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Cains v. Grassi

United States District Court, D. Arizona

October 4, 2016

David Cains, et al., Plaintiffs,
v.
Elisa Grassi, et al., Defendants.

          ORDER

          Honorable Roslyn O. Silver Senior United States District Judge

         Plaintiffs and Defendants are involved in the purchase, sale, and marketing of Arabian horses. In 2013, Defendants allegedly took numerous actions meant to “ruin” Plaintiffs' reputations and prospects in the Arabian horse industry. Before the present suit was filed, Plaintiffs and Defendants were involved in another lawsuit, also pending in the District of Arizona. Plaintiffs served Defendants with the summons and complaint in the present suit while Defendants were in Arizona for depositions in that separate lawsuit. Defendants now argue they were immune from service of process while in Arizona. Defendants also argue, assuming they were immune from service of process, personal jurisdiction does not exist. Finally, Defendants argue the complaint fails to state claims on which relief can be granted. Only this last contention has merit.

         BACKGROUND

         Plaintiffs David Cains and Scott Bailey live in Arizona and work in the Arabian horse industry. Bailey owns and operates Stonewall Farms Arabians, LLC, as well as Knight Media Networks, Inc. The complaint does not explain the nature of these two entities' activities but it appears Stonewall buys and sells horses while Knight owns and operates the “Arabhorse.com network.” That network apparently operates horse-related websites for third parties. (Doc. 12 at 6).

         Defendant Elisa Grassi works as an “independent contractor” for “persons and entities who own Arabian horses.” (Doc. 13-1 at 2). Ms. Grassi performs this work with her “significant other and life partner, ” Frank Sponle. Grassi and Sponle live in Germany but they conduct their business around the world. That business consists of “finding horses (or interests in horses such as breeding or embryos) for [their] clients to buy.” (Doc. 13-1 at 2). One of their clients is Sheikh Ammar bin Humaid Al Nuaimi, the Crown Prince of the Emirate of Ajman.

         As of February 2012, Stonewall owned a horse named La Bella Versace. In late February 2012, Grassi, acting on behalf of Sheikh Ammar, expressed an interest in purchasing La Bella Versace. Cains informed Grassi that any sale would have to include a right for Cains to retrieve two embryos from La Bella Versace. Grassi agreed to this condition provided “the embryos were retrieved before La Bella Versace was shipped out of the United States.” (Doc. 12 at 4). Stonewall sold the horse to Sheikh Ammar on February 25, 2012. After that date, but before La Bella Versace left Arizona, Cains retrieved two embryos from La Bella Versace. Once the embryos were retrieved, La Bella Versace was shipped to California.

         In 2013, Cains and Bailey “acted as Sheikh Ammar's agent” in purchasing a horse for him at the Scottsdale Arabian Horse Show. (Doc. 12 at 5). Grassi and Sponle were not involved in this transaction but they later demanded they receive a commission from Cains and Bailey based on that sale. After Cains and Bailey refused to pay a commission, “Grassi told Bailey ‘I will ruin you in the Arabian horse business.'” (Doc. 12 at 5). Grassi and Sponle then “began a campaign to financially ruin [Plaintiffs] . . . by making false statements about the Plaintiffs to others in the Arabian Horse Industry.” (Doc. 12 at 6). The centerpiece of that campaign consisted of Grassi and Sponle telling third parties that “Bailey, Cains and/or Stonewall stole horse embryos from Sheikh Ammar.” (Doc. 12 at 7). Grassi and Sponle based this on the fact that embryos were retrieved from La Bella Versace after Sheikh Ammar purchased her on February 25. Grassi and Sponle also removed their website from Bailey's Arabhorse.com network and induced others to remove their websites as well.

         On April 16, 2015, a business entity known as Ajman Stud sued Cains, Bailey, and Stonewall for breach of contract. (CV-15-1045-DJH, Doc. 1-1 at 34). According to the complaint in that action, Sheikh Ammar had transferred all of his interest in La Bella Versace to Ajman Stud sometime prior to the suit being filed. The complaint alleged the retrieval of embryos after Sheikh Ammar owned La Bella Versace constituted a breach of the purchase agreement. In June 2015, Cains, Bailey, and Stonewall answered the complaint and the following month the court issued a scheduling order. In early October 2015, the parties sought a ruling from the court on a discovery dispute regarding depositions.

         According to the parties' discovery dispute filing, Cains, Bailey, and Stonewall wished to depose Sheikh Ammar, Grassi, and Sponle. The parties could not agree on whether the depositions were appropriate and, if they were, where they should occur. The court resolved the dispute by directing Cains, Bailey, and Stonewall to issue written interrogatories to Sheikh Ammar in lieu of his deposition. The court stated, however, that Grassi and Sponle could be deposed in Arizona. The relevant portion of the court's order stated “The Court will grant Defendants' request to take the depositions of Mr. Sponle and Ms. Grassi in Arizona.” Grassi and Sponle believed that order was binding on them.[1] After the order, the parties negotiated dates for the depositions, scheduling them for April 12 and 13, 2016. (Doc. 17-4).

         On April 11, Grassi and Sponle traveled from Germany to Arizona. Grassi was deposed on April 12. On April 13-the day of Sponle's deposition-Cains, Bailey, Stonewall, and Knight filed the present suit against Grassi and Sponle. At the conclusion of Sponle's deposition, Grassi and Sponle were served with the complaint and summons in the present suit. Thus, Grassi and Sponle were physically present in Arizona at the time they were served. After being served, Grassi and Sponle returned to Germany. A short while later, they filed a motion to dismiss arguing they had not been properly served, personal jurisdiction did not exist, and the complaint fails to state claims for relief.

         ANALYSIS

         Normally, a challenge to personal jurisdiction presents a “threshold matter” that must be resolved before any other issue. Sandpiper Vill. Condo. Ass'n., Inc. v. Louisiana-Pac. Corp., 428 F.3d 831, 840 (9th Cir. 2005). In this case, however, the issue of service of process may dictate the outcome of the personal jurisdiction dispute. That is, Grassi and Sponle were in Arizona when they were served and personal jurisdiction will exist if that service were permissible. See Burnham v. Superior Court of California, Cty. of Marin, 495 U.S. 604, 610 (1990) (“Among the most firmly established principles of personal jurisdiction in American tradition is that the courts of a State have jurisdiction over nonresidents who are physically present in the State.”). Therefore, the propriety of service will be addressed first.

         I. Service was Proper

         This case was filed in state court and was still in state court at the time Grassi and Sponle were served. Because of that, whether service was proper “is strictly a state law issue.”[2]Lee v. City of Beaumont, 12 F.3d 933, 936-37 (9th Cir. 1993), overruled on other grounds by California Dep't of Water Res. v. Powerex Corp.,533 F.3d 1087 (9th Cir. 2008). Under Arizona law, it is Plaintiffs' ...


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