Black v. Arizala

• Decision Date: 05 June 2002
• Citation: 48 P.3d 843,182 Or.App. 16
• Parties: Murray L. BLACK; Melrhea E. Black; Jack Boersma and Barbara J. Boersma, as Trustees for the Boersma Family Trust; J.K. (Kelly) Hola; Jeannie Hola; Albert F. Laurie and Marlene D. Laurie, as Trustees of the A.F. Laurie Trust; Donald J. Meis and Nadine E. Meis, as Trustees for the Meis Family Trust UTA 8/22/95; Joel E. Colley; Mickell A. Colley; Richard Meloy; Seattle ATC Partnership, a partnership consisting of David Andrews, John Mitchell, Thomas Parks, Donald Stobie, and Gerald Traynor, Plaintiffs, and John J. Lenahan; Marilyn S. Lenahan; Willowrun, L.P., an Oregon limited partnership, Appellants, v. Gary H. ARIZALA; Quentin L. Breen; Breen Family Trust; John Duffy; Anthony Easton; Susan D. Easton; SDE Trust; Frank R. Goldstein; Ed Janowski; Javier O. Lamoso; Morgan, Lewis & Bockius, LLP, A Limited Liability Partnership; Fred H. Martinez; Theresa Miller; Margaret W.M. Minnich; Gary North; Lawrence Odell; James T. Perry; Mohammad Rahman; Romulus Corporation, a Delaware corporation; Romulus Telecommunications, Inc., a Puerto Rico corporation; Romulus Engineering, Inc., a Delaware corporation; Unicom Corporation, a Puerto Rico corporation; Supertel Communications Corporation, a Puerto Rico corporation; and Clearcomm L.P., a Delaware limited partnership, formerly known as PCS 2000, L.P., Respondents. Brown and Boston PCS 2000, a partnership consisting of Conrad Brown and Nixon Ray Boston; Kenneth Brown, as Trustee for the Brown Family Trust; William Sean Conway; Lisa M. Conway; Greg Downing; Donald F. Escher and Shirley P. Escher, Trustees for the Escher Daughters Trust; Harvey A. Gilbert and Deanne E. Gilbert, as Trustees for the Gilbert Family Trust; Kurt Gruen; Reyna Gruen; Joseph M. Ha; John F. Johnson And Anne R. Johnson, Trustees for the John F. and Anne R. Johnson Trust; Harold E. Jones, as Trustee for the Harold E. Jones Profit Sharing Trust; Virginia J. Jones; Caroline B. Kazmann, Trustee for the Belle M. Beem Trust; Hollis Kazmann; Ingrid Kluk; Knoxville IVDS Group, a partnership consisting of Robert Seaman and others; Donald C. Linkem; Donald J. Meis; Nadine E. Meis; Edmund J. Mooney, Trustee for the Edmund J. Mooney Trust; J. Ray O'Connor and Maurine O'Connor, Trustees for the J. Ray O'Connor Revocable Family Trust; Bill Ohman; Colleen Ohman; James Popa; RPM2 Group Limited Partnership, a partnership consisting of Michael Suenram, Pamela Suenram, Melburn E. Suenram, and Rose M. Suenram; Nancy L. Ryan; The Estate of Arthur J. Ryan; S & L Properties, a partnership consisting of Douglas A. Shinstine and Eric A. Luther; Elizabeth J. Seaman; Shelley A. McCoy; Ralph L. Stean, Trustee for the Ralph L. Stean Revocable Living Trust U/A April 14, 1992; James F. Stengel, Trustee for the James F. Stengel Living Trust dated 9/28/94; Gretchen B. Stengel, Trustee for the Gretchen B. Stengel Living Trust dated 9/28/94; and Russell S. Wunschel, Plaintiffs, v. Gary H. Arizala; Quentin L. Breen; Breen Family Trust; John J. Duffy; Anthony Easton; Susan D. Easton; SDE Trust; Frank R. Goldstein; Ed Janowski; Javier O. Lamoso; Morgan, Lewis & Bockius, LLP, a limited liability partnership; Fred H. Martinez; Theresa Miller; Margaret W.M. Minnich; Gary North; Lawrence Odell; James T. Perry; Mohammad Rahman; Romulus Corporation, a Delaware corporation; Romulus Telecommications, Inc., a Puerto Rico corporation; Romulus Engineering, Inc., a Delaware corporation; Wireless Express Limited Partnership, a Delaware limited partnership, fka IVDS Auction Consortium Limited Partnership; IVDS Management, Inc., a Delaware corporation; Unicom Corporation, a Puerto Rico corporation; Supertel Communications Corporation, a Puerto Rico corporation; and Clearcomm L.P., a Delaware limited partnership, fka PCS 2000 L.P., Defendants, and Romulus Engineering (MAS) Inc., a Delaware corporation; Datalink Network, Inc., a purported corporation; Romulus Engineering (IVD), Inc., a Delaware corporation, Defendants-Respondents.
• Court: Oregon Court of Appeals

