Court Opinion

ID: 2800067
Source: CourtListenerOpinion
Date Created: 2015-05-12 15:06:08.883978+00
Date Added: 2024-06-11T11:29:34.616226
License: Public Domain

NOTICE: NOT FOR PUBLICATION.
   UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION DOES NOT CREATE
          LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED.

                                    IN THE
             ARIZONA COURT OF APPEALS
                                DIVISION ONE

    CHRIS HENDERSON, a married person dealing with his sole and
 separate property; PETER STEVENSON, a married person dealing with
           his sole and separate property, Plaintiffs/Appellants,

                                        v.

  ISAACMAN KAUFMAN & PAINTER, P.C., a California professional
              corporation, Defendant/Appellee.

                             No. 1 CA-CV 14-0045
                               FILED 5-12-2015

           Appeal from the Superior Court in Maricopa County
                          No. CV2013-000639
                The Honorable Douglas Gerlach, Judge

                                  AFFIRMED

                                   COUNSEL

Ridenour, Hienton & Lewis, P.L.L.C, Phoenix
By Patricia A. Premeau
Counsel for Plaintiffs/Appellants

Gallagher & Kennedy, P.A., Phoenix
By Donald B. Petrie, Cober Plucker
Counsel for Defendant/Appellee
                        HENDERSON v. ISAACMAN
                           Decision of the Court

                        MEMORANDUM DECISION

Presiding Judge John C. Gemmill delivered the decision of the Court, in
which Judge Kenton D. Jones and Judge Donn Kessler joined.

G E M M I L L, Judge:

¶1              Appellants Chris Henderson and Peter Stevenson appeal the
trial court’s dismissal of their malpractice claims against California law firm
Isaacman, Kaufman, and Painter, P.C. (“IKP”). For the following reasons,
we affirm the trial court’s grant of the motion to dismiss for lack of personal
jurisdiction.

                              BACKGROUND

¶2            Henderson and Stevenson, non-Arizona residents, were joint
investors in a piece of property located in Maricopa County. In 2005, the
two sold the land to Estates at Spur Crossing, LLC, an Arizona limited
liability company. The two hired Brian Kaufman, a lawyer from IKP, to
represent them in the 2005 sale.1 Kaufman was a California-licensed lawyer
and managing partner of IKP, a California law firm. Neither Kaufman nor
IKP had any other contacts in Arizona and neither practiced law here. At
the time of the sale and all other transactions relevant to this appeal,
Henderson was a resident of California and Stevenson was a resident of
Illinois.2

¶3             Estates at Spur Crossing purchased the property for $1.2
million with $250,000 paid at close. It secured the remaining $950,000 with
a note and deed of trust. The note was due to be paid in full on or before
June 15, 2006.

¶4           Plaintiff’s claims arise from a second transaction involving the
property. In May 2006, Estates at Spur Crossing sold two 13.3 acre parcels;
one to Keith Vertes and the other to Scott Mead. Vertes and Mead both
purchased these parcels via warranty deed for $1.3 million, more than the

1   Mr. Kaufman passed away before the initial lawsuit was filed in 2013.

2 Henderson currently resides in Tennessee, and Stevenson still resides in
Illinois.

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                      HENDERSON v. ISAACMAN
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original sale price. Pursuant to this sale, Estates at Spur Crossing obtained
two deeds of trust from Vertes and Mead for $1.2 million each. In addition,
Vertes and Mead executed two separate notes in favor of Henderson and
Stevenson, each in the amount of $246,708.

¶5           The crux of the dispute arose on or about May 9, 2006, when
the Arizona real estate agent handling the Vertes and Mead sales emailed
IKP and Henderson requesting that Henderson and Stevenson execute a
subordination agreement. This agreement would give the deeds of trust
held by Vertes’ and Mead’s third-party lender priority over the notes held
by Henderson and Stevenson. Henderson and Stevenson agreed, and the
subordination agreement was recorded on May 16, 2006.

