Opinion
No. G032043.
10-31-2003
HARRAHS OPERATING COMPANY, INC., et al., Petitioners, v. THE SUPERIOR COURT OF ORANGE COUNTY, Respondent; GREGORY J. PORTER et al., Real Parties in Interest.
Tuverson & Hillyard and Rebecca L. Lipscomb for Petitioners. No appearance for Respondent. Speiser Krause, John J. Veth and Lisa G. Shah for Real Parties in Interest.
Petitioners Harrahs Entertainment, Inc. (HEI), Harrahs Operating Company, Inc. (HOC), and Rio Properties, Inc. (RPI), (collectively Petitioners) seek a writ of mandate compelling the trial court to vacate its order denying their motion to quash service of summons for lack of personal jurisdiction. Real parties in interest Gregory Porter and Renee Porter (the Porters) sued HEI, HOC, and RPI in Orange County Superior Court, alleging injuries caused by an elevator accident at the Rio All-Suite Hotel & Casino in Las Vegas, Nevada.
We conclude HEI is subject to general personal jurisdiction in California based on HEIs own press release announcing HEI operates and manages an Indian gaming casino near San Diego and has entered into a partnership with the Rincon San Luiseño Band of Mission Indians for operating the casino. Petitioners did not object to the admission of the press release. They submitted no evidence to support their contention a company called HCAL, Inc., actually operates and manages the casino. Operating and managing an Indian gaming casino are sufficient minimum contacts to support general personal jurisdiction over HEI in California. We therefore deny the writ petition as to HEI.
We conclude, however, HOC and RPI are not subject to personal jurisdiction in California based on the record. The Porters contend HOC and RPI are subject to general personal jurisdiction in California based on claims that (1) HEI conducts all of its gaming business, including the operation of the Indian gaming casino near San Diego, through HOC and (2) HOC and RPI are HEIs alter egos. The evidence was insufficient to support those claims, and the Porters do not contend HOC or RPI is subject to specific personal jurisdiction. We therefore grant the writ petition as to HOC and RPI and direct the trial court to vacate its order denying the motion to quash service of summons as to those two parties.
FACTS AND PROCEEDINGS IN THE TRIAL COURT
Gregory J. Porter, a California resident, alleged he suffered serious injuries as a result of an elevator malfunction at the Rio All-Suite Hotel & Casino (the Rio Hotel) in Las Vegas, Nevada. Porter was a registered guest of the Rio Hotel at the time of the mishap. Porter and his wife Renee sued HOC, HEI, and RPI for personal injury and loss of consortium.
HOC and HEI are incorporated in the State of Delaware and have their principal places of business in the State of Nevada. HOC is a wholly owned subsidiary of HEI. HOC is registered to do business in California and has an agent for service of process in this state.
RPI is incorporated and has its principal place of business in the State of Nevada. RPI is alleged to own and operate the Rio Hotel and is alleged to be a wholly owned subsidiary of HEI.
HEIs 2001 annual report stated: "[HEI], a Delaware corporation, operates casinos in more markets in the United States than any other casino company. . . . [¶] We conduct our business through a wholly owned subsidiary, [HOC] and through HOCs subsidiaries. Our principal asset is the stock of HOC, which holds directly or indirectly through subsidiaries substantially all of the assets of our businesses."
Petitioners moved to quash service of summons on the ground of lack of personal jurisdiction. In opposing the motion, the Porters submitted documentation purporting to show (1) HOC is HEIs principal asset, (2) HEI conducts its gaming business through HOC, (3) HEI and HOC are alter egos, and (4) HEI and HOC together own and operate the Rio Hotel. The Porters also submitted a press release issued by HEI dated August 8, 2002 announcing "Harrahs Entertainment Opens Southern Californias First Las Vegas-Style Casino." The press release stated: "Harrahs Rincon Casino and Resort, the first Southern California casino operated by a major Las Vegas gaming company, opens its doors today near San Diego. [¶] The $125 million resort, owned by the Rincon San Luiseño Band of Mission Indians, is the 26th gaming property operated by Harrahs Entertainment, Inc. (NYSE: HET)." Petitioners did not object to the Porters evidence.
The trial court denied the motion to quash. Petitioners filed a petition for writ of mandate challenging the trial courts order denying their motion to quash. We issued an order to show cause and set the matter for hearing.
