Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_04-cv-05049/USCOURTS-cand-4_04-cv-05049-0/pdf.json

Parties Involved:
CFA Northern California, Inc.
Plaintiff
CRT Partners, LLP
Defendant
Robert Campbell
Defendant
Claire Thomas
Defendant

Document Text:

United States District Court

For the Northern District of California

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IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

CFA NORTHERN CALIFORNIA, INC.,

Plaintiff,

v.

CRT PARTNERS LLP, CLAIRE THOMAS and

ROBERT CAMPBELL,

Defendants.

 

No. C 04-5049 CW

ORDER GRANTING

IN PART MOTION

TO DISMISS AND

DENYING MOTION

TO TRANSFER

VENUE

Defendants move for dismissal of this action pursuant to

Federal Rules of Civil Procedure Rule 12(b)(2) and 12(b)(6). In

the alternative, Defendants move under 28 U.S.C. § 1404(a) for

an order transferring this action to the District of Arizona. 

Plaintiff opposes the motions. The motions were heard on June

24, 2005. Having considered the parties' papers, the evidence

cited therein and oral argument on the motions, the Court grants

Defendants’ motion to dismiss the claims against Defendant

Robert Campbell and denies their motion to dismiss the claims

against Defendant CRT and Defendant Claire Thomas and denies

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Defendants' alternative motion to transfer venue.

BACKGROUND

Except where indicated otherwise, the following information

is taken from the Amended Complaint and the Affidavit of Claire

Thomas appended to Defendants’ motion. Plaintiff CFA Northern

California, Inc. is a California corporation having its

principal place of business in California. Defendant CRT

Partners, LLP (CRT) is an Arizona limited liability partnership

having its principal place of business in Arizona. Defendants

Claire Thomas and Robert Campbell are United States citizens and

residents of Arizona.

CRT operates eighteen Jack-in-the-Box restaurants in or

near Tucson, Arizona, and has done so for at least ten years.

The restaurants are situated on land that is leased to CRT. 

Claire Thomas is the managing partner of CRT. Robert Campbell

is also a partner in CRT. Thomas declares that the owners of

CRT own two limited liability companies that own the land on

which fourteen of the eighteen Jack-in-the-Box restaurants are

situated. The other four restaurants are situated on land

leased from other parties. Jack-in-the-Box is a California

corporation headquartered in San Diego. CRT signed Jack-in-theBox franchise agreements that call for interpretation and

enforcement under California law and provide for forum and venue

in California for resolving disputes. CRT also apparently

receives goods from California suppliers. While Defendants

contend that they order supplies and receive invoices from an

Arizona distribution center warehouse, they do not dispute that

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the goods originate in California. Thomas has made at least one

trip annually to Jack-in-the-Box headquarters in California

since the franchise agreements have been in place. 

 Plaintiff is a financial intermediary that introduces

potential purchasers of companies and businesses to potential

sellers. Plaintiff originally contacted Defendants about a

potential business venture. Thomas wished to retire from the

restaurant operation business, and her partners at CRT had

agreed to find a buyer for the business. After several phone

calls and letters between Plaintiff's representative, Jeff

Johnson, and Thomas, Thomas called Johnson and they agreed to

meet in April, 2003 in California to discuss possible assistance

Plaintiff might provide CRT in selling its business. Thomas

asserts that this meeting occurred during a trip she had taken

to visit her sister. Plaintiff alleges that at that meeting

Thomas told Johnson that she and Campbell each owned fifty

percent of CRT. 

Negotiations continued in Arizona. On or about May 16,

2003, Plaintiff entered into a contract with CRT for the purpose

of assisting CRT in selling its franchise business. The

contract provided that CRT would pay Plaintiff for its services

if a transaction transferring ownership to an "Interested

Party," as further defined by the contract, occurred, even as

long as a year after the termination of the contract. The

contract explicitly excluded real estate from the business

interest for which Plaintiff would seek a buyer. The contract

provided that, in case of a dispute, the parties would seek

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mediation in Arizona, and Arizona law would apply to the

dispute. Thomas and Campbell signed the contract for CRT. 