¶6            After the sales and execution of the subordination agreement
by Henderson and Stevenson, Vertes and Mead defaulted on their
respective deeds of trust. Neither paid the $246,708 due to Henderson and
Stevenson by the required dates. Upon IKP’s legal advice, Henderson and
Stevenson entered into subsequent modifications of the notes. Despite
these modifications, Vertes and Mead were still unable to pay the amounts
due, and upon default, the properties became subject to trustee’s sales.
Upon credit bids, both parcels were returned to the beneficiaries under the
$1.2 million deeds of trust. Because there were no excess proceeds, and as
a result of the 2006 subordination agreements, Henderson and Stevenson
were unable to collect on their notes.

¶7            Henderson and Stevenson allege that IKP was professionally
negligent in failing to advise them of the ramifications of signing the
subordination agreement. They claim that IKP failed to inform them of the
relevant facts surrounding the second sale of the property and they would
not have executed the agreements had they been made adequately aware
of the circumstances. In January 2013, they filed a complaint in Maricopa
County Superior Court against IKP alleging legal malpractice and breach
of fiduciary duty.

¶8            In response to Henderson and Stevenson’s complaint, IKP
filed a motion to dismiss for lack of personal jurisdiction. The Superior
Court granted the motion, noting that IKP had no representative in Arizona
and had not transacted business or given advice to parties in this state.
Additionally, the court explained that the alleged tort was not committed
in Arizona nor was any alleged damage felt in Arizona. In a ruling filed
November 13, 2013, it dismissed the claims against IKP for lack of personal
jurisdiction. Henderson and Stevenson timely appeal.

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                       HENDERSON v. ISAACMAN
                          Decision of the Court

                                 ANALYSIS

I.     Basis for Personal Jurisdiction

¶9             The main argument on appeal is that the trial court erred
when it held that Arizona does not have sufficient grounds to exercise
specific personal jurisdiction over IKP.3 Henderson and Stevenson argue
that IKP’s actions constituted purposeful conduct directed at Arizona,
thereby giving the state specific jurisdiction over IKP. When no evidentiary
hearing is conducted on the issue, this court reviews de novo a trial court’s
grant of a motion to dismiss for lack of jurisdiction. Planning Grp. of
Scottsdale, LLC v. Lake Mathews Mineral Properties, Ltd., 226 Ariz. 262, 264, ¶
2, n.1, 246 P.3d 343, 345, n.1 (2011).

¶10           Arizona courts may exercise long-arm personal jurisdiction
over a non-resident defendant to the fullest extent allowed by the Due
Process Clause of the United States Constitution. Ariz. R. Civ. P. 4.2(a).
Accordingly, the jurisdictional issue “hinges on federal law.” A. Uberti &
C. v. Leonardo, 181 Ariz. 565, 569, 892 P.2d 1354, 1358 (1995). In determining
whether an Arizona court may exercise personal jurisdiction, the analysis
should focus on the relationship between the defendant, the state, and the
claim. Williams v. Lakeview Co., 199 Ariz. 1, 6, ¶ 17, 13 P.3d 280, 285 (2000).
Whether an Arizona court may exercise personal jurisdiction over a non-
resident defendant is a question that cannot be answered by the application
of a “mechanical test” or formula. Id. at 3–4, ¶ 8, 13 P.3d at 282-83. Rather,
it requires a fact-intensive inquiry to determine whether exercising
jurisdiction would satisfy Due Process by comporting with traditional
notions of “fair play and substantial justice.” Id. (quoting Burger King Corp.
v. Rudzewicz, 471 U.S. 462, 485–86 (1985)).

¶11          Specific jurisdiction over an out-of-state defendant is
appropriate when that defendant has “minimum contacts” with the forum
state. World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 291 (1980).
Minimum contacts exist when three requirements are met: (1) the
defendant has purposefully availed itself of the privilege of conducting
business in Arizona; (2) the claim arises out of the defendant’s activities in
Arizona; and (3) it is reasonable for the forum state to exercise jurisdiction
over the defendant. Austin v. CrystalTech Web Hosting, 211 Ariz. 569, 574, ¶
18, 125 P.3d 389, 394 (App. 2005). Our decision here rests on the first

3   Plaintiffs concede that there are not sufficient “continuous and
systematic” contacts to support general jurisdiction over IKP. See
Helicopteros Nacionales v. Hall, 466 U.S. 408, 416 (1984).

