IN THE

ARIZONA COURT OF APPEALS

DIVISION ONE

JUDSON C. BALL REVOCABLE TRUST, Plaintiff/CounterDefendant/Appellant, 

v.

PHOENIX ORCHARD GROUP I, L.P., et al., Defendants/Counter-Claimants/ 

Intervenors/Appellees. 

No. 1 CA-CV 17-0642 

FILED 10-2-2018 

Appeal from the Superior Court in Maricopa County

Nos. CV2015-011768

 CV2016-000284

 (Consolidated)

The Honorable Dawn M. Bergin, Judge

AFFIRMED

COUNSEL

Barrett & Matura P.C., Scottsdale

By Jeffrey Matura, Amanda J. Taylor

Counsel for Plaintiff/Counter-Defendant/Appellant

Freeman Law P.L.L.C., Scottsdale

By Shelton L. Freeman, Jason M. Venditti, Elizabeth C. Heims

Counsel for Defendants/Counter-Claimants/Intervenors/Appellees
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

2

OPINION

Presiding Judge Kenton D. Jones delivered the Opinion of the Court, in 

which Judge Diane M. Johnsen and Judge Paul J. McMurdie joined.

J O N E S, Judge:

¶1 The Judson C. Ball Revocable Trust (the Trust) challenges the 

trial court’s determination that it lacked standing to pursue derivative 

claims on behalf of Phoenix Orchard Group I, L.P. and Phoenix Orchard 

Group II, L.P. (collectively, POG) after its partnership interests in the 

entities were rescinded. In this Opinion, we adopt the continuous

ownership rule, which requires a plaintiff in a derivative action to continue 

to possess an interest in the entity on whose behalf it sues throughout the 

litigation. Because the Trust no longer has any interest in POG, it lacks

standing to pursue its derivative claims. Accordingly, we affirm the court’s 

order dismissing the Trust’s claims.

FACTS AND PROCEDURAL HISTORY

¶2 In 2006, the Trust bought limited partnership interests in 

POG. Nine years later, the Trust sued POG and related parties,

1 alleging 

violations of the Arizona Securities Act. See Ariz. Rev. Stat. (A.R.S.) §§ 44-

18012 to -2126. Within its complaint, the Trust demanded either rescission 

of its investments or damages, and tendered the securities to POG. See 

A.R.S. § 44-2001(A) (stating a fraudulent sale of securities “is voidable at the 

election of the purchaser”). In its answer, POG accepted the tender and 

counterclaimed for a declaration that the rescission was valid and complete.

 

1 These defendants included Roger L. and Jean Ellen Stevenson; John 

P. and Lillian J. Norton; John R. and Doris Norton; Stevenson Family 

Farming, L.P.; Norton Stevenson Farming, L.P.; Cotton Norton Stevenson 

Consulting, Inc.; the Stevenson Family Living Trust Dated 7/11/1997; John 

P. Norton as Trustee of the Norton Family Living Trust as Restated 

November 15, 2002; and Citrines Operations, Inc.

2 Absent material changes from the relevant date, we cite a statute’s 

current version.
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

3

¶3 In January 2016, the Trust filed a separate limited partnership

derivative action on behalf of POG, alleging other partners and participants 

had breached the partnership agreements and the offering documents by 

making various payments “that appeared to be not allowed within the 

offering documents or partnership agreements.”3 See A.R.S. § 29-356. A 

few months later, the trial court approved the rescission of the Trust’s 

investment in POG and entered final judgment on the Trust’s fraud claims

in the first case, which was later affirmed by this Court. See Judson C. Ball 

Revocable Tr. v. Phx. Orchard Grp. I, L.P., 1 CA-CV 16-0557, 2018 WL 283049 

(Ariz. App. Jan. 4, 2018) (mem. decision). POG then intervened in the 

derivative action and moved to dismiss on the ground that the Trust was 

no longer a partner and therefore lacked standing to pursue the derivative 

claims. After conducting a detailed analysis of relevant authorities, the

court agreed and dismissed the complaint.

¶4 The Trust timely appealed a final judgment entered pursuant 

to Arizona Rule of Civil Procedure 54(b). We have jurisdiction pursuant to 

A.R.S. §§ 12-120.21(A)(1) and -2101(A)(1).

