Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_11-cv-01758/USCOURTS-azd-2_11-cv-01758-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1441 Petition For Removal--Other Contract

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WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Wells Fargo Bank, National Association,

Plaintiff, 

vs.

Bruce J. Brickman, individually and as

Trustee of the Bruce J. Brickman

Declaration of Trust dated December 20,

1991; Gary Weisman, individually and as

Trustee of the Gary Alan Weisman

Revocable Living Trust dated March 18,

1991, 

Defendants. 

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No. CV11-1758-PHX-JAT

ORDER

Pending before the Court is Defendants’ Motion to Dismiss for Lack of Personal

Jurisdiction and Alternative Motion to Transfer Venue Pursuant to 28 U.S.C. § 1404(a).

(Doc. 8). The Court now rules on the motions.

I. BACKGROUND

Defendants are Michigan residents, (Doc. 8 at 3), and Plaintiff is a South Dakota

corporation. (Doc. 8 at 5 n.1). Defendants are the sole members of a Michigan limited

liability company, Canal Crossing Phoenix #2, LLC (“Canal #2") which is registered to

transact business within Arizona. (Doc. 10 at 1-2). On December 13, 2007, Plaintiff agreed

to loan Canal #2 money for the purchase of Arizona real estate property. (Id. at 2). This loan

was conditioned upon Defendants’ personal guaranties to repay 50% of the loan. (Id.). The

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negotiations for the loan agreement and the guaranties all took place within Michigan

between Defendants and Plaintiff’s Michigan employees (Doc. 8 at 4-5; Doc. 14 at 2). The

loan agreement and guaranties were executed in Michigan and delivered to Plaintiff’s

Michigan office. (Id. at 3).

The documents contain choice of law and jurisdiction provisions. The loan agreement

provides that:

“Borrower and all persons and entities in any manner obligated to Lender

under the Loan Documents irrevocably submits to the jurisdiction of: (a) any

state or federal court sitting in the State of Michigan over any suit, action, or

proceeding, brought by Borrower against Lender, arising out of or relating to

the Loan Documents or the Loan; (b) any state or federal court sitting in the

state where the Property is located or the state in which Borrower’s principal

place of business is located over any suit, action or proceeding, brought by

Lender against Borrower, arising out of or relating to any of the Loan

Documents or the Loan; (c) any state court sitting in the county of the state

where the Property is located over any suit, action, or proceeding, brought by

Lender to exercise its power to foreclose the Property or any action brought by

Lender to enforce its rights with respect to any other collateral under the Loan

Documents . . .

(Doc. 8-1 Ex. 1, Ex. B, at 12) (emphasis added). Exhibit B to the loan agreement defines

“Loan Documents” and specifically excludes Defendants’ guaranties from that definition.

(Doc. 14-1 Ex. 1, Ex. B, at 16).

Each Defendant’s personal guaranty stated:

This Guaranty shall be governed by, and construed in accordance with, the

laws of the State of Michigan, except to the extent preempted by federal laws.

Guarantor and all persons and entities in any manner obligated to Lender under

this Guaranty consent to the jurisdiction of any federal or state court within the

State of Michigan having proper venue and also consent to service of process

by any means authorized by Michigan or federal law.

(Doc. 8-1 Ex. 1, Ex. A, at 5). The guaranties do not contain any provisions regarding

Defendants’ consent to Arizona jurisdiction. 

The loan agreement and guaranties were executed on December 13, 2007. (Doc. 8 at

3; Doc. 10 at 2). Defendants regularly travel to Arizona to manage Canal #2's property as

well as their other properties, and on March 15, 2011, Defendant Brickman met with Wells

Fargo representatives in Arizona to discuss the loan. (Doc. 10 at 2). When Canal #2's loan

matured, Defendants failed to honor their personal guaranties and this lawsuit arose. (Id. at

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1

 A defendant may also choose to waive his due process rights and consent to personal

jurisdiction. See Burger King, 471 U.S. at 472 n.14.

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2).

II. PERSONAL JURISDICTION

A. Burden of Proof

When a defendant moves prior to trial to dismiss a complaint for lack of personal

jurisdiction pursuant to Federal Rule of Civil Procedure 12(b)(2), the district court

determines the method of resolving the jurisdictional issue. Data Disc, Inc. v. Sys. Tech.

Assocs., 557 F.2d 1280, 1285 (9th Cir. 1977). If the parties have submitted only written

materials, the plaintiff “must make only a prima facie showing of jurisdictional facts through

the submitted materials in order to avoid a defendant’s motion to dismiss.” Id.

B. Legal Standard

In the absence of a federal statute governing the existence of personal jurisdiction, a

federal court applies the personal jurisdiction law of the state in which the court sits.

Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004); Terracom v.

Valley Nat’l Bank, 49 F.3d 555, 559 (9th Cir. 1995). Arizona’s long-arm statute provides that

an Arizona court may exercise personal jurisdiction over a nonresident defendant to the

maximum extent permitted under the Due Process Clause of the United States Constitution.

ARIZ. R. CIV. P. 4.2(a); Uberti v. Leonardo, 892 P.2d 1354, 1358 (Ariz. 1995).

The Due Process Clause requires that a nonresident defendant have certain minimum

contacts with the forum state such that the exercise of personal jurisdiction “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 omitted). Due process protects a defendant’s “liberty

interest in not being subject to the binding judgments of a forum with which he has

established no meaningful contacts, ties, or relations.” Omeluk v. Langsten Slip &

Batbyggeri, 52 F.3d 267, 270-71 (9th Cir. 1995) (quoting Burger King Corp. v. Rudzewicz,

471 U.S. 462, 471-72 (1985)).1

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Personal jurisdiction may be either general or specific. See Helicopteros Nacionales

de Columbia v. Hall, 466 U.S. 408, 414-15 nn.8-9 (1984) (citations omitted). General

jurisdiction exists when a defendant has “continuous and systematic” contacts with the forum

state. Id. at 415 (quoting Perkins v. Benquet Consol. Mining Co., 342 U.S. 437, 445 (1952));

see also Data Disc, 577 F.2d at 1287. A state may exercise specific jurisdiction over a

defendant lacking continuous and systematic contacts if the controversy is related to or arises

out of the defendant’s contacts with a forum state. See Helicopteros Nacionales, 466 U.S. at

414 (internal quotation omitted). In evaluating whether an exercise of specific jurisdiction

is proper, courts focus on the “relationship among the defendant, the forum, and the

litigation.” Id. (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). The inquiry evaluates

the “nature and quality of the defendant’s contacts in relation to the cause of action.” Data

Disc, 577 F.2d at 1287.

The Ninth Circuit applies a three-prong test to determine whether a defendant’s

contacts with the forum state are sufficient enough that an exercise of personal jurisdiction

comports with due process. See Schwarzenegger, 374 F.3d at 802.

(1) The non-resident defendant must purposefully direct his activities or

consummate some transaction with the forum or resident thereof; or perform

some act by which he purposefully avails himself of the privilege of

conducting activities in the forum, thereby invoking the benefits and

protections of its laws; (2) the claim must be one which arises out of or relates

to the defendant’s forum-related activities; and (3) the exercise of jurisdiction

must comport with fair play and substantial justice, i.e. it must be reasonable.

Id. (citing Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)); see also Bancroft & Masters,

Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). The plaintiff bears the burden

of satisfying the first two prongs of this test, Schwarzenegger, 374 F.3d at 802, and is

“obligated to come forward with facts, by affidavit or otherwise, supporting personal

jurisdiction.” Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986) (quoting Amba Mktg. Sys.,

Inc. v. Jobar Int’l, Inc., 551 F.2d 784, 787 (9th Cir. 1977)). Once the plaintiff has made this

showing, “the burden then shifts to the defendant to ‘present a compelling case’ that the

exercise of jurisdiction would not be reasonable.” Schwarzenegger, 374 F.3d at 802 (citing

Burger King, 471 U.S. at 476-78).

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The first prong of the three-part specific jurisdiction test requires the plaintiff to

establish either that the defendant purposefully availed himself of the privilege of conducting

activities within the forum state or that he purposefully directed his activities toward the

forum state. Id. Availment and direction are distinct concepts, with availment being the

standard for suits based in contract and direction the standard for suits based in tort. Id. A

contract with a party from the forum state does not automatically establish sufficient contacts

to support personal jurisdiction, Doe v. Unocal Corp., 248 F.3d 915, 924 (9th Cir. 2001), but

it is sufficient for due process that “the suit [is] based on a contract which had substantial

connection with [the forum state].” McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957).

Along with the terms of the contract, courts look at prior negotiations, the parties’ actual

course of dealing, and contemplated future consequences in determining whether a defendant

purposefully availed himself of the privilege of conducting activities within the forum state.

Doe, 248 F.3d at 924 (citing Burger King, 471 U.S. at 478-79).

The second prong of the Ninth Circuit’s test, whether the claim arises out of or relates

to the defendant’s forum-related activities, is a “but for” test. Doe, 248 F.3d at 924; see also

Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir. 1995). The claim arises out of the

defendant’s forum-related activities if, but for the contacts between the defendant and the

forum state, the cause of action would not have arisen. Doe, 248 F.3d at 924.

