How Not To Be Sued In Another State
I
am the co-editor-in-chief of the Gaming
Law Review and Economics, the law journal covering gaming law. We reported two cases in volume 12, Number 1,
involving patrons who were injured in auto accidents suing casinos. The allegations are typical: the casinos supposedly got the drivers who
caused the accident drunk. Nothing
unusual about that. What is different is
that the suits were filed in Kentucky and Arkansas, states without casinos.
Whether
the casinos can be sued in those states is a question of personal jurisdiction.
Those
two words strike fear into the hearts of most first year law students, and more
than a few practicing lawyers. The
problem with personal jurisdiction is two-fold: first, students are supposed to
figure out the law themselves, through the case method, starting with the
famous, or infamous, Pennoyer v. Neff,
decided by the Supreme Court in 1877, and continuing with court decisions right
up to the present. Which gives a good
idea as to the second problem: If a
doctrine is clear and easy to understand and apply, there would be no need for
courts to have to keep clarifying it for 132 years.
Personal
jurisdiction is of practical importance for casinos, because it answers the
question of whether the casino can be sued in another state. But, I have never heard of casino executives
asking their lawyers, before taking some important step, such as starting a
marketing campaign or modifying a website, "Will this subject us to having to
defend a suit in another state?"
This
is both a lost opportunity for lawyers to help save the company money, and an
indication that one of the main justifications for the doctrine has been lost.
Today,
a discussion of personal jurisdiction begins when a casino has been sued,
usually by a patron, in a federal or state court located in the plaintiff's
home state. The casino's lawyers move to
dismiss the case for lack of jurisdiction.
If they win, it does not mean the case is over. But it does mean that the plaintiff will now
have to start the case all over in a court in the casino's home state. This means the plaintiff will have to spend a
lot of time and money traveling across the country to find a new lawyer and to
attend hearings, only to have the trial heard in front of a judge and jury that
doesn't see casinos as evil deep pockets.
Law
students learn that the decision whether to dismiss involves a multi-step
analysis. The overwhelming focus in on
whether having the trial in the plaintiff's home state, called the forum state,
would violate the defendant's due process rights. This is usually framed as, "Does the
defendant have minium contacts with the forum state so that maintenance of the
suit would not offend traditional notions of fair play and substantial
justice."
Lots
of factors get looked at, particularly whether the defendant "purposefully
availed itself of the privilege of conducting activities within the forum
state." Although tens of thousands of
cases discuss this factor, the reason behind it has been lost: Due process is
not only a test of fairness. It also
tells the casino: you can make a conscious decision to avoid being sued in a
state by limiting your activity there.
Of
course, sometimes it is impossible to avoid being haled into an out-of-state
court. If a casino has set up an office
in another state it is almost always amenable to suit there, even for claims
having nothing to do with that office.
Courts have decided that having continuous and systematic contacts means
it would not be too much of a burden to have to defend any lawsuit there.
Other
times, the decision of whether to step up the casino's involvement with a state
is so clear that the question of being open to suit is unimportant. Harrah's Entertainment, Inc. (HEI), was sued
in a California state court by a couple who claimed they were injured in an
elevator accident in the Rio in Las Vegas.
In unreported decisions, the trial and appellate courts ruled that HEI
could be sued in California on any claim arising anywhere,"based on HEI's own press
release announcing HEI operates and manages an Indian gaming casino near San
Diego..." HEI is not going to turn down
a California casino just because someone might sue them there on an unrelated
claim.
On
the other hand, even a company as big as Harrah's, with casinos in dozens of
jurisdictions, can protect itself. Here,
HEI claimed that a separate company ran the Indian casino. Unfortunately, "They submitted no evidence to
support their contention a company called HCAL, Inc., actually operates and
manages the casino."
But
Harrah's lawyers had been careful in setting up the parent company's
relationship with two other subsidiaries, Harrah's Operating Company, Inc. and
Rio Properties, Inc. The Court of Appeal
dismissed both these companies from the suit, holding that the injured plaintiffs
were not able to show they did any business in California.
Companies
are considered separate legal entities, even if they are parent and subsidiary.
Harrah's
again showed how this works in a strange case brought by a couple who claimed
Harrah's Marina falsely reported to the IRS that they had won money, when they
had never made a bet! But the suit was dismissed, because the
plaintiffs filed it in Louisiana and the Atlantic City casino company,
technically Marina Associates, had almost no contact with that state. The parent company and Louisiana subsidiary
had nothing to do with this claim. The
plaintiffs tried to argue that they were injured in Louisiana by the allegedly false
statements. But the court held that that
was merely fortuitous: even if the
allegation were true, the casino had not intentionally targeted Louisiana.
Although
every case depends on its specific facts, there are some rules.
Having
a website alone is safe. A court
dismissed a suit filed in Missouri against Las Vegas's Imperial Palace for a
slip and fall at the hotel, even though the site allowed reservations to be
made and advertised an 800 number. The
casino did not direct its advertisements specifically toward Missouri.
On
the other hand, Nassau's Crystal Palace was forced to defend a suit filed in
Florida, because the Bahamian company had so many contacts with that
state. It even listed the Ft. Lauderdale
address of its subsidiary, Crystal Palace U.S. Inc., on many of its advertisements
and checks.
The
biggest problem for lawyers and executives trying to avoid, in advance, being
dragged into court in another state, is that the courts are split on how much
advertising is too much, and whether they should count how many patrons live in
the forum state. In the most recent auto
accident cases, the Kentucky court noted that the defendant, Caesars Indiana,
"earned at least $109 million from Kentucky residents in 2000;" while the
Arkansas court noted, "Over 14,380 Arkansas patrons are registered" with
Harrah's Shreveport.
On
the other hand, a Pennsylvania court held Claridge Tower at Bally's could not
be dragged to Philadelphia to defend an escalator accident claim, even though
Bally's advertises extensively and "thirty-three percent of all people
traveling on daily buses to Claridge Tower - 11,300 people - came from
Philadelphia and surrounding Pennsylvania areas."
One
court, in 1992, even held that Circus Circus and its subsidiary, the Edgewater
Hotel, could be sued in California for a Laughlin boating accident, but another
subsidiary, the Colorado Belle, could not be sued for the same accident,
because it did not advertise enough.
Personal
jurisdiction may sometimes be clear as mud.
But casino executives would still be wise to ask their lawyers about it
- before they are sued.
END
#141 © Copyright 2009, all rights reserved worldwide. Gambling and the Law® is a registered trademark of Professor I Nelson Rose. Professor I Nelson Rose is recognized as one of the world's leading experts on gambling law and is a consultant and expert witness for governments, industry and players. His latest books, Internet Gaming Law and Gaming Law: Cases and Materials, are available through his website, www.GamblingAndTheLaw.com.
