Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_07-cv-00457/USCOURTS-azd-2_07-cv-00457-3/pdf.json

Nature of Suit Code: 380
Nature of Suit: Other Personal Property Damage
Cause of Action: 28:1332 Diversity-Tort/Non-Motor Vehicle

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 Although the parties have requested oral argument, the Court finds that

oral argument would not aid the decisional process.

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Karlsson Group, Inc., et al.,

Plaintiffs,

vs.

Langley Farm Investments, LLC, et

al.,

Defendants.

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No. CV-07-0457-PHX-PGR 

 

 ORDER

DEFENDANT RENSKO, INC. AND MILLARD “MICKEY” OKSNER’S MOTION

FOR SUMMARY JUDGMENT, AND SANCTIONS

Among the dispositive motions pending before the Court is Defendant

Rensko, Inc. and Millard “Mickey” Oksner’s Motion for Summary Judgment, and

Sanctions (doc. #61).1

 Having reviewed the parties’ memoranda in light of the

cited-to evidence of record, the Court finds that the existence of genuine issues of

material fact preclude the granting of summary judgment to the moving

defendants pursuant to Fed.R.Civ.P. 56, and that because summary judgment is

not appropriate, that sanctions against the plaintiffs’ counsel pursuant to 28

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2

 While the Oksner-related defendants have moved to strike the

plaintiffs’ response as untimely, the Court declines to strike it in light of the

motions for extensions of time filed by the plaintiffs. Since none of the plaintiffs’

motions had been resolved by the Court prior to the time the plaintiffs’ response

was filed, the Court will deem the response to have been timely filed.

3

 Since the parties are familiar with the facts of this case, the Court

references the facts here only as they may be relevant to the Court’s disposition.

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U.S.C. § 1927 are also not appropriate.2

Background3

This action is one of five related lawsuits that have arisen from the disputed

sale of 5,075 acres of land known as the Petrified Forest Ranch in Apache

County (“the property”.) PFR, LLC, (“PFR”), the seller of the property, entered

into a brokerage agreement in December, 2003 with real estate broker Millard

“Mickey” Oksner, operating as Rensko, Inc. (collectively “Oksner”), to sell the

property. In October, 2004, Oksner signed a letter agreement with the Karlsson

Group, through its president, Anders Karlsson (collectively “Karlsson”), regarding

Karlsson’s purchase of the property. When the parties could not thereafter agree

on the terms of a formal contract, Karlsson asserted that the letter agreement

was a valid contract while PFR asserted that it was not because Oksner lacked

the authority to enter into a binding agreement and because PFR’s membership

had not approved the transaction.

Meanwhile, in November, 2004, PFR entered into a contract to sell the

property to ACRES4U Land & Development, LLC (“ACRES4U”), which was

operating on behalf of Langley Farm Investments, LLC (“Langley”). Given PFR’s

dispute with Karlsson, PFR’s contract with ACRES 4U contained a provision,

known as paragraph 20, that made the sale to ACRES4U conditional on PFR not

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being obligated to sell the property to anyone else and no other party claiming

that PFR was obligated to sell the property to anyone else.

On January 11, 2005, Karlsson filed a diversity of citizenship-based lawsuit

in the U.S. District Court for the Central District of California, Karlsson v. Petrified

Forest Ranch, LLC, 2:05-cv-00238-R-RC (“Karlsson I”), against PFR, two

individuals associated with PFR, and Oksner. The complaint, which alleged that

the defendants had breached the letter agreement signed by Oksner, sought

specific performance of the letter agreement and to enjoin PFR from selling the

property to anyone else. The complaint also alleged that Oksner was estopped

from denying his agency authority from PFR and, to the extent that he lacked the

authority to enter into the letter agreement on PFR’s behalf, that he had

defrauded Karlsson; it further alleged that PFR and Oksner had conspired to stop

Karlsson from buying the property.

In February, 2005, PFR notified ACRES4U that it was cancelling their

contract pursuant to paragraph 20. ACRES4U refused to accept the cancellation,

and thereafter assigned its interest in the contract to Langley.

Karlsson and PFR entered into a stipulated settlement of Karlsson I and

the California district court entered an order on March 18, 2005 that dismissed

“the entire action as to all defendants, with prejudice” pursuant to Fed.R.Civ.P.

41. Oksner never entered an appearance in Karlsson I. 

Pursuant to the settlement agreement, PFR agreed to sell the property to

Karlsson and Karlsson agreed to indemnify PFR against litigation by ACRES4U

and Langley; the settlement agreement also provided that any indemnified claims

would be assigned to Karlsson. PFR conveyed the property to Karlsson on

March 3, 2005 and the deed was recorded in Apache County on March 10, 2005.

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On March 11, 2005, Langley filed a action against PFR in the Apache

County Superior Court wherein it alleged claims for specific performance of the

November, 2004 land sale agreement, breach of contract, breach of implied duty

of good faith, and consumer fraud; Langley recorded a notice of lis pendens on

the property in Apache County on March 15, 2005. The superior court

subsequently entered summary judgment for PFR, finding that paragraph 20 of

the contract permitted PFR to cancel the contract given Karlsson’s contention that

it had the priority claim to the property. The Arizona Court of Appeals affirmed

the summary judgment to PFR on December 31, 2007. Langley released the

notice of lis pendens on February 7, 2008.

