Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_08-cv-01798/USCOURTS-azd-2_08-cv-01798-1/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1446pl Petition for Removal - Product Liability

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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Marlyn Nutraceuticals, Inc., 

Plaintiff, 

vs.

Improvita Health Products, et al., 

Defendant. 

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No. CV-08-1798-PHX-MHM

ORDER

Currently before the Court are Defendants Thomas Klamet and Daniel Kohler’s Motion

For Judgement on the Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil

Procedure. In the same motion, these Defendants also request that the Court dismiss

Plaintiff’s claims for lack of personal jurisdiction pursuant to Rule 12(b)(2) of the Federal

Rules of Civil Procedure. After reviewing the pleadings and determining that oral argument

is unnecessary, the Court issues the following order. 

I. BACKGROUND:

On May 15, 2007, Plaintiff MNI and Defendant Improvita entered into a

Manufacturing and Supply Agreement (the “Agreement”) pursuant to which MNI would

manufacture and supply nutritional products and supplements to Improvita. (Dkt. #1,¶10).

The Agreement provides that all disputes must be resolved through an arbitration process

pursuant to Article XVIII, entitled “Dispute Resolution.” (Dkt. #11, Ex. B). The

Agreement provides that Improvita will pay MNI for all finished product or work in

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process, and all unused ingredients that can not be returned. (Dkt. #11, ¶11). Improvita

fell behind on payments; from approximately October 2007 through late February 2008,

MNI attempted to work with Improvita with respect to its delinquent debts. (Id., ¶14). On

February 29, 2008, due to Improvita’s failure to pay down its debts and alleged attempt to

delay resolving the payment issues, MNI initiated negotiation proceedings pursuant to the

Agreement’s notice provision in Article XVIII. (Id., ¶19). MNI’s February 29, 2008

notice demanded that Improvita agree to formally mediate the payment dispute on or

before the close of business on March 5, 2008. (Id., ¶21). MNI also provided names of

potential mediators in Phoenix, Arizona, and approximately eight possible dates on which

the parties could mediate. (Id.). Improvita failed to respond to MNI’s request until March

4, 2008. (Id., ¶20, Ex. C).

Having made no progress through alternative dispute resolution, MNI filed a

Complaint against Improvita in Maricopa County Superior Court on March 20, 2008.

(Dkt. #11, ¶23). Improvita subsequently filed a Motion to Dismiss, arguing that the

dispute must be resolved through mediation or arbitration based on the alternative dispute

resolution provision in the May 15, 2007 Agreement. (Id.). MNI did not file a responsive

memorandum to Defendants’ Motion to Dismiss, and the Superior Court dismissed the

case. (Id., ¶24).

On May 19, 2008, MNI and Improvita submitted to a mediation in Phoenix,

Arizona. (Dkt. #11, ¶24). In preparation for the mediation, MNI submitted a 13 page

Mediation Memorandum, including 25 exhibits; Improvita made no settlement offers and

raised its alleged defenses less than one week prior to the mediation. (Id., ¶25). Improvita

did not provide supporting documentation. (Id., ¶28). Although the mediation was

unsuccessful, the parties attempted to schedule an arbitration. (Id., ¶25). Based on

correspondence between the parties’ counsel, an arbitration was scheduled for August 19,

2008, before Steve Scott in Phoenix, Arizona. (Id., ¶26). However, one week after

arbitration was scheduled, Improvita informed MNI that due to a scheduling conflict, the

arbitration could not take place before August 26, 2008. (Id., ¶27). The parties

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rescheduled the arbitration for August 27, 2008, to take place before Daniel Nastro. (Id.,

¶29). The parties also agreed on a disclosure statement date for discovery and relevant

arbitration issues; Improvita confirmed the August 27, 2008 arbitration date in a letter

dated July 1, 2008. (Id.). But on August 14, 2008, Improvita announced that it would not

participate in the scheduled arbitration because of the “associated expenses”; it proceeded

to cancel the arbitration and offered to reschedule one after October 1, 2008. (Id., ¶30).

Instead, on October 1, 2008, MNI filed a Complaint against Improvita and Defendants

Klamet and Kohler in this Court for breach of contract, viewing Improvita’s cancellation

of the arbitration as an act of bad faith and an attempt to further delay resolution. (Dkt.

#1). Defendants filed a Motion to Dismiss on October 6, 2008, and request dismissal

pursuant to Federal Rules of Civil Procedure 12(b)(1)(2)(3) and (6). (Dkt. #7). On

November 24, 2008, the Court granted the Defendants’ Motion to Dismiss without

prejudice and ordered the Parties to submit to arbitration no later than December 23,

2008. (Dkt. #16). The Court further ordered that if the arbitration did not occur within

the specified time, it would permit the Plaintiff to file a motion to re-open the case. (Id.). 

On December 02, 2008, Improvita filed a Motion to Continue Arbitration. (Dkt.

