Premier Funding Group LLC v. Aviva Life and Annuity Company et al

Filing 96

ORDER granting 26 Motion to Dismiss for Lack of Jurisdiction; granting in part and denying in part 27 Motion to Dismiss for Failure to State a Claim; finding as moot 28 Motion to Dismiss for Failure to State a Claim. Signed by Judge David G Campbell on 12/8/2014.(DGC, nvo)

1

WO

2
3
4
5
6

IN THE UNITED STATES DISTRICT COURT

7

FOR THE DISTRICT OF ARIZONA

8
9

Premier Funding Group LLC,

10

Plaintiff,

11

ORDER

v.

12

No. CV-14-01633-PHX-DGC

Aviva Life and Annuity Company, et al.,

13

Defendants.

14
15

Defendants Anthony Lengeling and Aviva Life and Annuity Company have filed

16

motions to dismiss. Docs. 26-28. Lengeling has moved to dismiss Premier’s claims

17

against him for lack of personal jurisdiction and failure to state a claim. Docs. 26, 28.

18

Aviva has moved to dismiss most of Premier’s claims for failure to state a claim.

19

Doc. 27. The motions are fully briefed.1 The Court will grant Defendant Lengeling’s

20

motion to dismiss for lack of personal jurisdiction and will grant in part Defendant

21

Aviva’s motion to dismiss for failure to state a claim.

22

I.

23

Background.
The heart of this case is a $566,850 loan that Plaintiff Premier Funding Group

24

made on account of Defendant Richard Baldwin’s alleged fraud.

Baldwin was an

25

insurance agent who had an agreement with Aviva Life and Annuity Company (“Aviva”)

26

– an Iowa corporation – to sell its insurance products. Doc. 84, ¶¶ 2, 18-19. In the spring

27
1

28

The parties’ request for oral argument is denied because the issues have been
fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P.
78(b); Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998).

1

of 2011, Baldwin began to work with Gardner Brown to sell Aviva’s life insurance

2

policies to Mr. Brown’s clients. Id., ¶ 23. Among Mr. Brown’s clients are David and

3

Victor Kimball (“Kimballs”), who live in Utah. Id., ¶¶ 6-7, 38. Although the Kimballs

4

had completed much of the paperwork necessary to acquire life insurance policies for

5

themselves, they ultimately informed Mr. Brown that they did not want to complete the

6

transaction. Id., ¶¶ 44-47, 57. Brown passed this information along to Baldwin. Id.,

7

¶ 58. Baldwin told Brown that he would nevertheless complete the underwriting on the

8

Kimballs’ application in case the Kimballs changed their mind. Id., ¶ 59.

9

For the transactions involving the life insurance policies, Baldwin was working

10

with Nicholas Larsen, a Utah resident, and the company that employed Larsen, Crump

11

Life Insurance Services (“Crump”).

12

wholesale distributor of life insurance that is incorporated in Pennsylvania. Id., ¶¶ 3, 16.

13

Baldwin and Larsen used Crump to process Aviva life insurance policy applications and

14

Crump paid them commissions for their work. Id., ¶¶ 47-48, 67. At some point, Baldwin

15

and Larsen allegedly forged the Kimballs’ signatures on the documents necessary to

16

complete the sale of the life insurance policies. Id., ¶ 93. Because the Kimballs were not

17

paying for the policies, Baldwin used the financial services of Plaintiff, Premier Funding

18

Group, LLC (“Premier”). Id., ¶¶ 51, 78.

Id., ¶¶ 67, 93-94.