On April 4, 2005, Karlsson filed a second action in the U.S. District Court

for the District of California against Langley, ACRES4U, and Oksner arising from 

ACRES4U and Langely’s attempt to purchase the property from PFR. The

complaint alleged claims for interference with contract and/or business

opportunity, extortion, abuse of process, interference with quiet enjoyment of

property, and conspiracy. The action was dismissed by the California district

court on October 3, 2005 for lack of prosecution. 

Langley filed a second suit on February 28, 2007 in Apache County

Superior Court, alleging claims against Karlsson and his attorney for intentional

interference with contract and to quiet title to the property. Langley voluntarily

dismissed the action after the Arizona Court of Appeals decided in favor of PFR

in Langley’s earlier state court action. 

Karlsson commenced the instant action on February 28, 2007 against

Langley and ACRES4U and various related companies and individuals, and

Oksner. Karlsson asserts that its claims against Oksner in the First Amended

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4

 Oksner also seeks summary judgment on Claim No. 8, the conspiracy

claim against all defendants in the First Amended Complaint. However, since

Karlsson concedes in its response that the conspiracy allegations are not meant

to be a separate claim notwithstanding the manner in which the First Amended

Complaint is drafted, the Court construes the complaint as not alleging any

separate claim for conspiracy.

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Complaint, filed March 20, 2007, are claims that PFR had against Oksner that

PFR assigned to Karlsson as part of the settlement of Karlsson I. The amended

complaint alleges in part that Oksner’s conduct related to ACRES4U/Langley’s

attempt to purchase the property constituted (1) an interference with PFR’s sale

of the property to Karlsson, (2) a breach his listing/brokerage agreement with

PFR, (3) a breach of the covenant of good faith and fair dealing, and (4) a breach

of fiduciary duties.

Oksner subsequently filed counterclaims against Karlsson for extortion,

tortious interference with business contract, and conspiracy.

Discussion

A. Res Judicata

Oksner seeks summary judgment as to all of the claims brought against

him in the First Amended Complaint, i.e., Claims Nos. 1, 5, 6,and 7, in part on the

ground that they are barred by the doctrine of res judicata in light of the stipulated

dismissal with prejudice entered on March 18, 2005 in Karlsson I.4

Since Karlsson I was a diversity case alleging only claims pursuant to

California substantive law, this Court must apply California preclusion law to

determine the effect, if any, to be given to the dismissal of that case. Semtek

International Inc. v. Lockheed Martin Corp., 531 U.S. 497, 506, 121 S.Ct. 1021,

1027 (2001); Giles v. General Motors Acceptance Corp., 494 F.3d 865, 884 (9th

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5

 The Court also rejects Oksner’s contention that summary judgment is

further warranted under the doctrine of collateral estoppel. One of the

requirements of collateral estoppel under California law is that the issue allegedly

being relitigated is one that was actually litigated and decided in the previous

action. See Zevnik v. Superior Court, 159 Cal.App.4th at 82-83. An issue is

actually litigated for collateral estoppel purposes when it is “properly raised by the

pleadings or otherwise, and is submitted for determination, and is determined.”

Gottlieb v. Kest, 141 Cal.App.4th 110, 148 (2006). Since Karlsson I was

dismissed pursuant to a settlement agreement before any of the issues therein

were judicially determined, collateral estoppel cannot bar this action. Rice v.

Crow, 81 Cal.App.4th 725, 736 (2000) (“A settlement which avoids trial generally

does not constitute actually litigating any issues and thus prevents application of

collateral estoppel.”)

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Cir. 2007). The California Supreme Court has defined the doctrine of res

judicata, in the sense of claim preclusion, as follows: “a final judgment, rendered

upon the merits by a court having jurisdiction of the cause, is conclusive of the

rights of the parties and those in privity with them, and is a complete bar to a new

suit between them on the same cause of action.”) Goddard v. Security Title Ins. &

Guarantee Co., 92 P.2d 804, 806 (Cal.1939); accord, Busick v. Workmen’s

Comp. Appeals Bd., 500 P.2d 1386, 1391-92 (Cal.1972); Zevnik v. Superior

Court of Los Angeles County, 159 Cal.App.4th 76, 82 (2008). Res judicata bars

the litigation of not only issues that were actually litigated but also issues that

could have been litigated. Busick, at 975; Zevnik, at 82. The Court concludes

that Oksner is not entitled to summary judgment on his res judicata defense for

several reasons.5

The first reason, which is not one raised by any party, is that the present

record does not establish that the California district court was in fact a court of

competent jurisdiction for res judicata purposes, i.e., that it had subject matter

jurisdiction over Karlsson I. The problem arises because the complaint in

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6

 A declaration submitted by Donna Cooper as part of Karlsson’s

opposition to the summary judgment motion (doc. #80-4), executed in Los

Angeles, CA on December 10, 2007, states that Cooper has been a “managing

member of Petrified Forest Ranch, LLC” since its formation in 2004.

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Karlsson I failed to properly allege the existence of diversity of citizenship

jurisdiction, which was the sole alleged basis for subject matter jurisdiction.