#18). The Court denied the Defendants’ motion, ordering the parties to meet and confer

to select an arbitrator no later than December 12, 2008. (Dkt. # 20). On January 27,

2009, MNI filed a Motion to Re-Open the Case, alleging that Defendants refused to

arbitrate the dispute by the court-ordered date, (Dkt. #21), along with its First Amended

Complaint. (Dkt. #22). In response, on February 13, 2009, Defendants filed the

following with the Court: Response to Plaintiff’s Motion to Re-Open the Case, (Dkt.

#23), Separate Answer to Amended Complaint by Improvita Health Products, Inc., (Dkt.

#24), Separate Answer to Amended Complaint by Thomas Klamet, Daniel Kohler, (Dkt.

#25), Motion For Judgement on the Pleadings pursuant to Rule 12(c) of the Federal Rules

of Civil Procedure. (Dkt. #26). The Court granted the MNI’s Motion to Re-Open on

February 17, 2009.

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In the instant motion before the Court—Defendant’s Motion For Judgement on the

Pleadings pursuant to Rule 12(c) of the Federal Rules of Civil Procedure— Individual

Defendants Klamet and Kohler contend that judgement on the pleadings is appropriate

because their status as corporate officers shields them from personal liability with regards

to Plaintiff’s claims. (Id.). Additionally, these Defendants argue that the Court may not

exercise jurisdiction over them. (Id.). Plaintiff, on the other hand, counters that its

pleadings properly allege actionable claims and make a prima facie showing of personal

jurisdiction over Defendants Klamet and Kohler. (Dkt. #28). 

II: DEFENDANTS’ MOTION FOR JUDGEMENT ON THE PLEADINGS:

A. Standard:

Rule 12(c) of the Federal Rules of Civil Procedure provide that "[a]fter the

pleadings are closed but within such time as not to delay the trial, any party may move for

judgment on the pleadings. "Judgment on the pleadings is proper, when, taking all of the

allegations in the pleadings as true, the moving party is entitled to judgment as a matter of

law." Honey v. Distelrath, 195 F.3d 531, 532–33 (9th Cir. 1999). “[A] court may dismiss

a complaint only if it is clear that no relief could be granted under any set of facts that

could be proved consistent with the allegation.” Swierkiewicz v. Sorema N.A., 534 U.S.

506, 514 (2002) (internal quotation marks omitted).

B. Discussion: 

In its Amended Complaint, Plaintiff plead two separate tort claims against these

Defendants: fraud and negligent misrepresentation. As to both claims, Defendants

Klamet and Kohler argue that as corporate representatives of Improvita, they cannot be

held personally liable to Plaintiff absent a piercing of the corporate veil based on “alterego” theory. (Dkt. #26, p.4). Accordingly, Defendants contend that Plaintiff’s claims

must fail as a matter of law because its pleadings do not state facts sufficient to warrant a

piercing of the corporate veil. Id. Plaintiff, on the other hand, denies that piercing the

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corporate veil is necessary in this case. (Dkt. # 28, p.3). Instead, it argue that corporate

officers may be held personally liable for torts committed in their official capacity

without piercing the corporate veil, and, as a result, its pleadings have sufficiently stated a

claim. Id..

As a general matter, under Arizona law, “[t]he corporate fiction will be

disregarded when the corporation is the alter ego of the business conduit of a person, and

when to observe the corporation would work an injustice. The alter-ego status is said to

exist when there is such unity of interest and ownership that the separate personalities of

the corporation and owners cease to exist.” Dietel v. Day, 492 P.2d 455, 457 (Ariz. App.

1972). When determining the presence of alter-ego status, courts must consider, among

other factors, the corporation’s failure to “maintain the formalities of separate corporate

existence; . . . plaintiff’s lack of knowledge of separate corporate existence; and [the]

commingling of personal and corporate funds.” Deutsche Credit Corp. v. Case Power &

Equipment Co., 876 P.2d 1190, 1196 (Ariz. App.1994). This Court aggress with

Defendants; Plaintiff’s complaint does not contain facts that justify a piercing of the

corporate veil. This omission, however, is not necessarily fatal to its claims. 

“[C]orporate directors are not personally liable for torts committed by the

corporation or by one of its officers merely by virtue of the office they hold.” 

Bischofshausen, Vasbinder, and Luckie v. D.W. Jaquays Min. and Equipment Contractors

Co., 145 Ariz. 204, 211 (App. 1985). “[T]heir status,” however, “does not shield them

from personal liability.” Albers v. Edelson Technology Partners L.P., 201 Ariz. 47, 52

(App. 2001). Under Arizona law, corporate officers, managers, or directors may be held

personally liable for a corporation’s torts where they have “participated [in the tort] or

have knowledge amounting to acquiescence or be guilty of negligence in the management

or supervision of the corporate affairs causing or contributing to the injury.”