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                       HENDERSON v. ISAACMAN
                          Decision of the Court

requirement, and we conclude that IKP did not purposefully avail itself of
Arizona as a legal forum.

¶12           Based on its interpretation of federal case law, our supreme
court articulated the applicable test for evaluating purposeful availment:
“Considering all of the contacts between the defendants and the forum
state, did those defendants engage in purposeful conduct for which they
could reasonably expect to be haled into that state’s courts with respect to
that conduct?” Planning Grp., 226 Ariz. at 268, ¶ 25, 246 P.3d at 349.

¶13            In Planning Group, a California limited partnership (“LMMP”)
sought investment capital for a new mining operation from an Arizona
limited liability company (“TPG”). 226 Ariz. at 264, ¶ 2, 246 P.3d at 345. In
order to solicit TPG’s investment, LMMP sent numerous letters, emails, and
faxes to TPG, in addition to participating in several telephone calls with
TPG representatives located in Arizona. Id. at 268–69, ¶ 28, 249 P.3d at 349–
50. Although LMMP did not have a physical presence in Arizona, LMMP
representatives were directed to deliver reports and other communications
to TPG at its Arizona location. Id. at 269, ¶ 30–31, 249 P.3d at 350. The court
found that, viewed in totality, these actions constituted purposeful
direction into Arizona’s specific jurisdiction. Id.

¶14           In contrast, the court found that Integrated Resources, a
second company involved in the negotiations between LMMP and TPG,
had not purposefully directed its dealings into Arizona. Id. at 271, ¶ 40, 246
P.3d at 352. Integrated Resources specialized in mining operations and
prepared a report outlining the specifics of the investment project. Id.
Although Integrated Resources was a stakeholder in the project and would
profit from TPG’s investment, the court found that the company had not
purposefully availed itself of Arizona’s jurisdiction. The court explained
that it is “not enough that a defendant know that he is dealing with an
Arizona resident then located in another state; the requisite activity must
instead be purposefully directed at the forum.” Id. The act of preparing
and circulating the report, without knowledge that it would be circulated
in Arizona, was not sufficient to give Arizona specific jurisdiction over
Integrated Resources.

¶15           Federal courts have reached similar conclusions when
determining whether a party has purposefully availed itself of a particular
state. The Ninth Circuit in Sher v. Johnson explained that “[o]ut-of-state
legal representation does not establish purposeful availment of the
privilege of conducting activities in the forum state, where the law firm is
solicited in its home state and takes no affirmative action to promote

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                       HENDERSON v. ISAACMAN
                          Decision of the Court

business within the forum state.” 911 F.2d 1357, 1363 (9th Cir. 1990). In that
case, a Florida firm represented a California resident charged with a crime
in Florida. The firm accepted payment from a California bank,
communicated telephonically and through the mail with parties in
California, and made trips to California to meet with the client in person.
Id. at 1362–63.

¶16           When the client later sued the firm for malpractice in
California, the Ninth Circuit held that the firm’s California activities were
“incident to the Florida representation” and not enough to create a
“substantial connection” with California because the firm did not promote
its business there. Id. Nonetheless, California had specific jurisdiction
because the Florida firm required the clients to execute a deed of trust
secured by their California home as security for payment. Id. at 1363. The
court held that the deed of trust, combined with the additional California
dealings, represented a “significant contact with California.”