Diversity was predicated on the plaintiffs being California citizens and the

defendants being Arizona citizens, but the complaint never properly set forth the

citizenship of defendant PFR because it failed to set forth the citizenship of any of

the 17 members of that limited liability company, and that information is not

otherwise available from the record before the Court. See Johnson v. Columbia

Properties Anchorage, LP, 437 F.3d 894, 899 (9th Cir. 2006) ("Notwithstanding

LLCs' corporate traits, ... every circuit that has addressed the question treats

them like partnerships for the purposes of diversity jurisdiction. ... We therefore

join our sister circuits and hold that, like a partnership, an LLC is a citizen of every

state of which its owners/members are citizens.") The Court believes that there is

a significant unresolved issue as to whether there was in fact complete diversity

of citizenship between the plaintiffs and the defendants in Karlsson I.

Both the Karlsson I complaint and the First Amended Complaint in this

action refer to Donna Cooper as being a manager of PFR during the relevant time

period.6

 Various pieces of information available to the Court strongly suggest

that Ms. Cooper was a citizen of California at the time that Karlsson I was

commenced: paragraph 76 of the First Amended Complaint states that plaintiff

Anders Karlsson, a California citizen, met with Cooper at her home in California

prior to the settlement of Karlsson I; the public records of the Arizona Corporation

Commission concerning PFR, of which this Court may take judicial notice, lists

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the address of manager Donna Jean Cooper as being in Hidden Hills, CA; a

Westlaw search of California public records lists Ms. Cooper as having a

California license as a speech pathologist, and residing, or having resided, in

Hidden Hills, Beverly Hills, and Tarzana, CA, and Westlaw does not show Ms.

Cooper has having any assets or a professional license in Arizona; and Oksner’s 

third-party complaint (doc. #32) filed in this action alleged that Ms. Cooper was a

resident of California.

If there was no complete diversity of citizenship in Karlsson I, then the

California district court only had the authority to dismiss that action for lack of

subject matter jurisdiction, and such a dismissal is not one on the merits for res

judicata purposes. Segal v. American Telephone and Telegraph Co., 606 F.2d

842, 844 (9th Cir.1979) (“Although a judgment of dismissal for lack of jurisdiction

is valid and final, the judgment does not bar another action by the plaintiff on the

same claim.”)

The second reason is that Karlsson I was terminated by a court order

accepting the parties’ stipulation for dismissal with prejudice. While such a

dismissal would bar the plaintiffs from refiling the same claims in the California

district court which entered it (assuming the initial existence of subject matter

jurisdiction in the earlier action), Headwaters Inc. v. U.S. Forest Service, 399 F.3d

1047, 1052 (9th Cir.2005) (“We have held that a stipulated dismissal of an action

with prejudice in a federal district court generally constitutes a final judgment on

the merits and precludes a party from reasserting the same claims in a

subsequent action in the same court[,]”) such a stipulated judgment does not

categorically bar the refiling of the same action in this Court. Semtek

International Inc. v. Lockheed Martin Corp., at 506, 121 S.Ct. at 1027 (Supreme

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7

 Based on Karlsson’s avowal that all of its claims in the First Amended

Complaint directed at Oksner arise solely from Oksner’s alleged breach of his

brokerage agreement with PFR, the Court will so construe the complaint and will

not permit Karlsson to prosecute any direct personal, i.e., non-assigned, claim, if

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Court noted that while a dismissal with prejudice in an earlier case “is

undoubtedly a necessary condition, but it is not a sufficient one, for claimpreclusive effect in other courts.); accord, Headwaters, at 1052 n. 4 (Court, citing

to Semtek, noted “that a stipulated dismissal ‘with prejudice’ under [Fed.R.Civ.P.]

41 ... may not have res judicata effect, even for the named parties in that suit, in

another court.”). Whether the Karlsson I dismissal has preclusive effect in this

Court depends on additional matters, such as whether the California district court

passed on the substance of the plaintiffs’ claims prior to dismissing the case. See

Semtek, at 501-03, 121 S.Ct. at 1024-26. Since the California district court

merely accepted the parties’ stipulated dismissal, that court did not pass on the

substance of the plaintiffs’ claims (and in fact could not have if it did not have

subject matter jurisdiction over that action.)

The third reason is that the Court, viewing the current record in the light

most favorable to Karlsson, cannot conclude as a matter of law that Karlsson is

seeking to litigate the same claims in this action that were dismissed with

prejudice in Karlsson I on March 18, 2005. Karlsson argues in its response that

res judicata does not bar its current claims, which it asserts stem from Oksner’s

breaches of the December, 2003 brokerage agreement between PFR and

Oksner and not from the previously litigated breaches of the October, 2004 letter

agreement between Karlsson and PFR, because it is “now asserting against the

Oksner Parties only those claims which originated with PFR, LLC, and assigned

to Plaintiffs effective May 24, 2005.”7

 In its motion, Oksner argues the current

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any, it may otherwise still have against Oksner.

8

 While Oksner also argues that the specific terms of the settlement

agreement between Karlsson and PFR “suggest” that PFR had no claims to

assign to Karlsson that it held against Oksner because the agreement provides

that Karlsson would not indemnify PFR as to any legal action that PFR

commenced against Oksner, the Court will not consider that argument for

purposes of resolving the summary judgment motion because Oksner raised it for

the first time in his reply; the issue could have, and should have, been raised in

Oksner’s initial memorandum so that Karlsson could have responded to it. Cf.

