Rainbow Travel Service, Inc. v. Hilton Hotels Corp.

• Decision Date: 16 February 1990
• Docket Number: 88-1731,Nos. 88-1730,s. 88-1730
• Parties: 29 Fed. R. Evid. Serv. 1119 RAINBOW TRAVEL SERVICE, INC., Plaintiff-Appellee/Cross-Appellant, v. HILTON HOTELS CORPORATION and Hotelerama Associates, Ltd., Defendants-Appellants/Cross-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 1233

896 F.2d 1233

29 Fed. R. Evid. Serv. 1119

RAINBOW TRAVEL SERVICE, INC., Plaintiff-Appellee/Cross-Appellant, v. HILTON HOTELS CORPORATION and Hotelerama Associates, Ltd. Defendants-Appellants/Cross-Appellees.

Nos. 88-1730, 88-1731.

United States Court of Appeals Tenth Circuit.

Feb. 16, 1990.

Richard M. Klinge (Lu Ann Stout, with him on the briefs) of Holloway, Dobson, Hudson & Bachman, Oklahoma City, Okl., for plaintiff-appellee/cross-appellant.

John N. Hermes (Joseph Walters, with him on the briefs), of McAfee & Taft, Oklahoma City, Okl., for defendants-appellants/cross-appellees.

Before TACHA and BRORBY, Circuit Judges, and BROWN, ^* District Judge.

WESLEY E. BROWN, District Judge.

In the district court, plaintiff Rainbow Travel Service ("Rainbow") won a jury verdict against the defendants for breach of contract and fraud. The defendants-appellants argue that the district court should have dismissed the action for lack of personal jurisdiction. Additionally, appellants contend that the court committed numerous errors in the admission of evidence and in the instructions to the jury. In a cross-appeal, Rainbow argues that it should be awarded prejudgment interest on the damage award. For the reasons set forth herein we affirm the judgment of the district court with the exception of the award of damages for breach of contract.

I. Facts.

The Fontainebleau Hilton is a deluxe resort hotel in Miami Beach, Florida. The hotel is operated by the defendant Hilton Hotels, Inc. ("Hilton"), a Delaware corporation, on behalf of the hotel's owner, defendant Hotelerama Associates, Ltd., a Florida limited partnership. Plaintiff Rainbow is a travel agency with its principal place of business in Oklahoma City, Oklahoma.

There are two Hilton hotel franchises operating in Oklahoma City, Oklahoma. The franchisor of these hotels is Hilton Inns, Inc., which is a wholly owned subsidiary of the defendant Hilton Hotels Corporation. Reservations can be made at any Hilton hotel through these franchises. Also, Hilton maintains an "800 number" in Oklahoma for taking reservations.

In recent years, the Fontainebleau Hilton has advertised in many travel publications, including the Official Hotel and Resort Guide, the Hotel and Travel Index, the Travel Agent's Hotel Sales Guide, and the Directory of Incentive Travel International. These publications are distributed throughout Oklahoma and other states. The Fontainebleau advertises in these publications in order to solicit the business of travel agents.

In the spring of 1986, Rainbow began organizing several tour packages for Oklahoma football fans who wanted to attend a University of Oklahoma versus University of Miami football game. The game was scheduled for September 26, 1986, in Miami, Florida. Rainbow initially contacted the Fontainebleau concerning the possibility of reserving hotel rooms for Rainbow's groups. After telephone calls and correspondence between the parties, the Fontainebleau sent Rainbow two contracts which called for the hotel to reserve one hundred and five rooms for Rainbow on the weekend of September 27, 1986. The second of these contracts, which is at issue in this case, provided that forty-five rooms were to be reserved for Rainbow on September 26, 1986. Rainbow executed the agreements and returned them to the Fontainebleau. In June of 1986, the Fontainebleau confirmed Rainbow's reservation by mail and requested prepayment for one night for Rainbow's groups. In response, Rainbow sent a partial payment of over $6,000.00. The Fontainebleau sent another confirmation in August and requested the remainder of the first night's payment. Rainbow then sent a final customer list and the remainder of the requested payment. The payments were made by checks drawn on Rainbow's account in Oklahoma.