¶17           IKP is more akin to Integrated Resources than to LMMP. It is
true that IKP knowingly communicated with Arizona parties, including
legal representatives of Vertes and Mead, relating to the second sale of the
property. But IKP did not make these communications in order to
“purposefully avail itself of the privilege of conducting activities” in
Arizona. Burger King, 471 U.S. at 475. Instead, any communication it
directed to this state regarding the second sale of the property was
incidental to the unilateral activity of Henderson and Stevenson—activity
that did not take place in Arizona. See Planning Grp., 226 Ariz. at 266, ¶ 16,
246 P.3d at 347 (explaining that the unilateral activity of the plaintiff in a
state cannot create personal jurisdiction over the defendant in that state).

¶18           Henderson and Stevenson rely on Beverage v. Pullman &
Comley, LLC, 232 Ariz. 414, 306 P.3d 71 (App. 2013) to argue that directing
communication into the forum state is enough to establish specific
jurisdiction. Importantly, the client in Beverage was an Arizona resident.
All communication directed to that client was therefore necessarily targeted
at Arizona. The claims here, on the other hand, are brought by California
and Illinois residents who solicited the assistance of a California firm to
advise them regarding an Arizona-based investment opportunity. Unlike
the law firm in Sher, IKP did not solicit or promote business in Arizona in
relation to the second sale of the property. The Arizona contacts it made
pursuant to that sale were incidental to its representation of non-Arizona
clients. IKP’s relationship with Arizona therefore falls short of the
“continuing relationships and obligations” sufficient to support specific

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                       HENDERSON v. ISAACMAN
                          Decision of the Court

personal jurisdiction. See Beverage, 232 Ariz. at 419, ¶ 17, 306 P.3d at 76
(citing Burger King, 471 U.S. at 487).4

¶19           IKP did not purposefully direct business into Arizona.
Because there was no purposeful availment, Arizona cannot exercise
personal jurisdiction over IKP. The trial court did not err when it granted
the motion to dismiss for lack of personal jurisdiction.

II.    Denial of Evidentiary Hearing

¶20            Henderson and Stevenson also argue that the court abused its
discretion in deciding the issue of whether it had jurisdiction over IKP
without conducting an evidentiary hearing to determine the full extent of
IKP’s contacts with Arizona. We review a trial court’s refusal to grant an
evidentiary hearing for an abuse of discretion. Pioneer Fed. Sav. Bank v.
Driver, 166 Ariz. 585, 589, 804 P.2d 118, 122 (App. 1990) (reviewing denial
of request for evidentiary hearing for abuse of discretion); see also Negron-
Torres v. Verizon Commc’ns, Inc., 478 F.3d 19, 27 (1st Cir. 2007) (explaining
that the trial court has substantial discretion to deny discovery in
jurisdictional disputes).

¶21            We find no abuse of discretion here. First, Henderson and
Stevenson have not made an offer of proof describing the additional facts
they expect to uncover with an evidentiary hearing. See, e.g., Curtis v.
Richardson, 212 Ariz. 308, 311, ¶ 12, 131 P.3d 480, 483 (App. 2006) (affirming
denial of an evidentiary hearing when movant “failed to provide specifics
regarding the substance of proposed testimony”). Second, based on the
record before it when it granted the motion to dismiss, the trial court had
sufficient information to conclude that the communications IKP directed
into Arizona did not constitute purposeful availment of Arizona as a legal
forum. Accordingly, the trial court did not abuse its discretion in deciding
the motion to dismiss without conducting an additional evidentiary
hearing.

4  Henderson and Stevenson also argue that based on defendants’ failure to
advise them against the subordination agreement, IKP and Kaufman
should have been aware that Henderson and Stevenson may be forced to
litigate claims relating to the realty in Arizona courts. But foreseeability
that a claim may arise in the forum state is not sufficient to give that state
specific jurisdiction over a client. Williams v. Lakeview Co., 199 Ariz. 1, 6, ¶
15, 13 P.3d 280, 285 (2000).

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                    HENDERSON v. ISAACMAN
                       Decision of the Court

                           CONCLUSION

¶22          Because Arizona does not have personal jurisdiction over
IKP, we affirm the trial court’s dismissal.

                               :ama

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