggests the potential breadth of the scope of Title III's application.

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We will be monitoring closely the cases against Days Inn. Please feel free to contact either Steve Reade (202-942-5678) or Nancy Perkins (202-942-5065) if you have any questions about the ADA, including its potential application to franchisors and others.
1.42 U.S.C. §§ 12101-12213.
2. Id. §§ 12181-12189.
3.Id. § 12182(b)(1)(A)(i) (emphasis supplied).

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