48 P.3d 843

182 Or.App. 16

Murray L. BLACK; Melrhea E. Black; Jack Boersma and Barbara J. Boersma, as Trustees for the Boersma Family Trust; J.K. (Kelly) Hola; Jeannie Hola; Albert F. Laurie and Marlene D. Laurie, as Trustees of the A.F. Laurie Trust; Donald J. Meis and Nadine E. Meis, as Trustees for the Meis Family Trust UTA 8/22/95; Joel E. Colley; Mickell A. Colley; Richard Meloy; Seattle ATC Partnership, a partnershipconsisting of David Andrews, John Mitchell, Thomas Parks, Donald Stobie, and Gerald Traynor, Plaintiffs, andJohn J. Lenahan; Marilyn S. Lenahan; Willowrun, L.P., an Oregon limited partnership, Appellants, v.Gary H. ARIZALA; Quentin L. Breen; Breen Family Trust; John Duffy; Anthony Easton; Susan D. Easton; SDE Trust; Frank R. Goldstein; Ed Janowski; Javier O. Lamoso; Morgan, Lewis & Bockius, LLP, A LimitedLiability Partnership; Fred H. Martinez; Theresa Miller; Margaret W.M. Minnich; Gary North; Lawrence Odell; James T. Perry; Mohammad Rahman; Romulus Corporation, a Delaware corporation; Romulus Telecommunications, Inc., a Puerto Rico corporation; Romulus Engineering, Inc., a Delaware corporation; Unicom Corporation, a Puerto Rico corporation; Supertel Communications Corporation, a Puerto Rico corporation; and Clearcomm L.P., a Delaware limited partnership, formerly known as PCS 2000, L.P., Respondents.

Brown and Boston PCS 2000, a partnership consisting of Conrad Brown and Nixon Ray Boston; Kenneth Brown, as Trustee for the Brown Family Trust; William Sean Conway; Lisa M. Conway; Greg Downing; Donald F. Escher and Shirley P. Escher, Trustees for the Escher Daughters Trust; Harvey A. Gilbert and Deanne E. Gilbert, as Trustees for the Gilbert Family Trust; Kurt Gruen; Reyna Gruen; Joseph M. Ha; John F. Johnson And Anne R. Johnson, Trustees for the John F. and Anne R. Johnson Trust; Harold E. Jones, as Trustee for the Harold E. Jones Profit Sharing Trust; Virginia J. Jones; Caroline B. Kazmann, Trustee for the Belle M. Beem Trust; Hollis Kazmann; Ingrid Kluk; Knoxville IVDS Group, a partnership consisting of Robert Seaman and others; Donald C. Linkem; Donald J. Meis; Nadine E. Meis; Edmund J. Mooney, Trustee for the Edmund J. Mooney Trust; J. Ray O'Connor and Maurine O'Connor, Trustees for the J. Ray O'Connor Revocable Family Trust; Bill Ohman; Colleen Ohman; James Popa; RPM2 Group Limited Partnership, a partnership consisting of Michael Suenram, Pamela Suenram, Melburn E. Suenram, and Rose M. Suenram; Nancy L. Ryan; The Estate of Arthur J. Ryan; S & L Properties, a partnership consisting of Douglas A. Shinstine and Eric A. Luther; Elizabeth J. Seaman; Shelley A. McCoy; Ralph L. Stean, Trustee for the