Crump is an independent

19

Premier is an Arizona company in the business of premium financing. Id., ¶¶ 1,

20

51. Premium financing involves a company loaning the funds necessary to pay the cost

21

of insurance premiums. Id., ¶ 26. To obtain financing for the Kimballs’ life insurance

22

policies, Baldwin sent Premier promissory notes and other documents with the forged

23

signatures of the Kimballs. Id., ¶ 74. Premier, following Baldwin’s instructions, wired

24

$566,850 to Action Valuation, Inc. Id., ¶¶ 80-81. Action Valuation wired the money

25

either directly to Aviva or to Aviva through Crump. Id., ¶ 83. Aviva then issued the

26

policies for the Kimballs and paid commissions to Baldwin and Crump. Id., ¶ 84.2

27
2

28

There was also an earlier transaction involving the wives of David and Victor
Kimball. Id., ¶ 63. Although the complaint is not clear, Premier seems to allege that
Baldwin fraudulently acquired life insurance policies for the Kimballs’ wives. He did so
-2-

1

Gardner Brown soon discovered that Aviva had issued the life insurance policies

2

even though the Kimballs did not want them. Id., ¶ 92. Mr. Brown’s lawyer then

3

contacted Aviva’s senior counsel, Anthony Lengeling, an Iowa resident. Id., ¶¶ 96-97.

4

The Kimballs also wrote letters informing Aviva that they did not want the policies. Id.,

5

¶ 98. Soon after, Aviva terminated Baldwin’s employment and began an investigation

6

into the Kimballs’ policies. Id., ¶¶ 103-15. In January of 2012, Premier’s counsel sent a

7

letter to Lengeling demanding that Aviva hold in trust the money it had received for the

8

Kimballs’ life insurance policy. Id., ¶ 109.

9

After receiving the letters, Aviva began to unwind the fraudulent transactions

10

involving the Kimballs. See id., ¶¶ 115-24. As part of this effort, Lengeling drafted a

11

settlement agreement between the Kimballs and Aviva. Id., ¶¶ 124-27. Lengeling

12

wanted to include a confidentiality provision in the agreement that would prevent the

13

Kimballs from revealing the contents of the agreement to Premier. Id., ¶¶ 149-51. The

14

Kimballs objected to the confidentiality provision, but ultimately signed the agreement.

15

Id., ¶¶ 152-55. The agreement included a confidentiality provision and stated that the

16

Kimballs had never authorized the policies and that the policies would be considered

17

void. Id., ¶ 155. Premier alleges that the Kimballs intended for Aviva to repay Premier

18

the money it had received for the voided policies. Id., ¶ 158. But Aviva refused to return

19

the $566,850 to Premier despite Premier’s repeated requests. Id., ¶ 175.
On February 6, 2014, Premier filed a lawsuit in Maricopa Superior Court. Doc. 1-

20
21

3.

Premier named Aviva, Crump, Richard Baldwin, Nicholas Larsen, Anthony

22

Lengeling, and the Kimballs as defendants. Id. Premier subsequently dismissed its

23

claims against the Kimballs. Doc. 1-3 at 97. On July 18, 2014, Defendants removed the

24

case to this Court on the basis of diversity. See Doc. 1-2; Doc. 73 (finding diversity and

25
26
27
28

using the same methods as he did for David’s and Victor’s policies. See id., ¶¶ 63-65.
Although Premier wired approximately $521,100 to Aviva for the wives’ policies, this
amount apparently is not at issue because Baldwin repaid this amount to Premier.
Doc. 84, ¶ 64 (“PFG financed the premium payments on the two wives’ life insurance
policies, sold the notes to Mr. Baldwin and PFG received the monies for the sold notes
from Mr. Baldwin without any complaints, problems or other issues.”).
-3-

1

denying motion to remand). Defendants Lengeling and Aviva have filed motions to

2

dismiss. Lengeling argues that the Court does not have personal jurisdiction over him or,

3

in the alternative, that Premier has failed to state a claim against him. Docs. 26, 28.3

4

Aviva argues that most of Premier’s claims against Aviva should be dismissed for failure

5

to state a claim. Doc. 27.

6

II.

Personal Jurisdiction.

7

A.

Legal Standard.

8

“Federal courts ordinarily follow state law in determining the bounds of their

9

jurisdiction over persons.” Daimler AG v. Bauman, 134 S. Ct. 746, 753 (2014). Arizona

10

has authorized its courts to exercise jurisdiction over persons to the maximum extent

11

permitted by the Due Process Clause of the Constitution. See Ariz. R. Civ. P. 4.2(a).

