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Premier Funding Group LLC v. Aviva Life and Annuity Co.

United States District Court, D. Arizona

December 8, 2014

Premier Funding Group LLC, Plaintiff,
v.
Aviva Life and Annuity Company, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Defendants Anthony Lengeling and Aviva Life and Annuity Company have filed motions to dismiss. Docs. 26-28. Lengeling has moved to dismiss Premier's claims against him for lack of personal jurisdiction and failure to state a claim. Docs. 26, 28. Aviva has moved to dismiss most of Premier's claims for failure to state a claim. Doc. 27. The motions are fully briefed.[1] The Court will grant Defendant Lengeling's motion to dismiss for lack of personal jurisdiction and will grant in part Defendant Aviva's motion to dismiss for failure to state a claim.

I. Background.

The heart of this case is a $566, 850 loan that Plaintiff Premier Funding Group made on account of Defendant Richard Baldwin's alleged fraud. Baldwin was an insurance agent who had an agreement with Aviva Life and Annuity Company ("Aviva") - an Iowa corporation - to sell its insurance products. Doc. 84, ¶¶ 2, 18-19. In the spring of 2011, Baldwin began to work with Gardner Brown to sell Aviva's life insurance policies to Mr. Brown's clients. Id., ¶ 23. Among Mr. Brown's clients are David and Victor Kimball ("Kimballs"), who live in Utah. Id., ¶¶ 6-7, 38. Although the Kimballs had completed much of the paperwork necessary to acquire life insurance policies for themselves, they ultimately informed Mr. Brown that they did not want to complete the transaction. Id., ¶¶ 44-47, 57. Brown passed this information along to Baldwin. Id., ¶ 58. Baldwin told Brown that he would nevertheless complete the underwriting on the Kimballs' application in case the Kimballs changed their mind. Id., ¶ 59.

For the transactions involving the life insurance policies, Baldwin was working with Nicholas Larsen, a Utah resident, and the company that employed Larsen, Crump Life Insurance Services ("Crump"). Id., ¶¶ 67, 93-94. Crump is an independent wholesale distributor of life insurance that is incorporated in Pennsylvania. Id., ¶¶ 3, 16. Baldwin and Larsen used Crump to process Aviva life insurance policy applications and Crump paid them commissions for their work. Id., ¶¶ 47-48, 67. At some point, Baldwin and Larsen allegedly forged the Kimballs' signatures on the documents necessary to complete the sale of the life insurance policies. Id., ¶ 93. Because the Kimballs were not paying for the policies, Baldwin used the financial services of Plaintiff, Premier Funding Group, LLC ("Premier"). Id., ¶¶ 51, 78.

Premier is an Arizona company in the business of premium financing. Id., ¶¶ 1, 51. Premium financing involves a company loaning the funds necessary to pay the cost of insurance premiums. Id., ¶ 26. To obtain financing for the Kimballs' life insurance policies, Baldwin sent Premier promissory notes and other documents with the forged signatures of the Kimballs. Id., ¶ 74. Premier, following Baldwin's instructions, wired $566, 850 to Action Valuation, Inc. Id., ¶¶ 80-81. Action Valuation wired the money either directly to Aviva or to Aviva through Crump. Id., ¶ 83. Aviva then issued the policies for the Kimballs and paid commissions to Baldwin and Crump. Id., ¶ 84.[2]

Gardner Brown soon discovered that Aviva had issued the life insurance policies even though the Kimballs did not want them. Id., ¶ 92. Mr. Brown's lawyer then contacted Aviva's senior counsel, Anthony Lengeling, an Iowa resident. Id., ¶¶ 96-97. The Kimballs also wrote letters informing Aviva that they did not want the policies. Id., ¶ 98. Soon after, Aviva terminated Baldwin's employment and began an investigation into the Kimballs' policies. Id., ¶¶ 103-15. In January of 2012, Premier's counsel sent a letter to Lengeling demanding that Aviva hold in trust the money it had received for the Kimballs' life insurance policy. Id., ¶ 109.

