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The following is a follow-up to an article that was previously published in volume 1, Issue 1 of Gordon & Rees' Hospitality Newsletter. view article...
Nevada Hotels and Casinos should note the California Supreme Court held recently in Snowney v. Harrah's Entertainment Inc., Daily Journal DAR 6517 (June 6, 2005), that businesses that advertise in California-by means of billboards, print ads, and ads aired on California radio and television-can be sued in the state's courts. This decision has far-reaching implications, particularly in the travel and entertainment industries. Any out-of-California businesses in the hospitality industry that solicit customers within California may be affected.
The U.S. Chamber of Commerce, among other business groups, has warned that a decision against the casinos could subject California to a flood of litigation and expose in-state companies to suits in multiple other jurisdictions if other states reciprocate. Most other states have similar "long-arm" statutes granting them jurisdiction over persons outside their geographical boundaries if such persons have "sufficient contacts" with the state in question.
In Snowney v. Harrah's, a California resident filed a class action against Nevada hotels for failing to provide notice of an energy surcharge imposed on hotel guests. At check-out, the hotels added a $3 energy surcharge out without any prior notice. Snowney alleged that the hotels had charged him and other guests more than the advertised price; thereby breaching their contract with their guests, unjustly enriching themselves, and violating the California Unfair Trade Practices Act (B&P 17200 & 17500).
The hotels in Snowney had conducted no business and had no bank accounts or employees in California. However, they heavily advertised in California and a high percentage of their revenues comes from California residents. In addition to the advertisements, these hotels maintained an Internet Website as well as a toll-free phone number where future guests could obtain room prices and make reservations. There was sufficient evidence for the California Supreme Court to conclude that these Nevada hotels had enough "presence" in California to be sued in California.
As of the date of publication of this newsletter, no defendant had formally petitioned the U.S. Supreme Court to review the California Supreme Court's decision.
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