C. Even if section 303 were limited to parties who own, operate, or lease the facilities in question, the United States is still entitled to judgment as a matter of law, because DIA operates the Wall Days Inn. Even assuming for the sake of argument that section 303 is limited to the parties identified in section 302, the United States is still entitled to judgment as a matter of law. Given the degree of control it exercises over all aspects of the operation of the hotels in the Days Inn System, including the Wall Days Inn, DIA “operates” the Wall Days Inn, and other Days Inns, within the meaning of section 302.21 1. The Days Inn “hotel operating system” and the “System Standards.”
When a licensee buys a franchise from DIA, part of what he or she buys is a “hotel operating system.” U.S. Facts ¶ 85. The Days Inn hotel operating system (commonly referred to as the “Days Inn System”) is both comprehensive and mandatory. It addresses all aspects of the operation of a Days Inn hotel, and, under the terms of the license agreement, the licensee is required to operate the hotel in compliance with all System Standards at all times. In addition to requiring compliance with the Days Inn System, moreover, the agreements that licensees enter into give DIA several additional means of control over the operation of Days Inn hotels. The license agreement between DIA and the Hauks typifies the ways in which DIA can and does control the day to day operations of the hotels in its system.
As part of its System Standards, DIA establishes operating policies for all Days Inn hotels — operating policies which “must be strictly observed by each property in the Days Inn System.” U.S. Facts ¶ 89. DIA has the right to change the System Standards at any time, in any fashion it deems necessary. U.S. Facts ¶¶ 25, 88.a. The operating policies that Days Inn hotels must follow are set forth in the Days Inn Operating Policies Manual, one of the Days Inn “System Standards” Manuals. U.S. Facts ¶ 89. James Stansburry, a former HFS employee who conducted training sessions for hotel managers and employees at Days Inn hotels around the country, explained that the OPM
was set up to tell the franchisee exactly what their responsibilities were as far as in operations, different requirements that the company required of them . . . . [I]t was their Bible to live by when they’re at the hotel as far as operating the hotel under Days Inns’ standards.
Deposition of James Stansburry, Ex. 17, at 114. His description is an apt one. As more fully detailed in the United States’ Statement of Material Facts, the OPM sets dozens of requirements for the daily operation of all Days Inn hotels, including the Wall Days Inn. U.S. Facts ¶¶ 90, 91. Among other things, the OPM sets requirements for grooming and attire for hotel employees, employee uniforms, hours of operation of the front desk, services that must be provided to guests (such as wake-up calls, fax machines, free local calls, free ice, complimentary coffee, baby cribs, and the like), the forms of payment the hotel must accept, guest safety and security, and swimming pools (including pool equipment, furniture, and chlorine and pH levels). U.S. Facts ¶¶ 91.f, h, i, j, l, m. For hotels with restaurants, the OPM sets a variety of operating requirements for the restaurant; if there is no restaurant at or adjacent to the hotel, the hotel must provide a free continental breakfast, and the OPM specifies the hours and the menu (fruit juice, coffee (including decaf) and tea, and pastries, muffins, croissant, or “local specialties”). U.S. Facts ¶ 91.o.
The OPM also includes dozens of specifications for the supplies and furnishings that must be provided in every guest room. These include requirements for the provision of, and often the number and location of, pictures, desks, tables, chairs, televisions, mirrors, towel racks, clothes hangers, ashtrays, wastebaskets, rolls of toilet tissue, note pads, and sheets of hotel stationery and envelopes. U.S. Facts ¶¶ 91.b, c. Similarly, the OPM specifies the number of towels that must be provided in each guest rooms (three bath towels, three hand towels, three wash cloths, and one bath mat), and the size, weight, fiber content, and color of the towels, sheets, pillowcases, and blankets. U.S. Facts ¶ 91.d. The maximum shrinkage allowed is ten percent. Id.
In addition, the OPM sets forth the responsibilities of the hotel’s general manager, requirements for employee relations at the hotel, and requirements for employee job performance. U.S. Facts ¶¶ 91.a, e, g. The OPM also sets requirements for housekeeping and maintenance at the hotel. U.S. Facts ¶ 91.k.