Burden of Proof and Standard of Review
When a nonresident defendant challenges personal jurisdiction, the plaintiff bears the burden of proof by a preponderance of the evidence to demonstrate the defendant has sufficient minimum contacts with the forum state to justify jurisdiction. (Vons Companies, Inc. v. Seabest Foods, Inc. (1996) 14 Cal.4th 434, 449 (Vons); DVI, Inc. v. Superior Court (2002) 104 Cal.App.4th 1080, 1090.) The plaintiff must "`present facts demonstrating that the conduct of defendants related to the pleaded causes is such as to constitute constitutionally cognizable "minimum contacts." [Citation.]" (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at pp. 1090-1091.) An unverified complaint has no evidentiary value in meeting the plaintiffs burden of proving minimum contacts. (Id. at p. 1091.)
When the evidence of jurisdictional facts is not in dispute, whether the defendant is subject to personal jurisdiction is a legal question subject to de novo review. (Vons, supra, 14 Cal.4th at p. 449.) When evidence of jurisdiction is in dispute, the trial courts determination of factual issues is reviewed for substantial evidence. (Ibid.; see also DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at p. 1091.) We must accept the trial courts resolution of factual issues and draw all reasonable inferences in support of the trial courts order. (Integral Development Corp. v. Weissenbach (2002) 99 Cal.App.4th 576, 584.)
JURISDICTIONAL REQUIREMENTS
California courts may exercise jurisdiction over nonresidents "on any basis not inconsistent with the Constitution of this state or of the United States." (Code Civ. Proc., § 410.10.) Code of Civil Procedure section 410.10 "manifests an intent to exercise the broadest possible jurisdiction, limited only by constitutional considerations." (Sibley v. Superior Court (1976) 16 Cal.3d 442, 445.)
The federal Constitution permits a state to exercise jurisdiction over a nonresident defendant if the defendant has sufficient "minimum contacts" with the forum such that "maintenance of the suit does not offend `traditional notions of fair play and substantial justice. [Citations.]" (Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316.) "The `substantial connection, [citations], between the defendant and the forum State necessary for a finding of minimum contacts must come about by an action of the defendant purposefully directed toward the forum State. [Citations.]" (Asahi Metal Industry Co. v. Superior Court (1987) 480 U.S. 102, 112.)
Personal jurisdiction may be either general or specific. (Vons, supra, 14 Cal.4th at p. 445.) A nonresident defendant is subject to the forums general jurisdiction where the defendants contacts are "`substantial . . . continuous and systematic." (Ibid., quoting Perkins v. Benguet Mining Co. (1952) 342 U.S. 437, 445, 446.) In that situation, the cause of action need not be related to the defendants contacts. (Vons, supra, 14 Cal.4th at p. 445; Cornelison v. Chaney (1976) 16 Cal.3d 143, 147.) "Such a defendants contacts with the forum are so wide-ranging that they take the place of physical presence in the forum as a basis for jurisdiction." (Vons, supra, 14 Cal.4th at p. 446.)
If the nonresident defendant does not have substantial and systematic contacts with the forum state, the defendant may be subject to specific jurisdiction if (1) "`the defendant has purposefully availed [itself] of forum benefits" with respect to the matter in controversy, (2) "`the "controversy is related to or `arises out of [the] defendants contacts with the forum,"" and (3) the exercise of jurisdiction would comport with fair play and substantial justice. (Pavlovich v. Superior Court (2002) 29 Cal.4th 262, 269; Vons, supra, 14 Cal.4th at pp. 446, 447; see also Burger King Corp. v. Rudzewicz (1985) 471 U.S. 462, 472, 476.)
Discussion
The Porters contend all three Petitioners are subject to general personal jurisdiction in California. The Porters do not contend any Petitioner is subject to specific personal jurisdiction in California.
In analyzing general personal jurisdiction, we examine whether each Petitioner has substantial, continuous, and systematic contacts with California. (Vons, supra, 14 Cal.4th at p. 445; DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at p. 1091.) In determining whether the Porters met their burden of proving minimum contacts, we consider only evidence presented to the trial court (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at pp. 1096-1097) and therefore decline to consider the supplemental exhibits submitted with the Porters answer to the writ petition.