Bischofshausen, 145 Ariz. at 210; see Dawson v. Withycombe, 216 Ariz. 84, 101 (App.

2007) (“a director cannot be liable without some kind of personal participation in the tort

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or at least acquiescence by knowledge of the tort combined with a failure to act.”). 

Furthermore, such liability is not contingent upon the defendant having acted individually

or in furtherance of personal interests: “a director or officer of a corporation is

individually liable for fraudulent acts or false representations of his own . . . even though

his action in such respect may be in furtherance of the corporate business.” Albers, 201

Ariz. at 52 (quoting 18B AM..JUR. 2D CORPORATIONS § 1882 (1985)).

Based on the preceding analysis, it is clear that the corporate veil need not be

pierced when the assertion of an officer or board members’ personal liability is based on

an allegation of tortious conduct. The instant case is such a situation; Plaintiff has plead

that the Defendants personally participated in two torts—fraud and negligent

misrepresentation. Accordingly, this Court cannot find that Plaintiff’s claims must fail as

a matter of law simply because Plaintiff did not allege facts sufficient to pierce the

corporate veil. The more difficult question for this Court, however, concerns an

ambiguity in Arizona law: do unintentional torts—negligence—subject an officer or board

member to personal liability. The Court must address this issue, as under Arizona law,

“[a] claim for relief for negligent misrepresentation is one governed by the principles of

the law of negligence.” Pettay v. Insurance Marketing Services, Inc., 156 Ariz. 365, 368

(App. 1987) (quoting Van Buren v. Pima Community College District Board, 113 Ariz.

85, 87 (1976)). 

In Albers the Arizona Court of Appeals limited personal liability to “intentionally

harmful or fraudulent conduct.” Albers, 201 Ariz. at 52. This language strongly suggests

that only intentional torts are actionable. On the other hand, the bulk of the authority

speaks of torts generally, not specifically limiting a cause of action to intentional conduct. 

See, e.g., Bischofshausen, 145 Ariz. at 210 (speaking of torts in general terms); Dawson

v. Withycombe, 216 Ariz. 84, 101 (App. 2007) (same). Further muddying the waters, the

Albers court cited with approval language from American Jurisprudence Second of

Corporations stating that “a director or officer of a corporation is individually liable for

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fraudulent acts or false representations of his own.” Albers, 201 Ariz. at 52 (quoting 18B

AM. JUR.2D CORPORATIONS § 1882 (1985)). False representations, as distinguished from

fraudulent acts, are not necessarily the product of intentional conduct. Given the confusion

on this issue, this Court will err on the side of inclusiveness, finding that claims grounded

in negligence are actionable under Arizona law. 

Having decided that both of Plaintiff’s claims are potentially actionable, this Court

wishes to note that in their Motion For Judgement on the Pleadings, Defendants, with the

exception of alter-ego theory—an area of law clearly inapplicable in this case—did not

offer any other reason why they are entitled to judgement on the pleadings. In their Reply,

Defendants responded to Plaintiff’s arguments only by denying that Mr. Klamet and Mr.

Kohler acted in their individual capacities. (Dkt. #29, p.2). Once again, the Defendants are

correct, but their assertion does not wound the Plaintiff’s claim since this Court has

established that under Arizona law, corporate officers may be held personally liable for

torts committed in furtherance of company business. Defendants also argued for the first

time in their Reply that Plaintiff failed to sufficiently plead its Fraud claim. (Id.) The

Court need not consider Defendants' position, however, since it was first raised in their

reply brief. See Eberle v. City of Anaheim, 901 F.2d 814, 818 (9th Cir. 1990) (noting that

legal arguments raised for the first time in the reply brief are deemed waived). Thus, even

if the argument has merit, this Court cannot appropriately consider it, since Plaintiffs did

not have the opportunity to respond. See United States v. Romm, 455 F.3d 990, 997 (9th

Cir. 2006). Accordingly, this Court finds that Defendants are not entitled to a judgement

on the pleadings.

/ / / 

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III: DEFENDANTS MOTION FOR PERSONAL JURISDICTION

A. Standard

To establish personal jurisdiction, plaintiff has the burden of showing that (1)

forum state's long-arm statute confers jurisdiction over the nonresident defendant; and (2)

the exercise of jurisdiction comports with principles of due process. Omeluk v. Langsten

Slip & Batbyggeri A/S, 52 F.3d 267, 269 (9th Cir. 1995). Arizona's long-arm statute

confers jurisdiction to the maximum extent allowed by the Due Process Clause of the

United States Constitution. ARIZ. R. CIV. P. 4.2(a); Doe v. American Nat'l Red Cross, 112

F.3d 1048, 1050 (9th Cir. 1997). Therefore, the issue before the Court is whether the

exercise of jurisdiction over Defendants accords with due process. See Omeluk, 52 F.3d at

269.

