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Smith & Wesson Corp. v. The Wuster

Court of Appeals of Arizona, First Division

November 21, 2017

SMITH & WESSON CORP. and SMITH & WESSON HOLDING CORP., Plaintiffs/Appellees,
v.
THE WUSTER (d/b/a AIRSPLAT.COM), Defendant/Appellant.

         Appeal from the Superior Court in Maricopa County No. CV2015-012668 The Honorable J. Richard Gama, Judge, Retired The Honorable Michael L. Barth, Judge Pro Tempore

          Garcia, Aguirre & Villarreal, P.L.C., Yuma By Araceli Rodriguez, Jacqueline R. Luger Counsel for Defendant/Appellant.

          Ballard Spahr LLP, Phoenix By Craig C. Hoffman Counsel for Plaintiffs/Appellees.

          Chief Judge Samuel A. Thumma delivered the opinion of the Court, in which Presiding Judge Kenton D. Jones and Judge Jon W. Thompson joined.

          OPINION

          THUMMA, JUDGE.

         ¶1 Defendant The Wuster d/b/a Airsplat.com appeals from a default judgment entered in favor of plaintiffs Smith & Wesson Corp. and Smith & Wesson Holding Corporation (collectively S&W). Airsplat argues the superior court abused its discretion in denying its motion for enlargement of time to file a motion to dismiss and erred in exercising personal jurisdiction over Airsplat. As discussed below, Airsplat has shown no abuse of discretion in denying its motion for enlargement of time. On the record presented, however, the court erred in concluding that the well-pleaded factual allegations of the complaint, deemed admitted given default entered against Airsplat, authorized the exercise of personal jurisdiction over Airsplat. Accordingly, default judgment is vacated and this action is dismissed without prejudice for lack of personal jurisdiction.

         FACTS AND PROCEDURAL HISTORY

         ¶2 In November 2015, S&W filed this case alleging Airsplat breached a written agreement resolving patent litigation in the United States District Court for the District of Arizona (the Settlement Agreement) by failing to pay $40, 000. Airsplat is a California business with its principal place of business in California and S&W served Airsplat in California.

         ¶3 When Airsplat failed to plead or otherwise defend, S&W filed an application for entry of default. See Ariz. R. Civ. P. 55(a)(2015).[1] When Airsplat did not timely plead or otherwise defend in response to the application, default against Airsplat became effective. See Ariz. R. Civ. P. 55(a)(3), (a)(4).

         ¶4 The day after default became effective, see Ariz. R. Civ. P. 6(a), Airsplat filed a motion to dismiss for lack of personal jurisdiction. S&W's opposition argued the motion to dismiss was untimely, given the default. S&W then argued that, because all allegations in the complaint "including the jurisdictional allegations, should be deemed admitted and binding in this case, " Arizona could exercise personal jurisdiction over Airsplat. S&W's opposition did not attach or rely upon any evidentiary support.

         ¶5 Along with its reply in further support of the motion to dismiss, Airsplat filed a motion for enlargement of time, arguing its failure to timely respond to the complaint "was the result of excusable neglect." See Ariz. R. Civ. P. 6(b). Airsplat argued, with a supporting affidavit, that it "was prepared to file" the motion to dismiss in a timely fashion, but its law "firm's docketing system and entire computer system was attached [sic] by a virus and then crashed, " meaning the motion to dismiss was filed after default became effective. S&W opposed the motion for enlargement of time, arguing Airsplat failed to promptly move to set aside the default, failed to show excusable neglect and failed to show a meritorious defense.

         ¶6 After full briefing, the superior court denied Airsplat's motion for enlargement of time. The court found that Airsplat's failure to timely respond to the complaint was caused by "mere carelessness and as such does not warrant a finding of excusable neglect." As a result, the default remained in place.

         ¶7 At the same time, the superior court addressed whether Arizona could exercise personal jurisdiction over Airsplat. The court first stated that specific personal jurisdiction was lacking, noting Airsplat "did not engage in purposeful conduct that targeted an Arizona company" and Airsplat "did not have sufficient contacts with [Arizona] to make the exercise of jurisdiction 'reasonable and just.'" Because the default meant Airsplat's motion to dismiss was untimely, however, the court "accepted] the jurisdictional facts [alleged in the complaint] as having been deemed admitted and binding on the parties." On that basis, the court retained personal jurisdiction over Airsplat and, after a hearing, entered a final default judgment against Airsplat. See Ariz. R. Civ. P. 54(c). This court has ...


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