The Planning Group Of Scottsdale v. Properties

• Decision Date: 06 May 2010
• Docket Number: No. 1 CA-CV 09-0224.,1 CA-CV 09-0224.
• Citation: 224 Ariz. 306,230 P.3d 365
• Parties: The PLANNING GROUP OF SCOTTSDALE, L.L.C., an Arizona limited liability company; and Altair, L.L.C., an Arizona limited liability company, Plaintiffs/Appellants,v.LAKE MATHEWS MINERAL PROPERTIES, LTD., a California limited partnership; James D. Holmes and Jane Doe Holmes, husband and wife; Shirley Smith and John Doe Smith, wife and husband; Randy Evers and Jane Doe Evers, husband and wife; Integrated Resources, Inc., a California Corporation, Defendants/Appellees.
• Court: Arizona Court of Appeals

224 Ariz. 306

230 P.3d 365

The PLANNING GROUP OF SCOTTSDALE, L.L.C., an Arizona limited liability company; and Altair, L.L.C., an Arizona limited liability company, Plaintiffs/Appellants,v.LAKE MATHEWS MINERAL PROPERTIES, LTD., a California limited partnership; James D. Holmes and Jane Doe Holmes, husband and wife; Shirley Smith and John Doe Smith, wife and husband; Randy Evers and Jane Doe Evers, husband and wife; Integrated Resources, Inc., a California Corporation, Defendants/Appellees.

No. 1 CA-CV 09-0224.

Court of Appeals of Arizona Division 1, Department C.

May 6, 2010.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Lewis and Roca LLP by George L. Paul, Thomas J. Morgan, Stefan M. Palys, Phoenix, Attorneys for Plaintiffs/Appellants.

Sherman & Howard L.L.C. by Daniel P. Beeks, Phoenix, Attorneys for Defendants/Appellees.

OPINION

KESSLER, Judge.

¶ 1 This appeal presents the question whether Arizona has specific personal jurisdiction over California nonresident Defendant Lake Mathews Mineral Properties, LTD (“LMMP”) and several related individuals and entities living or acting in California (collectively “Nonresident Defendants”). LMMP entered into an agreement to have The Planning Group of Scottsdale, L.L.C. (“TPG”) and Altair, L.L.C. (“Altair”) (collectively “ Plaintiffs”), both located in Arizona, fund a mining project in California. The Nonresident Defendants' only contacts with Arizona were that: (1) An already existing report related to the mining operation was delivered to the Plaintiffs by an Arizona resident at that resident's suggestion because he was a relative of one of the Nonresident Defendants; (2) Money was sent from Arizona to California; and (3) There were interstate communications between the parties. Plaintiffs sued the Nonresident Defendants in Arizona alleging both breach of contract and securities fraud. Applying the purposeful availment test, we affirm the superior court's dismissal of the complaint against the Nonresident Defendants for lack of personal jurisdiction.

I. FACTUAL AND PROCEDURAL HISTORY¹

A. The Parties

¶ 2 TPG and Altair made investments in various securities and TPG also sold insurance. Both companies are owned by Reid Johnson (“Johnson”). Jeffery Clark (“Clark”) is an employee of both TPG and Altair. Both Johnson and Clark are the managers of Altair.

¶ 3 LMMP is a California company owning mining rights under and adjacent to Lake Mathews in California. Nonresident Defendant James D. Holmes (“Holmes”) is the general partner of LMMP. Nonresident Defendant Shirley Smith (“Smith”) is LMMP's California attorney who represented the company on a straight contingency in return for a stated percentage of its profits. Nonresident Defendant Randy Evers (“Evers”) and his company, Nonresident Defendant Integrated Resources, Inc. (“Integrated”), are engineering consultants for LMMP in California. Defendant Lee Subke (“Subke”) ² is a retired real estate broker living in Arizona who happens to be Smith's brother.

B. The Incident

¶ 4 In 2005, Subke met with Clark to discuss a personal life insurance program offered by TPG. During their meeting, Subke learned that, in addition to selling insurance, TPG also invested in outside projects. Consequently, Subke contacted Smith to ask whether LMMP would authorize him to give Clark a copy of its due diligence report (“Report”). Smith relayed the request to Holmes, who responded affirmatively and Subke gave the Report to Clark, suggesting he talk to Smith. It is undisputed that this introduction between the Nonresident Defendants and Plaintiffs was not initiated by the Nonresident Defendants. This ended Subke's involvement in the matter, although one year later LMMP offered Subke a reward for introducing LMMP to Plaintiffs.

¶ 5 During the next few weeks, Clark, Holmes and Smith had several discussions via phone and email regarding Plaintiffs potentially funding LMMP's California mining project. It is unclear who among them made the first communication as the only evidence of record is that the communications were initiated by LMMP, Smith and Plaintiffs. Ultimately, the parties agreed to meet at the Los Angeles International Airport (“LAX”) to further discuss the California project's funding. Clark attended on behalf of TPG and Altair and Smith and Holmes attended on behalf of LMMP. After the meeting at LAX, Smith prepared in California a document called “Agreement: Basic Propositions Sufficient for Immediate Funding of the Holmes Project” (“Basic Propositions”). Basic Propositions was executed in California and faxed to Arizona. It provided TPG would fund the mining project with $370,000 by making $100,000 available initially with $90,000 available during each of the following three months. On the first payment, TPG would earn interest at nine percent per year and be entitled to be paid ten percent of the total gross proceeds from the mining project when realized. On the other payments, TPG would earn 3.333 percent of the gross proceeds. LMMP was to bear sole responsibility for management duties and no liability accrued against it if the project failed to yield proceeds.