Sophanthavong v. Palmateer, 378 F.3d 859, 872 (9th Cir.2004) (Court declined to

reach new issue raised for the first time in a reply brief because “[t]he unfairness

of such a tactic is obvious. Opposing counsel is denied the opportunity to point to

the record to show that the new theory lacks legal or factual support.”; accord,

United States v. Puerta, 982 F.2d 1297, 1300 n.1 (9th Cir.1992) (“New arguments

may not be introduced in a reply brief.”) 

9

 Oksner’s reliance on Calif. Code of Civil Procedure § 426.30 does not

change the Court’s conclusion with regard to the cross-claim issue. Section

426.30(a) provides that “if a party against whom a complaint has been filed and

served fails to allege in a cross-complaint any related cause of action (at the time

of serving his answer to the complaint) he has against the plaintiff, such party

may not thereafter in any other action against the plaintiff the related cause of

action not pleaded.” This provision has no application to the assigned claims

because (1) those claims are not claims that PFR had against Karlsson, 

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claims are barred by res judicata even if they are assigned claims because PFR

had no surviving claims against him to assign to Karlsson after the dismissal of

Karlsson I inasmuch as the current claims were compulsory cross-claims that

PFR should have brought against Oksner, but did not, in Karlsson I.8

 The Court

cannot agree because any claims that PFR might have had against co-defendant

Oksner in Karlsson I would have been cross-claims, which are always permissive

under Fed.R.Civ.P. 13(g), Peterson v. Watt, 666 F.2d 361, 363 (9th Cir.1982), and

non-litigated permissive cross-claims cannot form the basis for a res judicata

defense.9 Id. (“[I]f such a claim [a permissive cross-claim] is neither asserted nor

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(2) Karlsson has presented evidence showing that the assigned claims were not

known to PFR prior to the dismissal of Karlsson I and therefore not subject to 

§ 426.30(a), see AL Holding Co. v. O’Brien & Hicks, Inc., 75 Cal.App.4th 1310,

1313-14 (1999), (3) § 426.30(b)(1) provides that § 426.30(a) does not apply if the

court in which the action is pending did not have jurisdiction to render a personal

judgment against the person who failed to plead the related cause of action, and

there is a significant issue as to whether the Karlsson I court had diversity

jurisdiction over the action, and (4) § 426.30(b)(2) provides that § 426.30(a) also

does not apply if the person who failed to plead the related cause of action did

not file an answer to the complaint against him, and the docket sheet of Karlsson

I establishes that PFR never filed an answer prior to the dismissal of the action.

10

 For example, PFR managing member Donna Cooper states in

paragraph 10 of her declaration (doc. #80-4) that “[a]s of March 28, 2005, I was

not aware of any evidence or information that ACRES4U and Langley Parties had

made or would make any claims that Oksner in effect undercut the clauses

inserted by Richard Keyt to protect PFR, LLC in the ACRES4U [Langley] Contract

[Par. 20 of the ACES4U Contract], and the consequential cancellation, by offering

oral assurances to them that notwithstanding those clauses, PFR, LLC would sell

to them, not Karlsson. This was first learned in discovery in the Langley Action,

in July 2005.”

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litigated, the parties cannot be barred from asserting it in a later action by

principles of res judicata, waiver, or estoppel.”)

The fourth reason that summary judgment cannot be entered in Oksner’s

favor on the res judicata defense is that Karlsson has submitted significant

probative evidence showing that the factual bases for its current claims did not

arise until after the dismissal of Karlsson I.10 Under California law, res judicata is

not a bar to claims filed in a subsequent action if those claims arose after the

initial complaint in the previous action was filed. Yager v. Yager, 60 P.2d 422,

425 (Cal.1936) (“It is a general rule that a party cannot put in issue rights

acquired pendente lite unless a supplemental pleading is filed, and, if such a

pleading is not filed, he is not foreclosed from asserting such rights in a

subsequent action.”); Allied Fire Protection v. Diede Construction, Inc., 127

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11

 Oksner concedes that the limitations defense does not apply to the

breach of contract claim alleged against him. 

 While it is not absolutely clear from the First Amended Complaint, the

Court construes the claim for breach of the covenant of good faith and fair dealing

as sounding in both contract and tort. The Court’s discussion of the statute of

limitations issue applies only to the tort aspect of the claim.

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Cal.App.4th 150, 155 (2005) (“The general rule that a judgment is conclusive as

to matters that could have been litigated does not apply to new rights acquired

pending the action which might have been, but which were not, required to be

litigated.”) (Internal quotation marks omitted.); see also, Calif. Code of Civil

Procedure § 1047 (“Successive actions may be maintained upon the same

contract or transaction, whenever, after the former action, a new cause of action

arises therefrom.”)

B. Statute of Limitations

Oksner also seeks summary judgment on the claims against for him for

interference with contracts and/or business opportunities, breach of the covenant

of good faith and fair dealing, and breach of fiduciary duties on the ground that

those claims are tort claims that are barred by the two-year limitations period of

A.R.S. § 12-542.11 Oksner contends that these tort claims are time-barred

because they accrued on October 12, 2004, the date that Oksner signed the

letter agreement with Karlsson.