After receiving the letters, Aviva began to unwind the fraudulent transactions involving the Kimballs. See id., ¶¶ 115-24. As part of this effort, Lengeling drafted a settlement agreement between the Kimballs and Aviva. Id., ¶¶ 124-27. Lengeling wanted to include a confidentiality provision in the agreement that would prevent the Kimballs from revealing the contents of the agreement to Premier. Id., ¶¶ 149-51. The Kimballs objected to the confidentiality provision, but ultimately signed the agreement. Id., ¶¶ 152-55. The agreement included a confidentiality provision and stated that the Kimballs had never authorized the policies and that the policies would be considered void. Id., ¶ 155. Premier alleges that the Kimballs intended for Aviva to repay Premier the money it had received for the voided policies. Id., ¶ 158. But Aviva refused to return the $566, 850 to Premier despite Premier's repeated requests. Id., ¶ 175.

On February 6, 2014, Premier filed a lawsuit in Maricopa Superior Court. Doc. 1-3. Premier named Aviva, Crump, Richard Baldwin, Nicholas Larsen, Anthony Lengeling, and the Kimballs as defendants. Id. Premier subsequently dismissed its claims against the Kimballs. Doc. 1-3 at 97. On July 18, 2014, Defendants removed the case to this Court on the basis of diversity. See Doc. 1-2; Doc. 73 (finding diversity and denying motion to remand). Defendants Lengeling and Aviva have filed motions to dismiss. Lengeling argues that the Court does not have personal jurisdiction over him or, in the alternative, that Premier has failed to state a claim against him. Docs. 26, 28.[3] Aviva argues that most of Premier's claims against Aviva should be dismissed for failure to state a claim. Doc. 27.

II. Personal Jurisdiction.

A. Legal Standard.

"Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons." Daimler AG v. Bauman, 134 S.Ct. 746, 753 (2014). Arizona has authorized its courts to exercise jurisdiction over persons to the maximum extent permitted by the Due Process Clause of the Constitution. See Ariz. R. Civ. P. 4.2(a). Under the Due Process Clause, a federal district court may exercise jurisdiction over a person who is not physically present within the territorial jurisdiction of the court. Walden v. Fiore, 134 S.Ct. 1115, 1121 (2014). The nonresident generally must have certain minimum contacts with the forum so that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

A nonresident's contacts with the forum may allow a district court to exercise either general or specific personal jurisdiction. In re W. States Wholesale Natural Gas Antitrust Litig., 715 F.3d 716, 741 (9th Cir. 2013), cert. granted sub nom. Oneok, Inc. v. Learjet, Inc., 134 S.Ct. 2899 (2014). In this case, Plaintiff argues that the Court has specific but not general personal jurisdiction over Lengeling based on his intentionally tortious conduct. See Doc. 38 at 6. The Ninth Circuit uses a three-part test to analyze whether a party's "minimum contacts" satisfy due process for the exercise of specific jurisdiction. In re Antitrust Litig., 715 F.3d at 741-42.[4] In tort cases, the inquiry under the first part of the test - which is determinative in this case - is whether a defendant purposefully directed his activities at the forum state. Yahoo! Inc. v. La Ligue Contre Le Racisme Et L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006). The Ninth Circuit evaluates "purposeful direction under the three-part effects' test traceable to the Supreme Court's decision in Calder v. Jones .... [T]he effects' test requires that the defendant allegedly have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the defendant knows is likely to be suffered in the forum state.'" Schwarzenegger, 374 F.3d at 803 (quoting Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir. 2002)) (citing Calder v. Jones, 465 U.S. 783 (1984)).

