Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-3_11-cv-08013/USCOURTS-azd-3_11-cv-08013-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Breach of Contract

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

1

 Neither party has requested oral argument and the Court concludes that oral

argument would not aid the decisional process.

2

 The plaintiff’s members are citizens of Nevada, and the defendant is an

 WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Del Mar Land Partners, LLC,

 Plaintiff,

vs.

Stanley Consultants, Inc.,

 Defendant.

)

)

)

)

)

)

)

)

)

)

No. CV-11-8013-PCT-PGR

 

 ORDER

 

Pending before the Court is defendant Stanley Consultants, Inc.’s Motion to

Dismiss Plaintiff’s Amended Complaint Pursuant to F.R.C.P. 12(b)(3), 12(b)(6),

12(g) or in the Alternative, Motion to Transfer Venue (Doc. 12). Having

considered the parties’ memoranda in light of the record, the Court finds that the

motion to dismiss should be granted in part and denied in part and that the

motion to transfer venue should be denied.1

The plaintiff’s Amended Complaint (Doc. 8), which is based on diversity of

citizenship jurisdiction pursuant to 28 U.S.C. § 13322

, raises claims for breach of

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 1 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26 Iowa corporation with its principal place of business in Iowa.

- 2 -

contract, negligent misrepresentation, fraud, and unjust enrichment, all of which

arise from two contracts between the parties, a master agreement entered into in

October 2006 and an addendum agreement entered into in January 2007, which

concerned civil engineering consulting services the defendant was to provide to

enable the plaintiff to obtain permits from various Arizona state agencies required

for the development of a residential real estate project located in Mohave County,

Arizona. 

The defendant first argues that this action should be dismissed because its

filing was untimely and constitutes forum-shopping. The defendant’s argument is 

based solely on an order, entered on August 3, 2010, by the United States

District Court for the Southern District of California, the court in which the plaintiff

initially commenced this litigation against the defendant, wherein that court

granted the defendant’s motion to dismiss for lack of personal jurisdiction, with

leave to the plaintiff to amend its complaint by August 23, 2010. The defendant’s

contention, which is presented in a very cursory manner without citation to any

supporting law, is that dismissal is warranted because the plaintiff “did not re-file

by August 23, 2010 pursuant to the [California] Order, let alone in California.

Instead, on January 25, 2011, Plaintiff filed its Complaint against Stanley in this

Court.” The Court concludes that this aspect of the defendant’s motion to dismiss

is simply frivolous. The California court’s dismissal order merely stated, in

relevant part, that “[s]hould the Plaintiff choose to file a First Amended Complaint

in this district, as opposed to another district with fewer jurisdiction and venue

problems, it must be filed on or before August 23, 2010.” (Italics added; other

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 2 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

3

 Document 12-2, Exhibit 1 at page 6; 2010 WL 3056964, at *3 (S.D.Cal.

Aug. 3, 2010).

- 3 -

emphasis in the original).3

 Absolutely nothing in that order forbids the filing of this

action or controls the timing of the filing of this action.

The defendant’s second argument is that this action should be dismissed in

its entirety pursuant to Fed.R.Civ.P. 12(b)(3) for lack of venue. The defendant

contends that venue is not proper in this forum under any portion of the general

venue statute, 28 U.S.C. § 1391(a). The plaintiff, which bears the burden of

establishing the propriety of venue, alleges in the Amended Complaint, and

argues in part in its response to the motion to dismiss, that venue is proper

pursuant to § 1391(a)(2), which provides in relevant part that venue is appropriate

in “a judicial district in which a substantial part of the event or omissions giving

rise to the claim occurred[.]” 