Plaintiff prepared a “Descriptive Report,” describing the

business for sale, that included references to the leases for

the land on which the restaurants were situated. Plaintiff

identified approximately forty-two possible acquirers of CRT,

but none made an offer CRT found acceptable. Most of the work

Plaintiff did to fulfill the contract occurred in California. 

In January, 2004, CRT terminated its contract with Plaintiff. 

Before signing the contract, Thomas had told Johnson that

she would like to sell to Laura Olguin, CRT's Vice-President of

Operations, but could not, because of Jack-in-the-Box’s

franchisee requirements. Later, the franchisee requirements

were changed such that Olguin became a qualified purchaser. On

or about May 8, 2004, CRT purchased Thomas’s interest in the

partnership. Olguin was listed as a partner in CRT in the

May 8, 2004 purchase agreement. Thomas asserts that she and

Campbell had sold Olguin a ten percent interest in the

partnership in 2000. The purchase agreement excluded Thomas’s

interest in the entities that owned the real estate on which

fourteen of the restaurants were situated and was subject to a

condition precedent that CRT’s leases be amended to reflect the

change in CRT’s partners. Plaintiff alleges that Defendants at

first concealed the May 8, 2004 purchase by CRT of Thomas’s

interest in CRT. Plaintiff and Defendants dispute whether they

intended the May 16, 2003 contract between Plaintiff and CRT to

include a possible transaction between CRT and Thomas. 

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On November 30, 2004, Plaintiff filed the original

complaint against Defendants. On March 15, 2005, Defendants

filed a motion to dismiss. On March 31, 2005, Plaintiffs filed

an amended complaint alleging (1) breach of contract, (2) unjust

enrichment, (3) conspiracy to defraud and (4) fraud, and

claiming attorney’s fees. On April 22, 2005, Defendants filed

this motion.

LEGAL STANDARD

I. Personal Jurisdiction

Under Rule 12(b)(2) of the Federal Rules of Civil

Procedure, a defendant may move to dismiss for lack of personal

jurisdiction. The plaintiff then bears the burden of

demonstrating that jurisdiction exists. Schwarzenegger v. Fred

Martin Motor Co., 374 F.3d 797, 800 (9th Cir. 2004). The

plaintiff "need only demonstrate facts that if true would

support jurisdiction over the defendant." Ballard v. Savage, 65

F.3d 1495, 1498 (9th Cir. 1995); Fields v. Sedgwick Assoc.

Risks, Ltd., 796 F.2d 299, 301 (9th Cir. 1986). Uncontroverted

allegations in the complaint must be taken as true. AT&T v.

Compagnie Bruxelles Lambert, 94 F.3d 586, 588 (9th Cir. 1996). 

However, the court may not assume the truth of such allegations

if they are contradicted by affidavit. Data Disc, Inc. v.

Systems Technology Associates, Inc., 557 F.2d 1280, 1284 (9th

Cir. 1977). Conflicts between in the evidence must be resolved

in the plaintiff's favor. AT&T, 94 F.3d at 588.

If material facts are controverted or if the evidence is

inadequate, a court may permit discovery to aid in determining

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whether personal jurisdiction exists. Data Disc, Inc., 557 F.2d

at 1285 n.1. If the submitted materials raise issues of

credibility or disputed questions of fact, the district court

has the discretion to hold an evidentiary hearing in order to

resolve the contested issues. Id.

There are two independent limitations on a court's power to

exercise personal jurisdiction over a non-resident defendant:

the applicable State personal jurisdiction rule and

constitutional principles of due process. Sher v. Johnson, 911

F.2d 1357, 1361 (9th Cir. 1990); Data Disc, Inc, 557 F.2d at

1286. California's jurisdictional statute is co-extensive with

federal due process requirements; therefore, jurisdictional

inquiries under State law and federal due process standards

merge into one analysis. Rano v. Sipa Press, Inc., 987 F.2d

580, 587 (9th Cir. 1993).

The exercise of jurisdiction over a non-resident defendant

violates the protections created by the due process clause

unless the defendant has "minimum contacts" with the forum State

so that the exercise of jurisdiction "does not offend

traditional notions of fair play and substantial justice." 

