The Texas Supreme Court has reversed a Houston [14th] Court of Appeals decision imposing a duty of reasonable care on a franchisor for a criminal act committed a franchisee’s employee where the franchisee had sole responsibility for hiring.
Massage Heights Franchising, LLC v. Danette Hagman (No. 23-0996; May 2, 2025) arose from a sexual assault perpetrated by a massage therapist employed by MH Alden Bridge, LLC, a franchisee of Massage Heights Franchising. Plaintiff sued the both entities and others alleging negligence, negligent undertaking, and gross negligence. The jury found for Plaintiff on her negligence theory against all defendants, on her negligent undertaking theory against MHF, and on gross negligence against all defendants. The jury apportioned 15% of the responsibility to MHF and awarded $1.5 million in actual damages and $1.8 million in punitive damages. The Houston [14th] Court of Appeals reversed the gross negligent award but affirmed the trial court on everything else. MHF sought review, which SCOTX granted.
In a per curiam opinion, SCOTX reversed and rendered that Plaintiff take nothing from MHF. The issue was whether MHF, as the franchisor, owed a duty to care to Plaintiff, the franchisee’s customer. Under the franchise agreement, franchisee acted as an independent contractor with sole responsibility for all employment decisions, provided that massage therapists had to be licensed by the state and undergo a criminal background check. The agreement further assigned responsibility for customer safety and legal compliance to franchisee. Franchisee hired the massage therapist in 2017 after verifying his license and conducting a background check. Plaintiff requested the therapist for her visit in September 2017, unaware that another patron had complained to franchisee about a sexual assault (which was not reported to police). Plaintiff reported her own assault to franchisee’s manager. The therapist was later apprehended and convicted.
The court of appeals rejected the exemplary damages award on the basis of § 41.005, CPRC, which prohibits them for the third party criminal acts. Nevertheless, the court held that MHF owed a duty of reasonable care to franchisee’s customers on the franchisee’s premises because it controlled franchisee’s operations. SCOTX disagreed, holding that MHF did not exercise a degree of control over franchisee’s operations to justify imposing a duty of care. Franchisee had the specific responsibility for hiring the massage therapist, the alleged act that specifically led to plaintiff’s injury, as well as for customer safety. Although MHF provided franchisee with an operations manual that covered topics such as training, product sales, service offerings, and marketing, it left hiring solely to franchisee. Although MHF offered advice or recommendations regarding hiring standards, nothing in the manual or the franchise agreement required franchisee to take such advice. The Court thus held that MHF had no contractual right to control franchisee’s hiring of the therapist.
As to whether MHF exercised actual control over franchisee’s work, the Court determined both that the jury failed to find that franchisee was subject to MHF’s control and that Plaintiff did not prove actual control of the therapist’s hiring nor that MHF’s safety guidance unreasonably increased Plaintiff’s risk of injury. Although MHF required background checks and certain training protocols, as well as implemented procedures aimed at improving and coordinating franchisee’s reporting and response to sexual assault allegations, there was no evidence that those guidelines “unreasonably increased the risk of assaults.” Additonally, none of these measures established actual control over hiring, the central element of Plaintiff’s complaint.
Trying again, Plaintiff alleged that MHF owed her a duty to refrain from entering into or terminating franchise agreements with this particular franchisee based on prior reports of sexual misconduct. Likening this allegation to a negligent hiring or negligent retention claim, the Court observed that it “has not ruled definitively on the existence, elements, or scope of such a claim” (citing Waffle House, Inc. v. Williams, 313 S.W.3d 796, 804 n. 27 (Tex. 2010)). Since Plaintiff did not present this claim to the jury, it wasn’t properly before the Court. Finally, the Court found that Plaintiff did not present legally sufficient evidence to support the jury’s finding of negligent undertaking. To establish this claim, a Plaintiff must show that a defendant has undertaken “to render services that it knows or should know are necessary for another’s protection and either (1) the failure to exercise reasonable care increases the risk of physical harm or (2) harm results because of the other’s reliance on the undertaking” (citing Elephant Ins. Co. v. Kenyon, 644 S.W.3d 137, 151 (Tex. 2022). In this case, however, no such undertaking existed because “all safety responsibilities were contractually assigned to [franchisee], so [MHF] did not undertake to keep [Plaintiff] safe.”