12

Under the Due Process Clause, a federal district court may exercise jurisdiction over a

13

person who is not physically present within the territorial jurisdiction of the court.

14

Walden v. Fiore, 134 S. Ct. 1115, 1121 (2014). The nonresident generally must have

15

certain minimum contacts with the forum so that the maintenance of the suit does not

16

offend traditional notions of fair play and substantial justice. Int’l Shoe Co. v.

17

Washington, 326 U.S. 310, 316 (1945).

18

A nonresident’s contacts with the forum may allow a district court to exercise

19

either general or specific personal jurisdiction. In re W. States Wholesale Natural Gas

20

Antitrust Litig., 715 F.3d 716, 741 (9th Cir. 2013), cert. granted sub nom. Oneok, Inc. v.

21

Learjet, Inc., 134 S. Ct. 2899 (2014). In this case, Plaintiff argues that the Court has

22
23
24
25
26
27
28

3

Lengeling filed two separate motions under Rule 12(b). Docs. 26, 28. One
motion argued lack of personal jurisdiction (Doc. 26) and the other argued failure to state
a claim (Doc. 28). These motions were filed on the same day. Ordinarily, “a party that
makes a motion under this [Rule 12] must not make another motion under this rule
raising a defense or objection that was available to the party but omitted from its earlier
motion.” Fed. R. Civ. P. 12(g)(2). A party who fails to include a defense or objection in
an earlier motion made under Rule 12 is deemed to have waived that defense. Fed. R.
Civ. P. 12(h). Premier argues that Lengeling’s defense of lack of personal jurisdiction
should be deemed waived because it was not included in its motion for failure to state a
claim. Premier is correct in that Lengeling should have included his Rule 12 defenses in
one motion. Because the two motions were submitted on the same day, however, the
Court will treat Lengeling’s motions as being one motion.
-4-

1

specific but not general personal jurisdiction over Lengeling based on his intentionally

2

tortious conduct. See Doc. 38 at 6. The Ninth Circuit uses a three-part test to analyze

3

whether a party’s “minimum contacts” satisfy due process for the exercise of specific

4

jurisdiction. In re Antitrust Litig., 715 F.3d at 741-42.4 In tort cases, the inquiry under

5

the first part of the test – which is determinative in this case – is whether a defendant

6

purposefully directed his activities at the forum state. Yahoo! Inc. v. La Ligue Contre Le

7

Racisme Et L’Antisemitisme, 433 F.3d 1199, 1206 (9th Cir. 2006). The Ninth Circuit

8

evaluates “purposeful direction under the three-part ‘effects’ test traceable to the

9

Supreme Court’s decision in Calder v. Jones . . . . ‘[T]he ‘effects’ test requires that the

10

defendant allegedly have (1) committed an intentional act, (2) expressly aimed at the

11

forum state, (3) causing harm that the defendant knows is likely to be suffered in the

12

forum state.’” Schwarzenegger, 374 F.3d at 803 (quoting Dole Food Co. v. Watts, 303

13

F.3d 1104, 1111 (9th Cir. 2002)) (citing Calder v. Jones, 465 U.S. 783 (1984)).

14

The effects test does not “‘stand for the broad proposition that a foreign act with

15

foreseeable effects in the forum state gives rise to specific jurisdiction.’” Wash. Shoe Co.

16

v. A-Z Sporting Goods Inc., 704 F.3d 668, 675 (9th Cir. 2012) (quoting Bancroft &

17

Masters, Inc. v. Augusta Nat’l Inc., 223 F.3d 1082, 1087 (9th Cir. 2000)). Nor does the

18

effects test mean that specific jurisdiction may be based solely on a defendant’s

19

knowledge that the subject of his tortious activity resides in a particular state. See

20

Walden, 134 S. Ct. at 1125. Rather, the Court must always focus on the “‘relationship

21

among the defendant, the forum, and the litigation’ [which] is the essential foundation of

22

in personam jurisdiction.” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S.

