Snowney v. Harrah's Entertainment, Inc.

• Decision Date: 06 June 2005
• Docket Number: No. S124286.,S124286.
• Citation: 112 P.3d 28,29 Cal.Rptr.3d 33,35 Cal.4th 1054
• Court: California Supreme Court
• Parties: Frank SNOWNEY et al., Plaintiffs and Appellants, v. HARRAH'S ENTERTAINMENT, INC., et al., Defendants and Respondents.

29 Cal.Rptr.3d 33

35 Cal.4th 1054

112 P.3d 28

Frank SNOWNEY et al., Plaintiffs and Appellants, v. HARRAH'S ENTERTAINMENT, INC., et al., Defendants and Respondents.

No. S124286.

Supreme Court of California.

June 6, 2005.

Certiorari Denied November 14, 2005.

Schreiber & Schreiber, Edwin C. Schreiber and Eric A. Schreiber, Encino, for Plaintiffs and Appellants.

Fulbright & Jaworski, Robert W. Fischer, Jr., Joshua D. Lichtman, Alisha M. Lee and Andrea K. Pallios, Los Angeles, for Defendants and Respondents.

Robin S. Conrad; Robbins, Russell, Englert, Orseck & Untereiner, Roy T. Englert, Jr., Alan E. Untereiner, Washington, DC, Max Huffman and Alice W. Yao for Chamber of Commerce of the United States as Amicus Curiae on behalf of Defendants and Respondents.

Certiorari Denied November 14, 2005. See 126 S.Ct. 659.

BROWN, J.

In this case, a California resident filed a class action against a group of Nevada hotels for failing to provide notice of an energy surcharge imposed on hotel guests. Although these hotels conduct no business and have no bank accounts or employees in California, they do advertise heavily in California and obtain a significant percentage of their business from California residents. These advertising activities include billboards located in California, print ads in California newspapers, and ads aired on California radio and television stations. These hotels also maintain an Internet Web site and toll-free phone number where visitors or callers may obtain room quotes and make reservations. We now consider whether, based on these activities, California courts may exercise personal jurisdiction over these hotels, and conclude that they may.

I.

Defendants Harrah's Las Vegas, Inc., Harrah's Laughlin, Inc., Harrah's Operating Company, Inc. (HOC), Rio Properties, Inc., and Harveys Tahoe Management Company, Inc. (collectively defendants) own and operate hotels in Nevada. Plaintiff Frank Snowney is a California resident. In 2001, plaintiff reserved a room by phone from his California residence at one of the hotels owned and operated by defendants. To make the reservation, plaintiff gave the reservation agent his credit card number. At the time plaintiff made the reservation, the agent told him that the room would cost $50 per night plus the room tax. When plaintiff paid his bill at checkout, however, the bill included a $3 energy surcharge.

Plaintiff filed the instant class action against defendants and other entities¹ on behalf of himself and other "persons who were charged an energy surcharge as an overnight hotel guest in one of the defendant's hotels, yet were never given notice that there was an energy surcharge and/or what such charge would be." In the complaint, plaintiff alleged that defendants charged him and other guests an energy surcharge during their stays at hotels owned and operated by defendants without providing notice of these charges during the reservation or check-in process. He further alleged that, in doing so, defendants charged more than the advertised or quoted price. His complaint alleged causes of action for: (1) fraudulent and deceptive business practices in violation of Business and Professions Code section 17200 et seq.; (2) breach of contract; (3) unjust enrichment; and (4) violations of Business and Professions Code section 17500 et seq.

In response, defendants and other entities filed a motion to quash the summons for lack of personal jurisdiction. In support of the motion, defendants submitted a declaration from Brad L. Kerby, the corporate secretary of HEI. Kerby stated that defendants were incorporated in either Nevada or Delaware and maintained their principal place of business in Nevada. According to Kerby, defendants conducted no business in California and had no bank accounts or employees in California. Kerby, however, acknowledged that HOC was licensed to do business in California and that Harrah's Marketing Services Corporation (HMSC), a wholly owned subsidiary of HOC, operated offices in California to "assist customers who contact those offices" and "attempt[ed] to attract a limited number of high-end gaming patrons to Harrah's properties."

In opposition, plaintiff submitted several declarations, a transcript of Kerby's deposition, and various exhibits. This evidence established that defendants: (1) advertised extensively to California residents through billboards in California, California newspapers, and California radio and television stations; (2) had a joint marketing agreement with National Airlines, which served Los Angeles and San Francisco, and advertised in the airline's print media; (3) maintained an interactive Web site that accepted reservations from California residents, provided driving directions to their hotels from California, and touted the proximity of their hotels to California; (4) accepted reservations from California residents through their Internet Web site and a toll-free phone number listed on the site and in their advertisements; (5) obtained a significant percentage of their patrons from California through reservations made through the toll-free number and Web site; and (6) regularly sent mailings to those California residents among the four to six million people enrolled in their "Total Rewards" program. Plaintiff's evidence also confirmed that HSMC maintained several offices in California to handle reservations and market defendants' hotels.