International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945). 

Personal jurisdiction may be either general or specific. 

General jurisdiction exists where the defendant's contacts

with the forum State are so substantial or continuous and

systematic that jurisdiction exists even if the cause of action

is unrelated to those contacts. Bancroft & Masters, Inc. v.

Augusta Nat'l, Inc., 223 F.3d 1082, 1086 (9th Cir. 2000). The

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standard for establishing general jurisdiction is "fairly high." 

Id.; Brand v. Menlove Dodge, 796 F.2d 1070, 1073 (9th Cir.

1986). The defendant's contacts must approximate physical

presence in the forum State. Schwarzenegger, 374 F.3d at 801. 

Factors considered in evaluating the extent of contacts include

whether the defendant makes sales, solicits or engages in

business, designates an agent for service of process, holds a

license, or is incorporated in the forum State. Bancroft &

Masters, Inc., 223 F.3d at 1086. 

Specific jurisdiction exists where the cause of action

arises out of or relates to the defendant's activities within

the forum. Data Disc, Inc, 557 F.2d at 1286. Specific

jurisdiction is analyzed using a three-prong test: (1) the

non-resident defendant must purposefully direct its activities

or consummate some transaction with the forum or a resident

thereof; or perform some act by which it purposefully avails

itself 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 results from

the defendant's forum-related activities; and (3) the exercise

of jurisdiction must be reasonable. Lake v. Lake, 817 F.2d

1416, 1421 (9th Cir. 1987). Each of these conditions is

required for asserting jurisdiction. Insurance Co. of N. Am. v.

Marina Salina Cruz, 649 F.2d 1266, 1270 (9th Cir. 1981). 

A showing that a defendant "purposefully availed" itself of

the privilege of doing business in a forum State typically

consists of evidence of the defendant's actions in the forum,

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such as executing or performing a contract there. 

Schwarzenegger, 374 F.3d at 802. The requirement of purposeful

availment ensures that the defendant should reasonably

anticipate being haled into the forum State court based on its

contacts. World Wide Volkswagan Corp. v. Woodson, 444 U.S. 286,

297 (1980). The purposeful availment test is met where "the

defendant has taken deliberate action within the forum state or

if he has created continuing obligations to forum residents." 

Ballard, 95 F.3d at 1498. 

 A showing that a defendant "purposefully directed" its

conduct toward a forum State "usually consists of evidence of

the defendant's actions outside the forum state that are

directed at the forum, such as the distribution in the forum

state of goods originating elsewhere." Schwarzenegger, 374 F.3d

at 803. Purposeful direction may be established under the

"effects test" where the defendant (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. Dole Food Co. v. Watts, 303 F.3d 1104, 1111 (9th Cir.

2002).

The second factor requires that the claim arise out of or

result from the defendant's forum-related activities. A claim

arises out of a defendant's conduct if the claim would not have

arisen "but for" the defendant's forum-related contacts. 

Panavision Int'l v. L.P.U. Toeppa, 141 F.3d 1316, 1322 (9th Cir.

1998).

Once the plaintiff has satisfied the first two factors, the

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defendant bears the burden of overcoming a presumption that

jurisdiction is reasonable by presenting a compelling case that

specific jurisdiction would be unreasonable. Burger King Corp.

v. Rudzewicz, 471 U.S. 462, 472-73 (1985); Haisten v. Grass

Valley Medical Fund, Ltd., 784 F.2d 1392, 1397 (9th Cir. 1986). 

Seven factors are considered in assessing whether the exercise

of jurisdiction over a non-resident defendant is reasonable:

(1) the extent of the defendant's purposeful interjection into

the forum State's affairs, (2) the burden on the defendant,

(3) conflicts of law between the forum State and the defendant's

home jurisdiction, (4) the forum State's interest in

adjudicating the dispute, (5) the most efficient judicial

resolution of the dispute, (6) the plaintiff's interest in

convenient and effective relief, and (7) the existence of an

alternative forum. Caruth v. International Psychoanalytical

Ass'n, 59 F.3d 126, 128 (9th Cir. 1995); Roth v. Garcia Marquez,

942 F.2d 617, 623 (9th Cir. 1991). 

II. Failure to State a Claim

A motion to dismiss for failure to state a claim will be

denied unless it is “clear that no relief could be granted under

any set of facts that could be proved consistent with the

allegations.” Falkowski v. Imation Corp., 309 F.3d 1123, 1132

(9th Cir. 2002), citing Swierkiewicz v. Sorema N.A., 534 U.S.