While the Court agrees that the Arizona statutes of limitations govern this

action, Nevada Power Co. v. Monsanto Co., 955 F.2d 1304,1306 (9th Cir.1992)

(“[F]ederal courts exercising diversity jurisdiction are to use state statutes of

limitation[,]”) and that the tort claims at issue are governed by Arizona’s two-year

limitations period, see Clark v. AiResearch Manufacturing Co. of Arizona, 673

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P.2d 984, 987 (Ariz.App.1983) (“We agree ... that the two year statute of

limitations in A.R.S. § 12-542 governs claims for wrongful interference with

contract[.]”); CDT, Inc. v. Addison, Roberts & Ludwig, C.P.A., P.C., 7 P.3d 979,

981 (Ariz.App.2000) (Court noted that A.R.S. § 12-542 applies to actions for

breach of fiduciary duty); Stratton v. American Medical Security, Inc., 2008 WL

2039313, at *3 (D.Ariz. May 12, 2008) (Court noted that claims for breaches of

implied covenant of good faith and fair dealing have a limitations period of two

years pursuant to A.R.S. § 12-542), the Court concludes that the current record,

viewed in Karlsson’s favor, precludes a finding that Karlsson’s assigned tort

claims are time-barred as a matter of law.

Under Arizona’s discovery rule, a cause of action does not accrue for

purposes of the statute of limitations until the plaintiff knows, or with reasonable

diligence should know, the facts underlying the cause of action. Doe v. Roe, 955

P.2d 951, 960 (Ariz.1998). While a plaintiff need not know all of the facts

underlying a cause of action to trigger accrual, the plaintiff must at least possess

minimum knowledge sufficient to identify both that a wrong occurred and that it

caused injury. Id., at 961.

Since Karlsson avows that the tort claims at issue are claims that were

assigned to it from PFR, the critical issue is whether PFR knew or should have

known of the critical facts underlying them more than two years prior to the

commencement of this action on February 28, 2007. This issue cannot be

decided as a matter of law because Karlsson has submitted significant probative

evidence creating a triable issue of fact as to when PFR learned of Oksner’s

alleged misconduct related to the ACRES4U/Langley contract that Karlsson

asserts underlie these claims. For example, as previously noted, Donna Cooper

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12

 To the extent that Karlsson is in fact alleging tort claims against

Oksner directly related to the execution of the letter agreement with Karlsson in

October, 2004, the Court agrees with Oksner that any such claims are timebarred.

13

 The Langley-related parties consist of Langley Farm Investments,

LLC, Langley Petrified Forest Ranch, LLC, Langley Land, LLC, Steven G. Rees,

Stacey J. Brimhall and Parshelle S. Brimhall and the Van Wagner-related parties

consist of Albert E. Van Wagner, Jr. and Albert E. Van Wagner, Jr. P.C.

(collectively “Langley”)

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has submitted a declaration stating that neither she nor PFR had any information

prior to March 28, 2005 that Oksner had done anything at variance with his legal

and contractual duties to PFR injurious to PFR other than his alleged omissions

related to the letter agreement with Karlsson that were the basis of Karlsson I.12

See Nevada Power Co., 955 F.2d at 1307 (Court noted that under federal law,

which in diversity cases governs when an issue is one of law for the Court to

decide or one of fact for the jury to determine, the issue of when discovery

occurred and a cause of action accrued for purposes of a statute of limitations “is

generally inappropriate for resolution on summary judgment” and “may be

decided as a matter of law only when uncontroverted evidence irrefutably

demonstrates plaintiff discovered or should have discovered the [tortious]

conduct.”).

LANGLEY AND VAN WAGNER PARTIES’ AMENDED MOTION TO DISMISS

THE COMPLAINT

Also pending before the Court is the Langley and Van Wagner Parties’

Amended Motion to Dismiss the Complaint (doc. #92)13, where in they argue that

the claims against them should be dismissed for lack of subject matter jurisdiction

and for failure to state a claim. Having considered the parties’ memoranda in

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14

 To the extent that Langley is contending that a dismissal is warranted

because there is no federal question jurisdiction, the Court considers that to be a

non-issue as the First Amended Complaint rests solely on diversity of citizenship

jurisdiction notwithstanding that Karlsson’s sloppy drafting of the First Amended

Complaint failed to remove all vestiges of the federal question jurisdiction-related

allegations that the Court dismissed from Karlsson’s original complaint.

15

 28 U.S.C. § 1359 provides that “[a] district court shall not have

jurisdiction of a civil action in which any party, by assignment or otherwise, has

been improperly or collusively made or joined to invoke the jurisdiction of such

court.”

16

 Although both Langley and Karlsson both contend that there is no

dispute that PFR is an Arizona citizen, apparently merely because it is an

“Arizona LLC,” the Court does not in fact know the citizenship of PFR because

neither side has cited to any evidence in the record that establishes the

citizenship of each of PFR’s 17 members.

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light of the relevant record, the Court finds that the motion should be granted in

part and denied in part.

A. Lack of Subject Matter Jurisdiction14

Langley initially argues, without citation to any supporting case law, that

there is no diversity of citizenship jurisdiction in this action pursuant to 28 U.S.C.