When a motion to dismiss is based on Rule 12(b)(3), the pleadings need

not be accepted as true and the Court may consider evidence outside of the

pleadings, such as affidavits and declarations. Murphy v. Schneider National,

Inc., 362 F.3d 1133, 1137 (9th Cir. 2004). To that end, the Court has considered

the relevant evidence submitted by the parties. Since the Court is not holding an

evidentiary hearing to resolve material disputed facts, given that neither party has

requested such a hearing, the Court, as it must, has drawn all reasonable

inferences in favor of the plaintiff as the non-moving party and has resolved all

factual conflicts in the plaintiff’s favor. Id., at 1138 and 1140. Having accepted

the plaintiff’s assertions of fact as true, the Court is persuaded that the plaintiff

has made a prima facie showing that venue as to all claims is proper in the

District of Arizona under § 1391(a)(2) notwithstanding the defendant’s assertion

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 3 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

4

 Because the Court concludes that venue is proper under § 1391(a)(2), 

the Court need not resolve the disputed issue of whether the defendant is a

“resident” of Arizona for purposes of § 1391(a)(1), which is the other basis for

venue raised by the plaintiff in its response (but not in its Amended Complaint). 

The Court notes that while the defendant argues that it is not subject to personal

jurisdiction in this forum for purposes of § 1391(a)(3), the plaintiff is not relying on

that alternative venue provision and the defendant has not moved to dismiss this

action for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). 

 To the extent that personal jurisdiction is an issue, the Court concludes

that the plaintiff has made a prima facie showing that the exercise of specific

jurisdiction over the defendant comports with due process as to both the contract

and tort claims given that the plaintiff’s evidence establishes that the defendant

has business offices in Arizona, it negotiated and executed its contracts with the

plaintiff in Arizona and made its alleged misrepresentations to the plaintiff in

Arizona, and it performed its duties related to the contracts in Arizona. See Data

Disc, Inc. v. System Technology Associates, Inc., 557 F.2d 1280, 1285 (9th Cir.

1977) (When the court, in the exercise of its discretion, elects to resolve the

jurisdiction issue solely on the basis of written materials, the plaintiff need only

make a prima facie showing that jurisdiction exists, i.e., it need only allege facts

sufficient to support a finding a jurisdiction and to submit competent evidence

which, if credited, would permit those facts to be found.)

5

 While the defendant has objected to certain portions of Warren

Church’s declaration, it has improperly done so through a separate filing (Doc.

16-1) in violation of LRCiv 7.2(m)(2). In any case, the Court rejects those

- 4 -

that none of the events or omissions giving rise to the plaintiff’s claims occurred in

Arizona because the plaintiff’s evidence establishes that substantial activities

underlying this action were undertaken by the defendant within Arizona.4

The plaintiff has sufficiently established the existence of venue for the

breach of contract claim because Warren Church, the plaintiff’s managing

member who negotiated the contracts with the defendant, states in his

declaration that he negotiated and signed the contracts at the defendant’s office

in Kingman, Arizona and that the contracts called for the defendants to perform

work in Arizona5

; furthermore, the defendant has provided an affidavit submitted

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 4 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

objections for purposes of resolving the defendant’s Rule 12(b)(3) motion,

particularly those directed at paragraphs two and three of Church’s declaration. 

- 5 -

in the initial California action from Michael Fondren, a surveyor manager for the

defendant working out of the defendant’s Phoenix, Arizona office, wherein he

confirms that he performed surveying work under the contracts at the plaintiff’s

property in Mohave County, Arizona. See Decker Coal Co. v. Commonwealth

Edison Co., 805 F.2d 834, 842 (9th Cir.1986) (Court concluded that venue for

purposes of § 1391(a) for a breach of contract claim is the place of intended

performance.) The plaintiff’s evidence is also sufficient to establish the propriety

of venue for the tort claims because Church states in his declaration that at least

some of the misrepresentations underlying the tort claims were made to him by

defendant’s employees during face to face conversations at the defendant’s

Kingman, Arizona office. See Myers v. Bennett Law Offices, 238 F.3d 1068, 1076

(9th Cir.2001) (Court noted that in a tort action the locus of the injury is a relevant

factor in determining the propriety of venue under § 1391.) 

The defendant’s third argument is that the plaintiff’s fraud claim, the Third

Cause of Action in the Amended Complaint, should be dismissed pursuant to

Fed.R.Civ.P. 12(b)(6) because it is not pleaded with the particularity required by

Fed.R.Civ.P. 9(b). The Court disagrees.