Once a plaintiff has shown that the first two prongs of the test are satisfied, a court

presumes that the exercise of personal jurisdiction is reasonable. Ballard, 65 F.3d at 1500

(citing Sher v. Johnson, 911 F.2d 1357, 1364 (9th Cir. 1990)). The burden then shifts to the

defendant to show a compelling case that the exercise of jurisdiction would be unreasonable.

Id.; Schwarzenegger, 374 F.3d at 802 (citing Burger King, 471 U.S. at 476-78). In evaluating

the reasonableness of exercising specific jurisdiction over a nonresident defendant, the Ninth

Circuit applies a seven-factor test: “(1) the extent of the defendant’s purposeful injection into

the forum; (2) the defendant’s burdens from litigating in the forum; (3) the extent of conflict

with the sovereignty of the defendant’s state; (4) the forum state’s interest in adjudicating the

dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the

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forum to the plaintiff’s interest in convenient and effective relief; and (7) the existence of an

alternative forum.” Ziegler v. Indian River Cnty., 64 F.3d 470, 475 (9th Cir. 1995) (citing

Terracom, 49 F.3d at 561). All seven factors must be weighed and none alone is dispositive.

Id; Core-Vent Corp. v. Nobel Indus. AB, 11 F.3d 1482, 1488 (9th Cir. 1993).

C. Discussion

Plaintiff must make a prima facie showing that Defendants purposefully availed

themselves of the privilege of conducting activities in Arizona and that the cause of action

in this case arises from Defendants’ forum-related activities. As a threshold matter, the Court

first addresses Plaintiff’s claim that Defendants consented in the terms of the loan agreement

to personal jurisdiction in Arizona. (Doc. 10 at 6). The loan agreement provides that

“Borrower and all persons and entities in any manner obligated to Lender under the

Loan Documents irrevocably submits to the jurisdiction of . . . (b) any state or federal court

sitting in the state where the Property is located . . .” (Doc. 8-1 Ex. 1, Ex. B, at 12) (emphasis

added). The parties to the loan agreement are Plaintiff and Canal #2, not Defendants. (Id. at

14). And as Defendants correctly point out, Exhibit B to the loan agreement clearly defines

the guaranties as being “not loan documents.” (Id. at 16). Therefore, the loan agreement

subjects Canal #2, but not Defendants, to personal jurisdiction in Arizona. Defendants have

not consented to personal jurisdiction in Arizona.

Plaintiff otherwise argues for Defendants’ purposeful availment on a variety of facts,

implying that taken together, these facts show prior negotiations, the parties’ actual course

of dealing, and contemplated future consequences. See Doe, 248 F.3d at 924. Plaintiff alleges

that Defendants’ execution of the loan guaranties induced Plaintiff to make the loan to Canal

#2 for the purpose of acquiring the property. (Doc 10 at 3-4). Plaintiffs highlight that Canal

#2 was formed for the purpose of purchasing the Arizona property, Canal #2 was registered

to do business in Arizona, Defendants’ ownership of the property causes them to regularly

travel to Arizona, and Defendants personally obligated themselves to travel to Arizona to

clean up any environmental contamination on the property. (Id. at 3-5).

Defendants, on the other hand, seek to distance themselves from the loan agreement

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and Arizona, arguing that “the Guarantors did not have any contact with Arizona as it relates

to the Guaranties.” (Doc. 8 at 5). Defendants assert, without opposition, that the guaranties

were negotiated and executed solely in Michigan, and that the guaranty contract is a separate

contract from the loan agreement (Id. at 3, 6). They bolster their argument with the

guaranties’ choice of law provisions, in which Defendants consented to jurisdiction in

Michigan and agreed that Michigan law would apply. (Doc. 8-1 Ex. 1, Ex. A, at 5); (Doc. 8-1

Ex. 2, Ex. A, at 5). Courts, however, have concluded that the personal guaranties of

nonresident defendants may constitute purposeful availment of the privilege of conducting

activities within the forum state. See Susan M. Kole, Execution, Outside of Forum, of

Guaranty of Obligations Under Contract to Be Performed Within Forum State as Conferring

Jurisdiction Over Nonresident Guarantors Under “Long-Arm” Statute or Rule of Forum,28

A.L.R.5th 664 (1995).