§ 135915 because Karlsson was collusively joined as a plaintiff in place of the

allegedly non-diverse PFR.16 Assuming that Langely has not waived its

conclusory argument by its failure to even mention it in its reply, the Court finds

that the argument lacks merit.

First, the collusion issue need not even be resolved since Karlsson has

alleged its own personal claims against Langley in addition to assigned claims

obtained from PFR and Langely does not argue that Karlsson is not diverse from

the defendants in this action.

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17

 While Langley contends in its reply that the Court should treat this

aspect of its motion as a motion for summary judgment pursuant to Fed.R.Civ.P.

12(d), apparently because its motion incorporates by reference the statement of

facts it included with its essentially identical first motion to dismiss, the Court

declines to do so. Langley clearly states in its amended motion that the purpose

of this portion of its motion is “[t]o dismiss the Karlsson Parties’ Complaint for

failure to state a cause of action upon which relief may be granted pursuant to

FRCP 12(b)(6)[;]” if Langley wanted to file a motion for summary judgment

pursuant to Fed.R.Civ.P. 56, it could have, and should have, done so. Furthermore, the Court declines to search through the previously-filed statement of facts

to find relevant citations to the record given Langley’s failure in both of its

memoranda to “include citations to the specific paragraph in the statement of

facts that supports factual assertions made in the memoranda[,]” as mandated for

a summary judgment motion by LRCiv 56.1(e). 

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Second, Karlsson has met its burden of establishing a lack of collusion

regarding the assigned claims because it has submitted evidence showing both

that there was no previous ownership connection between it and PFR, and that

there was a legitimate and non-pretextual business reason for the assignment of

the claims, i.e., that the assignment was part of the settlement of Karlsson I. See

Yokeno v. Mafnas, 973 F.2d 803, 810 (9th Cir.1992) (No collusiveness exists for

purposes of §1359 if the party asserting diversity establishes that there was a

legitimate and non-pretextual business reason for the assignment that created

the diversity.)

B. Failure to State a Claim

Langley also seeks the dismissal of all of the claims against it pursuant to

Fed.R.Civ.P. 12(b)(6) on the ground that none of them properly state a claim.17

The Court concludes that the motion should be granted in part and denied in part.

The Court initially notes that since Karlsson has conceded in its response

that Claim No. 2 of the First Amended Complaint (Interference with Quiet

Enjoyment of Property) “does not state a claim different from that in Claim No.1"

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(Interference with Contracts and/or Business Opportunities), the Court will

dismiss Claim No. 2 as duplicative. As previously noted, the Court construes the

First Amended Complaint as not alleging any separate claim for conspiracy

notwithstanding Claim No. 8 (Conspiracy) because Karlsson concedes in its

response to Langley’s motion that Claim No. 8 “merely states general allegations

that apply to all other claims” and was not meant to be a separate claim.

(1) Interference with Contracts and/or Business Opportunities

According to Karlsson, Claim No. 1 of the First Amended Complaint, as it

applies to Langley, asserts Karlsson’s personal claims against Langley for

interfering with Karlsson’s contract/business opportunities with PFR commencing

on February 28, 2005. The gist of the claim is that ACRES4U’s threat to PFR,

made on behalf of Langely, to sue PFR if PFR did not sell the property to it

substantially increased the price of Karlsson’s purchase of the property and its

legal expenses because PFR conditioned the sale to Karlsson on Karlsson’s

agreement to indemnify it against any ACRES4U/Langley suit, and that Langley’s

subsequent suit against PFR in state court and its filing of the lis pendens further

increased Karlsson’s costs related to the property and interfered with its

economic exploitation of the property.

Langley argues in part that this claim should be dismissed for failure to

state a claim. The Court cannot agree. In resolving the Rule 12(b)(6) aspect of

the motion, the Court must take all allegations of material fact in the First

Amended Complaint as true and must construe them in the light must favorable

to Karlsson. It may grant the motion to dismiss as to any specific claim only if

Karlsson has failed to plead enough facts to state a claim for relief that is

plausible on its face. Bell Atlantic Corp. v. Twombly, U.S. , 127 S.Ct. 1955

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18

 In its reply, Langley improperly argues for the first time that the

intentional interference claim should be dismissed on the additional grounds that

Karlsson cannot satisfy the first, second and fifth of the required elements. As

the Court has already noted, see footnote 7, the Court will not consider a moving

party’s new arguments in a reply that could have been raised in the motion itself. 

But even if the Court were to consider these new arguments, they are insufficient

to require the dismissal of Claim No. 1. 

First, Langley’s contention regarding the first element, i.e., that the letter

agreement of October, 2004 did not create a valid contractual relationship

between Karlsson and PFR because Oknser did not have the authority to sign it,

and its contention regarding the second element, i.e., that it had no knowledge of

the settlement agreement between Karlsson and PFR when it filed its first state

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(2007).

In Arizona, “[t]ort liability may be imposed upon a defendant who

intentionally and improperly interferes with the plaintiff’s rights under a contract

with another if the interference causes the plaintiff to lose a right under the

contract.” Snow v. Western Savings & Loan Ass’n, 730 P.2d 204, 211 (Ariz.