Where an evidentiary hearing is not held, dismissal for lack of personal jurisdiction

is appropriate only if the plaintiff has not made a prima facie showing of personal

jurisdiction. Fields v. Sedgwick Associated Risks, Ltd., 796 F.2d 299, 300 (9th Cir. 1986).

“[U]ncontroverted allegations in [plaintiff's] complaint must be taken as true, and

‘conflicts between the facts contained in the parties' affidavits must be resolved in

[plaintiff's] favor for purposes of deciding whether a prima facie case for personal

jurisdiction exists.’” American Telephone & Telegraph Co. v. Compagnie Bruxelles

Lambert, 94 F.3d 586, 588 (9thCir.1996) (citing WNS, Inc. v. Farrow, 884 F.2d 200, 2003

(5thCir. 1989). However, a court may not assume the truth of allegations in a pleading that

are contradicted by affidavit. Data Disc, Inc., v. Systems Tech. Assoc, 557 F.2d 1280,

1284 (9thCir. 1977). If the plaintiff is able to meet its prima facie burden, the movant can

nevertheless continue to challenge personal jurisdiction either at a pretrial evidentiary

hearing or at trial itself. Metropolitan Life Ins. Co. v. Neaves, 912 F.2d 1062, 1064, n.1

(9thCir. 1990). 

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Due Process requires that the nonresident defendant have “certain minimum

contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional

notions of fair play and substantial justice.’” International Shoe Co. v. Washington, 326

U.S. 310, 316 (1945) (internal citation omitted). There are two types of personal

jurisdiction, general and specific. General jurisdiction exists where a non-resident

defendant engages in substantial, continuous or systematic activities within the forum.

Perkins v. Benquet Consol.Mining,Co., 342 U.S. 437, 445 (1952). When a defendant’s

contacts with the forum do not rise to the level required for general jurisdiction, a court

may exercise specific jurisdiction over a claim when it arises from the defendant’s

activities within that forum. Shute v. Carnival Cruise Lines, 897 F.2d 377,897 F.2d 377,

381 (9th Cir. 1990) rev’d on other grounds, 499 U.S. 585 (1991).

B. Analysis:

In its complaint, Plaintiff, an Arizona company, alleges that these Individual

Defendants made false representations to MNI employees through telephone, email, and

mail that caused acts to occur in Maricopa County, Arizona. (Compl., p.2, 3–4). These

representations allegedly included multiple promises to make payment that were never

kept, as well as assurances that Defendant Improvita had secured or was about to secure

new lines of credit that would allow it to make payment. (Compl., 3–4) As a result of

these statements, Plaintiff contends Defendants induced it to continue shipping product to

Improvita and to forbear from bringing a lawsuit, thereby causing financial injury. 

(Compl., p. 10). Defendants have not submitted controverting affidavits, thus this Court

must accept the uncontested allegations in the complaint as true for the purposes of its

analysis. Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1108 (9th Cir. 2002).

1. Fiduciary Shield doctrine

As a threshold issue, this Court must determine if the fiduciary shield doctrine

prevents it from exercising jurisdiction over the Defendants. “Under the fiduciary shield

doctrine, a person's mere association with a corporation that causes injury in the forum

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state is not sufficient in itself to permit that forum to assert jurisdiction over the person.” 

Davis v. Metro Productions, Inc., 885 F.2d 515, 520 (9th Cir. 1989). In Calder v. Jones,

the Supreme court limited the reach of the fiduciary shield doctrine, holding that a

defendant’s “status as [an] employee[] does not somehow insulate [her] form jurisdiction.” 

465 U.S. 783, 790 (1984). Instead, the Supreme Court directed lower courts to access an

employee-defendant’s contact with the forum state individually. Id. The Ninth Circuit,

applying Calder, has determined that:

because the Arizona long-arm statute extends to the limit of constitutional

due process and because it is not equitably limited by the fiduciary shield

doctrine, the reach of long-arm jurisdiction in Arizona is effectively

stretched by the reasoning of Calder. . . . Thus, Arizona's long-arm statute

may, consistent with constitutional due process, allow assertion of personal

jurisdiction over officers of a corporation as long as the court finds those

officers to have sufficient minimum contacts with Arizona. 

Davis, 885 F.2d at 522 (internal citations omitted). Accordingly, the Court finds that

Defendants are not protected from personal jurisdiction by their status as corporate

employees. Instead, the jurisdictional question will be answered based on “traditional

notions of fair play and substantial justice” as embodied in the minimum contacts doctrine. 

International Shoe, 326 U.S. at 316.

2. Minimum Contacts

Plaintiff, while not conceding lack of general jurisdiction over individual

Defendants, makes its argument for personal jurisdiction based primarily on specific

jurisdiction. The Ninth Circuit utilizes a three-prong test to evaluate the nature and quality

of Defendants’ contacts for purposes of specific jurisdiction; the test provides:

(1) the nonresident defendant must do some act or consummate some

transaction with the forum 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; 2) the claim must be one

which arises out of or results from the defendant’s forum related activities;

and 3) exercise of the jurisdiction must be reasonable.