2. Enforcement of the System Standards: the Quality Assurance program.
DIA actively enforces its System Standards, including the requirements of the OPM. Under the terms of the license agreements, DIA is entitled to conduct, and does conduct, unannounced inspections of every Days Inn hotel, including the Wall Days Inn, at least three times per year. U.S. Facts ¶¶ 88.a, 92, 93. These mandatory inspections are known as “Quality Assurance” evaluations; at the end of each inspection, the hotel is scored on its compliance with the System Standards. U.S. Facts ¶ 97, 99. If the hotel receives a failing score, it is reinspected, and given thirty days to cure the conditions that caused it to fail; if it still fails, the hotel is subject to being terminated from the system. U.S. Facts ¶ 98. Even for hotels with better scores, QA deductions can be costly. The QA scores are translated into a “Sunburst” rating system in which each property receives from zero to five “Sunbursts,” with higher scores getting more Sunbursts. U.S. Facts ¶ 103. The Sunburst ratings for all Days Inn hotels are published in the Days Inn directory, which is distributed free of charge at every Days Inn hotel, and are available to guests who call the Days Inn reservation center, and through the Days Inn World Wide Web site. Id. The QA system is thus a powerful tool for controlling the way licensees operate their hotels. As Mr. Keeble explained,
[t]he big importance [of the Sunburst rating system] is franchisees have bought into it, and the big impact that we’ve seen is franchisees have bought into the concept, bought into the idea, and they — they work to get that Sunburst rating up. They want it to be higher because it’s a source of personal pride and it could very well be a good marketing tool for them as well. And yes, it will attract more guests and it might attract higher-paying guests, as well.
U.S. Facts ¶ 104.a. Mr. Hauk added that in his view, the importance of the Sunburst rating lies in the fact that “[c]ustomers look at it and I believe determine where they want to stay because of the sunburst rating.” U.S. Facts ¶ 104.b. Accordingly, in conducting the business of the Wall Days Inn, the Hauks make an effort to get a high QA score, “[b]ecause we get a higher sunburst rating, and that reflects on how our property looks to the customer.”
QA inspections are exacting. They include hundreds of items, both inside and outside the facility. U.S. Facts ¶ 94. QA inspectors arrive at the property unannounced, posing as guests. Id. Among other things, QA inspectors check dozens of items in the hotel’s guest rooms, including the condition and proper operation of room number signs, door locks, drapery controls, heating and air conditioning units, telephones, chairs, tables, beds, televisions, light fixtures, plumbing fixtures, towel racks, linens of all sorts, and the presence of all required room supplies. U.S. Facts ¶ 95. In addition to the inspections in the guest rooms, QA evaluations cover a variety of other areas, including: compliance with DIA’s operating standards; hotel employees’ grooming, appearance, uniforms, professionalism, and knowledgeability; compliance with all of DIA’s required marketing programs and required training programs; the number of guest complaints received by the hotel; safety issues including the presence and proper functioning of smoke detectors, fire extinguishers, first aid kits, lighting in the parking lots, guest room security locks, depth markings on swimming pools, and storage of flammable materials; presence of non-discrimination posters required by federal law; and, in some cases, accessibility issues for individuals with disabilities, including the location of peepholes in the doors to accessible guest rooms, and bathroom door width. U.S. Facts ¶ 96.
At the Wall Days Inn, QA inspectors issued numerous warnings or deductions, including required items missing from guest rooms (skirt hangers, stationery, Days Inn cups, and Do Not Disturb signs), missing eye wash from the first aid kit, faded striping in the parking lot, failing to cover wastebaskets in the hotel’s restrooms, dirty filters in the heating and air conditioning units, inadequate front desk hours, failing properly to maintain the courtesy call log, housekeepers not wearing proper uniforms, front desk staff wearing jeans and no name tag, and insufficient plants and flowers around the exterior of the hotel. U.S. Facts ¶ 100.
At the conclusion of the inspection, which typically takes two hours or more, the inspector fills out a QA evaluation form, giving the property a score for the inspection. U.S. Facts ¶ 97. The inspector discusses the results of the inspection with the hotel manager, and seeks a commitment from the manager to correct items for which deductions were taken. Id. Those commitments often include commitments to take certain actions on a daily basis, and the Hauks have routinely agreed to take a variety of actions to clean or maintain items in guest rooms or other features of the hotel on a daily or regular basis. U.S. Facts ¶ 97, 102. Moreover, the Hauks have repeatedly modified various aspects of their operation of the Wall Days Inn, to comply with Days Inn requirements and avoid QA deductions. Among other things, they changed the hours of operation of their front desk, have arranged to install electronic door locks for all of their guest rooms, give discounts on room rates they would not otherwise give, and respond to guest complaints they believe to be meritless. U.S. Facts ¶ 101.
