Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-4_12-cv-00311/USCOURTS-azd-4_12-cv-00311-0/pdf.json

Parties Involved:
James Arnett
Plaintiff
Ben Howard Trust
Defendant
Benjamin Snow Howard
Defendant
Lifeline Media LLC
Defendant
Nationwide Affordable Housing
Defendant

Document Text:

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

27

28

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

James Arnett, 

Plaintiff, 

vs.

Benjamin Snow Howard, et al., 

Defendants. 

)

)

)

)

)

)

)

)

)

)

)

No. CV-12-0311-TUC-DCB-DTF

REPORT AND RECOMMENDATION

Pending before the Court is Defendants’ Motion to Dismiss the Amended Complaint.

(Doc. 37.) Plaintiff filed a response and Defendant replied. (Docs. 40, 41.) Pursuant to the

Rules of Practice in this Court, the matter was assigned to Magistrate Judge Ferraro for a

report and recommendation. The Magistrate recommends the District Court, after its

independent review of the record, enter an order denying the motion to dismiss and

transferring the case to Utah.

BACKGROUND

The Court summarizes the facts from Arnett’s Amended Complaint (Doc. 35) that are

relevant to resolving the pending motion. Plaintiff alleges Defendant Howard contacted him

in Tucson by Skype in November 2010, asking him for free assistance in building a website.

Howard sent a Cricket phone to Arnett in Tucson in order to consult on the website. In

February 2011, Howard traveled to Tucson to finalize the website with Arnett. While in

Arizona, Howard solicited Arnett’s services for a 2-month project to produce an audio book

and a motion picture in Utah. Howard offered him equity partnership. Arnett accepted the

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 1 of 10
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

27

28

- 2 -

arrangement and agreed to contact him when he was available, which he did in May. During

that phone conversation, Howard reiterated the agreement and offered to pay for Arnett’s

Tucson work space and his Utah expenses. On June 5, 2011, Arnett flew to Utah on a ticket

purchased by Howard. Howard then stated the equity agreement could be drafted later.

With respect to the project, Howard was acting as the agent of Defendant Nationwide

Affordable Housing; he later paid Arnett’s expenses through Defendant Lifeline Media. In

late August 2011, Arnett asked Howard to finalize the equity agreement or to pay him for his

services. Howard promised he would eventually do one or the other. As a bonus incentive,

Howard offered Arnett a motorcycle to ride back to Arizona, which Howard represented as

safe, in excellent condition and worth more than $3000. The motorcycle title was in the name

of the Ben Howard Trust. After completing the audio book, a television spot, and the voice

and picture track of the movie, Arnett returned to Arizona in October.

In December 2011, Howard called Arnett wanting to come to Tucson regarding the

audio mix for the project, but Arnett informed him that without payment he could not house

Howard. Howard then uploaded the motion picture onto the Lifeline Media websites, without

license to exhibit it without payment. Plaintiff invoiced Howard for $211,000 in services.

Howard has refused to make any payment to Arnett and continues to use the materials in

promotion of his business.

Arnett alleges four claims, one breach of contract, two fraud and one of

endangerment. In the contract claim, Arnett alleges that Defendant Howard represented the

project as having substantial earning power and offering Plaintiff a major equity interest.

Plaintiff accepted the offer and produced the goods. Howard breached the agreement by

failing to execute a written equity agreement or make payment for the product produced by

Arnett. In Claim 2, Plaintiff alleges Defendants misrepresented the value of the equity

partnership to induce Arnett to produce the media products. He also alleges Defendants

misrepresented their ability to pay to induce Plaintiff to forgo litigation. In the second fraud

claim, Arnett alleges that Howard and the Ben Howard Trust misrepresented the value and

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 2 of 10
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

27

28

- 3 -

condition of the motorcycle transferred to Plaintiff, in order to induce Plaintiff to continue

working on Howard’s project. Plaintiff alleges that all Defendants committed endangerment

by knowingly not disclosing the dangerous condition of the motorcycle brakes and delaying

Plaintiff’s departure until the weather conditions were poor with the intention of causing

catastrophic injury or death.

DISCUSSION

Defendants argue that Plaintiff’s Amended Complaint should be dismissed for lack

of personal jurisdiction, improper venue and because it fails to state a claim. At a minimum,

Defendants argue the case should be transferred to a court in Utah.