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EDIAS Software Intern., LLC v. BASIS Intern. Ltd., 947 F. Supp. 413, 417 (D. Ariz.

1996). All three factors must exist for personal jurisdiction to apply. Omeluk v. Langstein

Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9thCir. 1995). 

The first prong of the test—purposeful availment—is “treated . . . somewhat

differently in tort and contract cases.” Yahoo! Inc. v. La Ligue Contre Le Racisme Et

L'Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006). When confronted with a claim in

tort the court must “inquire whether a defendant ‘purposefully directed his activities’ at the

forum state, applying an effects test that focuses on the forum in which the defendants’

actions were felt.” Id. To satisfy the effects test, a defendant must have: “(1) committed

an intentional act, (2) expressly aimed at the forum state, (3) causing harm that the

defendant knows is likely to be suffered in the forum state.” Id. Under this test, a

defendant need not have had physical contact with the forum state for a court to exercise

its jurisdiction. Brainerd v. Governors of the University of Alberta, 873 F.2d 1257, 1260

(9th Cir. 1989). 

For its prima facie showing of personal jurisdiction, Plaintiff relies exclusively on

the allegations set forth in its complaint. Therein, Plaintiff asserts two tort claims against

Defendants; Fraud and Negligent Misrepresentation. The former is an intentional tort

claim, while the latter is not. Plaintiff contends that the effects test is applicable to both

causes of action. This is incorrect: “It is well established that the [effects] test applies only

to intentional torts, not to . . . breach of contract and negligence claims.” Holland America

Line Inc. v. Wartsila North America, Inc., 485 F.3d 450, 460 (9th Cir. 2007). 

Accordingly, the Court will analyze Plaintiff’s fraud claim under the purposeful-direction

effects test, and its negligent misrepresentation claim under the purposeful availment

standard.

a. Purposeful Direction

The first prong of the effects test requires the Court to find that Defendants

committed an intentional act. “‘Intent’ in the context of the ‘intentional act’ test refer[s] to

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an intent to perform an actual physical act in the real world, rather than an intent to

accomplish a result or consequence of that act.” Schwarzenegger v. Fred Martin Motor

Co., 374 F.3d 797, 806 (9th Cir. 2004). And, an “‘act’ denotes an external manifestation

of the actor’s will.” Id. (quoting The Restatement (Second) of Torts § 2 (1964)). The

phone calls, emails, and mailings sent by the Defendants and the misrepresentations

therein constitute intentional acts for the purposes of the effects test. The acts alleged in

the Plaintiff’s complaint cannot occur spontaneously or because of reflex, thus Defendants

must have intended to perform them. And it goes almost without saying that Defendants’

intent to perform them clearly manifested itself externally. Accordingly, this Court has no

trouble finding that the intentional act prong of the effects test has been met. See Calder,

465 U.S. at 789 (finding the researching, writing, editing, and publishing of an allegedly

libelous article is an intentional act); Schwarzenegger, 374 F.3d at 806 (holding that

placing an add in a local newspaper constituted an intentional act); Bancroft & Masters,

Inc. v. Augusta Nat'l, Inc., 223 F.3d 1082, 1088 (9th Cir.2000) (finding that the sending of

a demand letter constituted an intentional act).

Next, the court must consider whether the Defendants expressly aimed their

intentional acts at Arizona. The “express aiming” requirement is met when “the defendant

is alleged to have engaged in wrongful conduct targeted at a plaintiff whom the defendant

knows to be a resident of the forum state.” Bancroft & Masters, 223 F.3d at 1087. Acts

that have merely foreseeable effects in the forum state are insufficient. Id. In the instant

case, Defendants must surely have known that the consequences of their allegedly

wrongful conduct would be felt in Arizona. After all, the Defendants made each and

everyone of their alleged misrepresentations directly to Plaintiff, an Arizona corporation. 

These actions constitute the type of “individual targeting” that is the gravamen of the

expressly-aiming test. See, e.g., Dole Food Co., Inc. v. Watts, 303 F.3d 1104, 1112 (9th

Cir. 2002) (“Because Watts and Boenneken knew that Dole's principal place of business

was in California, knew that the decisionmakers for Dole were located in California, and

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communicated directly with those California decisionmakers, we conclude that their

actions were “expressly aimed” at the forum state.”); Bancroft & Masters, 223 F.3d at

1087 (finding that a demand letter sent to Virginia was expressly aimed at California

because it targeted a California corporation). 