I. General Personal Jurisdiction over HEI
The Porters contend HEI is subject to general personal jurisdiction in California because it operates and manages Harrahs Rincon Casino and Resort near San Diego. In support of this contention, the Porters submitted the press release announcing "Harrahs Entertainment Opens Southern Californias First Las Vegas-Style Casino." We need not decide whether the press release is inadmissible hearsay (Evid. Code, § 1200), admissible as an admission against interest (Evid. Code, § 1220), or properly authenticated (Evid. Code, §§ 1400, 1401). Petitioners did not object to the press release, and therefore the trial court properly considered it.
Did this press release meet the Porters burden of proving minimum contacts with California sufficient to support general personal jurisdiction over HEI? Yes.
The press release stated, "Harrahs Rincon Casino and Resort, the first Southern California casino operated by a major Las Vegas gaming company, opens its doors today near San Diego." The press release specifically identified HEI, both by name and by its New York Stock Exchange ticker symbol, as the operator of the casino: "The $125 million resort, owned by the Rincon San Luiseño Band of Mission Indians, is the 26th gaming property operated by Harrahs Entertainment, Inc. (NYSE: HET)." The press release contained this statement from HEIs chairman and chief executive officer: "`We are honored to be partners with the Rincon Band in this exciting new resort . . . . We have been the clear leader in tribal gaming ventures with our successful resorts in Arizona, North Carolina and Kansas." The press release also contained this statement from the tribal chairman: "`The opening of this resort marks the beginning of a new era of economic empowerment for the Rincon people . . . . I would like to thank Harrahs for delivering on its promises to us. We look forward to a rewarding relationship with Harrahs Entertainment in the years to come."
Under federal law, an Indian tribe may enter into management contracts for the operation and management of tribal gaming activity. (25 U.S.C. § 2711.) The press release raises the inference HEI entered into such a management contract with the Rincon San Luiseño Band of Mission Indians to operate and manage Harrahs Rincon Casino and Resort.
Petitioners contend HEI does not operate Harrahs Rincon Casino and Resort. Petitioners contend that a corporation named HCAL, Inc., an entity affiliated with HEI, actually operates and manages the casino for the Rincon San Luiseño Band and that a management contract exists between HCAL and the Rincon San Luiseño Band. Petitioners submitted no evidence to support those contentions. Petitioners did not produce evidence of HCALs existence or the purported management contract between HCAL and the Rincon San Luiseño Band. A company named HCAL does not appear in any of the evidence submitted to the trial court.
To the contrary, HEIs 2001 annual report stated: "[HEI] conduct[s its] business through a wholly owned subsidiary, [HOC] and through HOCs subsidiaries." The 2001 annual report thus suggests HOC or an HOC subsidiary, and not HEI, entered into the management agreement with the Rincon San Luiseño Band. But the annual report did not state HEI conducts all of its business through HOC or an HOC subsidiary. Even if that were the case in 2001, we do not know whether the same held true in August 2002, when the press release was issued, or in February 2002, when the alleged elevator malfunction occurred.
Operating and managing an Indian gaming casino in California constitutes substantial and continuous conduct in the state sufficient to create general personal jurisdiction. By submitting the press release—to which Petitioners did not object—the Porters met their burden of showing HEI has minimum contacts with California. If Petitioners had evidence showing HEI did not enter into a management contract with the Rincon San Luiseño Band and did not operate Harrahs Rincon Casino and Resort, it was incumbent on them to produce such evidence. Petitioners failed to do so. We therefore deny the writ petition as to HEI.
II. General Personal Jurisdiction over HOC
The Porters contend HOC is subject to general personal jurisdiction in California based on their claims that (1) HOC "is the instrumentality through which [HEI] conducts all of its gaming business" and (2) HEI and HOC are alter egos.
In support of the first claim, the Porters rely on HEIs 2001 annual report, which stated that HEI conducts its business through HOC and through HOCs subsidiaries, and that HEIs principal asset is HOCs stock. Petitioners did not object to the admission of HEIs 2001 annual report. The Porters contention that HOC is subject to general personal jurisdiction derives from this syllogism based on the annual report: HEI operates and manages Harrahs Rincon Casino and Resort; HEI conducts its gaming business through HOC and through HOCs subsidiaries; therefore, HOC operates and manages Harrahs Rincon Casino and Resort on behalf of HEI and has contacts with California.
