Ariz. courts have no jurisdiction over Calif. defendants

Jessica M. Karmasek Jan. 26, 2011, 1:00pm


PHOENIX (Legal Newsline) - The Arizona Supreme Court has upheld a lower court judgment dismissing claims against a California corporation, Integrated Resources, and its CEO, saying it lacks jurisdiction over them.

The Court, in its 24-page opinion, also reversed the judgment insofar as it dismisses the claims against Lake Mathews Mineral Properties, Ltd., a California partnership that was seeking investment capital for a mining operation in the state; its general partner; and a California attorney involved in the dealings.

Vice Chief Justice Andrew D. Hurwitz, who authored the opinion, said the Court was charged with confronting a topic "that has vexed generations of law students and judges alike" -- determining whether the Due Process Clause of the Fourteenth Amendment permits a state court to exercise personal jurisdiction over non-resident defendants.

The case involves an alleged loan by Arizona corporations to a California venture, with repayment to be made in Arizona.

The Planning Group of Scottsdale, LLC, and Altair, LLC -- collectively known as TPG in the opinion -- ended up filing a complaint against Lake Mathews Mineral Properties; LMMP's general partner, James Holmes; Lee Subke, an Arizona resident; Subke's sister, Shirley Smith, also a California attorney; Randall Evers, a mining expert and president and CEO of Integrated Resources; and Integrated Resources itself.

The complaint had four counts, including:

- A declaratory judgment that TPG had obtained interests in LMMP's mineral deposits, but had only limited liability for the mining venture;

- Damages for breach of contract;

- Damages for violating Arizona securities laws; and

- An accounting.

All of the defendants but Subke -- all those California defendants -- moved to dismiss the complaint for lack of personal jurisdiction.

The Maricopa County Superior Court granted the motion and entered judgment. TPG appealed, but an appeals court affirmed the judgment.

The Supreme Court, in this case, granted review because "the jurisdiction of Arizona courts over non-resident defendants is a recurring issue of statewide importance," it said.

The Court, in its opinion, said it found the "analytical framework" used by the appeals court "problematic in some respects."

"We cannot agree that a court, in evaluating personal jurisdiction, must characterize an entire complaint as primarily sounding either in contract or tort," Hurwitz wrote for the Court.

"Moreover, we do not believe that if purposeful direction is established with respect to a tort claim, a contract claim arising out of precisely the same set of facts is somehow placed beyond the constitutional purview of Arizona courts."

The Court continued, "The issue, after all, is whether the aggregate of the defendants' contacts with this state makes it fair and reasonable to hale them into court here with respect to claims arising out of those contacts."

The Court said "it seems clear" that the California defendants borrowed money from investors in Arizona after "extensive communications" directed toward those investors in the state and after sending a basic proposal to TPG, which is also located in Arizona.

The appeals court, it said, "minimized" the import of telephone calls, e-mails, faxes and letters directed by the California defendants to Arizona.

"Even if examined separately under the purposeful availment test, the purposeful contacts of LMMP, Holmes, and Smith with this state are sufficient to support the exercise of personal jurisdiction in Arizona with respect to TPG's contract claims," it wrote.

Of Evers and Integrated Resources, the Court said he directed no communication -- oral, written or otherwise -- into Arizona.

"TPG has identified no purposeful conduct by Evers or his corporation that either took place in this state or was directed at this forum.

"Although Evers prepared the due diligence report, he did so before Subke's contact with Clark, and there is no evidence that he was aware that the report was to be sent to Arizona," it wrote.

The Court ruled that the opinion of the appeals court is vacated and the case is to be remanded to the superior court.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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