Ralph L. Stean Revocable Living Trust U/A April 14, 1992; James F. Stengel, Trustee for the James F. Stengel Living Trust dated 9/28/94; Gretchen B. Stengel, Trustee for the Gretchen B. Stengel Living Trust dated 9/28/94; and Russell S. Wunschel, Plaintiffs, v.Gary H. Arizala; Quentin L. Breen; Breen Family Trust; John J. Duffy; Anthony Easton; Susan D. Easton; SDE Trust; Frank R. Goldstein; Ed Janowski; Javier O. Lamoso; Morgan, Lewis & Bockius, LLP, a limitedliability partnership; Fred H. Martinez; Theresa Miller; Margaret W.M. Minnich; Gary North; Lawrence Odell; James T. Perry; Mohammad Rahman; Romulus Corporation, a Delaware corporation; Romulus Telecommications, Inc., a Puerto Rico corporation; Romulus Engineering, Inc., a Delaware corporation; Wireless Express Limited Partnership, a Delaware limited partnership, fka IVDS Auction Consortium Limited Partnership; IVDS Management, Inc., a Delaware corporation; Unicom Corporation, a Puerto Rico corporation; Supertel Communications Corporation, a Puerto Rico corporation; and Clearcomm L.P., a Delaware limited partnership, fka PCS 2000 L.P., Defendants, andRomulus Engineering (MAS) Inc., a Delaware corporation; Datalink Network, Inc., a purported corporation; Romulus Engineering (IVD), Inc., a Delaware corporation, Defendants-Respondents.

9611-09017, 9708-06851; A104791

Court of Appeals of Oregon.

Argued and Submitted August 15, 2001.

Decided June 5, 2002.

Helen T. Dziuba, Portland, argued the cause for appellantsJohn J. Lenahan, Marilyn S. Lenahan, and WillowRun, L.P.On the briefs were Roger K. Harris and Harris Berne Christensen LLP.

Darleen Darnall, Portland, argued the cause for respondentsGary H. Arizala, Javier O. Lamoso, Fred H. Martinez, Margaret W.M. Minnich, Lawrence Odell, James T. Perry, Mohammad Rahman, SuperTel Communications Corp., Unicom Corporation, and ClearComm L.P., fka PCS 2000, L.P. Joining in this brief are Joseph C. Arellano, Portland, and Kennedy Watts Arellano & Ricks L.L.P. for respondentAnthony Easton; Bruce L. Campbell, Thomas C. Sand, Portland, and Miller Nash Wiener Hager & Carlsen LLP for respondentsMorgan, Lewis & Bockius, LLP and Frank R. Goldstein; Steven K. Blackhurst, and Ater Wynne Hewitt Dodson & Skerritt for respondentsQuentin L. Breen, Breen Family Trust, Romulus Corporation, Romulus Telecommunications, Inc., Romulus Engineering, Inc., Romulus Engineering (MAS), Inc., DataLink Network, Inc., and Romulus Engineering (IVD), Inc.; and, Michael D. Kennedy and Kennedy Bowles, P.C., Portland, for respondentsJohn J. Duffy, Theresa Miller, and Ed Janowski.Darleen Darnall and Davis Wright Tremaine LLP filed the reply brief for respondentsGary H. Arizala, Javier O. Lamoso, Fred H. Martinez, Margaret W.M. Minnich, Lawrence Odell, James T. Perry, Mohammad Rahman, SuperTel Communications Corp., Unicom Corporation, and ClearComm L.P., fka PCS 2000, L.P.

