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Arnett v. Howard

United States District Court, Ninth Circuit

May 28, 2013

James Arnett, Plaintiff,
v.
Benjamin Snow Howard, et al., Defendants.

REPORT AND RECOMMENDATION

D. Thomas Ferraro United States Magistrate Judge

Pending before the Court is Defendants’ Motion to Dismiss the Amended Complaint. (Doc. 37.) Plaintiff filed a response and Defendant replied. (Docs. 40, 41.) Pursuant to the Rules of Practice in this Court, the matter was assigned to Magistrate Judge Ferraro for a report and recommendation. The Magistrate recommends the District Court, after its independent review of the record, enter an order denying the motion to dismiss and transferring the case to Utah.

BACKGROUND

The Court summarizes the facts from Arnett’s Amended Complaint (Doc. 35) that are relevant to resolving the pending motion. Plaintiff alleges Defendant Howard contacted him in Tucson by Skype in November 2010, asking him for free assistance in building a website. Howard sent a Cricket phone to Arnett in Tucson in order to consult on the website. In February 2011, Howard traveled to Tucson to finalize the website with Arnett. While in Arizona, Howard solicited Arnett’s services for a 2-month project to produce an audio book and a motion picture in Utah. Howard offered him equity partnership. Arnett accepted the arrangement and agreed to contact him when he was available, which he did in May. During that phone conversation, Howard reiterated the agreement and offered to pay for Arnett’s Tucson work space and his Utah expenses. On June 5, 2011, Arnett flew to Utah on a ticket purchased by Howard. Howard then stated the equity agreement could be drafted later.

With respect to the project, Howard was acting as the agent of Defendant Nationwide Affordable Housing; he later paid Arnett’s expenses through Defendant Lifeline Media. In late August 2011, Arnett asked Howard to finalize the equity agreement or to pay him for his services. Howard promised he would eventually do one or the other. As a bonus incentive, Howard offered Arnett a motorcycle to ride back to Arizona, which Howard represented as safe, in excellent condition and worth more than $3000. The motorcycle title was in the name of the Ben Howard Trust. After completing the audio book, a television spot, and the voice and picture track of the movie, Arnett returned to Arizona in October.

In December 2011, Howard called Arnett wanting to come to Tucson regarding the audio mix for the project, but Arnett informed him that without payment he could not house Howard. Howard then uploaded the motion picture onto the Lifeline Media websites, without license to exhibit it without payment. Plaintiff invoiced Howard for $211, 000 in services. Howard has refused to make any payment to Arnett and continues to use the materials in promotion of his business.

Arnett alleges four claims, one breach of contract, two fraud and one of endangerment. In the contract claim, Arnett alleges that Defendant Howard represented the project as having substantial earning power and offering Plaintiff a major equity interest. Plaintiff accepted the offer and produced the goods. Howard breached the agreement by failing to execute a written equity agreement or make payment for the product produced by Arnett. In Claim 2, Plaintiff alleges Defendants misrepresented the value of the equity partnership to induce Arnett to produce the media products. He also alleges Defendants misrepresented their ability to pay to induce Plaintiff to forgo litigation. In the second fraud claim, Arnett alleges that Howard and the Ben Howard Trust misrepresented the value and condition of the motorcycle transferred to Plaintiff, in order to induce Plaintiff to continue working on Howard’s project. Plaintiff alleges that all Defendants committed endangerment by knowingly not disclosing the dangerous condition of the motorcycle brakes and delaying Plaintiff’s departure until the weather conditions were poor with the intention of causing catastrophic injury or death.

DISCUSSION

Defendants argue that Plaintiff’s Amended Complaint should be dismissed for lack of personal jurisdiction, improper venue and because it fails to state a claim. At a minimum, Defendants argue the case should be transferred to a court in Utah.

PERSONAL JURISDICTION

Defendants move to dismiss for lack of personal jurisdiction, as provided for by Federal Rule of Civil Procedure 12(b)(2). Because this is a diversity case, the Court applies Arizona’s long-arm statute, Terracom v. Valley Nat’l Bank, 49 F.3d 555, 559 (9th Cir. 1995), which provides for personal jurisdiction to the full extent allowed by the Due Process Clause, Ariz. R. Civ. P. 4.2(a).

Due process requires that a defendant not present within the court’s state “have certain minimum contacts with it such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe Co. v. State of Wash., Office of Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer, 311 U.S. 457, 463 (1940)). A defendant has fair warning that he may be subjected to suit in a forum if he has “‘purposefully directed’ his activities at residents of the forum” and the suit is due to injuries allegedly resulting from those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774 (1984)). When a party reaches out beyond one state to create continuing contractual relationships with citizens of another state, that party can be subject to jurisdiction in the other state based on its activities there. Id. at 473. This rule is based in part on a state’s interest in providing a convenient forum for its citizens to seek recovery for damages caused by an out of state person. Id.

The Court may exercise specific jurisdiction if:

(1) the defendant has performed some act or consummated some transaction within the forum or otherwise purposefully availed himself of the privileges of conducting activities in the forum, (2) the claim arises out of or results from the defendant’s ...

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