23

408, 414 (1984) (quoting Shaffer v. Heitner, 433 U.S. 186, 204 (1977)). “The proper

24

question is not where the plaintiff experienced a particular injury or effect but whether

25
4

26
27
28

Under this three-part test, specific jurisdiction exists only if: (1) the defendant
purposefully availed himself of the privileges of conducting activities in the forum,
thereby invoking the benefits and protections of its laws, or purposely directed conduct at
the forum that had effects in the forum; (2) the claim arises out of the defendant’s forumrelated activities; and (3) the exercise of jurisdiction comports with fair play and
substantial justice, i.e., it is reasonable. See In re Antitrust Litig., 715 F.3d at 741-42
(citing Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004)).
-5-

1

the defendant’s conduct connects him to the forum in a meaningful way.” Walden, 134

2

S. Ct. at 1125.

3

“When a defendant moves to dismiss for lack of personal jurisdiction, the plaintiff

4

bears the burden of demonstrating that the court has jurisdiction over the defendant.”

5

Pebble Beach Co. v. Caddy, 453 F.3d 1151, 1154 (9th Cir. 2006). “Where, as here, the

6

defendant’s motion is based on written materials rather than an evidentiary hearing, the

7

plaintiff need only make a prima facie showing of jurisdictional facts to withstand the

8

motion to dismiss.” Mavrix Photo, Inc. v. Brand Techs., Inc., 647 F.3d 1218, 1223 (9th

9

Cir. 2011). “The plaintiff cannot ‘simply rest on the bare allegations of its complaint,’

10

but uncontroverted allegations in the complaint must be taken as true.” Id. (quoting

11

Schwarzenegger, 374 F.3d at 800). The Court may not assume the truth of allegations in

12

a pleading that are contradicted by an affidavit, but factual disputes are resolved in

13

Plaintiff’s favor. Id. (quoting Data Disc, Inc. v. Sys. Tech. Assocs., Inc., 557 F.2d 1280,

14

1284 (9th Cir. 1977)). If the plaintiff survives the motion to dismiss under a prima facie

15

burden of proof, the plaintiff still must prove the jurisdictional facts by a preponderance

16

of the evidence at a preliminary hearing or at trial. Data Disc, 557 F.2d at 1285 n.2.

17

B.

Analysis.

18

Anthony Lengeling is an Iowa resident who at all relevant times was located in

19

Iowa. Doc. 84, ¶ 8. Premier is an Arizona limited liability company whose individual

20

members are residents of Arizona and California. Id., ¶ 1. Premier argues that Lengeling

21

“expressly aimed” tortious conduct at Premier in Arizona when he helped Aviva keep the

22

money that had been fraudulently obtained from Premier and crafted a settlement

23

agreement that would keep this fact secret from Premier. To be more specific, Premier

24

alleges that (1) Lengeling knew that Premier was based in Arizona; (2) he intentionally

25

defrauded Premier by helping Aviva keep the money that had originated with Premier;

26

(3) he attempted to cover up this fraud with a confidentiality provision in a settlement

27

agreement; and (4) he knew that these actions would cause Premier to suffer injury in

28

Arizona. See Doc. 38 at 8. Premier argues that this satisfies the effects test.

-6-

1

The Court disagrees. As established by Walden v. Fiore, personal jurisdiction

2

does not exist merely because a person directs tortious conduct at another whom he

3

knows resides in a particular state. 134 S. Ct. at 1125. Specific jurisdiction must be

4

based on a person’s contacts with the forum state, not on his contacts with the plaintiff.

5

See id. at 1121 (“[T]he defendant’s suit-related conduct must create a substantial

6

connection with the forum State.”). The Ninth Circuit has stated that the express aiming

7

“requirement is satisfied when the defendant is alleged to have engaged in wrongful

8

conduct targeted at a plaintiff whom the defendant knows to be a resident of the forum

9

state.” Bancroft, 223 F.3d at 1087; see also Wash. Shoe, 704 F.3d at 675. But this

10

reasoning is not consistent with the Supreme Court’s recent decision in Walden.