Since Rule 9(b) requires that the circumstances constituting the alleged

fraud be specific enough to give the defendant notice of the particular misconduct

so that it can defend itself against the charge and not just deny that it has done

anything wrong, a complaint must state the time, place, and specific content of

the alleged false representations as well as the identities of the parties to the

misrepresentations in order to avoid a Rule 9(b) dismissal. Sanford v.

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 5 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 6 -

MemberWorks, Inc., 625 F.3d 550, 558 (9th Cir. 2010). The defendant’s Rule 9(b)

challenge is predicated on its conclusory contention that the Amended Complaint

fails to meet this test because it fails to provide the defendant with notice of the

time, place, date, and content of the alleged misrepresentations, and it fails to

allege that the misrepresentations were made by individuals operating under the

defendant’s authority. 

The Court concludes that the alleged misrepresentations underlying the

fraud claim, which relate to the defendant’s statements regarding its ability to

provide civil engineering services in Arizona, are sufficiently specific that the

defendant will be able to prepare an answer to that claim. For example,

paragraphs 18 and 19 of the fraud claim provide (1) that “Defendant’s

representatives Mike Fondren, Dave Frohman and Chris Darnell represented to

Plaintiff’s representative Warren Church, prior to entering into the contracts in

question, that Defendant was experienced with the permitting process and the

work required to obtain the necessary approvals in Arizona[,]” (2) that “Defendant

also represented in the October 2006 agreement that it would submit the required

application to [the Arizona Department of Water Resources] for a determination of

water adequacy and to [the Arizona Department of Environmental Quality] for

water supply to the project[,]” and (3) that the defendant “falsely stat[ed] to

Warren Church that additional work was required because Arizona had changed

its permitting process after the October 2006 agreement was signed,

necessitating additional work by Defendant outside the scope of the original

agreement.” To the extent that required information is missing from the fraudrelated allegations in the Amended Complaint, the defendant has failed to specify

what details it lacks knowledge of or how that missing information prevents it from

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 6 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

6

 Although the parties’ contracts were not attached as exhibits to the

plaintiff’s Amended Complaint, the Court may consider them without turning the

defendant’s Rule 12(b)(6) motion into a motion for summary judgment because

the authenticity of these documents is not contested and the plaintiff’s amended

complaint necessarily relies on them. Lee v. City of Los Angeles, 250 F.3d 668,

688 (9th Cir.2001).

- 7 -

answering the fraud claim.

The defendant’s fourth argument is that the plaintiff’s negligent

misrepresentation claim, the Second Cause of Action in the Amended Complaint,

should be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) because it fails to state a

claim due to the bar of the economic loss doctrine. The Court agrees with the

defendant to the extent that it concludes that Arizona law bars this claim.

As an initial matter, the defendant argues that the application of Nevada

law to resolve this issue is mandated by the choice of law provision in the parties’

master contract, which was carried over into the addendum contract, which

provided that the parties’ “Agreement shall be governed by Nevada law.”6

 The

plaintiff, which does not dispute the validity of the choice of law provision, argues

that Arizona law applies to its negligent misrepresentation claim notwithstanding

the contractual choice of law provision because the claim sounds in tort.

The Court agrees with the plaintiff that the application of Nevada law is not

required by the choice of law provision because that narrow provision facially only

governs the interpretation of the parties’ contracts, not the resolution of a related

tort claim such as the negligent misrepresentation claim. See Sutter Home

Winery, Inc. v. Vintage Selections, Ltd., 971 F.2d 401, 407 (9th Cir.1992) (In a

case involving a choice of law provision stating that “[e]xcept as otherwise

required by applicable law, this Agreement shall be governed by the law of the

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 7 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 8 -

State of California[,]” the court concluded that the plaintiff’s tort claims were not

governed by California law, noting that “[c]laims arising in tort are not ordinarily

controlled by a contractual choice of law provision. Rather, they are decided

according to the law of the forum state.”) (Internal citation omitted). Under the

governing Arizona choice of law principles, 

courts are required to resolve tort issues under the law of the state

having the most significant relationship to both the occurrence and

the parties with respect to any particular questions. Bates v. Superior

Court, Maricopa County, 156 Ariz. 46, 749 P.2d 1367, 1370 (1980). 

