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Stuckey v. Leath

United States District Court, D. Arizona

April 9, 2019

Norman Stuckey, Plaintiff,
Jennifer Leath, Maryam Boroujerdi-Rad, and Meadows & Fries LLP, Defendants.


          James A. Teilborg Senior United States District Judge.

         Pending before the Court is Defendant Meadows & Fries, LLP's (“M&F”) Motion to Dismiss (Doc. 11) pursuant to Federal Rules of Civil Procedure (“Rules”) 12(b)(2) and 12(b)(3). Also pending before the Court is Defendants Jennifer Leath and Maryam Boroujerdi-Rad's (collectively, “Employees;” both M&F and Employees together, “Defendants”) Motion to Dismiss (Doc. 13) pursuant to Rules 12(b)(1), 12(b)(2), 12(b)(3), and 12(b)(6). The Court now rules on the motions.

         I. BACKGROUND

         On November 19, 2018, M&F filed its Motion to Dismiss (Doc. 11). Plaintiff Norman Stuckey (“Plaintiff”) filed a Response (Doc. 15) on December 3, 2018, and M&F filed a Reply (Doc 18) on December 17, 2018. On November 27, 2018, Employees likewise filed their Motion to Dismiss (Doc. 13). Plaintiff filed a Response (Doc. 16) on December II, 2018, and Employees filed a Reply (Doc. 17) on December 17, 2018.

         A. Complaint

         Plaintiff brings a direct action against Defendants for their respective actions as employees of and a professional services firm retained by Stucky Psychological Services, PC (“SPS”). (Doc. 10 (“Compl.”) ¶¶ 9-30). The eleven-count Complaint asserts the following causes of action: (i) breach of contract; (ii) conversion; (iii) breach of fiduciary duty; (iv) constructive fraud; (v) common law fraud; (vi) negligent misrepresentation; (vii) tortious interference; (viii) financial elder abuse; (ix) fraudulent transfer; (x) unjust enrichment; and (xi) complete accounting. (Id. ¶¶ 31-112). Plaintiff asserts all counts against Employees, and also asserts counts (iii), (iv), (vi), and (xi) against M&F. (Id.).

         B. Facts

         The following facts are either undisputed or recounted in the light most favorable to the non-moving party. See Wyler Summit P'ship v. Turner Broad. Sys., Inc., 135 F.3d 658, 661 (9th Cir. 1998). Plaintiff, president and CEO of SPS, is a ten-year resident of Sun Lakes, Arizona. (Compl. ¶ 9). Prior to his death, Plaintiff's son, David Stuckey, was the sole owner of SPS, a California corporation with its principal place of business in California. (Id. ¶ 20; Doc. 15-1 at 13-16). At all relevant times, SPS employed Leath and Boroujerdi-Rad, both citizens of Orange County, California. (Compl. ¶¶ 12-13). After David Stuckey's death in January 2014, Plaintiff entered into an oral contract with Employees to provide operational loans to SPS. (Id. ¶ 22). In return for funding SPS, Plaintiff was to become its owner, president, and CEO, and receive loan repayments and profit disbursement. (Id.). Employees were to make periodic financial reports to Plaintiff and “make a good faith offer to buy [SPS] within a reasonable time.” (Id.).

         In early 2014, M&F telephoned Plaintiff in Arizona to offer tax services to SPS. (Doc. 15 at 2). M&F is a limited liability partnership organized in California. (Compl. ¶ 14). M&F's principle place of business is in California, and both of its partners are California citizens. (Id.). In October 2014, M&F mailed an engagement letter from California to Plaintiff in Arizona, offering to prepare federal and California state income tax returns for SPS. (Doc. 1-1 at 10-12). Plaintiff agreed to and signed the agreement “as president of [SPS].” (Compl. ¶ 27 n.3).

