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Advanced Reimbursement Solutions LLC v. Spring Excellence Surgical Hospital LLC

United States District Court, D. Arizona

October 12, 2017

Advanced Reimbursement Solutions LLC, Plaintiff,
Spring Excellence Surgical Hospital LLC, et al., Defendants.


          Douglas L. Rayes, United States District Judge.

         This action arises out of a series of contracts Defendant Joanna Davis negotiated with Plaintiff Advanced Reimbursement Solutions, LLC (ARS), and signed as Chief Executive Officer of Defendant Spring Excellence Surgical Hospital, LLC (SESH). ARS seeks damages from SESH for either breach of contract and the implied covenant of good faith and fair dealing, or for unjust enrichment. Alternatively, ARS seeks damages from Davis for breaching the implied warranty of authority. Before the Court is SESH's motion to dismiss for lack of personal jurisdiction and improper venue or, alternatively, motion to transfer. (Doc. 22.) The motion is fully briefed. (Docs. 22, 28, 33.) For the reasons stated below, SESH's motion is denied.

         I. Background

         ARS is a third-party medical billing service located in Phoenix, Arizona. (Doc. 18 ¶¶ 1, 12.) The company contracts with medical providers to process and bill out-of-network health insurance claims. (¶ 13.) In August 2016, ARS began discussions with Davis, who represented that she was responsible for the day-to-day management of SESH. (¶ 15.) At some point thereafter, Davis, purporting to be SESH's CEO, executed the Executive Billing Agreement (EBA) with ARS. (¶¶ 14-33.) SESH directed patient and medical services information to ARS, which began filing medical claims for reimbursement. (Doc. 28-1 ¶¶ 25-26.) In December 2016, ARS began sending invoices to SESH for its services, but SESH refused to pay. (Doc. 18 ¶¶ 43-67.)

         ARS and SESH dispute the parties to the EBA. ARS alleges that SESH, through its agent Davis, entered into a contract for its billing services. (¶¶ 16-17.) Pursuant to that contract, ARS was entitled to compensation for its reimbursement claims processing services on behalf of SESH. (¶¶ 28-31.) Alternatively, if Davis did not have the authority to contract on behalf of SESH, ARS argues that SESH nevertheless ratified the contract by accepting approximately $2.78 million in reimbursement claims filed by ARS on its behalf. (Doc. 28 at 8-9.) Under either theory, ARS argues that SESH is subject to the forum selection clause contained within the EBA, under which the parties stipulated to Phoenix, Arizona as the exclusive jurisdiction for actions arising out of the EBA. (Id.) In contrast, SESH claims that ARS unreasonably relied on Davis' representations that she was SESH's CEO. (Doc. 22 at 3-4; Doc. 33 at 2-4.) SESH argues that ARS fails to allege facts plausibly demonstrating that SESH held Davis out as an agent with the authority to contractually bind it with ARS. (Doc. 22 at 4.) SESH also argues that it is not subject to the EBA's forum selection clause and it has not consented to jurisdiction in Arizona because it is not a party to the contract. (Id. at 2-4.)

         II. Personal Jurisdiction

         A. Legal Standard

         “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). Moreover, “uncontroverted allegations in [the plaintiff's] complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in [the plaintiff's] favor for purposes of deciding whether a prima facie case for personal jurisdiction exists.” Am. Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996) (internal quotation and citation omitted). Here, the Court takes ARS' allegations as true because none are contradicted by affidavit.

         B. Analysis

         “Federal courts ordinarily follow state law in determining the bounds of their jurisdiction over persons.” Walden v. Fiore, -- U.S. --, 134 S.Ct. 1115, 1121 (2014); see also Fed. R. Civ. P. 4(k)(1)(A). Arizona authorizes courts to exercise jurisdiction to the maximum extent permitted by the Due Process Clause of the United States Constitution. See Ariz. R. Civ. P. 4.2(a). Thus, courts in this District may exercise personal jurisdiction over a defendant who is not physically present in Arizona if the defendant has sufficient minimum contacts with the State, such that the suit can be maintained without offending traditional notions of fair play and substantial justice. See Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).

         Personal jurisdiction may be general or specific. General personal jurisdiction over a nonresident defendant requires “continuous corporate operations within a state so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.” Id. at 318. Conversely, specific personal jurisdiction exists when a lawsuit arises out of, or is related to, the defendant's contacts with the forum. Helicopteros Nacionales de Colo., S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984). Here, ARS contends only that SESH is subject to specific jurisdiction. (Doc. 28 at 10-11.)

         In determining whether specific jurisdiction over an out-of-state defendant exists, the Court applies a three-prong test:

(1) The non-resident defendant must purposefully direct [its] activities or consummate some transaction with the forum or resident thereof; or perform some act by which [it] purposefully avails [itself] of the privilege of conducting activities in the ...

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