PERSONAL JURISDICTION

Defendants move to dismiss for lack of personal jurisdiction, as provided for by

Federal Rule of Civil Procedure 12(b)(2). Because this is a diversity case, the Court applies

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

which provides for personal jurisdiction to the full extent allowed by the Due Process Clause,

Ariz. R. Civ. P. 4.2(a).

Due process requires that a defendant not present within the court’s state “have certain

minimum contacts with it such that the maintenance of the suit does not offend ‘traditional

notions of fair play and substantial justice.’” Int’l Shoe Co. v. State of Wash., Office of

Unemployment Comp. & Placement, 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer,

311 U.S. 457, 463 (1940)). A defendant has fair warning that he may be subjected to suit in

a forum if he has “‘purposefully directed’ his activities at residents of the forum” and the suit

is due to injuries allegedly resulting from those activities. Burger King Corp. v. Rudzewicz,

471 U.S. 462, 472 (1985) (quoting Keeton v. Hustler Magazine, Inc., 465 U.S. 770, 774

(1984)). When a party reaches out beyond one state to create continuing contractual

relationships with citizens of another state, that party can be subject to jurisdiction in the

other state based on its activities there. Id. at 473. This rule is based in part on a state’s

interest in providing a convenient forum for its citizens to seek recovery for damages caused

by an out of state person. Id.

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 3 of 10
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

27

28

- 4 -

The Court may exercise specific jurisdiction if:

(1) the defendant has performed some act or consummated some transaction

within the forum or otherwise purposefully availed himself of the privileges

of conducting activities in the forum, (2) the claim arises out of or results from

the defendant’s forum-related activities, and (3) the exercise of jurisdiction is

reasonable.

Bancroft & Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1086 (9th Cir. 2000).

Defendant Howard

First, factor one is satisfied as to Defendant Howard. He traveled to Arizona to

conduct business with Plaintiff Arnett, an Arizona resident. While in Arizona, Howard

proposed a contract to Arnett for the creation of an audio book and a motion picture, to which

Arnett agreed. Because Howard sought to enter into a contract with an Arizona resident

while in Arizona, he purposefully availed himself of the privileges of conducting activities

in the forum. Burger King Corp., 471 U.S. at 476 (finding that a party avails himself of the

privilege of doing business in a state when he creates “continuing obligations” with a resident

of that state). A contract alone does not establish sufficient minimum contacts. Id. at 478

(considering prior negotiations, contemplated future consequences, terms of the contract and

actual course of dealing). However, here, Howard negotiated a contract while in Arizona that

involved paying an Arizona resident for services, including paying Arnett’s Arizona

expenses while he worked on the project in Utah. Further, Howard continued his refusal to

compensate Arnett after Arnett returned to Arizona, causing foreseeable injuries to him in

Arizona. See id. at 480.

Second, Arnett’s contract and tort claims arise out of Howard’s contract with an

Arizona resident and his failure to make the agreed payment for Arnett’s services. See

Bancroft & Masters, Inc., 223 F.3d at 1088 (applying a “but for” causation test, that is the

contacts satisfying purposeful availment must give rise to the suit).

Third, Defendant must make a “compelling case” that it is unreasonable for this Court

to exercise personal jurisdiction over him. Id. (quoting Burger King Corp., 471 U.S. at 476-

77). In making this determination, the Court considers several factors:

(1) the extent of the defendant’s purposeful interjection into the forum state,

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 4 of 10
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

27

28

- 5 -

(2) the burden on the defendant in defending in the forum state, (3) the extent

of the 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.

Id. (citing Burger King Corp., 471 U.S. at 477). Although Howard’s time in Arizona was

limited he intentionally sought out an Arizona resident with whom to contract for services

he sought to have performed. Defendant states that the burden on him to defend in Arizona

would be great, however, he provides no reasoning in support of that assertion. Defendant

resides in Utah, which is a neighboring state and he has retained an Arizona attorney.

Inconvenience is more readily accommodated through a change of venue and rarely rises to

the level of a constitutional issue. Burger King Corp., 471 U.S. at 484.

