United States District Court, D. Arizona
Honorable Roslyn O. Silver Senior United States District
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.
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
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
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
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.
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.
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. After the order, the parties negotiated
dates for the depositions, scheduling them for April 12 and
13, 2016. (Doc. 17-4).
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.
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.
Service was Proper
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.”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