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Riemer v. KSL Recreation Corp.

March 29, 2004

[5] MARILYN L. RIEMER AND GEORGE RIEMER, PLAINTIFFS-APPELLEES,
v.
KSL RECREATION CORPORATION, DEFENDANT-APPELLANT.



[6] Appeal from the Circuit Court of Cook County 00 L 12141 Honorable Susan F. Zwick, Judge Presiding

[7] The opinion of the court was delivered by: Justice McBRIDE

[8]  Illinois residents Marilyn L. Riemer and George Riemer filed this suit on October 20, 2000, seeking damages for personal injuries and loss of consortium, after Marilyn was allegedly struck and injured when a mirror fell from a wall on August 5, 1999, while the Riemers were guests at the Claremont Resort & Spa in California. The sole issue on appeal is whether the circuit court of Cook County correctly determined that the only defendant named in the Riemers' suit, a nonresident corporation, is subject to personal jurisdiction in Illinois because it was "doing business" in Illinois through the sales activities of a subsidiary to a subsidiary corporation. The "doing business" doctrine is codified in section 2-209(b)(4) of the Code of Civil Procedure. 735 ILCS 5/2-209(b)(4) (West 2000). Under the doctrine, a foreign corporation that engages in a continuous and systematic course of business in Illinois becomes subject to the general jurisdiction of its courts, and may be called upon to defend suits in the forum even when those suits have no connection with the corporation's activities in Illinois. The circuit court denied defendant's section 2-301 motion to quash service of process and dismiss plaintiffs' cause of action based upon lack of personal jurisdiction. 735 ILCS 5/2-301 (West 2000). This court, however, granted defendant's interlocutory petition for leave to appeal pursuant to Supreme Court Rule 306(a)(3) (166 Ill. 2d R. 306(a)(3)), and we now address its contention that it lacked sufficient business contacts with Illinois to invoke the general jurisdiction of its courts.

[9]  Discovery on the issue of jurisdiction revealed the following facts. Defendant KSL Recreation Corporation is a Delaware corporation with its primary place of business in La Quinta, California. Defendant corporation, formed in 1992, specializes in identifying and purchasing resort properties and then selling them to sub-subsidiary or "indirect subsidiary" corporations which operate and manage the properties. In 1993, defendant acquired the Doral Golf Resort & Spa in Miami, Florida, and the La Quinta Resort & Club and PGA West in La Quinta, California. In 1996, defendant acquired the Lake Lanier Islands Resort near Atlanta, Georgia. In 1997, defendant acquired the Grand Traverse Resort & Spa in northwest Michigan near Traverse City, Michigan. In 1998, defendant acquired the Claremont Resort & Spa near Berkeley, California, and the Grand Wailea Resort Hotel & Spa in Wailea, Maui, Hawai'i. Finally, in 2000, defendant acquired the Arizona Biltmore Resort & Spa in Phoenix, Arizona. None of the resort properties are owned, operated, or managed by the defendant corporation, and none of them are located in Illinois. Further, defendant does not own or lease any property in Illinois, it maintains no offices, mailing address, telephone number, or employees in Illinois, it is not licensed to do business in Illinois, and it does not have a registered agent for service of process in Illinois. One of defendant's wholly owned direct subsidiary corporations is KSL Recreation Group.

[10]   Direct subsidiary KSL Recreation Group is also a Delaware corporation, which in turn wholly owns at least 26 other Delaware corporations. The sub-subsidiaries include: (a) KSL Claremont Resort, which, since 1998, has owned and operated the facility where Marilyn Riemer is alleged to have been injured in 1999; (b) various corporations which own and operate the five other resort properties and develop and sell surrounding real estate; and (c) KSL Resorts Group, which solicits business for the six resorts. Operating the resorts includes providing lodging, conference services, food and beverages, golf and spa facilities, club memberships, entertainment, and athletic-focused special events.

[11]   The sub-subsidiary soliciting business for all of the resorts, KSL Resorts Group, is based in Reston, Virginia, but has regional United States offices, including a midwest location, near Chicago, in Arlington Heights, Illinois.

[12]   Defendant's only contacts with Illinois were through the activities of its sub-subsidiary's Illinois office. However, plaintiffs were never solicited by the Illinois office and their stay at the California resort was unrelated to any activity in Illinois. Nevertheless, they served process in December of 2000, on the only employee of the sub-subsidiary's Illinois office, Laura Jean Gydesen.

[13]   At a discovery deposition taken on July 19, 2001, Gydesen stated that her employer had existed for about three years and had maintained an Illinois office during that time frame. Gydesen had been in Illinois for approximately 18 months, working as the sub-subsidiary's director of Midwest sales. The Midwest office had been located in Des Plaines, Illinois, but was currently located in her residence in a high-rise apartment building in Arlington Heights, and its mailing address was at an Arlington Heights Mailboxes Etc. location. Her territory included the midwestern states of Illinois, Minnesota, Wisconsin, Nebraska, Iowa, North Dakota, and South Dakota.