506 (2002). A complaint must contain a “short and plain

statement of the claim showing that the pleader is entitled to

relief.” Fed. R. Civ. P. 8(a). “Each averment of a pleading

shall be simple, concise, and direct. No technical forms of

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pleading or motions are required.” Fed. R. Civ. P. 8(e). These

rules “do not require a claimant to set out in detail the facts

upon which he bases his claim. To the contrary, all the Rules

require is ‘a short and plain statement of the claim’ that will

give the defendant fair notice of what the plaintiff’s claim is

and the grounds on which it rests.” Conley v. Gibson, 355 U.S.

41, 47 (1957).

When granting a motion to dismiss, a court is generally

required to grant a plaintiff leave to amend, even if no request

to amend the pleading was made, unless amendment would be

futile. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv.

Inc., 911 F.2d 242, 246-47 (9th Cir. 1990). In determining

whether amendment would be futile, a court examines whether the

complaint could be amended to cure the defect requiring

dismissal “without contradicting any of the allegations of [the]

original complaint.” Reddy v. Litton Indus., Inc., 912 F.2d

291, 296 (9th Cir. 1990). Leave to amend should be liberally

granted, but an amended complaint cannot allege facts

inconsistent with the challenged pleading. Id. at 296-97. 

III. Venue

If the Court determines that venue is improper in the

Northern District of California, it must dismiss or transfer the

case. 28 U.S.C. § 1404(a). 

Title 28 U.S.C. § 1404(a) provides as follows: "For the

convenience of parties and witnesses, in the interest of

justice, a district court may transfer any civil action to any

other district or division where it might have been brought." 

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The statute, therefore, identifies three basic factors for

district courts to consider in determining whether a case should

be transferred: (1) convenience of the parties; (2) convenience

of the witnesses; and (3) the interests of justice. 28 U.S.C.

§ 1404(a). The Ninth Circuit has held that a fourth factor for

the court to consider is the plaintiff's choice of forum. See

Securities Investor Protection Corp. v. Vigman, 764 F.2d 1309,

1317 (9th Cir. 1985). The Securities Investor court held that,

unless the balance of the § 1404(a) factors "is strongly in

favor of the defendants, the plaintiff's choice of forum should

rarely be disturbed." Id.; see also Decker Coal Co. v.

Commonwealth Edison Co., 805 F.2d 834, 843 ("defendant must make a

strong showing . . . to warrant upsetting the plaintiff's choice

of forum"). The burden is on the defendant to show that the

convenience of parties and witnesses and the interest of justice

require transfer to another district. See Commodity Futures

Trading Comm'n v. Savage, 611 F.2d 270, 279 (9th Cir. 1979). 

For purposes of venue, a corporation is deemed to reside 

in any judicial district in which it is subject to personal

jurisdiction at the time the action is commenced. In a

State which has more than one judicial district and in

which a defendant that is a corporation is subject to

personal jurisdiction at the time an action is commenced,

such corporation shall be deemed to reside in any district

in that State within which its contacts would be sufficient

to subject it to personal jurisdiction if that district

were a separate State, and, if there is no such district,

the corporation shall be deemed to reside in the district

within which it has the most significant contacts.

28 U.S.C. § 1391(c). 

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DISCUSSION

I. Personal Jurisdiction

A. General Jurisdiction

Defendants contend that this Court has neither general or

specific personal jurisdiction over them. Plaintiff first

argues that CRT’s business activities in California were

sufficiently substantial and continuous to permit this Court to

exercise personal jurisdiction over Defendants based on general

jurisdiction. Plaintiff notes that Defendants signed eighteen

Jack-in-the-Box franchise agreements that called for

interpretation and enforcement under California law and provided

for forum and venue in California for resolving any disputes. 

