Fraternizing With Franchises: a Franchise Approach to Fraternities

• Publication year: 2017

Fraternizing with Franchises: A Franchise Approach to Fraternities

Cassandra Coolidge

FRATERNIZING WITH FRANCHISES: A FRANCHISE APPROACH TO FRATERNITIES

Abstract

Fraternities are founded on ideals such as scholarship, leadership, and community service, and provide benefits to their members such as lifelong friendship and leadership experience. But news headlines frequently highlight a dark side of fraternities and their members' out-of-control conduct—hazing, sexual assaults, and excessive partying. Despite this conduct, national organizations may avoid liability for their local chapters' actions. National organizations have insulated themselves from liability by not supervising local chapters actively, shifting responsibility, and developing policies that they know members may not follow. As one court expressed, it did not find a national organization liable in an effort to continue encouraging the fraternity to develop these policies.

Fraternities consist of a national organization and numerous local chapters located nationally, which operate similarly, hold the same values, and perform the same rituals. Fraternities are operationally and structurally similar to franchises. This Comment argues for courts to consider fraternities to be franchise arrangements and to apply franchise case law when determining the liability of national organizations. A franchise model provides a ready-made approach that considers fraternity structure and operation and finds liability when the requisite relationship and control exist. Accordingly, this Comment analyzes how fraternities are franchise arrangements and demonstrates the ready-made approach a franchise model provides by applying franchise liability to a fraternity using recent Maine cases.

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Introduction..............................................................................................919

I. A Portrait of Fraternities...........................................................923

A. Engrained in American History: The Development of Fraternities................................................................................ 924
B. The Structure of Fraternities: From Anarchy to Uniformity..... 925

II. Holding the National Organization Liable.............................927

A. Examining National Organization Liability Under the Theory of Negligence ............................................................................. 928
B. Examining National Organization Liability Under the Theory of Vicarious Liability................................................................. 932

III. A Portrait of Franchises..............................................................937

A. Independent but Consistent: The Characteristics of a Franchise Arrangement ............................................................. 937
B. Holding the Franchisor Liable—The Traditional Right to Control Test............................................................................... 940

IV. Argument: A Franchise Approach to Fraternities..................945

A. An Unofficial Franchise: Applying Franchise Characteristics to Fraternities ............................................................................ 947

1. A Fraternity Satisfies the Four Elements of a Franchise Arrangement ........................................................................ 948
2. A Fraternity Has Additional Franchise Characteristics that Further Establish a Franchise Relationship ................ 950

B. Applying Franchise Case Law to Fraternities: Rainey Meets Brown ........................................................................................ 953

Conclusion..................................................................................................961

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Introduction

Fraternities are founded on values and principles relating to community service, scholarship, and leadership.¹ Fraternities are also beneficial for their members. For example, fraternity members often have higher grade point averages and higher graduation rates than unaffiliated students.² Additionally, students in fraternities collectively raise millions of dollars for philanthropies and spend millions of hours serving the community annually.³ Further, fraternities help students establish valuable friendships⁴ and provide leadership opportunities and experience for their members.⁵ However, recent headlines reveal a dark side to fraternity life: 85 Yale FratMembers Included in Suit over Death, Injury at 2011 Harvard Game;⁶ 5 from Baruch College Face Murder Charges in 2013 Fraternity Hazing;⁷ UAPD Investigates Sexual Assault

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Allegation Near Fraternity House;⁸ Fresno State Suspends Alpha Gamma Rho Fraternity for Hazing Activity.⁹ Not all fraternity members and chapters live up to the Animal House stereotype,¹⁰ but headlines do not lie: with increasing frequency, national organizations may face legal issues stemming from local chapters' actions.

When an unfortunate fraternity incident occurs, who is responsible? The member(s), the local chapter, or the national organization?¹¹ That question is an overarching concern in the days following an incident. As to individual chapter members, they can face liability for their actions.¹² Typically, a local chapter is an unincorporated association¹³ and whether it faces liability

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depends on the laws under which it was formed.¹⁴ But what about the national organization? It can be difficult to hold the national organization liable¹⁵ despite tragic incidents, and Smith v. Delta Tau Delta, Inc.¹⁶ depicts this difficulty. In Smith, Johnny Smith, a college freshman, had to participate in a "'hell week' of hazing and sleep deprivation" to gain membership into the Beta Psi Chapter of Delta Tau Delta and died as a result.¹⁷ Smith was spray painted when he failed to participate in an event to the fraternity brothers' satisfaction and had to clean the house kitchen wearing only an apron.¹⁸ At a house party at the conclusion of "hell week," Smith, after he "was visibly intoxicated," participated in "pledge family drink night," an event the chapter required freshmen pledges to participate in from time to time as a condition of membership, which involved "drink[ing] alcohol with their fraternity families."¹⁹ That night, Smith consumed numerous beers and shots, fell down a stairwell sustaining several cuts, could not walk, and could barely talk.²⁰ Smith, with a blood alcohol level near 0.40%, died in a pool of his own vomit and was not discovered until four to eight hours later.²¹ Despite the national organization's broad enforcement powers and provision of "informational resources, organizational guidance, common traditions, and its brand" to the local chapter, the Indiana Supreme Court did not hold the national organization liable.²²

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In addition to the difficulty of holding national organizations liable, the public generally does not realize the extent to which national organizations go to prevent liability.²³ National organizations have learned what subjects them to liability and have evolved in response.²⁴ To prevent liability, national organizations have self-insured, developed procedures and policies to transfer liability to outside parties, found creative ways to protect their assets from juries, and found ways to indemnify the national and local organizations for undergraduate members' conduct.²⁵ Moreover, a national organization's imposed protocol following a fraternity incident can be self-serving:

Those questionnaires and honest accounts—submitted gratefully to the grown-ups who have arrived, the brothers believe, to help them—may return to haunt many of the brothers, providing possible cause for separating them from the fraternity, dropping them from the fraternity's insurance, laying the blame on them as individuals and not on the fraternity as the sponsoring organization.²⁶

Further, national organizations may not "actively supervise" local chapters, rather they may remain "predominantly passive;" however, national organizations or local fraternity leadership may know of a local chapter's

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conduct.²⁷ National organizations have the resources and ability to reform their local chapters, but incidents continue and the consequences often fall on their local chapters and individual members.²⁸

This Comment proposes that fraternities are unofficial franchise arrangements due to their similarities in structure and operation. Consequently, this Comment argues for courts to apply franchise law when determining the liability of a national organization. A franchise model is a sensible approach because it provides a ready-made test for determining the degree of control national organizations have over local chapters. Similar to franchises, fraternity control and oversight varies, and a franchise model would impose liability when national organizations have the requisite control and prevent liability when it is absent.

This Comment proceeds in four Parts. Part I provides a background on fraternities by tracing their developmental history and explaining their structure. Part II discusses liability theories typically used to hold a national organization liable. Part III provides a background on franchise arrangements by discussing the structure of a franchise and franchisor liability for franchisee actions. Lastly, Part IV argues that courts should view fraternities as unofficial franchise arrangements and look to franchise case law when deciding the liability of a national organization.

I. A Portrait of Fraternities

This Part proceeds in two sections. First, it provides a brief history of how fraternities developed by highlighting the progression, establishment and characteristics of modern social fraternities. Second, it explains how fraternities are typically structured and discusses the powers shared among the

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three typical fraternal entities: the national organization, the local chapter, and the alumni...