1986). In order to plead a prima facie case of intentional interference with

contract or business expectancy, Karlsson must allege facts sufficiently showing:

(1) the existence of a valid contractual relationship or business expectancy; 

(2) Langley’s knowledge of the relationship or expectancy; (3) intentional

interference by Langley inducing or causing a breach or termination of the

relationship or expectancy; (4) resultant damage to it caused by the disruption of

its relationship or expectancy; and (5) that Langley acted improperly. Id.; Dube v.

Likins, 167 P.3d 93, 98 (Ariz.App.2007).

Langley conclusorily argues in its motion that the contractual interference

claim must be dismissed because Karlsson cannot satisfy the third element

because nothing it did caused either Karlsson or PFR to breach their settlement

agreement since their agreement was in fact fulfilled.18 The Court is

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court action and recorded the lis pendens, cannot be resolved through this Rule

12(b)(6) motion given the allegations of the First Amended Complaint, which the

Court must construe in Karlsson’s favor. The First Amended Complaint alleges,

for example, that Oksner had full authority from PFR to sign the letter agreement,

that Langley, through its representatives, knew that there was a competing buyer

for the property before it entered into its contract with PFR and before its filed its

first state action and recorded the lis pendens, and that the deed showing the

sale of the property from PFR to Karlsson was recorded in Apache County prior

to Langley’s filing of its first state court action there.

Second, Langley’s conclusory contention regarding the fifth element, i.e.,

that it did not act improperly in filing the first state court action because the

Apache County Superior Court has already concluded that Langley filed the

action in good faith, cannot be resolved at this time because Langley has made

no effort to discuss the elements of res judicata and/or collateral estoppel and

how those preclude the litigation of the propriety of Langley’s conduct in this

action.

19

 The Court notes that the existence of genuine issues of material fact

would preclude the granting of summary judgment in Langley’s favor on this claim

even if the Court were to consider Langley’s motion as one pursuant to

Fed.R.Civ.P. 56.

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unpersuaded because the allegations of the First Amended Complaint, viewed in

Karlsson’s favor, are sufficient to allege that Langley’s actions at least in part

induced PFR to breach the letter agreement, forcing Karlsson to agree to PFR’s

demand that Karlsson indemnify it against any legal action taken against it by

Langley as an additional condition of PFR selling the property to Karlsson.19

Furthermore, it is not clear under Arizona law that an actual breach of a contract

or business expectancy must in fact occur before an intentional interference claim

can be prosecuted. See Bar J Bar Cattle Co., Inc. v. Pace, 763 P.2d 545, 547

(Ariz.App. 1988) (Court, although noting that one of the elements of the tort of

intentional interference with contract is intentional interference inducing or

causing a breach, stated that “[w]rongful interference rests on improper conduct

by the defendant, a stranger to the contract, not on whether a breach followed.

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That no breach of contract occurred should give us pause in determining whether

defendant’s conduct was wrongful, but it does not preclude liability if he otherwise

caused harm.”)

Langley also argues in its motion, but not in its reply, that the intentional

interference claim must be dismissed because it is time-barred under the twoyear limitations period of A.R.S. § 12-542. The Court may dismiss a claim on

limitations grounds only if the Court, after accepting the allegations of the First

Amended Complaint as true, can determine that the running of the statute of

limitations is apparent from the face of the complaint. See Huynh v. Chase

Manhattan Bank, 465 F.3d 992, 997 (9th Cir.2006). The Court cannot make that

determination here.

As previously noted, a cause of action does not accrue under Arizona law

until the plaintiff knows, or with reasonable diligence should know, the facts

sufficient to identify both that a wrong occurred and that it caused injury. Doe v.

Roe, 955 P.2d at 960. The factual allegations of the First Amended Complaint,

taken as true, are sufficient to show that Karlsson’s claims against Langley arose

within two years of the commencement of this action on February 28, 2007. For

example, the First Amended Complaint alleges that Karlsson did not learn of

ACRES4U’s threats to PFR to pursue litigation to prevent the sale of the property

to Karlsson until on or after February 28, 2005, and that Langley did not initiate

the litigation in the state court that included the filing of its notice of lis pendens on

the property until March, 2005.

(2) Abuse of Process and Unlawful Use of Lis Pendens

Karlsson’s abuse of process claim, as set forth in Claim No. 3 of the First

Amended Complaint, is based solely on the lis pendens that Langely filed and

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recorded on the property as part of its first state court action; the gist of the claim

is that since the lis pendens was filed for the ulterior purpose of seeking to

compel Karlsson to surrender all or part of its interest in the property, the lis

pendens was unlawful and unlawfully used under A.R.S. § 33-420. Langley

argues that Claim No. 3 must be dismissed because it fails as a matter of law. 

The Court agrees. 

Claim No. 3 facially fails to state a claim because an essential element of

the tort of abuse of process is “a willful act in the use of judicial process,” 

Nienstedt v. Wetzel, 651 P.2d 876, 881 (Ariz.App.1982), and the filing of a notice

of lis pendens does not amount to the use of judicial process under Arizona law

as it is not an act done in the name of the court and under its authority. Gray v.

Kohlhase, 502 P.2d 169, 172-73 (Ariz.App.1972) (Court affirmed the summary

dismissal of a counterclaim for abuse of process that was based on the filing of a

lis pendens.) See also, Woodcourt II Limited v. McDonald Co., 119 Cal.App.3d

245, 251-52 (1981) (Court, citing in part to Gray v. Kohlhase, affirmed the

dismissal of an abuse of process claim on the ground that the recording of a

notice of lis pendens “does not constitute process in the sense that ‘abuse of

process’ is used.”)