Plaintiff further alleges that CRT placed orders for and

received goods from California suppliers. Plaintiff alleges

that Thomas made at least one trip annually for at least the

last ten years to Jack-in-the-Box headquarters in California. 

Defendants do not operate a business in California,

although they have interacted with Jack-in-the-Box in California

for at least ten years, including by ordering supplies and

visiting Jack-in-the-Box headquarters. However, these

interactions with Jack-in-the Box do not suffice for general

jurisdiction over Defendants.

The additional fact that Thomas negotiated in California for a

contract for financial intermediary services is insufficient to

meet the threshold. 

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B. Specific Jurisdiction

Plaintiff further argues that, at a minimum, this Court has

specific jurisdiction over Defendants. In order to determine

whether it may exercise specific personal jurisdiction over

Defendants, the Court must analyze each prong of the three-part

test for personal jurisdiction enumerated in Lake. 

(1) Purposeful Availment and Purposeful Direction

Plaintiff argues that it shows that Defendants meet the

purposeful availment requirement of Lake with allegations of

Thomas's phone calls to Plaintiff's California office and a

meeting between Plaintiff and Thomas in California, in April,

2003, for the purpose of discussing a possible agreement for

Plaintiff’s services. 

Thomas responds that she was traveling to California to see

her sister and she met with Johnson while she was on that trip,

but this does not contradict Plaintiff’s allegations. While a

contract was not signed at that meeting, a contract did result

the following month from these and further negotiations. Thus

Thomas took a deliberate action that created an obligation to

Plaintiff, a California resident. 

Defendants cite Roth for the proposition that simply having

a contract with a California resident is insufficient to create

specific jurisdiction. See 942 F.2d at 621. While that is

true, in Roth the court went on to find personal jurisdiction

because most of the work called for by that single contract was

performed in the forum. Id. at 622. Likewise, CRT here signed

a contract with a California company that regularly conducts

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business in California and that did a large part of the work

contracted for in California. Plaintiff has demonstrated that

Defendant CRT purposely availed itself of the privilege of

conducting business in California, and that Thomas negotiated

for the contract in California. 

Plaintiff also claims that Defendants defrauded Plaintiff

in California because Thomas falsely told Plaintiff that Thomas

and Campbell each owned fifty percent of CRT and Thomas

concealed any interest in CRT owned by Olguin. Plaintiff adds

that Thomas and/or Campbell told it, after the May, 2004

purchase agreement with Olguin was signed, that no transaction

had taken place.

 Thus, the amended complaint alleges intentional activity,

partly undertaken by Thomas in California, aimed at a California

corporation that caused harm which Defendants should have known

would be suffered in California by Plaintiff.

These activities are sufficient to establish the first

prong of the requirements for specific jurisdiction over

Defendants CRT and Thomas. However, Plaintiff does not allege

that Campbell traveled to California, or conducted negotiations

or made false statements here. Jurisdiction over Campbell may

not be exercised simply by virtue of his partnership in CRT.

See Sher, 911 F.2d at 1365. Accordingly, the Court may not

exercise personal jurisdiction over him. 

(2) Arising Out Of

The second prong of the Lake test addresses whether the

claim arises out of or results from the defendant's forumCase 4:04-cv-05049-CW Document 37 Filed 07/21/05 Page 14 of 21
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related activities. Applying the Panavision Int'l “but-for”

test, the question, therefore, is this: but for Defendants’

contacts with California, would Plaintiff’s claims have arisen?

The answer is clearly no. If CRT had not entered into the

contract at issue, Plaintiff would have no claims against

Defendants. It is precisely Thomas and CRT's forum-related

activities that gave rise to each of Plaintiff’s claims. For

purposes of specific personal jurisdiction analysis, Plaintiff’s

claims arise out of Thomas and CRT's forum-related activities. 

(3) Reasonableness

Finally, the third prong of the Lake test requires that

jurisdiction be reasonable. Here, the first two prongs of the

requirements for personal jurisdiction over CRT and Thomas have

been met. Therefore, they must overcome the presumption of

reasonableness by addressing the seven factors listed in Roth.