The trial court granted the motion to quash for lack of personal jurisdiction. Specifically, the court found that plaintiff had failed to establish either general or specific jurisdiction. Plaintiff appealed.

The Court of Appeal reversed as to defendants, concluding that defendants had "sufficient contacts with California to justify the exercise of specific jurisdiction." Specifically, the court held that: (1) "by soliciting and receiving the patronage of California residents" through their advertising activities, defendants "have purposefully directed their activities at California residents, have purposefully derived benefit from their contacts with California, and have established a substantial connection with this state"; (2) defendants' California contacts "are substantially connected to causes of action that challenge an alleged mandatory surcharge imposed on all hotel guests"; and (3) the exercise of jurisdiction over defendants would be fair and reasonable. In doing so, the court declined to follow Circus Circus Hotels, Inc. v. Superior Court (1981) 120 Cal. App.3d 546, 174 Cal.Rptr. 885 (Circus Circus), disapproved in part in Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 464, 58 Cal.Rptr.2d 899, 926 P.2d 1085 (Vons).

We granted review to determine whether the exercise of jurisdiction over defendants is proper.

II.

"California courts may exercise personal jurisdiction on any basis consistent with the Constitution of California and the United States. (Code Civ. Proc., § 410.10.) The exercise of jurisdiction over a nonresident defendant comports with these Constitutions `if the defendant has such minimum contacts with the state that the assertion of jurisdiction does not violate "`traditional notions of fair play and substantial justice.'"' ([Vons], supra, 14 Cal.4th [at p.] 444 [58 Cal.Rptr.2d 899, 926 P.2d 1085], quoting Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316 [66 S.Ct. 154, 90 L.Ed. 95] (Internat.Shoe).)" (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 268, 127 Cal.Rptr.2d 329, 58 P.3d 2 (Pavlovich).) "The concept of minimum contacts ... requires states to observe certain territorial limits on their sovereignty. It `ensure[s] that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system.'" (Vons, supra, 14 Cal.4th at p. 445, 58 Cal. Rptr.2d 899, 926 P.2d 1085, quoting World-Wide Volkswagen Corp. v. Woodson (1980) 444 U.S. 286, 292, 100 S.Ct. 559, 62 L.Ed.2d 490 (World-Wide Volkswagen).) To do so, the minimum contacts test asks "whether the `quality and nature' of the defendant's activity is such that it is `reasonable' and `fair' to require him to conduct his defense in that State." (Kulko v. California Superior Court (1978) 436 U.S. 84, 92, 98 S.Ct. 1690, 56 L.Ed.2d 132, quoting Internat. Shoe, supra, 326 U.S. at pp. 316-317,66 S.Ct. 154.) The test "is not susceptible of mechanical application; rather, the facts of each case must be weighed to determine whether the requisite `affiliating circumstances' are present." (Kulko, at p. 92, 98 S.Ct. 1690.)

Under the minimum contacts test, "[p]ersonal jurisdiction may be either general or specific." (Vons, supra, 14 Cal.4th at p. 445, 58 Cal.Rptr.2d 899, 926 P.2d 1085.) Because plaintiff does not claim general jurisdiction, we only consider whether specific jurisdiction exists here.

"When determining whether specific jurisdiction exists, courts consider the `"relationship among the defendant, the forum, and the litigation."' (Helicopteros Nacionales de Colombia v. Hall (1984) 466 U.S. 408, 414, 104 S.Ct. 1868, 80 L.Ed.2d 404, quoting Shaffer v. Heitner (1977) 433 U.S. 186, 204, 97 S.Ct. 2569, 53 L.Ed.2d 683.) A court may exercise specific jurisdiction over a nonresident defendant only if: (1) `the defendant has purposefully availed himself or herself of forum benefits' (Vons, supra, 14 Cal.4th at p. 446, 58 Cal.Rptr.2d 899, 926 P.2d 1085); (2) `the "controversy is related to or `arises out of' [the] defendant's contacts with the forum"' (ibid., quoting Helicopteros, supra, 466 U.S. at p. 414, 104 S.Ct. 1868); and (3) `"the assertion of personal jurisdiction would comport with `fair play and substantial justice'"' (Vons, supra, 14 Cal.4th at p. 447, 58 Cal.Rptr.2d 899, 926 P.2d 1085, quoting Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472-473, 105 S.Ct. 2174, 85 L.Ed.2d 528 [(Burger King)].)" (Pavlovich, supra, 29 Cal.4th at p. 269, 127 Cal.Rptr.2d 329, 58 P.3d 2.)

"When a defendant...