3. Other means by which DIA controls or directs the functioning of the hotels in its system. In addition to the System Standards — as set out in the OPM and enforced by the QA program — the license agreements give DIA a variety of other forms of control over or involvement in the operations of individual Days Inn hotels, including the Wall Days Inn.
a. Control over renovations or other physical changes to the hotel.
As described in Part II.D., above, DIA has considerable control over the initial design and construction of new Days Inn hotels. The license agreements give DIA a similar level of control over any renovations or other changes to the hotel. First, the agreements contain provisions prohibiting the licensee from materially modifying, diminishing, or expanding the hotel, or changing its interior design or layout, without DIA’s prior written consent. U.S. Facts ¶ 88.m. DIA also has the authority affirmatively to require its licensees to undertake renovations to their hotels. Under the terms of the standard license agreement, DIA can require licensees to undertake renovations costing (by DIA’s estimate) up to an aggregate of $3,000 times the number of guest rooms. U.S. Facts ¶ 88.l.i. The Wall license agreement contains two renovations provisions: one for “minor” renovations, which is capped at $1,000 times the number of guest rooms, and the other for “major” renovations, which is capped at $10,000 times the number of rooms (for the Wall hotel, $32,000 and $320,000, respectively), adjusted for inflation. U.S. Facts ¶ 88.l.ii.
b. The Days Inn reservation system and policies.
DIA operates a national reservations system, which produces approximately 25-30% of the room reservations for Days Inn hotels system-wide. U.S. Facts ¶¶ 105, 106. All Days Inn hotels, including the Wall Days Inn, are required to participate in the system, and to honor reservations accepted by the system. U.S. Facts ¶¶ 105, 107. System hotels are also required to comply with other reservations policies set by DIA, including their “walk” policy, which requires hotels to find other lodging for guests with confirmed reservations whose rooms are not available, and, if the substitute lodging costs more, to pay the difference. U.S. Facts ¶ 108.
c. DIA’s mandatory marketing programs.
Under the terms of the license agreements, licensees are required to participate in a variety of marketing and promotional programs conducted by DIA. Under some of these programs — for example, the September Days Club for senior citizens, and the Inn-Credible Club Card, for business travelers — individual Days Inn hotels are required to provide discounted room rates and other benefits to members. U.S. Facts ¶¶ 110.a, b. Under at least one marketing program, the Simple Super Saver program, DIA both sets a minimum discount that must be offered, and imposes an upper limit on the rate that licensees may charge. U.S. Facts ¶ 110.c. DIA also conducts promotional programs from time to time, including programs connected to popular motion pictures; for programs like these, DIA requires licensees, including the Hauks, to purchase promotional materials to be displayed in the hotel lobby or to be given away to guests. U.S. Facts ¶ 110.f.
Other DIA marketing programs impose service requirements on Days Inn licensees. For instance, DIA requires licensees to provide non-smoking guest rooms, U.S. Facts ¶ 110.e, and to engage in a “Courtesy Call Program,” in which the hotel’s front desk staff is required to contact each guest shortly after check-in, to ensure that the guest has no complaints. U.S. Facts ¶ 110.d. The front desk staff are required to keep a log of all “courtesy calls,” and log is included in the Days Inn QA inspections. Id.
d. DIA’s mandatory training programs for managers and employees of all Days Inn hotels.
DIA conducts several training programs for the general managers of Days Inn hotels and hotel employees, many of which are mandatory. The first is what DIA calls the “Property Training Program,” which is the training session that occurs at the hotel, at or near the completion of construction of a new Days Inn hotel. U.S. Facts ¶ 111.c. The hotel’s management, front desk staff, and housekeepers are all required to attend various sessions of the training, which three to four days. Id. The training sessions cover a wide variety of topics, including marketing, guest relations, the reservations system, Quality Assurance standards (including mock inspections of hotel guest rooms, and showing housekeepers how to be more efficient in the cleaning rooms and setting up their carts), and guest safety and security. Id. The initial property training for the Wall Days Inn took place from June 29 to July 2, 1993. U.S. Facts ¶ 111.c.i.