The effects test does not "stand for the broad proposition that a foreign act with foreseeable effects in the forum state gives rise to specific jurisdiction.'" Wash. Shoe Co. v. A-Z Sporting Goods Inc., 704 F.3d 668, 675 (9th Cir. 2012) (quoting Bancroft & Masters, Inc. v. Augusta Nat'l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000)). Nor does the effects test mean that specific jurisdiction may be based solely on a defendant's knowledge that the subject of his tortious activity resides in a particular state. See Walden, 134 S.Ct. at 1125. Rather, the Court must always focus on the "relationship among the defendant, the forum, and the litigation' [which] is the essential foundation of in personam jurisdiction." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). "The proper question is not where the plaintiff experienced a particular injury or effect but whether the defendant's conduct connects him to the forum in a meaningful way." Walden, 134 S.Ct. at 1125.

"When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff bears the burden of demonstrating that the court has jurisdiction over the defendant." Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). "Where, as here, the defendant's motion is based on written materials rather than an evidentiary hearing, the plaintiff need only make a prima facie showing of jurisdictional facts to withstand the motion to dismiss." Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th Cir. 2011). "The plaintiff cannot simply rest on the bare allegations of its complaint, ' but uncontroverted allegations in the complaint must be taken as true." Id. (quoting Schwarzenegger, 374 F.3d at 800). The Court may not assume the truth of allegations in a pleading that are contradicted by an affidavit, but factual disputes are resolved in Plaintiff's favor. Id. (quoting Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280, 1284 (9th Cir. 1977)). If the plaintiff survives the motion to dismiss under a prima facie burden of proof, the plaintiff still must prove the jurisdictional facts by a preponderance of the evidence at a preliminary hearing or at trial. Data Disc, 557 F.2d at 1285 n.2.

B. Analysis.

Anthony Lengeling is an Iowa resident who at all relevant times was located in Iowa. Doc. 84, ¶ 8. Premier is an Arizona limited liability company whose individual members are residents of Arizona and California. Id., ¶ 1. Premier argues that Lengeling "expressly aimed" tortious conduct at Premier in Arizona when he helped Aviva keep the money that had been fraudulently obtained from Premier and crafted a settlement agreement that would keep this fact secret from Premier. To be more specific, Premier alleges that (1) Lengeling knew that Premier was based in Arizona; (2) he intentionally defrauded Premier by helping Aviva keep the money that had originated with Premier; (3) he attempted to cover up this fraud with a confidentiality provision in a settlement agreement; and (4) he knew that these actions would cause Premier to suffer injury in Arizona. See Doc. 38 at 8. Premier argues that this satisfies the effects test.

The Court disagrees. As established by Walden v. Fiore , personal jurisdiction does not exist merely because a person directs tortious conduct at another whom he knows resides in a particular state. 134 S.Ct. at 1125. Specific jurisdiction must be based on a person's contacts with the forum state, not on his contacts with the plaintiff. See id. at 1121 ("[T]he defendant's suit-related conduct must create a substantial connection with the forum State."). The Ninth Circuit has stated that the express aiming "requirement is satisfied when the defendant is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum state." Bancroft, 223 F.3d at 1087; see also Wash. Shoe, 704 F.3d at 675. But this reasoning is not consistent with the Supreme Court's recent decision in Walden.

In Walden, two professional gamblers were traveling through a Georgia airport on their way home to Nevada. 134 S.Ct. at 1118. They were carrying with them $97, 000 in cash. Id. Walden, an agent of the Drug Enforcement Administration, stopped the gamblers and seized the cash. Id. He suspected that the money came from drugs. Id. He drafted an allegedly false affidavit to show probable cause for forfeiture of the funds. Id. Ultimately, no forfeiture complaint was filed. Id. at 1120. The gamblers filed a Bivens claim against Walden in the federal district court in Nevada. Id. at 1120. The district court dismissed the claim for lack of personal jurisdiction and the Ninth Circuit reversed. Fiore v. Walden, 688 F.3d 558 (9th Cir. 2011). The Ninth Circuit found that Walden had "expressly aimed" his allegedly false affidavit at Nevada by submitting the affidavit with knowledge that it would affect persons with a "significant connection to Nevada." Id. at 581. The ...


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