Courts look to four factors in making this determination: (1) the place

where the injury occurred, (2) the place where the conduct causing

the injury occurred, (3) the domicile of the parties, and (4) the place

where the parties’ relationship is centered. Id.

Sutter Home Winery, at 407; see also, Restatement (Second) of Conflicts of Law

§ 148 (applying the most significant relationship test to determine choice of law

for negligent misrepresentation claims). Applying these factors to the evidence of

record, it is clear that Arizona has the most significant relationship to the

negligent misrepresentation claim because it is the state in which the alleged

misrepresentations occurred, the state where the harm stemming from those

misrepresentations was felt, and the state in which the parties’ relationship was

centered since it was the location of the plaintiff’s construction project and the

place of the defendant’s performance; Nevada, on the other hand, has only a

marginal connection to the events underlying the misrepresentation claim in that

the plaintiff is a Nevada company and its members are domiciled there and it is

one of the locations (as is Arizona) in which the defendant has an office. The

Court will therefore apply Arizona law to determine if the economic loss doctrine

bars the negligent misrepresentation claim.

The economic loss doctrine, as formulated by the Arizona Supreme Court,

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 8 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 9 -

refers “to a common law rule limiting a contracting party to contractual remedies

for the recovery of economic losses unaccompanied by physical injury to persons

or other property.” Flagstaff Affordable Housing Limited P’ship v. Design Alliance,

Inc., 223 P.3d 664, 667 (Ariz.2010) (Court concluded that the economic loss

doctrine barred a housing project’s owner from recovering negligence-based

damages arising from its architect’s failure to design the project’s buildings in

accordance with the parties’ contracts and federal accessibility rules because the

damages sought were only for economic losses.) For purposes of the doctrine,

“[e]conomic loss ... refers to pecuniary or commercial damage, including any

decreased value or repair costs for a product or property that is itself the subject

of a contract between the plaintiff and defendant, and consequential damages

such as lost profits.” Id. 

The plaintiff’s position is that the tort damages it seeks do not arise from

any failure on the defendant’s part to properly perform design or engineering

services required by the parties’ contracts, but rather from the defendant’s

inducement of the plaintiff to contract with it by falsely representing that it had

expertise and knowledge regarding Arizona environmental and water law and

regulations and Arizona permitting procedures, which the plaintiff asserts

constitutes a tort independent of its breach of contract claim. While the full scope

of Arizona’s economic loss doctrine has yet to be resolved, the Court is

persuaded that the economic loss doctrine is applicable here to limit the plaintiff

to its contract remedies because the pertinent allegations of the Amended

Complaint are directed at alleged breaches by the defendant that in effect

deprived the plaintiff of the benefit of its bargain and there are no allegations of

physical harm either in the form of personal injury or property damage. The harm

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 9 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 10 -

allegedly suffered by the plaintiff is not one that is separate and distinct from any

harm that would foreseeably result from the defendant’s failure to perform as the

parties’ contracts required as it is clear from the Amended Complaint that the

plaintiff’s damages arise from its contention that its housing project was

unnecessarily delayed, which resulted in buyers cancelling the purchase of lots

within the plaintiff’s property, making harder for the plaintiff to sell additional lots,

and reducing the sale price for lots it did sell, because the defendant’s filings on

the plaintiff’s behalf were repeatedly rejected by the various Arizona agencies

due to the defendant’s unfamiliarity with Arizona law and permitting process. See

Cook v. Orkin Exterminating Co., __ P.3d __, 2011 WL 2162688, at *5 (Ariz.App.