¶ 6 TPG and Altair sent $100,000 to LMMP in California.³ Approximately one month later, TPG and Altair wired $90,000 to LMMP. Before TPG and Altair's third payment was due, Plaintiffs' Arizona attorney sent LMMP a “Term Sheet.” According to Plaintiffs, the Term Sheet formalized the transaction and terms on which they would be willing to continue to fund the project in even greater amounts. According to Smith, however, the Term Sheet contained new terms departing from Basic Propositions. LMMP did not agree to the Term Sheet and TPG and Altair refused to make the final two payments. During this period Smith contacted the Plaintiffs and their attorney in Arizona by telephone, email and fax.

¶ 7 In December 2005, LMMP, TPG and Altair had a face-to-face meeting at LAX to discuss possibly resolving the conflict between them. A few days later, Holmes sent a letter to Clark in Arizona outlining several alternatives that were discussed at the LAX meeting.

C. The Complaint and Trial Court Ruling

¶ 8 Two years later, after the parties were still unable to resolve their differences, TPG and Altair filed a complaint in Maricopa County Superior Court against Nonresident Defendants and Subke. The complaint sought declaratory relief to require the defendants to sign: (1) A note evidencing the Plaintiffs' investment in the project; (2) A deed giving Plaintiffs royalty interests; and (3) Any other documents to memorialize the transaction. Plaintiffs also alleged Nonresident Defendants had breached the contract and sought specific performance or restitution of the amounts paid to Defendants, Defendants were liable for securities fraud, and Defendants should give an accounting of their use of the invested funds and mining operations so Plaintiffs could collect royalties and monitor the mining operations.

¶ 9 Nonresident Defendants moved to dismiss the complaint for lack of personal jurisdiction, arguing Plaintiffs' complaint only alleged general jurisdiction, and that they did not have sufficient contacts with Arizona for general jurisdiction. Plaintiffs moved to amend their complaint to clarify they were alleging specific personal jurisdiction. Oral argument was held on the two motions. The court did not hold an evidentiary hearing, but the Nonresident Defendants and Plaintiffs submitted documents to the court in support of their respective positions. While the court permitted Plaintiffs to amend their complaint to clarify that they were alleging specific jurisdiction, it dismissed all of Plaintiffs' claims against Nonresident Defendants for a lack of personal jurisdiction and entered a final Rule 54(b) judgment.⁴

¶ 10 Plaintiffs timely appealed and we have jurisdiction pursuant to Arizona Revised Statutes section 12-2101(B) (2003).

II. DISCUSSION

¶ 11 “Once the defendant has moved for dismissal for lack of jurisdiction, the plaintiff has the burden of establishing that jurisdiction is proper.” GT Helicopters, Inc. v. Helicopters, Ltd., 135 Ariz. 380, 382, 661 P.2d 230, 232 (App.1983). When there is no evidentiary hearing, a plaintiff need only make a prima facie showing of personal jurisdiction and we review the trial court's decision and factual findings de novo. Uberti, 181 Ariz. at 569, 892 P.2d at 1358; Arizona Tile, L.L.C. v. Berger, 223 Ariz. 491, 493, ¶ 8, 224 P.3d 988, 990 (App.2010); Boschetto v. Hansing, 539 F.3d 1011, 1015 (9th Cir.2008); Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir.2006). A prima facie showing in this context means evidence sufficient to avoid a directed verdict. Bohreer v. Erie Ins. Exchange, 216 Ariz. 208, 211, ¶ 7, 165 P.3d 186, 189 (App.2007). However, plaintiffs cannot “ ‘simply rest on the bare allegations of the complaint, but [are] rather [required] to come forward with facts, by affidavit or otherwise, supporting personal jurisdiction.’ ” Macpherson v. Taglione, 158 Ariz. 309, 311-12, 762 P.2d 596, 598-99 (App.1988) (quoting Amba Mktg. Sys., Inc. v. Jobar Int'l., Inc., 551 F.2d 784, 787 (9th Cir.1977)).

¶ 12 On appeal, Plaintiffs contend Nonresident Defendants are subject to specific personal jurisdiction in Arizona because the Nonresident Defendants: (1) Intended to induce Plaintiffs to purchase securities, sent materials and made phone calls and emails to Arizona to induce such purchase and violated Arizona security laws; and (2) Engaged in conduct that caused injury in Arizona.⁵

A. Specific Personal Jurisdiction⁶

¶ 13 Arizona courts may exercise specific personal jurisdiction over nonresident defendants to the extent permitted by the Due Process Clause of the United States Constitution. Ariz. R. Civ. P. 4.2(a); Uberti, 181 Ariz. at 569, 892 P.2d at 1358; Batton v. Tenn. Farmers Mut. Ins. Co., 153 Ariz. 268, 270, 736 P.2d 2, 4 (1987) (construing prior Ariz. R. Civ. P. 4(e)(2)). The ultimate goal is to determine whether “ ‘the defen...