(3) Extortion

Claim No. 4 of the First Amended Complaint alleges that Langley

committed extortion or attempted extortion by filing the state court action and the

notice of lis pendens, and by demanding that Karlsson quitclaim the property to it

or face litigation. Langley argues, and the Court agrees, that this case should be

dismissed even if a separate tort claim for extortion in fact exists under Arizona

law, which is in fact questionable. Although Karlsson, citing to Lundvall v.

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 Claim No. 9 is also entitled in part as being one for “Quiet Title”. 

Although Langley seeks the dismissal of the quiet title claim on the ground that it

fails to comply with the requirements of A.R.S. § 12-1102, the Court does not

reach this issue because the claim does not in fact seek to quiet title to any real

property. 

 Because Langley did not raise the issue in its motion, the Court also

does not reach that portion of Claim No. 9 that alleges that “Plaintiffs are entitled

and seek an order determining entitlement to the $30,000 proceeds in escrow

which were held initially as the Rensko commission.” 

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Hughes, 65 P.2d 1377 (Ariz.1937), contends in its response that this claim is

actually one for duress, the First Amended Complaint does not state any claim for

duress. In order to constitute actionable duress, “the threat must be of some act

which causes such fear in the person threatened as to preclude him from

exercising free will and judgment in entering into the transaction, and that the act

threatened must be an unlawful one.” Id. at 1378. The First Amended Complaint

does not sufficiently allege that anything Langley did towards Karlsson amounted

to duress. Furthermore, any duress claim would be duplicative as Karlsson

acknowledges in its response that the allegations of this claim are included in the

allegations of Claim No. 1 that Langley’s actions interfered with Karlsson’s

contractual and economic opportunities.

(4) Equitable/Declaratory Relief

In Claim No. 9 of the First Amended Complaint, Karlsson seeks in part an

order declaring Langley’s lis pendens to be unlawful and null and void and

directing its removal.20 The Court will dismiss this portion of Claim No. 9 because

it is moot, given that Langley released the lis pendens in February, 2008. 

This portion of the claim is also time-barred. Any action by Karlsson to

have the lis pendens removed as groundless or invalid should have been filed

pursuant to A.R.S. § 33-420, see Richey v. Western Pacific Development Corp.,

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684 P.2d 169, 173 (Ariz.App.1984), and, as the liability for filing a groundless lis

pendens is one created by statute, such an action had to have been filed within

the one year limitations period of A.R.S. 12-541(5), which it was not because it is

undisputed that Karlsson knew of the lis pendens more than one year before this

action was commenced.

Therefore,

IT IS ORDERED that the following motions filed by plaintiffs Karlsson

Group, Inc. and Anders Karlsson are all denied as moot: Third Application to

Extend Time to Responsively Plead to Cross-Complaint and Third Party

Complaint by Rensko, Inc. and Millard “Mickey” Oksner (doc. #53); Reasserted

and Extended Motion to Stay Proceedings as to Cross-Complaint (doc. #58);

Application to Enlarge Time to Respond to Motion for Summary Judgment by

Defendants Rensko, Inc. and Millard “Mickey” Oksner (doc. #62); Revised Motion

to Enlarge Time to Respond to Motion for Summary Judgment by Defendants

Rensko, Inc. and Millard “Mickey” Oksner (doc. #71); and Further Revised Motion

to Enlarge Time to Respond to Motion for Summary Judgment by Defendants

Rensko, Inc. and Millard “Mickey” Oksner (doc. #74).

IT IS FURTHER ORDERED that Defendant Rensko, Inc. and Millard

“Mickey” Oksner’s Motion to Strike Plaintiffs’ Memorandum in Partial Opposition

to MSJ as Untimely (doc. #81) is denied.

IT IS FURTHER ORDERED that Defendant Rensko, Inc. and Millard

“Mickey” Oksner’s Motion for Summary Judgment, and Sanctions (doc. #61) is

denied.

IT IS FURTHER ORDERED that the Langley and Van Wagner Parties’

Amended Motion to Dismiss the [First Amended] Complaint (doc. #92) is granted

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21

 The Court declines to resolve at this time Karlsson’s request that it be

allowed to file an amended and/or supplemental complaint. Any such request

must be made through a motion filed in accordance with Fed.R.Civ.P. 15(a)

and/or (d) and LRCiv 15.1.

22

 Claim No. 8 (Conspiracy) of the First Amended Complaint is deemed

not to be a separate claim for relief.

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in part and denied in part.21 It is granted as to Claim No. 2 (Interference with

Quiet Enjoyment of Property), Claim No. 3 (Abuse of Process and Unlawful Use

of Lis Pendens), Claim No. 4 (Extortion and Attempted Extortion), and that portion

of Claim No. 9 (Equitable Relief; Declaratory Relief; Quiet Title) related to the

filing of the notice of lis pendens; it is denied as to Claim No. 1 (Interference with

Contracts and/or Business Opportunities) and that portion of Claim No. 9 related 

to the real estate commission issue.22

DATED this 8th day of September, 2008.

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