In Forsythe v. Overmyer, 576 F.2d 779 (9th Cir. 1978), the Ninth Circuit found that

the personal guaranty of a nonresident defendant constituted purposeful availment of the

privilege of conducting transactions within California, and subjected the defendant to

personal jurisdiction in California. Defendant Overmyer was a New York resident, sole

owner of an Oregon corporation (through his ownership of that corporation’s parent), and

chief executive officer of the same Oregon corporation. 576 F.2d at 781. Overmyer’s Oregon

corporation contracted with the California plaintiff for the lease of real property located in

Oregon, and the lease contract was negotiated within California. Id. at 783. Though he

remained in New York, Overmyer personally guarantied the lease and mailed his guaranty

to the plaintiff in California. Id. at 781. The lease, but not the guaranty, provided that it

would be subject to the jurisdiction of California courts and governed by California law. Id.

The Ninth Circuit reaffirmed its respect for “corporate boundaries in jurisdictional contexts,”

but found that Overmyer “interjected himself into the transaction by assuming personal

liability in the event of a default on a contract expressly subject to jurisdiction in the

California forum.” Id. at 783.

In Hamada v. Valley Nat’l Bank, 555 P.2d 1121 (Ariz. Ct. App. 1976), the Arizona

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Court of Appeals exercised jurisdiction over a Utah defendant who personally obligated

himself to an Arizona bank in connection with that bank’s loan to a Utah corporation. 555

P.2d at 1122-23. The court held that the execution of the defendant’s obligation to buy back

shares of stock, performed with the defendant’s knowledge that it was to be used in a

transaction in Arizona, was sufficient minimal contacts for Arizona to exercise personal

jurisdiction. Id. at 1124.

This Court was confronted with this same issue on nearly identical facts in Compass

Fin. Partners L.L.C. v. Unlimited Holdings, Inc., No. CV07-1964-PHX-MHM, 2008 WL

2945585 (D. Ariz. 2008). There, the plaintiff, a Delaware limited liability company, sued the

defendant, a Nevada corporation, for breach of guaranty arising from a loan agreement and

guaranty executed in Nevada but concerning real property located in Arizona. 2008 WL

2945585, at *1. The loan agreement, note, and guaranty were governed by Nevada law, and

the documents provided that the borrower submitted to personal jurisdiction in Nevada. Id.

In finding no purposeful availment, the Court distinguished Hamada, which involved an

obligation to an Arizona bank, from the Nevada-based loan between two non-Arizona

parties. Id. at *5. The Court also rejected the plaintiff’s contention that its claim arose out of

the purchase of real property, viewing the guaranty as separate from the purchase and

concluding that the execution of the guaranty did not consummate any transaction within

Arizona sufficient to exercise personal jurisdiction. Id.

The Court finds the present case distinguishable from Forsythe and Hamada. Here,

the loan agreement, guaranty, and all other loan documents were negotiated and executed in

Michigan. In Forsythe, California personal jurisdiction was proper because the loan

agreement was negotiated in California with a California plaintiff, but here neither party is

an Arizona citizen and all negotiations took place in Michigan. And in Hamada, the

obligation was the buyback of stock from an Arizona bank. Here, the obligation is the

payment of a loan between two non-Arizonan parties.

The facts of this case are indistinguishable from those of Compass Financial. Like in

Compass Financial, although a purchase of Arizona real property occurred, neither party is

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an Arizona citizen. The loan agreement and guaranty apply the law of another state, and they

subject the defendants to the jurisdiction of another state. Plaintiff argues that Defendants’

guaranties induced it to provide the loan and that this should serve as a basis for establishing

jurisdiction. This Court rejected a similar claim in Compass Financial, 2008 WL 2945585,

at *5, and this Court will do so again. “Plaintiff’s claim here does not arise out of the

purchase of real property as Plaintiff suggests. Plaintiff’s claim arises out of the loan for

which the land acts as collateral.” Id. Because the guaranty and the loan were wholly

negotiated in Michigan, contain Michigan choice of law clauses, and subject Defendants to

personal jurisdiction in Michigan, Defendants’ signing of the guaranty did not constitute

purposeful availment of the privilege of conducting activities within Arizona.

Plaintiff has failed to make a prima facie showing of purposeful availment, the first

prong of our three-part test for specific personal jurisdiction. Therefore, this Court need not

proceed to the remaining two prongs; Plaintiff has not shown that Defendants have sufficient

minimum contacts with Arizona such that this Court’s exercise of personal jurisdiction would

comport with Defendants’ due process rights. Because this Court will not exercise personal

jurisdiction over Defendants, Defendants’ alternative motion for a transfer of venue is moot.

Accordingly,

IT IS ORDERED granting Defendants’ Motion to Dismiss for Lack of Personal

Jurisdiction. (Doc. 8).

IT IS FURTHER ORDERED denying Defendants’ Alternative Motion to Transfer

Venue Pursuant to 28 U.S.C. § 1404(a) as moot. (Doc. 8).

DATED this 27th day of March, 2012.

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