General managers of all Days Inn hotels are also required to attend DIA’s Hospitality Management Training program. U.S. Facts ¶ 111.a. This week-long training session occurs at the Days Learning Center in Knoxville, Tennessee, and covers a wide range of topics relating to the operation of a Days Inn hotel. Id. In particular, HMT covers the Days Inn System standards, setting room rates, managing room inventory, controlling labor costs, scheduling, motivating and managing hotel personnel, sales and marketing, labor laws, loss prevention and risk management, innkeepers’ law, safety and security, occupational health and safety standards, stress management, leadership skills, and unit operation and maintenance, and recruiting, interviewing, and selecting hotel personnel. Id. Both Richard and Karla Hauk attended HMT; Mr. Hauk testified that some sessions were very helpful to him, including sessions on personnel matters — interviewing job applicants, and hiring, firing, and motivating employees. U.S. Facts ¶ 111.a.i.
In addition to initial property training and HMT, DIA engages in a variety of other training efforts, including training for hotel employees provided at the hotel site by QA inspectors, and training programs provided by regional alliances of Days Inn hotels. U.S. Facts ¶ 111.d. DIA also requires licensees to attend annual conferences, because those conferences are primarily training events. U.S. Facts ¶ 111.b. As Mr. Keeble put it, the conferences are designed for hotel managers to “get a little bit more education in operation of their hotel.” Id.
In connection with its initial property training and other training programs, DIA produces and issues to licensees a wide range of training manuals. These include manuals on housekeeping, hotel maintenance, guest services, telephone etiquette, and many other topics. U.S. Facts ¶ 112. These training manuals provide detailed instruction on how to accomplish various tasks arising in the course of the day to day operation of a Days Inn hotel. For instance, general managers are provided with a manual on how to train their housekeepers, which manual covers employees’ personal appearance (including brushing teeth, trimming fingernails, and moderate use of cosmetics), standards for cleaning guest rooms (including how to arrange items on the housekeepers’ cart, how to prepare a room for cleaning, how to clean the bathroom and make the beds, and how to vacuum the carpet). U.S. Facts ¶ 112.a. Other manuals are provided directly to hotel employees who participate in training sessions conducted by DIA. For instance, DIA provides a “Housekeeping Participants Manual,” which also shows how to arrange the housekeeper’s cart, and addresses personal grooming, a “Telephone Etiquette Participants’ Manual,” which addresses how to answer the phone at a Days Inn hotel, and a “Guest Services Participants’ Manual,” which addresses the courtesy call program and dealing with guest complaints, and provides a series of form letters that can be used to respond to complaint. U.S. Facts ¶¶ 112.b, c, d. DIA also provides a Maintenance Operating Manual covering a variety of topics related to maintaining and repairing various aspects of and equipment at a Days Inn hotel. U.S. Facts ¶ 112.e.
e. The Days Inn Guest Services department.
DIA also controls the way its licensees deal with guest complaints. DIA has a “Guest Services” department which oversees the handling of all guest complaints regarding Days Inn hotels. U.S. Facts ¶ 113. DIA requires its licensees to respond to all guest complaints, even if meritless, and to report to DIA on how it has resolved them. U.S. Facts ¶ 114. If a licensee does not respond to a complaint, the DIA Guest Services department will resolve the matter with the guest, and, if a refund is given, charge the hotel in question for the amount of the refund. U.S. Facts ¶ 113.
f. Other controls on the operations of Days Inn hotels granted to DIA by the license agreements.
Finally, there are several other provisions in the Days Inn license agreements that give DIA control over various other aspects of the operation of Days Inn system hotels. For instance, provisions in both the standard license agreement and the Wall license agreement require the licensees to keep books and records specified by DIA, in a form specified by DIA, require the licensees to provide financial statements to DIA, and allow DIA to audit their books at any time. U.S. Facts ¶ 88.d. The agreements also contain provisions limiting the ability of the licensees to operate any food or beverage service at the hotel, and requiring the licensees to get DIA’s approval for any outside management company to run the hotel. U.S. Facts ¶¶ 88.i, j.