In Defendants’ motion to dismiss, they contend that they meet

the criteria because they did not purposefully interject

themselves into California but instead sought to be governed by

Arizona law. They also argue that conflicts of law are not

relevant because the contract states that Arizona law will

govern disputes and that Arizona can serve as an alternative

forum. As well, Defendants assert they will be burdened by

having to litigate in California. Id. 

Defendants do not address Plaintiff’s interest in

convenience, California’s interest in adjudicating the dispute

or why Arizona would be the most efficient location for judicial

resolution. An intent to avoid the jurisdiction of another

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forum is not equivalent to an intent to avoid the benefits of

the other forum’s market. Haisten, 784 F.2d at 1401. 

Defendants CRT and Thomas sought out a company based in

California, knowing its base of potential purchasers would be

from California; they sought the benefit of California’s market

for investment. California has a strong interest in assuring

that contracts made with its residents are not breached and that

its residents are not defrauded. Defendants have given no

evidence that the burden of traveling from Arizona to California

would be great, especially considering that most of the dispute

revolves around interpretation of a written contract. Because

the Court rules that Defendants CRT and Thomas purposefully

availed themselves of the privilege of conducting business in

California and directed their activities at a California

corporation, their arguments are similarly unpersuasive here. 

Defendants CRT and Thomas have not carried their burden to show

that the exercise of specific personal jurisdiction over them in

this case is unreasonable.

This Court’s exercise of specific personal jurisdiction

over Defendants CRT and Thomas is reasonable and affords them

the process that they are due. Defendants’ connections with

California are such that they should reasonably anticipate being

haled to court here, World-Wide Volkswagen, 444 U.S. at 297, and

they have established such minimum contacts with California that

the exercise of specific personal jurisdiction over them "does

not offend traditional notions of fair play and substantial

justice." International Shoe, 326 U.S. at 316. 

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Therefore, the Court grants Defendants' motion to dismiss

the claims against Campbell and denies the motion to dismiss the

claims against CRT and Thomas. 

II. Failure to State a Claim

Defendants assert that Plaintiff has failed to state a

claim upon which relief can be granted. Defendants argue that

Arizona law requires Plaintiff to have a real estate broker’s

license to perform the contract between Plaintiff and CRT

because the restaurants for sale were situated on leased land,

and the proposed sale of the business was ancillary to or

contingent on the re-negotiation of these leases. Defendants

claim that Plaintiff does not have a real estate broker’s

license, and therefore that the contract is illegal and cannot

be enforced. 

Arizona Revised Statutes section 32-2101(47)(n)(2004)

states that a real estate broker’s license is required by a

person other than a salesperson who “[e]ngages in any of the

acts listed in subdivisions (a) through (m) of this paragraph

for the sale or lease of other than real property if a real

property sale or lease is a part of, contingent on or ancillary

to the transaction.” Subsection (i) lists “[a]ssists or directs

in the procuring of prospects, calculated to result in the sale,

exchange, leasing or rental of real estate or timeshare

interests” as one such act. As well, section 32-2122 states

that an “act, in consideration or expectation of compensation,

which is included in the definition of a real estate . . .

broker, whether the act is an incidental part of a transaction

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or the entire transaction, constitutes the person offering or

attempting to perform the act of a real estate broker.” 

Finally, section 32-2152 requires a broker’s claim for

compensation to allege in the complaint that “the plaintiff was

a qualified licensed broker or salesperson at the time the claim

arose.” Defendants cite two statements in Plaintiff’s

Descriptive Report that describe the leases of the real estate

on which the restaurants for sale were situated, and potential

terms for assuming those leases, as evidence that the assignment

of the leases to a buyer was at least ancillary to the contract

between Plaintiff and CRT. Mot. to Dismiss, Ex. A & B. Thomas

declares that the proposed sale was contingent on the transfer

of the leases because the businesses could not run without them. 

Thomas Dec. ¶ 3.