Defendant contends that Utah’s law governs and Arizona’s exercise of jurisdiction

would conflict with Utah’s sovereignty as the actions took place in Utah. As the Supreme

Court has noted, any conflicting sovereignty can be accommodated through choice-of-law

rules. Burger King Corp., 471 U.S. at 477; Gray & Co. v. Firstenberg Mach. Co., Inc., 913

F.2d 758, 761 (9th Cir. 1990). Arizona has an interest in providing a convenient forum for

redress of its residents’ injuries. Burger King Corp., 471 U.S. at 473. While the performance

of the contract was primarily in Utah, Defendant provides no support for his argument there

are significant numbers of witnesses or voluminous evidence that would be inefficient to

present in an Arizona Court. Arguably Plaintiff will be equally inconvenienced to litigate in

Utah as Defendant to defend here in Arizona. Because Plaintiff is representing himself, it

would be more challenging to present his case in a different state. Review of the seven

factors does not weigh strongly in either party’s favor. Because the Court has found

sufficient minimum contacts and that the claim arose out of Howard’s contact with the

forum, Defendant’s suggestion of unreasonableness is not sufficiently compelling to defeat

this Court’s personal jurisdiction.

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 5 of 10
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

27

28

- 6 -

Defendants Nationwide Affordable Housing, Lifeline Media and 

the Ben Howard Trust

Plaintiff has not alleged that any of the entity Defendants have sufficient minimum

contacts with Arizona. With respect to Lifeline Media LLC and the Ben Howard Trust,

Defendant has not alleged that they took any actions directed at Arizona. With respect to

Nationwide Affordable Housing, Inc., Arnett might be alleging that Howard was representing

this entity when they formed a contract in Arizona but the allegation is too vague in its

current form to establish personal jurisdiction. The Court finds it does not have personal

jurisdiction over these three defendants and they are subject to dismissal on that ground.

VENUE

Defendants contend venue is not proper in Arizona. The venue statute provides for

venue based on three possible factors. 28 U.S.C. § 1391(b). Plaintiff argues venue is proper

in Arizona because it is a “district in which a substantial part of the events or omissions

giving rise to the claim occurred, or a substantial part of property that is the subject of the

action is situated.” 28 U.S.C. § 1391(b)(2).

Plaintiff bears the burden of establishing that venue is proper in Arizona. Piedmont

Label Co. v. Sun Garden Packing Co., 598 F.2d 491, 496 (9th Cir. 1979). Venue must be

established as to each defendant and each claim. See United Truck and Equip., Inc. v. Curry

Supply Co., No. CV08-01046-PHX-GMS, 2008 WL 4811368, *10 (D. Ariz. Nov. 5, 2008)

(citations omitted). The Ninth Circuit has suggested that venue for breach of contract claims

is best in the place of intended performance not the place of repudiation. Decker Coal Co.

v. Commonwealth Edison Co., 805 F.2d 834, 842 (9th Cir. 1986) (noting that the place of

performance is anticipated at the time of contracting and is likely to have a close nexus to the

underlying events).

After closely reviewing the entirety of the Amended Complaint, the Court finds that

venue is not proper in this Court as to any Defendants or claims.

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 6 of 10
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

27

28

- 7 -

Claim 1: Breach of Contract

A substantial part of the events giving rise to the breach of contract did not occur in

Arizona. The only nexus with this forum is that the initial contract was formed in Arizona.

However, the intention was always that contract performance would be in Utah. Further,

while Arnett was in Utah, the Amended Complaint alleges the contract was modified and renegotiated. Most critically, the central events or omissions giving rise to the claim were the

actions of Howard that occurred in Utah – he refused to reduce the equity agreement to

writing or to pay Arnett for his services.

Claim 2: Fraud as to the Contract

Plaintiff alleges Defendants Howard, Nationwide Affordable Housing and Lifeline

Media misrepresented Howard as a tortfeasor in a case pending in Georgia, which devalued

Arnett’s equity interest in the project. Defendants subsequently offered to make payment in

lieu of equity, but failed to do so. These alleged false statements were made in Utah and

Plaintiff alleges he was in Utah when he relied upon them. Arnett has not alleged that any

acts or omissions relating to this claim took place in Arizona.

Claim 3: Fraud as to the Motorcycle

Plaintiff alleges that Howard and the Ben Howard Trust materially misrepresented the

condition and value of the motorcycle to induce Arnett to continue work on the projects.

These false statements are alleged to have occurred in Utah and Plaintiff was in Utah at the

time he alleges he relied upon them. No acts or omissions giving rise to this claim took place

in Arizona.

Claim 4: Endangerment

Plaintiff alleges Defendants knew the condition of the motorcycle and delayed

Arnett’s departure from Utah on the motorcycle until the weather conditions were terrible,

in order to place Arnett in great danger of physical harm. The acts of Defendants are alleged

to have taken place in Utah, with no actions occurring in Arizona.

