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Lindsey v. Punta Vista Bahia Sa

United States District Court, D. Arizona

June 15, 2018

John Lindsey, et al., Plaintiffs,
Punta Vista Bahia SA, et al., Defendants.


          Honorable John J. Tuchi United States District Judge

         At issue are Plaintiffs' Motion to Confirm Arbitral Award (Doc. 2, MTC), to which Defendants filed a Response (Doc. 29, Resp. to MTC) and Plaintiffs filed a Reply (Doc. 30, Reply to MTC); and Defendants' Motion to Dismiss (Doc. 28, MTD), to which Plaintiffs filed a Response (Doc. 31, Resp. to MTD), and Defendants filed a Reply (Doc. 37, Reply to MTD). In this Order, the Court will also resolve Plaintiffs' Motion to Amend (Doc. 38). The Court finds these matters appropriate for resolution without oral argument. See LRCiv 7.2(f). For the reasons that follow, the Court will deny Plaintiffs' Motion to Confirm Arbitral Award and grant Defendants' Motion to Dismiss.

         I. Factual Background

         This case arises out of a real estate sale in Costa Rica. According to the Complaint, on or about November 11, 1993, Defendant Punta Vista Bahia, S.A. (“PVBSA”) signed a concession contract to develop the Monarch Resort in Playa Panama, Guanacaste, Costa Rica. (Doc. 1, Compl. ¶ 31.) PVBSA advertised the resort as a four-star condo-hotel with amenities for hotel guests and condo owners alike. Each of the 14 individual Plaintiffs, by way of 15 entity Plaintiffs, entered into a Purchase Option Agreement with PVBSA for one or more condos between February 2003 and October 2006. (Compl. ¶ 45.)

         The Purchase Option Agreements, all of which are identical in substance, stated that each owner could occupy his/her condo for 30% of the year; the remaining 70% had to be available for rent to hotel guests. Condo owners were to receive a portion of the rental income generated by hotel guests. The Agreements mandated that the Arbitration Court of the Center of Conciliation and Arbitration of the Chamber of Commerce of Costa Rica would settle any disputes between the parties. (Compl. ¶ 135.)

         By early 2009, three years after it opened, the Monarch Resort began to fall into disrepair. The condo walls were water damaged, moldy, and falling apart, and neither the resort grounds nor the pool were maintained. Around October 2010, Defendant John Michael Fitzgerald, an Arizona resident, asserted his ownership of PVBSA. (Compl. ¶¶ 19, 21, 77.) Plaintiffs claim they have been denied access to their condos since 2012 and are not receiving any part of the rental income. (Compl. ¶¶ 115, 122.) Defendants began operating the resort exclusively as a hotel under the name Vista Bahia Beach Resort in March 2017, and Plaintiffs still do not have access to their condos. (Compl. ¶¶ 113-14.)

         Pursuant to the Agreements, Plaintiffs filed for arbitration of a number of claims against Defendants in the designated Arbitration Court on or about October 10, 2012. (Compl. ¶ 141.) The arbitration panel found in favor of Plaintiffs on August 29, 2013. (Compl. ¶ 147.) Defendants then appealed the arbitration award, and the Costa Rica Supreme Court set aside the award on December 3, 2015. (MTD at 5.)

         In their Complaint, filed December 12, 2017, Plaintiffs allege that Defendants violated the Federal Arbitration Act, 9 U.S.C. §§ 201-208 (“FAA”), by failing to pay the arbitration award to Plaintiffs. (Doc. 1, Compl. ¶¶ 134-55.) Plaintiffs also allege eight state law claims, including breach of contract, breach of the implied covenant of good faith and fair dealing, conversion, violations of the Arizona Consumer Fraud Act, common law fraud, negligent misrepresentation, breach of fiduciary duties, and negligence. (Compl. ¶¶ 156-246.) Along with their Complaint, Plaintiffs filed a Motion to Confirm Arbitral Award. (Doc. 2.) Defendants have now filed a Motion to Dismiss, arguing that the Court lacks jurisdiction over Plaintiffs' FAA claim and should decline to exercise supplemental jurisdiction over Plaintiffs' state law claims, which in any event Plaintiffs are obligated to arbitrate under the parties' arbitration agreement.

         II. Legal Standards

         Defendants move to dismiss Plaintiffs' claims under both Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6).

         A. Lack of Subject Matter Jurisdiction

         Under Rule 12(b)(1), “[a] motion to dismiss for lack of subject matter jurisdiction . . . may attack either the allegations of the complaint as insufficient to confer upon the court subject matter jurisdiction, or the existence of subject matter jurisdiction in fact.” Renteria v. United States, 452 F.Supp.2d 910, 919 (D. Ariz. 2006) (citing Thornhill Publ'g Co. v. Gen. Tel. & Elecs. Corp., 594 F.2d 730, 733 (9th Cir. 1979)). “Where the jurisdictional issue is separable from the merits of the case, the [court] may consider the evidence presented with respect to the jurisdictional issue and rule on that issue, resolving factual disputes if necessary.” Thornhill, 594 F.2d at 733; see also Autery v. United States, 424 F.3d 944, 956 (9th Cir. 2005) (“With a 12(b)(1) motion, a court may weigh the evidence to determine whether it has jurisdiction.”). The burden of proof is on the party asserting jurisdiction to show that the court has subject matter jurisdiction. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990).

         B. Failure to State a Claim for Relief

         A dismissal under Rule 12(b)(6) for failure to state a claim can be based on either (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable legal claim. Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990). “While a complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a plaintiff's obligation to provide the ‘grounds' of his ‘entitle[ment] to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555 (citations omitted). The complaint must thus contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “[A] well-pleaded complaint ...

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