No appearance for respondentsSusan D. Easton, SDE Trust, and Gary North.

Before ARMSTRONG, Presiding Judge, and EDMONDS¹ and KISTLER, Judges.

EDMONDS, J.

PlaintiffsJohn J. Lenahan, Marilyn S. Lenahan, and Willowrun, L.P.(plaintiffs), appeal from a judgment dismissing their claims for security law violations and related torts on the ground that a forum selection clause in a limited partnership agreement required them to bring the case in Puerto Rico.²We reverse.

The consolidated cases involve investments in one or more of several related enterprises whose purpose is to seek the award of radio communication frequencies from the Federal Communications Commission for use in data transfer and other communications businesses.Plaintiffs, who are Oregon residents, are parties to only one of the cases, Black v. Arizala.That case involves their investment in PCS 2000, L.P. (PCS), a Delaware limited partnership whose headquarters are in San Juan, Puerto Rico.³In their first amended complaint, plaintiffs allege that, in the process of selling limited partnership interests in PCS, defendants violated the federal securities laws and the securities laws of Oregon and several other jurisdictions; committed common-law fraud; and violated the Oregon Racketeer Influenced and Corrupt Organization Act (ORICO), ORS 166.715 to ORS 166.735.

Plaintiffs invested in PCS by purchasing limited partnership interests.As part of the purchase, they became parties to the PCS Agreement of Limited Partnership(the Agreement).All of their claims in this case are based on events that occurred before they purchased those interests and became parties to the Agreement.Among other things, plaintiffs allege that defendants represented that PCS could buy licenses from the FCC at a certain price when defendants in fact did not know what the price would be; did not disclose the cost of engineering, acquiring, and installing the necessary equipment; did not disclose the risk of losing the licenses if PCS failed to raise sufficient capital or to build the infrastructure within the required times; did not disclose that two principal promoters had been involved in previous unsuccessful transactions in the telecommunications industry and had defaulted on guarantees to equipment suppliers, creating a risk that it would be more difficult for PCS to raise capital; and did not disclose the increased costs and disadvantages of the technology that PCS would use in comparison to conventional cellular telephones.

The trial court dismissed the case based on the choice of law, forum selection, and arbitration clause of the Agreement.That clause provides:

"This Agreement shall be construed and enforced in accordance with and governed by the law of the State of Delaware, excluding that body of law relating to conflicts of law.Any dispute under this Agreement shall be submitted to binding arbitration in San Juan, Puerto Rico under the rules of the American Arbitration Association concerning commercial disputes, and the parties agree to be bound by any decision reached under such rules.Any arbitrator shall be specifically bound by the provisions respecting limitation of liability set forth in this Agreement.Venue for any legal action arising from this Agreement, including enforcement of any arbitration award, shall be in San Juan, Puerto Rico."

Although this clause appears to provide for arbitration as the primary method of resolving disputes under the Agreement, defendants did not ask the court to order plaintiffs to arbitrate their claims.Rather, they relied on the final sentence, which establishes venue "for any legal action arising from this Agreement" in Puerto Rico.They argued that that sentence required plaintiffs to bring this action in Puerto Rico, not in Oregon.The trial court agreed and dismissed the case.

The threshold issue concerns our standard of review.That standard depends on the nature of defendants' motion, about which the parties disagree.On appeal, plaintiffs argue,

"Defendant[s] called [their] motion a Rule 21 motion, but it is not.ORCP 21 does not contain a motion to dismiss based on an arbitration/venue clause in a contract between the parties.Because defendants submitted, and the trial court relied on, facts that do not appear on the face of the [complaints], the motion to dismiss was really a motion for summary judgment."

Defendants counter,

"ORCP 21A

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