11

In Walden, two professional gamblers were traveling through a Georgia airport on

12

their way home to Nevada. 134 S. Ct. at 1118. They were carrying with them $97,000 in

13

cash. Id.

14

gamblers and seized the cash. Id. He suspected that the money came from drugs. Id. He

15

drafted an allegedly false affidavit to show probable cause for forfeiture of the funds. Id.

16

Ultimately, no forfeiture complaint was filed. Id. at 1120. The gamblers filed a Bivens

17

claim against Walden in the federal district court in Nevada. Id. at 1120. The district

18

court dismissed the claim for lack of personal jurisdiction and the Ninth Circuit reversed.

19

Fiore v. Walden, 688 F.3d 558 (9th Cir. 2011). The Ninth Circuit found that Walden had

20

“expressly aimed” his allegedly false affidavit at Nevada by submitting the affidavit with

21

knowledge that it would affect persons with a “significant connection to Nevada.” Id. at

22

581. The court stated that express aiming existed if the “intended impact [is] targeted at a

23

known individual who has a substantial, ongoing connection to the forum.” Id. at 578. In

24

reversing, the Supreme Court disapproved of the Ninth Circuit’s analysis:

25
26
27
28

Walden, an agent of the Drug Enforcement Administration, stopped the

Rather than assessing petitioner’s own contacts with Nevada, the Court of
Appeals looked to petitioner’s knowledge of respondents’ ‘strong forum
connections.’ In the court’s view, that knowledge, combined with its
conclusion that respondents suffered foreseeable harm in Nevada, satisfied
the ‘minimum contacts’ inquiry. This approach to the ‘minimum contacts’
analysis impermissibly allows a plaintiff’s contacts with the defendant and
forum to drive the jurisdictional analysis. Petitioner’s actions in Georgia
did not create sufficient contacts with Nevada simply because he allegedly
-7-

1
2

directed his conduct at plaintiffs whom he knew had Nevada connections.
Such reasoning improperly attributes a plaintiff’s forum connections to the
defendant and makes those connections “decisive” in the jurisdictional
analysis.

3
4

134 S. Ct. at 1124-25 (citations omitted).

5

Defendant Lengeling – at all times acting in Iowa – allegedly committed a tort

6

against a company located in Arizona. The tort was helping Aviva keep money that

7

belonged to Premier. But Lengeling did not reach out to Arizona to commit this act.

8

Indeed, Premier wired the money to Aviva through a third-party company at an

9

unspecified location. Doc. 84, ¶¶ 80-83. Thus, as the plaintiffs did in Walden, Premier is

10

attempting to make Premier’s connection with Arizona, not Lengeling’s connection with

11

Arizona, decisive in the jurisdictional analysis. Walden held, however, that Lengeling’s

12

tortious conduct combined with his knowledge that the injury would be felt by Premier in

13

Arizona is not sufficient for personal jurisdiction. Premier must show that Lengeling

14

expressly aimed his tortious conduct at Arizona, not simply at Premier.

15

Premier has pointed to a few contacts that Lengeling had with Arizona. These

16

contacts are a series of e-mails and phone calls between Lengeling and Premier’s counsel,

17

who resides in Arizona. See Doc. 26-1. In its complaint, Premier alleges that it wrote a

18

letter to Aviva, which Lengeling read, requesting that Aviva hold the “fraudulently

19

procured monies” in a trust until the matter could be fully resolved. Doc. 84, ¶¶ 109-10.

20

Lengeling later sent an e-mail to Premier’s counsel stating that “Aviva has cancelled the

21

Kimball policies and is considering this issue closed. We are not going to enter into any

22

form of settlement agreement for the return of premiums.” Id., ¶ 156. In his motion to

23

dismiss, Lengeling reveals that there were additional e-mails and phone calls regarding

24

the return of the money. See Doc. 26-1.