Plaintiff does not allege that it has a real estate

broker’s license, but instead asserts that the contract between

Plaintiff and CRT did not pertain to real estate. Plaintiff

notes that the contract expressly excluded real estate as part

of any potential transaction. The transaction that did occur,

that is, the transfer of Thomas’s interest to CRT by means of

the May 8, 2004 purchase agreement, did not include Thomas’s

interest in the separate entities that owned the real estate on

which fourteen of the restaurants were situated. It was merely

subject to a condition precedent that CRT’s leases be amended to

reflect the change in CRT’s principals. Indeed, if Olguin was

already a partner in CRT at the time of CRT’s purchase of

Thomas’s interest, the leases for the land on which the

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restaurants were situated were not assigned or sublet to anyone,

but only amended, and no real estate transaction occurred.

In Cambridge Co. v. Arizona Lawn Sprinklers, Inc., 801 P.2d

504, 506 (Ariz. App. 1990), the court allowed the plaintiff to

recover a fee for assisting in the sale of a corporation even

though the plaintiff did not have a real estate broker’s

license, the sale could have included a real estate transaction

and performance of the contract could thus have been illegal.

The court stated that the test for an illegal contract focused

on how the contract was performed, not how it could have been

performed. Id. The court noted that the real estate

transaction that did occur did not involve the parties to the

contract for the sale of the corporation. Id. Here, the May 8,

2004 transaction that did occur involved the amendment of leases

to reflect the withdrawal of a partner of CRT, not the

assignment or sublease of leases from CRT to another entity;

thus, no real estate transaction occurred.

Defendants assert that this ruling in Cambridge was

overruled by the addition of subsection (n) to section 32-

2101(47). Defendants seem to contend that, under subsection

(n), even a contract that might include a real estate

transaction is illegal. Defendants do not cite any authority

for this contention and it is not clear whether it is correct. 

Even if it is, the court in Cambridge also pointed out that the

acquisition of a company that holds leases for land on which it

operates can be structured in such a manner that a real estate

transaction is not involved (such as through the purchase of

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stock in the corporation owning the leases). Id. Plaintiff’s

amended complaint alleges that its contract with CRT excluded

the leaseholds, and that therefore any sale would have been

conducted without a real estate transaction. Plaintiff may be

able to prove a claim that does not imply a violation of

subsection (n). Therefore, Defendants’ motion to dismiss for

failure to state a claim is denied. 

At the hearing, Plaintiff represented that Johnson does

have a California real estate broker’s license and that the

Arizona statute allows him to conduct transactions such as the

one at issue. Although the Court denies Defendants’ motion to

dismiss, the Court stated that Plaintiff could, in an abundance

of caution, file an amended complaint to make this allegation. 

Plaintiff filed an amended complaint on July 7, 2005.

III. Venue

Defendants argue that venue should be transferred to the

District of Arizona for the convenience of the witnesses and in

the interests of justice. In support of their motion,

Defendants argue that most of the known potential witnesses live

in Arizona and that there is no indication that a transfer would

slow proceedings because this Court has not made any rulings. 

While Defendants reside in Arizona, Plaintiff and Johnson

reside in California. Further, as Plaintiff notes, three of the

potential witnesses Defendants have identified, Thomas, Campbell

and Johnson, are parties to the suit. Defendants have

identified only Olguin and CRT’s counsel as possible non-party

witnesses, and have not identified any documentation or other

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evidence in Arizona or other factors that would heavily burden

Defendants in trying a case in California. Moreover, Defendants

regularly travel outside of Arizona for business purposes. 

Plaintiff’s choice of venue is not lightly disturbed. The

balance of factors does not strongly favor Defendants so as to

overcome Plaintiff’s choice. Therefore, the Court denies

Defendants’ motion to transfer venue.

CONCLUSION

For the foregoing reasons, the Court DENIES Defendants’

motion to dismiss the claims against CRT and Thomas and their

alternative motion to transfer venue (Docket No. 23). 

Defendants' motion to dismiss the claims against Defendant

Campbell for lack of jurisdiction is GRANTED. If Plaintiff were

to sue Defendant Campbell in Arizona, however, the Court would

transfer this action there. 

IT IS SO ORDERED.

Dated: 7/21/05 /s/ CLAUDIA WILKEN 

CLAUDIA WILKEN

United States District Judge

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