DISCUSSION

¶5 The Trust had standing to file the derivative claims because it 

was a limited partner in POG at the time it filed its complaint. The only 

issue on appeal is whether the Trust lost its standing after its partnership 

interests were rescinded. Whether a party has standing presents a question 

of law subject to de novo review. Home Builders Ass’n of Cent. Ariz. v. Kard, 

 

3 A derivative claim is one brought by a shareholder or partner to 

enforce an entity’s cause of action against its officers and directors or third 

parties. Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 95-96 (1991) (citations 

omitted). Generally, an action is derivative in nature “if the gravamen of 

the complaint is injury to the [entity], or to the whole body of its stock or 

property without any severance or distribution among individual holders, 

or if it seeks to recover assets for the [entity asserting the claim] or to 

prevent the dissipation of its assets.” Albers v. Edelson Tech. Partners L.P., 

201 Ariz. 47, 52, ¶ 17 (App. 2001) (quoting Funk v. Spalding, 74 Ariz. 219, 223 

(1952)). Although this case involves a derivative action brought on behalf 

of a limited partnership, we look to cases addressing corporate derivative 

claims for guidance. See, e.g., Simms v. Rayes, 234 Ariz. 47, 51, ¶¶ 14-15 (App. 

2014) (applying cases involving corporate derivative actions to resolve a 

derivative claim filed by a partner in a limited liability partnership).
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

4

219 Ariz. 374, 377, ¶ 8 (App. 2008) (citing Robert Schalkenbach Found. v. 

Lincoln Found., Inc., 208 Ariz. 176, 180, ¶ 15 (App. 2004)).

¶6 A limited partner may file a derivative action on behalf of the 

limited partnership “if general partners with authority to do so have 

refused to bring the action or if an effort to cause those general partners to 

bring the action is not likely to succeed.” A.R.S. § 29-356. By statute:

[T]he plaintiff shall be a partner at the time of bringing the 

action and:

(1) Shall have been a partner at the time of the 

transaction of which he complains; or

(2) His status as a partner shall have devolved upon 

him by operation of law or pursuant to the terms of 

the partnership agreement from a person who was 

a partner at the time of the transaction.

A.R.S. § 29-357. By rule: 

The complaint must:

(1) be verified;

(2) allege facts sufficient to show that the plaintiff has 

standing to maintain the derivative action; and

(3) allege facts sufficient to show that the plaintiff 

satisfies all statutory and other requirements under 

the law for maintaining the derivative action.

Ariz. R. Civ. P. 23.1(b).

¶7 The Trust argues that neither the statutes nor the rule 

expressly require the plaintiff in a partnership derivative action to continue 

to hold a partnership interest after filing the complaint. The Trust points 

out that Rule 23.1(b) was amended in 2017 to eliminate language specifying 

that a “derivative action may not be maintained if it appears that the 

plaintiff does not fairly and adequately represent the interests of the 

shareholders or members similarly situated in enforcing the right of the 

corporation or association.” In the absence of this language in the current

rule, the Trust contends it need only prove it was a limited partner of POG

when it filed the derivative complaint. Appellees, on the other hand, urge 
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

5

us to join the majority of jurisdictions that have adopted a “continuous

ownership” requirement as a matter of common law.

¶8 As an initial matter, we do not agree that the recent 

elimination of the express “fairly and adequately represent” language from 

Rule 23.1(b) mandates rejection of the continuous ownership rule in 

Arizona. The current version of Rule 23.1(b) states that a derivative 

complaint must “allege facts sufficient to show that the plaintiff satisfies all 

statutory and other requirements under the law for maintaining the 

derivative action.” The current rule’s acknowledgement of requirements 

other than those imposed by statute affords room for application of wellreasoned common law principles where appropriate.

¶9 A derivative action, by its very nature, challenges the power 

of the entity’s management. Ala. By-Prods. Corp. v. Cede & Co. ex rel. Shearson 

Lehman Bros., Inc., 657 A.2d 254, 264-65 (Del. 1995). Given this inherent 

conflict, Delaware courts have held, as a matter of common law, that a 

derivative plaintiff must have “an adequate interest in vigorously litigating 

the claim.” Id. at 265 (quoting Portnoy v. Kawecki Berylco Indus., Inc., 607 F.2d 

765, 767 (7th Cir. 1979)). Once the derivative plaintiff no longer has an 

ownership interest in the entity upon whose behalf the suit was brought, 

the plaintiff no longer has standing because it has no financial interest in 

recovery and “may lose any incentive to pursue the litigation adequately.” 

Id. at 265-66 (quoting Portnoy, 607 F.2d at 767).

¶10 Accordingly, in Delaware “[t]o have standing to maintain a 

shareholder derivative suit, a plaintiff must be a shareholder at the time of 

the filing of the suit and must remain a shareholder throughout the 

litigation.” Kramer v. W. Pac. Indus., Inc., 546 A.2d 348, 354 (Del. 1988).