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 7 of 10
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

27

28

- 8 -

Transfer

Defendants request that if the Court is not inclined to dismiss the case for improper

venue, that it transfer the case to Utah. Pursuant to 28 U.S.C. § 1406(a), this Court may, in

the interest of justice, transfer a case filed in an improper venue to a district in which it could

have been brought originally. See Goldlawr, Inc. v. Heiman, 369 U.S. 463, 466 (1962)

(venue transfer allowed regardless of whether a court has personal jurisdiction over

defendants).

The Court first assesses whether the case could have been brought originally in Utah.

Because this action is between citizens of different states and the amount in controversy

exceeds $75,000 any district court has subject matter jurisdiction over the case. 28 U.S.C.

§ 1332(a). Based on the allegations in the Amended Complaint, a district court in Utah would

have personal jurisdiction over all Defendants. Defendant Howard is domiciled in Utah and

was personally served there. See J. McIntyre Machinery, Ltd. v. Nicastro, 131 S. Ct. 2780,

2787 (2011) (plurality opinion). Further, all Defendants are subject to specific jurisdiction

under Utah’s long-arm statute. The Court applies a three-part test for personal jurisdiction:

“identifying the defendant’s acts implicating Utah; (2) determining whether a nexus exists

between the plaintiff’s claim and the defendant’s conduct; and (3) assessing the nature of the

defendant’s contacts against due process standards.” STV Int’l Mktg v. Cannondale Corp.,

750 F. Supp. 1070 (D. Utah 1990). As to part one, any person acting in person or through an

agent is subject to jurisdiction in Utah if he transacts any business within the state. Utah

Code Ann. § 78B-3-205. All Defendants are alleged to have transacted business within the

borders of Utah, and Arnett’s claims arise out of the business each Defendant conducted with

him in Utah. Finally, Defendants have sufficient minimum contacts with Utah such that

requiring them to defend suit there does not offend “traditional notions of fair play and

substantial justice.” Defendants performed acts within the forum state, Arnett’s claims arise

out of those acts and jurisdiction in Utah is reasonable. Therefore, Utah has personal

jurisdiction over all Defendants. See Bancroft & Masters, Inc., 223 F.3d at 1086. Finally, as

evaluated above, venue is proper in Utah because a substantial part of the events or omissions

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 8 of 10
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

27

28

- 9 -

giving rise to Arnett’s claims occurred there. 28 U.S.C. § 1391(b)(2).

Next, the Court finds it is in the interest of justice to transfer this case to Utah.

Although Plaintiff believes venue is proper here and resists a transfer based solely on the

convenience of Defendants, he has expressed an intention to continue the suit even if

transferred. Cf. King v. Russell, 963 F.2d 1301, 1304 (9th Cir. 1992) (denying transfer, in

part, because plaintiff had no interest in a transfer). Further, Plaintiff had a difficult time

serving Defendants and ultimately the United States Marshal was employed to perfect inperson service. (Docs. 6, 10, 17.) Plaintiff should not be required to engage in that process

again. Finally, there is no reason to believe Plaintiff was acting in anything but good faith in

filing in this District. See King, 963 F.2d at 1304-05 (denying transfer because action

suggestive of bad faith and harassment).

CONCLUSION

The Court has personal jurisdiction over Defendant Howard but does not have

personal jurisdiction over Defendants Lifeline Media LLC, Nationwide Affordable Housing

Inc., or the Ben Howard Trust. Venue is not proper in the District of Arizona as to any

Defendants or claims alleged in the Amended Complaint. However, the Court has discretion

to transfer this case to the District of Utah and it is in the interest of justice to do so. Because

it has determined that it does not have jurisdiction over all of the Defendants and this is not

the proper venue for the case, the Court does not reach Defendants’ arguments that Plaintiff

has failed to state a claim.

REPORT AND RECOMMENDATION

Based on the foregoing, the Magistrate Judge recommends the District Court deny

Defendants’ motion to dismiss and grant Defendants’ alternative motion seeking a transfer

to the District of Utah.

Pursuant to Federal Rule of Civil Procedure 72(b)(2), any party may serve and file

written objections within fourteen days of being served with a copy of the Report and

Recommendation. A party may respond to the other party’s objections within fourteen days.

No reply brief shall be filed on objections unless leave is granted by the district court. If

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 9 of 10
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

27

28

- 10 -

objections are not timely filed, they may be deemed waived.

DATED this 28th day of May, 2013.

Case 4:12-cv-00311-DCB-DTF Document 47 Filed 05/29/13 Page 10 of 10