D. The Court should assess civil penalties against DIA and HFS.
In addition to authorizing injunctive relief, the ADA also authorizes the Court, in a case brought by the Attorney General, to assess a civil penalty against an entity that has violated title III, to vindicate the public interest. 42 U.S.C. § 12188(b)(2)(C). Such a penalty may be in any amount up to $50,000.00 for a first violation, and up to $100,000.00 for a subsequent violation.22
Civil penalties serve two purposes: 1) to punish wrongful conduct, Tull v. United States, 481 U.S. 412, 422 n.7 (1987); United States v. Balistrieri, 981 F.2d 916, 936 (7th Cir. 1992), and 2) to deter other potential violators. United States v. ITT Continental Baking Co., 420 U.S. 223, 231, 232-33 (1975); United States v. Reader's Digest Ass'n, Inc., 662 F.2d 955, 966-67 (3d Cir. 1981). Thus, a civil penalty must not be so small as to be an acceptable cost of doing business, as that would nullify its effectiveness in punishing wrongdoing and deterring illegal conduct. ITT Continental Baking, 420 U.S. at 231-32; Reader's Digest Ass'n, 662 F.2d at 966-67, 967 n.16. Thus, when civil penalties are sought, a defendant's financial condition is a relevant factor to consider. Federal Election Comm'n v. Furgatch, 869 F.2d 1256, 1258 (9th Cir. 1989) (in determining size of civil penalty, one relevant factor is defendant's ability to pay). See also Reader's Digest Ass'n, 662 F.2d at 967 (same); United States v. Danube Carpet Mills, Inc., 737 F.2d 988, 993 (11th Cir. 1984) (same). In addition, under the terms of the ADA, in determining the amount of a penalty the court must give consideration to whether the entity made any good faith effort to comply with the statute. 42 U.S.C. § 12188(b)(5).
Here, there is no evidence that DIA or HFS made any good faith effort to comply with the requirements of section 303, or to ensure that new hotels joining its chain were readily accessible to and usable by individuals with disabilities. When HFS took control of the Days Inn chain in January 1992, just as title III of the ADA was going into effect, it re-issued the DIAF Planning and Design Standards Manual under DIA’s name. U.S. Facts ¶ 31.a. There were few substantive changes to the manual, but HFS did specifically include mention of the ADA as one of the “jurisdictional codes” that licensees were required to comply with, and reorganized the manual to put all of the “barrier-free” provisions in a single section. U.S. Facts ¶ 121. Thus, there can be no question that HFS was fully aware of the ADA when it re-issued the manual, but it made no effort to check the PDSM’s “barrier-free” requirements to see whether they were consistent with the ADA’s architectural requirements for new hotels. Id. Further, although it reviews plans for new hotels, DIA does not check those plans for compliance with the ADA, and does not even make careful checks to see if the plans complied with the “barrier-free” provisions of its own PDSM. U.S. Facts ¶¶ 122-24. If the HFS Design and Construction department had made such checks, there might have been fewer violations of the ADA Standards at the Wall and other new Days Inn hotels. U.S. Facts ¶ 125.
Moreover, despite provisions requiring their licensees to comply with all federal laws and regulations, specifically including the ADA, DIA and HFS have routinely admitted hotels into the Days Inn system that they knew or should have known were not accessible to people with disabilities including the Wall hotel. The ADA violations at these hotels were not minor, or isolated, or hidden; rather, as detailed above, there were numerous violations of the Standards at the Wall hotel, in every part of the facility, and the same is true of all of the other hotels examined by the United States. U.S. Facts ¶ 127. DIA representatives tour the hotels upon their completion, and QA inspectors inspect the hotels regularly. DIA and HFS have nonetheless accepted the Wall and other new hotels into its system, and collected royalties from them. Indeed, DIA and HFS exhibit no concern at all over the fact that the Days Inn hotel chain includes numerous new hotels that are inaccessible to individuals with disabilities. According to Mr. Keeble, no one at HFS or DIA makes any effort to check to see whether Days Inn hotels comply with the requirements of the ADA, despite the provision in the license agreement requiring the hotel to comply with federal law. U.S. Facts ¶ 126. As far as DIA and HFS are concerned, ADA compliance is someone else’s problem.
Finally, given the size and resources of these defendants, a significant civil penalty is warranted. HFS is the world’s largest franchisor of hotels, and DIA is the world’s largest franchisor of economy or “mid-market” hotels. U.S. Facts ¶ 116. Not surprisingly, HFS has substantial annual revenues — over $400 million in 1995 — and profits: in 1995, HFS had retained earnings of $83.6 million. U.S. Facts ¶ 130. With respect to the Wall Days Inn in particular, DIA and HFS collected approximately $90,000 in royalties and advertising fees from the Wall hotel during the first three years of its existence. U.S. Facts ¶¶ 128-29. Given that the hotel has now been open for an additional year, the total is likely to be closer to $120,000. The United States urges the Court to impose civil penalties on DIA and HFS of sufficient magnitude to render their conduct with respect to the Wall Days Inn unprofitable, and to deter others from engaging in a pattern or practice of discrimination like that engaged in by DIA and HFS.