         Plaintiff alleges that Defendant committed the following unlawful acts during 2014- 2018. First, Employees took unauthorized salary advances and improperly booked loan funding. (Id. ¶ 2). Second, M&F failed to detect or disclose these unauthorized advances and improper bookings. (Id. ¶ 3). Third, M&F provided legal representation to Employees without first obtaining Plaintiff's informed consent. (Id. ¶ 8). Fourth, Employees made “bad faith” offers to buy SPS from Plaintiff. (Id. ¶ 25). Finally, Employees and M&F failed to report accurate financial information to Plaintiff during this period. (Id. ¶¶ 26-27). In response, Plaintiff commenced this action.


         M&F filed a Motion to Dismiss pursuant to 12(b)(2) and 12(b)(3), and Employees filed a Motion to Dismiss pursuant to Rules 12(b)(1), 12(b)(2), 12(b)(3), and 12(b)(6). (See Doc. 11; Doc. 13). While the Court observes that Defendants make arguments under the banner of standing-which ordinarily presents a “threshold question of justiciability”- those arguments may also be characterized as addressing a “real party in interest” issue. See In re Swintek, 906 F.3d 1100, 1102 (9th Cir. 2018). Because the Court finds it dispositive, the Court begins by addressing whether it has personal jurisdiction over Defendants. Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 578 (1999) (“[T]here is no unyielding jurisdictional hierarchy. Customarily, a federal court first resolves doubts about its jurisdiction over the subject matter, but there are circumstances in which a district court appropriately accords priority to a personal jurisdiction inquiry.”).

         A. Personal Jurisdiction

         Defendants lack sufficient contacts with Arizona to justify the exercise of personal jurisdiction over them. Generally, federal courts have personal jurisdiction over nonresident defendants to the extent allowed by the state in which the courts sit. See Fed. R. Civ. P. 4(e), (k); Walden v. Fiore, 571 U.S. 277, 283 (2014). Arizona law provides for personal jurisdiction to the extent allowed by the United States Constitution. See Ariz. R. Civ. P. 4.2. “The Due Process Clause of the Fourteenth Amendment sets the outer boundaries of a [] tribunal's authority to proceed against a defendant.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 923 (2011) (citation omitted).

         Due process requires that a defendant “have certain minimum contacts with [the forum state] such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal quotation marks and citation omitted). This framework gives rise to two forms of personal jurisdiction: “general” and “specific” jurisdiction. Bristol-Myers Squibb Co. v. Superior Ct. of Cal., S.F. Cty., 137 S.Ct. 1773, 1779-80 (2017). The burden of establishing personal jurisdiction rests on the plaintiff, but if the motion attacking jurisdiction “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). Courts must accept uncontroverted statements in a complaint as true and resolve conflicts of facts contained in affidavits in the plaintiff's favor, but a “plaintiff cannot simply rest on the bare allegations of its complaint.” Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004) (internal quotation marks and citation omitted).

         1. General Jurisdiction

         Under general jurisdiction, a court can hear any claim against a defendant who can be “fairly regarded as at home” in the state. Goodyear, 564 U.S. at 919. Generally, an individual is at home where domiciled, and an unincorporated entity-including an LLP- is a citizen of each state in which any member is a citizen. See Daimler AG v. Bauman, 571 U.S. 117, 137 (2014); see also Americold Realty Tr. v. Conagra Foods, Inc., 136 S.Ct. 1012, 1013, (2016) (“For these unincorporated entities, we too have adhere[d] to our oft-repeated rule that diversity jurisdiction in a suit by or against the entity depends on the citizenship of all [its] members” (alterations in original; internal quotations marks and citation omitted)). Both Employees and M&F, through its partners, are citizens of California. (Compl. ¶¶ 12-14). Accordingly, the Court lacks general jurisdiction over Defendants.

         2. Specific Jurisdiction

         When relying on specific jurisdiction, a plaintiff must establish that jurisdiction is proper for each claim asserted against a defendant. See Picot v. Weston, 780 F.3d 1206, 1211 (9th Cir. 2015). If personal jurisdiction exists over one claim, the Court “may exercise pendant jurisdiction over any remaining claims that arise out of the same common nucleus of operative facts.” Id. (internal quotation marks and citation omitted). The specific jurisdiction inquiry focuses on “the relationship among the defendant, the forum, and the litigation.” Walden, ...

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