Wilson v. American Trans Air, Inc.

• Decision Date: 20 April 1989
• Docket Number: No. 88-1927,88-1927
• Parties: Dorothy A. WILSON and Louie P. Wilson, Plaintiffs-Appellants, v. AMERICAN TRANS AIR, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 386

874 F.2d 386

13 Fed.R.Serv.3d 457

Dorothy A. WILSON and Louie P. Wilson, Plaintiffs-Appellants, v. AMERICAN TRANS AIR, INC., Defendant-Appellee.

No. 88-1927.

United States Court of Appeals Seventh Circuit.

Argued Nov. 29, 1988.

Decided April 20, 1989.

Alfred H. Kreckman, Jr., Massey Anderson & Gibson, Paris, Ill., for plaintiffs-appellants.

Peter G. Tamulonis, Kightlinger & Gray, Indianapolis, Ind., for defendant-appellee.

Before POSNER, COFFEY and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge.

Dorothy and Louie Wilson instituted this diversity action against American Trans Air, Inc., Holiday Inns, Inc., and Humphreys (Cayman) Ltd. in order to recover damages for injuries Mrs. Wilson suffered as a result of a criminal assault that occurred while the Wilsons were vacationing in the Cayman Islands. They were participants in a tour planned by American Trans Air, and the assault occurred while they were guests at a Holiday Inn on Grand Cayman Island operated by Humphreys. The district court granted American Trans Air's summary judgment motion, denied the Wilsons' motion to amend their complaint, and dismissed with prejudice their complaint against American Trans Air. On April 6, 1988, final judgment in favor of American Trans Air was entered pursuant to Rule 54(b) of the Federal Rules of Civil Procedure. This appeal followed. We affirm the judgment of the district court.

I. Background

American Trans Air (American) is a charter tour operator headquartered in Indianapolis, Indiana. It regularly plans and operates tours to the Cayman Islands. Participants in these tours are offered accommodations at the Holiday Inn Grand Cayman International Beach Resort (Holiday Inn Grand Cayman), operated by Humphreys (Cayman) Ltd. under a franchise agreement with Holiday Inns, Inc. American sometimes sponsors two or three trips to the Cayman Islands per month and has included, as an option, accommodations at the Humphreys hotel in its tours since at least 1976. One employee of American always accompanies the tours to the Caymans and stays with the tour group at the Humphreys hotel.

Mr. and Mrs. Wilson participated in an American tour to the Cayman Islands in October 1984. They chose to stay at the Humphreys hotel. On October 30, Mrs. Wilson was assaulted by an intruder entering her second floor hotel room through a balcony door while she was asleep. The intruder attempted to rob and rape Mrs. Wilson, and she suffered bodily injuries during the attack.

The majority of participants in these tours apparently do not choose to purchase an optional "ground package" that includes accommodations at a local hotel (in this case, Humphreys). However, promotional materials for this trip did include references to accommodations at the Holiday Inn Grand Cayman. In addition, brochures, rate cards, and other promotional material are provided to American by Humphreys at American's request. The Wilsons also assert that, since 1978, American has published advertisements for 131 tours specifically offering accommodations at the Humphreys hotel.

American did conduct basic research regarding its tours. It attempted to gain information about the political stability and climate of the destination country. It apparently did not inquire into guest safety and security at the hotel. The Wilsons allege that there was substantial criminal activity involving guests at the Humphreys hotel in the months preceding the attack on Mrs. Wilson, see Appellants' Br. at 10, but American disclaims any knowledge of such activity.

II. Discussion

The Wilsons maintain that American is liable to them because it breached its duty as a charter tour operator to investigate proposed accommodations for safety and to warn prospective patrons of any dangerous conditions discovered during the investigation. The Wilsons submit that this duty arises out of contractual language contained in American's travel brochure, the federal regulations governing charter tour operators, and tort law. The contract allegedly gives American, as a charter tour operator, the duties of an innkeeper, while the Wilsons contend that principles of Indiana tort law require American to conduct a reasonable investigation into facilities and warn of any dangerous conditions that could affect guests. The district court properly rejected these arguments and granted summary judgment to American.

The Wilsons also attempted to amend their complaint to include a count alleging that American and Humphreys were joint venturers with respect to the hotel accommodations offered to participants in American's tours to the Cayman Islands. The district court denied the Wilsons' motion to amend, and we conclude that it did not abuse its discretion in doing so. We shall address each of the Wilsons' contentions in turn. ¹

A. Summary Judgment

1.