25

Premier, however, does not allege that these communications were tortious

26

conduct aimed at Arizona. Rather, the communications were the result of allegedly

27

tortious conduct by Lengeling. More specifically, Lengeling committed his allegedly

28

tortious act when he helped Aviva retain the money. His later communications with

-8-

1

Premier simply gave Premier notice of his actions.

This fact makes this case

2

distinguishable from cases on which Premier relies. In Metro. Life Ins. Co v. Neaves, 912

3

F.2d 1062 (9th Cir. 1990), there was a dispute over whom was the beneficiary of a life

4

insurance policy. Id. at 1063-64. The defendant, who lived in Alabama and was a co-

5

beneficiary of the policy, had sent a letter to the insurance company in California stating

6

that the other co-beneficiary had died. Id. at 1064. The insurance company claimed that

7

the defendant intentionally defrauded the company because she knew that the other co-

8

beneficiary was still alive. Id. The Ninth Circuit found that the California district court

9

had jurisdiction over defendant because she “purposefully directed her actions into

10

[California]” by sending the letter. Id. at 1065. The letter was the fraudulent conduct,

11

and for that reason the California court had jurisdiction over an Alabaman defendant.

12

In Brainerd v. Governors of the Univ. of Alberta, 873 F.2d 1257 (9th Cir. 1989), a

13

professor at University of Arizona sued his former employer who lived in Canada. Id. at

14

1257-58. A dean of the University of Arizona had telephoned the Canadian defendant

15

who allegedly told the dean, in breach of a settlement agreement with the plaintiff, that

16

the plaintiff had misused funds in his previous job. Id. at 1258. In finding that the

17

Arizona district court had jurisdiction over the Canadian defendant, the Ninth Circuit

18

emphasized that the “content of this telephone conversation is the source of this lawsuit.”

19

Id. Because the Canadian defendant allegedly committed a tort while communicating

20

with a person in Arizona, the lower court had jurisdiction. Id. at 1259. Again, the

21

communication with the forum state was the tortious conduct, and for that reason the

22

effects test was satisfied.5

23

Premier does not allege that Lengeling’s communications with Premier’s counsel

24

were tortious. Rather, Premier claims that Lengeling aided and abetted (Claim Twelve,

25

Doc. 84, ¶¶ 332-60) Baldwin’s fraud by helping Aviva retain the money that originated

26
5

27
28

The reasoning in Neaves and Brainerd is admittedly not clear. Although these
cases are distinguishable for the reasons mentioned, there are portions of the opinions that
suggest that mere knowledge of the tort victim’s domicile is sufficient to establish
personal jurisdiction under the effects test. See Neaves, 912 F.2d at 1065; Brainerd, 873
F.2d at 1259-60. Such suggestions, however, are not consistent with Walden.
-9-

1

with Premier and by structuring a settlement agreement that would keep this a secret from

2

Premier. Id., ¶¶ 349-51. Premier has also claimed that Lengeling breached legal and

3

equitable duties (Claim Thirteen, Constructive Fraud, id., ¶¶ 361-68) to Premier because

4

of this conduct. This conduct, however, took place in Iowa, where Lengeling and Aviva

5

reside, and arguably in Utah, where the Kimballs reside. It did not occur in Arizona.

6

Personal jurisdiction does not exist “solely as a result of ‘random,’ ‘fortuitous,’ or

7

‘attenuated’ contacts, or of the ‘unilateral activity of another party or a third person.’”

8

Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985). Premier has failed to make a

9

prima facie case that the Court has personal jurisdiction over Anthony Lengeling and his

10

wife. The Court, therefore, grants Defendant Lengeling’s motion to dismiss for lack of

11

personal jurisdiction (Doc. 26).

12

III.

Failure to State a Claim.

13

A.

Legal Standard.

14

Defendant Aviva argues that all of Premier’s claims against Aviva, except the

15

claim of negligent hiring and supervision, should be dismissed under Rule 12(b)(6).

