Making Guest Reservations on Your Website: How to Avoid Being Sued in Topeka, Kansas
Making Guest Reservations on Your Website:
How to Avoid Being Sued in Topeka, Kansas
Oregon Lodging Association’s "Lodging News"
March 2004
The reality in today’s lodging marketplace is that nearly all lodging properties use the internet in some fashion to advertise the property and to solicit guests. This relatively new forum gives rise to some interesting legal issues which we recommend you consider when using your website to solicit and register guests. One such issue which will be discussed in this article is the possibility of being sued by a guest in another state and a simple, yet effective, method for minimizing this risk.
A significant question that has been presented to various state and federal courts around the country is whether a guest who is injured at a lodging facility while on vacation in one state, can then sue that facility in the guest’s home state. An example of this type of a case where the lodging facility’s internet activities played a significant role in the Court’s reasoning is a case involving the Circus Circus Hotel in Las Vegas. In that case, a New Jersey resident was injured while on the premises of the hotel in Las Vegas. The guest then sued the hotel in New Jersey claiming that the hotel’s national advertising campaign, internet reservations booking system, and direct solicitation of prospective guests in New Jersey constituted sufficient contacts in New Jersey to allow the hotel to be sued in federal district court in New Jersey. For reasons such as cost and familiarity with Nevada law, Circus Circus asked the New Jersey Court to dismiss the action in New Jersey due to New Jersey’s lack of jurisdiction over Circus Circus, a Nevada corporation.
Fortunately, the Court in the Circus Circus case ultimately disagreed with the guest and allowed the case to be transferred to a federal court in Nevada. However, the basis for doing so was, in part, based upon a so-called "forum selection clause" (discussed below) on the web site which required disputes to be settled in Nevada. Although most of the courts which have considered the issue of jurisdiction in the internet context have held that such activity was not sufficient to allow the lodging property to be sued in the guest’s home state, the analysis comes down to a very intense factual review of the specific internet activity at issue. At least one court has distinguished between so-called "passive" internet activities, where the business simply advertises its product over the internet, and more active transactions, where the business actually sells its products or makes reservations over the internet and exchanges information with the customer or guest using the internet website. In the latter instance, it would be more likely that a court would consider a lodging facility to have actively engaged in business in the guest’s home state allowing a guest to sue the property in the guest’s home state.
Of course, as referenced above, determining jurisdiction requires a highly fact-intensive inquiry by a court which will vary from case to case. For an Oregon property for example, it is probably unlikely that a guest from Kansas would be able to sue the property in Kansas if the Oregon property simply advertised over the internet, took an occasional internet reservation from a Kansas guest, and never made any attempt to actually direct its marketing or solicitation activities to Kansas residents. To the contrary, a very different result may occur if a Washington, Idaho or California resident attempts to sue an Oregon property in one of those states. In that case, it may very well be that the lodging property at issue undertakes specific marketing and solicitation efforts of prospective guests in those states and a fair amount of residents from those states tend to make internet reservations using the property’s internet reservation system.
The good news is that the risk of being sued in a guest’s home state far from Oregon can be minimized in a fairly simple and effective manner, at least with regards to a property’s internet activity, by adding a forum selection clause to the property’s website. Such a clause would specifically state that the website is controlled and operated by the lodging property located in Oregon and that all terms of any reservation contract or other legal issues arising from the relationship between the guest and the property will be submitted to the jurisdiction of the state or federal courts in Oregon and interpreted under Oregon law. Absent this type of provision, the Court in the Circus Circus case discussed above may very well have allowed the guest to continue the lawsuit against Circus Circus in New Jersey. In that case, the Court’s opinion indicated that by accepting internet reservations, Circus Circus had placed itself in the "stream of commerce" in New Jersey which may have been sufficient to impose personal jurisdiction in New Jersey over Circus Circus.
It is important to note that questions of jurisdiction can be highly complicated and a detailed discussion of the related constitutional and other legal principles is beyond the scope of this article. Additionally, it does not appear that the enforceability of forum selection clauses in the context of internet hotel reservations has been widely addressed by state and federal courts around the country. However, forum selection clauses are often upheld by courts and a well-drafted and well-placed forum selection clause is likely to be enforced in this context as well.