The syllogism has several flaws. First, the annual report did not state HEI conducts all of its business through HOC or an HOC subsidiary. Second, even if HEI did conduct all of its gaming business through HOC in 2001, we do not know whether the same held true in August 2002, when the press release was issued, or in February 2002, when the elevator mishap allegedly occurred.
The syllogisms most significant flaw is the Porters failure to show that HOC, as opposed to one of HOCs subsidiaries, conducted HEIs business with respect to the management contract with the Rincon San Luiseño Band. The distinction between HOC conducting HEIs business and a subsidiary of HOC conducting HEIs business is critical. If a subsidiary of HOC operates and manages Harrahs Rincon Casino and Resort for HEI, it would not automatically follow that HOC is subject to personal jurisdiction in California. A parent corporation is subject to personal jurisdiction based on the contacts of a wholly owned subsidiary company only under limited circumstances. (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at pp. 1092-1094.) If a wholly owned subsidiary of HOC operated and managed Harrahs Rincon Casino and Resort, then HOC would be subject to jurisdiction in California based on the subsidiarys conduct only if (1) the subsidiary and HOC are alter egos, (2) the subsidiary performs a function that is compatible with and assists HOC in the pursuit of HOCs business, or (3) HOC exercises such a degree of control over the subsidiary as to reflect HOCs purposeful disregard of the subsidiarys independent corporate existence. (Id. at pp. 1087, 1093-1094.)
The Porters did not present evidence of the relationship between HOC and any of its subsidiaries. The evidence presented did not permit a determination whether HOC would be subject to general personal jurisdiction in California based on the conduct of an HOC subsidiary under the principles set forth in DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th 1080, 1092-1094.
The Porters second basis for jurisdiction over HOC is that HEI and HOC supposedly are alter egos. The trial court commented the Porters alter ego claim was "a good argument," but did not make an express finding that HEI and HOC are alter egos. We infer the trial court made an implied finding that HEI and HOC are alter egos and determine whether that implied finding is supported by substantial evidence. (Watts v. Crawford (1995) 10 Cal.4th 743, 762, fn. 15; Kulko v. Superior Court (1977) 19 Cal.3d 514, 519, fn. 1.)
"`[J]udicial jurisdiction over the parent corporation will give the state judicial jurisdiction over the subsidiary corporation if the parent so controls and dominates the subsidiary as in effect to disregard the latters independent corporate existence." (Mathes v. National Utility Helicopters Ltd. (1977) 68 Cal.App.3d 182, 189-190.) The basic test is whether the parties are alter egos. (Id. at p. 190.) "The party asserting alter ego liability must establish (1) `such a unity of interest and ownership between the corporation and its equitable owner that the separate personalities of the corporation and the shareholder do not in reality exist and (2) `an inequitable result if the acts in question are treated as those of the corporation alone." (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at p. 1093.) The factors that show a "`unity of interest" vary according to each case and are fact specific. (Tomaselli v. Transamerica Ins. Co. (1994) 25 Cal.App.4th 1269, 1285, fn. 13.) "Among the facts which can be considered are financial issues (e.g., was the corporation adequately capitalized?); corporate formality questions (e.g., was stock issued, are minutes kept and officers and directors elected, are corporate records segregated?); ownership issues (e.g., what is the stock ownership picture?); commingling issues (e.g., are corporate assets commingled, does the parent company merely use the corporate shell of the subsidiary to obtain goods and services for the parent company?); etc." (Ibid.)
The Porters submitted evidence showing: (1) HEI owns all of HOCs stock, and HOC owns, directly or through subsidiaries, "substantially all of the assets of [HEIs] businesses"; (2) HEI and HOC have the same chief executive officer, president, and chief financial officer; (3) HEI and HOC prepare consolidated financial statements; (4) HEI and HOC use the same corporate address; and (5) HEI conducts its business through HOC and HOCs subsidiaries.
This evidence did not show a unity of interest and ownership between HOC and HEI such that they have no true separate existence. The fact HEI and HOC produce consolidated financial reports does not establish unity of interest, and "`[t]he cases are unanimous that consolidated reporting is standard business practice and will not support jurisdiction in the absence of evidence establishing an agency relationship." (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at p. 1095.) Other than the same chief executive officer, president, and chief financial officer, HEI and HOC have different corporate executives. The evidence did not show commingling of assets, failure to keep corporate formalities, inadequate capitalization, or HEIs use of HOC as a mere shell. In essence, the evidence simply showed the relationship between HEI and HOC was that of a parent company and its wholly owned subsidiary, which alone would not subject HOC to general personal jurisdiction. (See id. at p. 1087; Mathes v. National Utility Helicopters Ltd., supra, 68 Cal.App.3d at p. 190.)