Rainbow's president, A.J. Musgrove, went to Miami on September 24, 1986, to make sure that all arrangements had been made for his groups' stay at the Fontainebleau. One group from Rainbow arrived on September 25 and was accommodated as planned. Musgrove met with the hotel's tour representative, Livia Cohen, on September 24, twice on September 25, and again on the morning of September 26. Ms. Cohen assured Mr. Musgrove that everything was fine and that all of the reserved rooms would be available. When the Rainbow group arrived at the hotel on the afternoon of September 26, however, they were told by Hilton representatives that no rooms were available at the Fontainebleau. Hilton made arrangements for the group to stay at the Seacoast Towers, a hotel/apartment complex located about ten blocks away from the Fontainebleau. Rainbow subsequently filed this action in the U.S. District Court for the Western District of Oklahoma, alleging breach of contract and fraud.

II. Personal Jurisdiction.

Appellants first challenge the district court's assertion of in personam jurisdiction. The appellants argue that they did not have sufficient contacts with Oklahoma to support an Oklahoma court's exercise of jurisdiction over them. The relevant facts on this issue, as previously set forth, are not in dispute.

The Oklahoma long arm statute provides: "A court of this state may exercise jurisdiction on any basis consistent with the constitution of this state and the Constitution of the United States." Okla.Stat.Tit. 12, Sec. 2004 F (1984). The standards required by due process for the exercise of personal jurisdiction over nonresident defendants are well settled and will not be repeated in full here. (See Rambo v. American Southern Insurance Company, 839 F.2d 1415 (10th Cir.1988) for a comprehensive discussion of due process standards.) In sum, where the person over whom jurisdiction is asserted has established certain "minimum contacts" with the forum such that requiring him to defend his interests in the forum would not offend "traditional notions of fair play and substantial justice," International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945), and where he has "purposely avail[ed] [himself] of the privilege of conducting activities within the forum state, thus invoking the benefits and protections of its laws," Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958), jurisdiction will be upheld.

The application of these standards to contracts made between citizens of different states is not without difficulty. The Supreme Court recently stated:

[W]e note a continued division among lower courts respecting whether and to what extent a contract can constitute a "contact" for purposes of due process analysis. If the question is whether an individual's contract with an out-of-state party alone can automatically establish sufficient minimum contacts in the other party's home forum, we believe the answer clearly is that it cannot. The Court long ago rejected the notion that personal jurisdiction might turn on "mechanical" tests ... or on "conceptualistic ... theories of the place of contracting or of performance...." Instead, we have emphasized the need for a "highly realistic" approach that recognizes that a "contract" is "ordinarily but an intermediate step serving to tie up prior business negotiations with future consequences which themselves are the real object of the business transaction ..." It is these factors--prior negotiations and contemplated future consequences, along with the terms of the contract and the parties' actual course of dealing--that must be evaluated in determining whether the defendant purposely established minimum contacts with the forum.

Burger King Corporation v. Rudzewicz, 471 U.S. 462, 478-79, 105 S.Ct. 2174, 2185, 85 L.Ed.2d 528 (1985) [citations omitted].

Applying these principles to the facts before us, we find that the assertion of personal jurisdiction over the defendants in Oklahoma does not offend due process. The Fontainebleau apparently advertises in Oklahoma and throughout much of the United States and directs their solicitations at travel agents in particular. When the hotel was contacted by Rainbow Travel Service, the hotel entered into negotiations with the plaintiff in Oklahoma and came to an agreement regarding the reservation of hotel rooms. The hotel sent contracts to the plaintiff in Oklahoma for execution. Their agreement was subsequently confirmed by letters sent to the plaintiff. Significantly, the Fontainebleau required the plaintiff to partially perform the contract in Oklahoma by demanding advance payments for the rooms. These payments were substantial, totaling slightly more than $10,000.00. These contacts with the state of Oklahoma cannot be considered "random" or "fortuitous." Cf. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). Although the defendants clearly were not physically present in the state of Oklahoma, their activities were purposefully directed at an Oklahoma resident. See Burger King, supra 471 U.S. at 476, 105 S.Ct. at 2184 ("Although territorial presence frequently will enhance a potential defendant's affiliation with a State and will reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted.") See also Sinatra v. National Enquirer, Inc., 854 F.2d 1191, 1195 (9th Cir.1988); Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834 (9th Cir.1986) (The solicitation of business in the forum state that results in business being transacted or contract negotiations will probably be considered purposeful availment.) When Hilton's course of conduct is viewed as a whole, it can fairly be said that the defendant "purposely avail[ed] itself of the privilege of conducting activities within the forum State." Hanson v. Denckla, supra. The agreement between the parties in...