[14]   Gydesen specified that the only business her employer conducted was soliciting sales for the six resorts and that her only duties were to solicit sales to groups and meetings. She never solicited individual bookings. She performed her duties through direct contacts, phone campaigns, and trade shows. She did not use telemarketing or advertise through radio or television. She relied on her knowledge of potential clients, and most of her sales efforts went into direct sales calls and trade shows. Two of the four trade shows she attended were in Illinois.

[15]   According to defendant's answers to the Riemers' interrogatories, Gydesen had booked a total of 18 events for the six resorts, including one for the Claremont Resort & Spa in April 2001. Gydesen also stated during her deposition that she had generated about $6 million in business for the six resorts during her 18 months in Illinois (between approximately January 2000 and July 2001). The record also includes a Form 10-K Annual Report filed for the fiscal year ending October 321, 2000, by the sales corporation's parent, KSL Recreation Group. The Form 10-K Annual Report indicated that income generated from operating the resorts totaled $69.5 million for the fiscal year ending on October 31, 1999, and $80.1 million for the fiscal year ending on October 31, 2000.

[16]   It also disclosed that 96% of the revenue derived in fiscal 2000 by intermediate subsidiary KSL Recreation Group "together with its subsidiaries" was attributable to their ownership and management of the resorts, and the remaining 4% of their revenue was attributable to their development and sale of real estate in and around the resorts. The intermediate subsidiary listed its 26 subsidiaries by name, including the sales subsidiary at issue here and multiple subsidiaries associated with each of the six resorts. For example, there were four subsidiaries associated with the hospitality operations and real estate holdings in Michigan, and others associated with the Claremont operations. In the text of its Form 10-K filing, the intermediate subsidiary repeatedly referred to itself and its subsidiaries in the collective, as "the Company," and all of the financial figures disclosed in the Form 10-K were aggregated for "the Company," rather than being broken out by the specific corporations. In the Form 10-K filing, the intermediate subsidiary also made references to the defendant parent corporation, but consistently referred to the defendant parent corporation either by name or as "the Parent," distinguishing it from all of the other KSL corporate entities. Despite these clear and repeated distinctions, the Riemers erroneously suggest to this court, "All of the corporations, parent and subsidiary, are referred to collectively in this [Form 10-K] filing as the 'Company,' " and "The SEC filing lists the corporate officers and directors of the Company (which comprises all the corporate entities) ***." It is apparent, however, that the Riemers' assertions about "the Company" are incorrect. The Form 10-K report filed with the Securities and Exchange Commission by the intermediate subsidiary, KSL Recreation Group, does not suggest in any way that the defendant parent corporation, KSL Recreation Corporation, is part of "the Company."

[17]   Gydesen also said that sometimes she took part in negotiating room rates or special considerations for a particular group, but that she never executed any contracts. The hotel would send a standard 12- to 15-page contract directly to the client or to Gydesen for delivery to the client, and the hotel would execute the contract and any contract amendments. Further, before Gydesen became the Midwest sales director, she worked at the La Quinta and Grand Wailea resorts, and in those capacities she had executed contracts. No one at KSL Resorts executed contracts.

[18]   Gydesen also related that accommodations could be booked through one of the regional sales offices, such as her Midwest office, or directly with a hotel's on-property staff, but if a client booked through the hotel's website, Gydesen would not receive a sales incentive. She had nothing to do with sales over the Internet.

[19]   Gydesen was asked about a trade publication which appears to have been the July/August 2000 edition of "Medical Meetings," in which it was reported that Gydesen had been named "director of sales, Midwest" for defendant KSL Recreation Corporation, rather than for sub-subsidiary KSL Resorts Group. The publisher, Adams Business Media, also reported on the appointments and promotions of other individuals in the meeting sales field. Gydesen stated that if a publication had listed her as a director of sales for KSL Recreation Corporation, the publication was incorrect.

[20]   Larry E. Lichliter, the "L" in the various KSL corporations, swore in an affidavit that sub-subsidiary KSL Claremont Resort -- rather than parent KSL Recreation Corporation -- directly owned and operated the Claremont Resort and Spa in California. Lichliter also provided details about the sub-subsidiary responsible for sales for all the resorts, KSL Resorts Group. He swore it had its own corporate charter, maintained its own bank accounts, corporate books and financial statements, had its own tax identification number, and paid its own taxes. He also swore that defendant parent KSL Recreation Corporation did not "exhibit any amount of control" over the internal affairs of sub-subsidiary KSL Resorts Group. Further, sub-subsidiary KSL Resorts Group retained sufficient operating ...


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