Courts in other jurisdictions have adopted the continuous ownership 

requirement for the same reasons, even when it is not expressly required by 

statute. See Portnoy, 607 F.2d at 767; Grosset v. Wenaas, 42 Cal. 4th 1100, 1109-

10 (2008); Timko v. Triarsi, 898 So. 2d 89, 91-92 (Fla. Dist. Ct. App. 2005); 

Bacigalupo v. Kohlhepp, 240 S.W.3d 155, 157 (Ky. Ct. App. 2007); White ex rel. 

Banes Co. Derivative Action v. Banes Co., 866 P.2d 339, 342 (N.M. 1993).

¶11 Not all jurisdictions have adopted the continuous ownership 

requirement. Indeed, the Trust urges us to follow the Supreme Court of 

North Carolina in Alford v. Shaw, which found “no requirement of 

continu[ous] share ownership” in the plain language of the applicable 

statute. 398 S.E.2d 445, 449 (N.C. 1990); accord Ross-Williams ex rel. Sprint

Nextel Corp. v. Bennett, 419 P.3d 608, 626-27 (Kan. App. Ct. 2018). But neither 

Alford nor the Trust address the considerations that led Delaware and other 
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

6

jurisdictions to adopt the continuous ownership requirement as a matter of 

common law — reasons that we find persuasive.

4 Moreover, Alford is 

distinguishable because, unlike the present case where the Trust sued for 

and obtained rescission, the Alford plaintiff alleged the defendant

corporation wrongfully deprived him of his interest via a fraudulent 

merger. Alford, 398 S.E.2d at 451-52. Although equitable considerations 

may warrant an exception to the continuous ownership requirement when

the plaintiff is wrongfully deprived of standing, see, e.g., Lewis v. Anderson, 

477 A.2d 1040, 1046 n.10 (Del. 1984) (recognizing an exception to the 

continuous ownership requirement where the merger that deprived the 

plaintiff of ownership is the subject of a claim of fraud) (citing Bokat v. Getty 

Oil Co., 262 A.2d 246, 249 (Del. 1970)), we need not and do not address 

exceptions that may apply under circumstances not presented here.

¶12 We find the Delaware courts’ reasoning for adopting the 

continuous ownership requirement both sound and consistent with 

longstanding Arizona common law. Although Arizona’s constitution does 

not require standing to sue, we nonetheless generally require that each 

party have an actual interest in the outcome of the litigation. See Armory 

Park Neighborhood Ass’n v. Episcopal Cmty. Servs. in Ariz., 148 Ariz. 1, 6 (1985). 

This ensures that our courts “do not issue mere advisory opinions, that the 

case is not moot and that the issues will be fully developed by true 

adversaries.” Id. Combining the continuous ownership rule with the 

statutory and rule requirements serves that principle by ensuring that a 

derivative action is both brought and then maintained by a plaintiff that 

continues to have an actual interest in the outcome of the litigation.

¶13 The Trust argues that it has a sufficient incentive to continue 

the litigation on behalf of POG because it may recover attorneys’ fees if it 

prevails. But the Trust cites no authority for the proposition that the mere 

hope of a fee award will encourage a plaintiff to appropriately and 

adequately pursue a derivative claim on behalf of a business entity. The 

potential to recover fees at the end of a case does not confer standing to 

pursue it or ensure that the claims are litigated by true adversaries. Cf. Steel 

Co. v. Citizens for a Better Env’t, 523 U.S. 83, 107 (1998) (“Obviously, . . . a 

plaintiff cannot achieve standing to litigate a substantive issue by bringing 

suit for the cost of bringing suit. The litigation must give the plaintiff some 

other benefit besides reimbursement of costs that are a byproduct of the 

 

4 Additionally, Alford relied upon Gaillard v. Natomas Co., 219 Cal. 

Rptr. 74 (Ct. App. 1985), which was later disapproved of by the California 

Supreme Court when it adopted the continuous ownership requirement. 

See Alford, 398 S.E.2d at 449-50; Grosset, 42 Cal. 4th at 1114 n.9. 
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

7

litigation itself [to satisfy Article III of the U.S. Constitution].”); Lewis v. 

Cont’l Bank Corp., 494 U.S. 472, 480 (1990) (“[An] interest in attorney’s fees 

is, of course, insufficient to create a[] case or controversy where none exists 

on the merits of the underlying claim.”) (citing Diamond v. Charles, 476 U.S. 

54, 70-71 (1986)); see also Sears v. Hull, 192 Ariz. 65, 71, ¶ 24 (1998) (noting 

that Arizona courts consistently require standing similar to that imposed 

by the U.S. Constitution “as a matter of judicial restraint”).