 Finally, the Court must determine if the Defendants caused harm that they knew

was likely to be suffered in the forum state “[W]hen a forum in which a plaintiff

corporation has its principal place of business is in the same forum toward which

defendants expressly aim their acts, the “effects” test permits that forum to exercise

personal jurisdiction”. Dole, 303 F.3d at 1114. In other words, when the Plaintiff’s

principal place of business is located in the same forum at which the defendant aimed her

intentional acts, the Court may find that a defendant knew harm was likely to be suffered

in the forum state. See Id. Such is the situation at hand. This Court has already decided

that Defendant aimed its actions at Arizona and that Plaintiff’s principal place of business

is Arizona. This being the case, all that is left for the Court to decide is if Plaintiff has

alleged harm. In its pleadings, Plaintiff claims that Defendants’ misrepresentations

caused it both to continue shipping product to Imporvita and to forbear from bringing a

lawsuit, and that these decisions caused it economic injury. (Cmplnt., p.4). The Court,

therefore, believes that the causing-harm prong of the effects test has been met. 

Consequently, the Court also finds that Defendants purposefully directed their alleged

fraudulent conduct at Arizona, satisfying the first prong of the minimum-contacts test. 

b. Purposeful Availment:

Before moving onto the second and third elements of the minimum contacts test,

the Court will consider whether the purposeful availment element has been satisfied with

respect to Plaintiff’s negligent-misrepresentation allegation. Defendants argue that their

contacts with Arizona are limited to communications via US Mail, email, and phone calls,

and that these actions are insufficient to find purposeful availment. (Dkt. #29, p.4). 

Plaintiff, arguing for an application of the effects test, did not directly address this issue. 

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The purposeful availment standard is meant to determine whether “the defendant's

conduct and connection with the forum State are such that he should reasonably anticipate

being haled into court there.” World-Wide Volkswagen v. Woodson, 444 U.S. 286, 297

(1980). And, it “is based on the presumption that it is reasonable to require a defendant

who conducts business and benefits from his activities in a state to be subject to the burden

of litigating in that state as well.” Brainerd v. Governors of the University of Alberta, 873

F.2d 1257, 1259 (9th Cir.,1989). “Jurisdiction may not be avoided by a lack of physical

contact with the forum state.” Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987). 

“Nevertheless, a defendant may not be haled into a jurisdiction as the result of random,

fortuitous or attenuated contacts or based upon the unilateral acts of third parties.” Id.

Plaintiff’s negligent misrepresentation suit is brought against Messrs. Kohler and

Klamet in their corporate capacity as officers of Defendant Improvita. As such, the

Defendants’ contacts with Arizona cannot reasonably be said to have been for their

benefit, instead they were for the benefit of their employer. Similarly, this Court cannot

find that these Defendants have conducted business in Arizona, only that their employer

has. Accordingly, it is difficult for this Court to conclude that they have enjoyed the

benefits of or invoked the protection of Arizona’s laws. Additionally, and in light of the

Defendants lack of business contacts with Arizona, the Court has concerns about the

sufficiency of Defendants’ contacts with Arizona. See e.g. Scullin Steel Co. v. National

Ry. Utilization Corp., 676 F.2d 309, 314 (8th Cir. 1982) (“The use of interstate facilities

(telephone, the mail) . . . are secondary or ancillary factors and cannot alone provide the

“minimum contacts” required by due process.”); see also Brainerd, 873 F.2d at 729

(declining to find purposeful availment test met where alleged contacts consisted of

communications between individuals at two universities, and the defendant did not

otherwise conduct business in the proposed forum state). In sum, the Court does not

believe these Defendants’ contacts with Arizona were such they should reasonably have

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anticipated being brought to court there. Accordingly, this court must decline to exercise

its jurisdiction over Defendants on Plaintiff’s negligent misrepresentation claim.

Before moving on, the Court acknowledges that at first blush it seems illogical that

personal jurisdiction could potentially be exercised over these Defendants on one claim,

but not the other. After all, both claims stem from the same set of facts and allege the

same contacts with Arizona. The different tests that the Court must apply to each claim,

however, dictate such a result. See, e.g., See Brainerd, 873 F.2d at 729 (finding that

defendant’s contacts did not satisfy the purposeful availment test, but did satisfy the

purposeful direction test). In finding that Defendants satisfied the purposeful direction

test, the Court focused on whether defendants knew or should have known their intentional

acts would have an effect in Arizona. In making this determination, the Court did not have

to wrestle with many of the considerations that are essential elements of purposeful

availment, such as whether Defendants conducted business with Arizona or personally

benefitted from such activities. Had it been required to do, the Court’s determination may

well have been different.

c. Arising Out of the Forum Related Activities:

Having determined that Plaintiff’s fraud claim satisfied the first prong of the

minimum contacts test, the Court must “ rely on a “but for” test to determine whether a

particular claim arises out of forum-related activities and thereby satisfies the second

requirement for specific jurisdiction.” Ballard v. Savage, 65 F.3d 1495, 1500 (9th Cir.