The Wilsons ground their contract argument in the following language found in the advertising newsletter that American distributed to potential customers: ²

Responsibility of American Trans Air: This tour program is planned and operated by American Trans Air, Inc. ... as principal and tour operator.... American Trans Air is responsible for making all arrangements for transportation, provided that in the absence of negligence on the part of American Trans Air, the responsibility does not extend to any assumption of liability for any personal injury or property damage arising out of or caused by any negligent act on the part of any hotel, other air carrier or anyone rendering any of the services or accommodations being offered in connection with this Public Charter.

Appellants' App. at 53 (emphasis supplied). Contract language like this is expressly authorized by 14 C.F.R. Sec. 380.32(x) (1988), the federal regulation governing contracts between public charter operators and charter participants. ³

The Wilsons maintain that, by inserting this contractual language in its newsletter, American assumed the duties of an innkeeper, even though the language itself disclaims liability for any injury "caused by any negligent act on the part of any hotel." They note that the contract states that American is the principal and is responsible for any negligent act of its own with respect to the accommodations offered in connection with the tour. The Wilsons argue that, as principal, American stands in the shoes of its agent, Humphreys, and owes its patrons the duties of an innkeeper. As an innkeeper, in turn, American owes a duty to its guests to provide them with safe lodging. ⁴ The Wilsons assert that this duty required American to make some reasonable investigation into the safety of any accommodations that it promoted and recommended and to warn prospective patrons of any danger at the hotel that might affect them. See Appellants' Br. at 14-15.

We cannot accept the Wilsons' contention that American has assumed the duties of an innkeeper. The district court concluded that the newsletter's contractual language, "rather than establishing a duty[,] is a clear disclaimer by American of any duty to plaintiffs in this case once plaintiffs have deplaned." R. 16 at 8. We agree that this language constitutes a disclaimer. The Wilsons' interpretation of the contract makes the exculpatory language of the contract, language authorized by the applicable regulation, meaningless. It makes little sense to allow charter tour operators to disclaim contractually vicarious liability for the negligent acts of a hotel and then to impose on the charter operator direct liability as an innkeeper. Therefore, we conclude that the contract does not impose on American, as principal, the duties of an innkeeper.

2.

While we do not believe that the contract and the regulation impose the duties of an innkeeper on American, we note that a charter tour operator, as the principal responsible to tour participants for all the services and accommodations offered in connection with the charter tour, ⁵ cannot disclaim liability for injuries arising out of its own negligence. A charter tour operator, as principal, employs independent contractors such as airlines and hotels to provide transportation and accommodation services to its patrons. ⁶ Although a principal generally cannot be held liable for the torts of an independent contractor, Indiana law does allow a principal to be held liable for the torts of a hired independent contractor when the consequences of the principal's own negligent failure to select a competent contractor caused the harm upon which the suit is based. See Stone v. Pinkerton Farms, Inc., 741 F.2d 941, 946 (7th Cir.1984); Hixon v. Sherwin-Williams Co., 671 F.2d 1005, 1009-10 (7th Cir.1982); Wabash Co. v. Pearson, 22 N.E. 134, 135 (Ind.1889); see also Wilson v. Good Humor Corp., 757 F.2d 1293, 1309-10 (D.C.Cir.1985); Annotation, When Is Employer Chargeable With Negligence in Hiring Careless, Reckless, or Incompetent Independent Contractor, 78 A.L.R.3d 910 (1977 and Supp.1988); Restatement (Second) of Torts Sec. 411 (1965). This negligent selection theory would allow liability to be imposed upon American for its own negligence as principal, liability that it did not disclaim under its contract and cannot disclaim under the applicable federal regulation.

Although the Wilsons' allegation that American breached a duty to investigate the safety and security of the hotel accommodations that it included in its tour package can be construed as a claim based on a negligent selection theory, ⁷ their claim cannot survive American's summary judgment motion. American chose Humphreys to provide the hotel accommodations in its tour package. Humphreys operated a Holiday Inn. The hotel was located on Seven Mile Beach on Grand Cayman Island, British West Indies--a British Crown Colony. There is nothing in the record that indicates that the Holiday Inn Grand Cayman was located in a high-crime area, that the hotel experienced more safety and security problems than other resort hotels on the island, or that...