Even if the evidence were sufficient to support a finding of "`unity of interest and ownership" between HEI and HOC, the Porters presented no evidence tending to show "`an inequitable result" if HEIs acts were treated as HEIs alone. Here, "there was no showing of such critical facts as inadequate capitalization, commingling of assets, disregard of corporate formalities, nor any of the other facts which demonstrate . . . that an inequitable result would have followed if the corporate separateness had been respected." (Tomaselli v. Transamerica Ins. Co., supra, 25 Cal.App.4th at p. 1285.)
HOCs only contacts with California, independent of its relationship with HEI, are that HOC is registered to do business in California and has an agent for service of process in this state. As the Porters counsel correctly recognized at oral argument, those facts alone are insufficient to establish general personal jurisdiction. (DVI, Inc. v. Superior Court, supra, 104 Cal.App.4th at p. 1095.)
Accordingly, we conclude the Porters failed to meet their burden of submitting evidence to establish HOCs contacts with California were substantial, continuous, and systematic. HOC therefore is not subject to personal jurisdiction in California.
III. General Personal Jurisdiction over RPI
The Porters do not claim RPI has any contacts with California. The Porters contend RPI is subject to general personal jurisdiction in California based on their claim that RPI and HEI are alter egos and RPI "exists only for the benefit of [HEI]."
In support of their alter ego argument, the Porters rely on a press release dated August 11, 1998 announcing HEIs intent to purchase the stock and assume the debt of a company named Rio Hotel and Casino, Inc. HEIs form 10-Q for the quarterly period ended September 30, 1998 described HEIs acquisition of Rio Hotel and Casino, Inc., as follows: "In third quarter Harrahs announced the signing of a definitive merger agreement with Rio Hotel and Casino, Inc. ("Rio"), under which Harrahs will acquire Rio for stock and the assumption of Rios outstanding debt. Rio stockholders will receive one share of Harrahs stock for each share of Rio stock owned. The combined value of the stock to be issued and the debt to be assumed by Harrahs is estimated to be approximately $880 million." The Porters also rely on an HEI Web site directory and HEI statistical data including the Rio Hotel as a "Harrahs Casino."
This evidence failed to meet the Porters burden of proving minimum contacts for two reasons. First, the evidence did not reveal the relationship between RPI and Rio Hotel and Casino, Inc., or between RPI and HEI. The evidence showed HEI purchased the stock of Rio Hotel and Casino, Inc., which is not a party to this lawsuit. The Porters have treated Rio Hotel and Casino, Inc., and RPI as one and the same but submitted no evidence regarding the relationship between the two companies. With respect to the relationship between RPI and HEI, the most we can discern from the record is that HEI is RPIs "ultimate parent."
Second, assuming, as the Porters do, RPI and Rio Hotel and Casino, Inc., are the same corporation, the evidence fails to establish RPI and HEI are alter egos. At most, the evidence shows RPI is a wholly owned subsidiary of HEI. But "[o]wnership of all the stock of the subsidiary and the existence of common directors do not by themselves fuse the parent and subsidiary for purposes of jurisdiction." (Mathes v. National Utility Helicopters Ltd., supra, 68 Cal.App.3d at p. 190; see also Rollins Burdick Hunter of So. Cal., Inc. v. Alexander & Alexander Services, Inc. (1988) 206 Cal.App.3d 1, 9.) The evidence supported the conclusion RPI and HEI are separate entities. RPI and HEI have different officers; they have different corporate addresses; and they have separate employees. RPI therefore is not subject to general personal jurisdiction in California.
Disposition and Order
The petition for writ of mandate is denied as to HEI and granted as to HOC and RPI. Let a writ of mandate issue directing the superior court to vacate its order denying the motion to quash service of summons as to HOC and RPI and to enter an order granting the motion as to them.
The Porters are to recover their costs incurred in this proceeding against HEI. HOC and RPI are to recover their costs incurred in this proceeding. HEI is to bear its own costs.
WE CONCUR SILLS, P. J. and RYLAARSDAM, J.