1995). The question, therefore, is: but for the Individual Defendants’ contacts with the

Plaintiff, would the Plaintiff’s claims have arisen? Plaintiff answers this question in the

affirmative, arguing that had Defendants not made fraudulent representations, it would not

have suffered the economic harm alleged in its complaint. (Dkt. #28, p.9). The Court

agrees with this logic. Taking, as it must, the Plaintiff’s allegations as true, it is reasonable

to assume that Plaintiff would not have continued to ship product to a company that had

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not paid it for previous shipments, except for the assurances of payment and ability to pay

made to it be the Defendants. The Plaintiff has carried its burden on this element.

d. Reasonableness

Finally, the Court needs to determine if exercising personal jurisdiction over the

Defendants is reasonable. The Court must “presume that an otherwise valid exercise of

specific jurisdiction is reasonable.” Ballard, 65 F.3d at 1500. To avoid jurisdiction,

Defendants “must present a compelling case that the presence of some other

considerations would render jurisdiction unreasonable.” Id. (quoting Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 477 (1985)). In determining reasonableness, the Court must

consider: 

(1) the extent of the defendants' purposeful injection into the forum state's

affairs; (2) the burden on the defendant of defending 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 forum to the

plaintiff's interest in convenient and effective relief; and (7) the existence of

an alternative forum

Dole, 303 F.3d at 1114. Finally, the court must balance and weigh all seven factors; none

is dispositive. Ziegler v. Indian River County, 64 F.3d 470, 475 (9th Cir 1995).

1. Purposeful Injection:

The first element of the reasonableness prong of the minimum contacts test is

purposeful injection. The Court has already concluded Defendants purposely directed

their actions at Arizona. This finding, however, does not necessitate a determination that

the purposeful injection elements satisfied. “There may be circumstances under which the

level of purposeful injection into the forum supports a finding of purposeful availment [or

purposeful direction] yet still weighs against the reasonableness of jurisdiction.” Dole,

303 F.3d at 1104. The Defendants—conflating the purposeful injection with the

purposeful availment test—urge that they did not personally conduct any business in

Arizona and have only been accused of sending emails and mail, and making phone calls;

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actions they argue are insufficient to meet the purposeful availment test (or, presumably,

the purposeful injection test). (Dkt. #29, p. 4). Were they accused merely of making

phone calls and sending email, the purposeful injection prong would likely weigh in their

favor. The problem with the Defendants’ argument is that it separates the communications

from their content. The communications are alleged to have conveyed fraudulent

statements that caused Plaintiff, an Arizona corporation, to take actions which the

Defendants must surely have known would cause it harm. By so doing, the Defendants

purposefully injected themselves into this forum. See e.g. Id. at 1114 (finding purposeful

injection where “[n]ot only did [defendants] know that their scheme would injure Dole

U.S., which they knew had its principal place of business in California, but they also

engaged in repeated communications with Dole managers in California in furtherance of

their alleged scheme.”). For these reasons, the Court finds that the purposeful injection

factor weighs in favor of the Plaintiff.

2. The Burden of Defending in the Forum

The next factor the Court must consider is the burden on Defendants of defending

in the forum. Defendants, residents of Ohio, claim that forcing them to defend this matter

in Arizona would place on them a substantial burden. In support of this contention,

Defendants inform the Court that they are “individual entrepreneurs”, and that traveling to

Arizona, even for one day, would “seriously affect their ability to earn a likelihood.” (Dkt.

#29, p.5). “[U]nless the inconvenience [to the defendants of litigating in the forum state]

is so great as to constitute a deprivation of due process, it will not overcome clear

justifications for the exercise of jurisdiction.” Panavision Intern., L.P. v. Toeppen, 141

F.3d 1316, 1323 (9th Cir. 1998) (internal quotation omitted). The Court is sympathetic to

the Defendants’ arguments, but notes that “modern advances in comminations and

transportation have significantly reduced the burden of litigating” in another forum. 

Sinatra v. Nat'l Enquirer, Inc., 854 F.2d 1191, 1199 (9th Cir.1988). Taking the

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Defendants at their word, the Court finds that this factor weighs against exercising its

jurisdiction, but only slightly.

3. Conflict with the Sovereignty of Ohio

The Court must also consider the extent to which its exercise of jurisdiction in

Arizona would conflict with the sovereignty of Ohio. Defendants argue that such a

conflict exists because the legal theory on which the Plaintiff rests its case is not

recognized in Ohio. (Dkt. #26). This Court, respectfully disagrees with the Defendants’

conclusions. Just like in Arizona, Ohio recognizes that “[w]hen a corporate officer

commits a tort while in the performance of his duties, he is individually liable for the

wrongful act.” See, e.g., Shaffer v. Frontrunner, Inc.,566 N.E.2d 193, 197 (Ohio

App.,1990). This factor, therefore, presents no barrier to litigation in this case.