May 19, 2011) (In a case in which the plaintiffs claimed in part that they were

induced to enter a contract with the defendant based on its negligent

misrepresentations regarding its ability to rid their home of termites, the court

concluded that the economic loss doctrine barred the plaintiff’s tort claims

because the plaintiffs were seeking remedies for purely economic loss from the

defendant’s failure to adequately perform its promises under the contract.)

The defendant alternatively requests that the Court transfer this action to

the District of Nevada pursuant to 28 U.S.C. § 1404(a) should the Court decline

to dismiss it. The Court has broad discretion under the statute to order such a

transfer if this action could have been brought in the District of Nevada and the

transfer “is warranted by the convenience of parties and witnesses and promotes

the interests of justice.” Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). The

determination of whether a requested transfer under § 1404(a) is appropriate in a

particular case requires that the Court weigh multiple factors affecting the

convenience of the forum, such as (1) the location where the relevant

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 10 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 11 -

agreements were negotiated and executed, (2) the state most familiar with the

governing law, (3) the plaintiff’s choice of forum, (4) the parties’ contacts with the

forum, (5) the contacts relating to the plaintiff’s causes of action in the chosen

forum, (6) the differences in the costs of litigation in the two forums, (7) the

availability of compulsory process to compel the attendance of unwilling non-party

witnesses, (8) the ease of access to sources of proof, (9) the existence of a forum

selection clause, and (10) the relevant public policy of the forum state.

Jones v. GNC Franchising, Inc., 211 F.3d 495, 498-99 (9th Cir.), cert. denied, 531

U.S. 928 (2000). 

The Court concludes that it need not analyze the propriety of a § 1404(a)

transfer through a discussion of all of the relevant factors because no transfer is

warranted inasmuch as the defendant’s cursory argument in favor of the transfer,

which merely touches on some of the relevant factors with no discussion of the

relevant case law, is insufficient to meet its significant burden of showing that

Nevada is a more appropriate forum for this action. See Decker Coal Co. v.

Commonwealth Edison Co., 805 F.2d at 843 (“The defendant must make a strong

showing of inconvenience to warrant upsetting the plaintiff’s choice of forum.”) 

For example, the defendant’s contention that it would be more convenient for

both parties to litigate this action in Nevada as they both have offices in Nevada

is not persuasive because the defendant also has offices in Arizona, the plaintiff’s

project is located in Arizona and the place of the defendant’s performance was in

Arizona, and the plaintiff’s chosen forum is Arizona; the defendant’s contention

that the parties’ contracts were negotiated and executed in Nevada is specifically

disputed by the plaintiff which contends that both of these acts occurred in

Arizona; the defendant’s contention that the choice of law provision in the parties’

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 11 of 12
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

- 12 -

contracts illustrates that the parties agreed that any disputes between them would

be venued in a Nevada court is not persuasive because the choice of law

provision cannot reasonably be construed as also being a forum selection clause;

and the defendant’s contention, which it states is based only in its information and

belief, that relevant witnesses are located in Nevada is of no significance since

the defendant has made no effort to set forth the identity or location of any

witness or to explain why it would be inconvenient for any witness to testify in

Arizona. Accordingly,

IT IS ORDERED that the defendant’s Motion to Dismiss Plaintiff’s

Amended Complaint Pursuant to F.R.C.P. 12(b)(3), 12(b)(6), 12(g) (Doc. 12) is

granted solely to the extent that the plaintiff’s Negligent Misrepresentation claim,

the Second Cause of Action in the Amended Complaint, is dismissed, and the

motion is denied in all other respects.

IT IS FURTHER ORDERED that the defendant’s [Alternative] Motion to

Transfer Venue (Doc. 12) is denied.

IT IS FURTHER ORDERED that the Court has set a Scheduling

Conference for Monday, August 1, 2011, at 11:15 a.m., in Courtroom 601 of the

Sandra Day O’Connor United States Courthouse, 401 W. Washington Street,

Phoenix, AZ.

DATED this 11th day of July, 2011.

Case 3:11-cv-08013-PGR Document 20 Filed 07/12/11 Page 12 of 12