¶14 The Trust also suggests that Delaware adopted the 

continuous ownership rule because it was consistent with that state’s 

recognition of a shareholder’s right to bring a direct claim for injury to the 

organization. It argues we should decline to follow Delaware’s lead

because Arizona law authorizes a direct claim only if a shareholder suffers 

“an injury separate and distinct from the [entity].” To the contrary, 

however, Delaware generally applies the same rule as Arizona: “[T]o have

standing to sue individually, rather than derivatively on behalf of the 

corporation, the plaintiff must allege more than an injury resulting from a 

wrong to the corporation.” Kramer, 546 A.2d at 351 (citations omitted); 

compare Albers, 201 Ariz. at 52, ¶ 18 (“A shareholder may maintain a direct 

action . . . when . . . the injuries or damages were sustained by individual 

shareholders rather than by the corporation.”), with El Paso Pipeline GP Co. 

v. Brinckerhoff, 152 A.3d 1248, 1260 (Del. 2016) (“[T]o prove that a claim is 

direct, a plaintiff must demonstrate that the duty breached was owed to the 

stockholder and that he or she can prevail without showing an injury to the 

corporation.”) (quotation omitted). Thus, there is no material difference 

between Arizona and Delaware law that would justify rejection of the 

sound policy analysis relied upon by Delaware in adopting the continuous 

ownership rule.

¶15 Finally, relying on Workman v. Verde Wellness Center, Inc., 240 

Ariz. 597 (App. 2016), the Trust contends that continuous ownership is not 

necessary in the absence of a requirement in statute or rule that the plaintiff 

fairly and adequately represent the interests of the entity. See also Lewis v. 

Chiles, 719 F.2d 1044, 1050 n.1 (9th Cir. 1983) (noting the “fairly and 

adequately” requirement “has served as an anchor for the concept that 

ownership must extend throughout the life of the litigation”). The plaintiff 

in Workman was a member of the board of a nonprofit corporation who sued 

to dissolve the corporation under A.R.S. § 10-11430(B), which explicitly 

grants a director the right to sue for dissolution. Workman, 240 Ariz. at 604-

05, ¶¶ 20-23. The board voted to remove her as a director a few hours after 

she filed suit and then argued she lacked standing to maintain the case. Id. 

In evaluating the argument, this Court inferred that the corporation had 

removed the plaintiff from the board because of her suit and held that the 
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

8

corporation could not moot her claim by ousting her from the board. Id. In 

coming to that conclusion, we made note of the “fairly and adequately”

language in the applicable version of Rule 23.1(b) and then broadly 

explained that “[t]he reason for the requirement is because the derivative 

plaintiff essentially stands in the shoes of the corporation to enforce the 

rights of the corporation, and the primary interest the shareholder has in 

doing so is by virtue of the related interest in protecting his or her shares.” 

Id. at 604, ¶ 21. Workman does not suggest that principle would not apply 

absent the language now omitted from Rule 23.1(b). In any event, to the 

extent the continuous ownership requirement would apply to a corporate 

dissolution, this Court merely applied an exception to the standing rule, not 

applicable here, where the plaintiff’s “loss of ownership ‘is the result of 

corporate action in which the holder did not acquiesce.’” Workman, 240

Ariz. at 604, ¶ 21. See supra ¶ 11 (acknowledging possible exceptions to the 

continuous ownership rule).

¶16 In sum, we adopt the continuous ownership rule and hold 

that, to maintain standing in a derivative action, the plaintiff must not only 

possess an ownership interest when commencing suit, but must also

continue to maintain its ownership interests throughout the litigation. 

Because the Trust no longer possesses any ownership interest in POG, we 

conclude, as did the trial court, that the Trust lacks standing to maintain the 

derivative action.
J. BALL TRUST v. PHX. ORCHARD, et al.

Opinion of the Court

9

CONCLUSION

¶17 The trial court’s order dismissing the Trust’s derivative 

complaint is affirmed.

¶18 Both parties request an award of attorneys’ fees incurred on 

appeal pursuant to A.R.S. § 12-341.01(A) (authorizing an award of 

attorneys’ fees to the successful party in an action arising out of a contract). 

The Trust’s complaint, alleging other partners and participants in POG had 

violated partnership and operating agreements, arose out of contract for 

purposes of A.R.S. § 12-341.01(A). See Jerman v. O’Leary, 145 Ariz. 397, 403 

(App. 1985) (citing Sparks v. Republic Nat’l Life Ins., 132 Ariz. 529, 544 (1982)). 

Accordingly, POG, as the successful party, is awarded its costs and

reasonable attorneys’ fees incurred on appeal upon compliance with 

ARCAP 21(b).