4. Forum State’s Interest

The fourth factor that this Court must examine concerns Arizona’s interest in

having this case litigated in state. Plaintiffs argue that Arizona has a strong public-policy

interest in preventing foreigners from committing torts against its citizens. (Dkt. #28,

p.11). Defendant, on the other hand, denies that Arizona has any such interest, and, to the

contrary asserts that should this claim be allowed to proceed, “the costs to the Arizona

Court system conducting this trial will be thousands of dollars concerns out-of-state

residents.” (Dkt. # 29, p.5–6). The Court begins by noting that states have a strong

incentive in providing their citizens with an effective means of redress from tort. See

Sinatra, 654 F.2d at 1200. Second, the Court does not understand, nor have Defendants

explained, how trying a case in federal court will cost the Arizona court system one cent,

let alone thousands of dollars. For these reasons, the “forum state’s interest” test weighs

in favor of the Plaintiff.

/ / / 

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5. Efficiency of Adjudication

Arizona is the most efficient forum in which to hear this case. Both Parties point

out, correctly, that evidence and witnesses can be found in both Arizona and Ohio. 

Accordingly, this consideration is a wash. Therefore, given that this Court is already

familiar with the claims, facts, and parties involved, it believes that this efficiency of

adjudication can most readily be achieved by leaving the case where it is; in Arizona.

6. Convenience and Effectiveness of Relief for Plaintiff

Sixth, the Court is required to look at the convenience and effectiveness of relief of

having trial in Plaintiff’s desired forum. Plaintiff is an Arizona Corporation. The

maintenance of a suit outside of Arizona would clearly be less convenient for Plaintiff, and

Defendant does not deny it is so. Instead, Defendant argues that litigating the case in Ohio

would be the most effective means of satisfying a potential judgement, but does not

explain why this is so. In sum, Defendants have not shown that the plaintiff’s claims can

more effectively remedied in Ohio. See Brand, 796 F.2d at 1075 (explaining that plaintiffs

made no showing that Arizona constituted a more convenient forum). Consequently, the

Court finds that this factor weighs in favor of the Plaintiff; Arizona is the most convenient

and effective forum of relief.

7. Existence of an Alternative Forum

The seventh, and final, factor in the reasonableness test is the existence of an

alternative forum. This element comes into play, however, “only when the forum state is

shown to be unreasonable.” Corporate Investment Business Brokers v. Melcher, 824 F.2d

786, 791 (9th Cir.1987). This court does not believe that such a showing has been made,

nor does it believe that any” regulatory or policy interests are served” by transferring the

case to Ohio, the alternative forum proffered by Defendants. Sinatra, 854 F.2d at 1201.

After balancing each and everyone of the reasonableness test factors, this Court

concludes that its exercise of jurisdiction over the Defendants is both reasonable and

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proper. The burden of rebutting the presumption of reasonableness lay with the

Defendants; it was not met. Id. Therefore, this Court finds that Plaintiff has made the

necessary prima facie showing of jurisdictional fact with respect to its fraud claim. The

Court cannot exercise jurisdiction over Plaintiff’s negligent misrepresentation claim, as the

facts plead do not permit a finding that the first element of the minimum contacts

test—purposeful availment—has been satisfied. 

However, “[w]hen a defendant must appear in a forum to defend against one claim,

it is often reasonable to compel that defendant to answer other claims in the same suit

arising out of a common nucleus of operative facts.” Action Embroidery Corp. v. Atlantic

Embroidery, Inc., 368 F.3d 1174, 1181 (9th Cir. 2004). Under the doctrine of pendent

personal jurisdiction the court may exercise its jurisdiction “over a defendant with respect

to a claim for which there is no independent basis of personal jurisdiction so long as it

arises out of a common nucleus of operative facts with a claim in the same suit over which

the court does have personal jurisdiction.” Id. at 1180. Such a decision is completely

within the Court’s discretion and should be made to promote “judicial economy, avoidance

of piecemeal litigation, and overall convenience.” Id. at 1181. Plaintiff’s negligent

misrepresentation claim against Defendants, over which this Court does not have

jurisdiction, clearly arises from the same set of operative facts. Consequently, the Court

finds that exercising its jurisdiction over both of Plaintiff’s claims against these

Defendants would promote the interests of justice and the efficient use of the parties' and

the Court's resources. 

Accordingly,

IT IS HEREBY ORDERED that Defendants Thomas Klamet and Daniel Kohler’s

Motion for Judgement on the Pleadings, (Dkt. #26), is DENIED

IT IS FURTHER ORDERED that Defendants request to Dismiss Plaintiff’s

claims for lack of personal jurisdiction, (Dkt. #26), is DENIED as to Plaintiff’s

fraud claim and GRANTED as to Plaintiff’s negligent misrepresentation claim.

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IT IS FURTHER ORDERED that Plaintiff’s claim for negligent

misrepresentation will remain part of this case under the Court’s discretionary

application of pendent personal jurisdiction 

DATED this 29th day of September, 2009.

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