16

When analyzing a complaint for failure to state a claim, the well-pled factual allegations

17

are taken as true and construed in the light most favorable to the nonmoving party.

18

Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). Legal conclusions couched as

19

factual allegations are not entitled to the assumption of truth, Ashcroft v. Iqbal, 556 U.S.

20

662, 680 (2009), and therefore are insufficient to defeat a motion to dismiss for failure to

21

state a claim, In re Cutera Sec. Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a

22

Rule 12(b)(6) dismissal, the complaint must plead enough facts to state a claim to relief

23

that is plausible on its face. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This

24

plausibility standard “is not akin to a ‘probability requirement,’ but it asks for more than

25

a sheer possibility that a defendant has acted unlawfully.”

26

(quoting Twombly, 550 U.S. at 556). “[W]here the well-pleaded facts do not permit the

27

court to infer more than the mere possibility of misconduct, the complaint has alleged B

28

but it has not ‘show[n]’ B ‘that the pleader is entitled to relief.’” Id. at 679 (quoting Fed.

- 10 -

Iqbal, 556 U.S. at 678

1

R. Civ. P. 8(a)(2)).

2

B.

3

As a preliminary matter, Premier and Aviva dispute whether Arizona or Utah law

4

applies to the issues between them. When a conflict of law exists “in a diversity case, the

5

district court must apply the choice-of-law rules of the state in which it sits.” Abogados

6

v. AT & T, Inc., 223 F.3d 932, 934 (9th Cir. 2000) (citing Klaxon Co. v. Stentor Elec.

7

Mfg. Co., 313 U.S. 487 (1941)). Arizona has adopted the “most significant relationship”

8

test set forth in the Restatement (Second) of Conflict of Laws. See Bates v. Super. Ct.,

9

749 P.2d 1367, 1369 (Ariz. 1988); Garcia v. Gen. Motors Corp., 990 P.2d 1069, 1075-76

10

Choice of Law.

(Ariz. Ct. App. 1999).6

11

Aviva argues that the majority of the underlying events took place in Utah.

12

Doc. 27 at 6. But the Restatement does not require the Court to decide which forum has

13

the most contacts with all of the issues and parties in the case. Rather, contacts under the

14

Restatement “are to be evaluated according to their relative importance with respect to

15

the particular issue.” Restatement (Second) of Conflict of Laws § 145 (emphasis added)

16

(stating the “general principle” for deciding choice-of-law issues for tort claims). A court

17

may apply the law of different forums to different issues. Id. § 145 cmt. d. Thus, even

18

though many of the underlying facts in this case occurred in Utah, these facts are not

19

relevant unless they directly pertain to the issues between Premier and Aviva.

20

The particular issues in this motion are claims sounding in tort and restitution that

21

Premier has brought against Aviva. These claims can be summarized simply: Richard

22

Baldwin (or an associate) forged the Kimballs’ signatures on a life insurance policy and a

23
24
25
26
27
28

6

The Court notes that the parties have not identified the conflict between Arizona
and Utah law. In cases involving a choice-of-law issue, the parties usually first identify
the conflict in question. See, e.g., Pounders v. Enserch E & C, Inc., 306 P.3d 9, 11 (Ariz.
2013). Identifying the laws that are in conflict can be critical to the choice-of-law
analysis. See Russell J. Weintraub, Commentary on the Conflict of Laws 397 (6th ed.
2010). The Restatement requires careful consideration of the policies behind particular
laws in deciding which forum has the “most significant relationship” with a particular
claim. See Restatement (Second) of Conflict of Laws § 6. Regardless of the failure of
the parties to identify the relevant conflict, the Court finds that Aviva has failed to make
any successful argument that Utah law should apply.
- 11 -

1

request for financing.

Baldwin presented the request for financing to Premier and

2

Premier financed the premiums for the Kimballs’ purported life insurance policies. The

3

payments went to Aviva. When Baldwin’s fraud came to light, Aviva kept the payments,

4

thereby allegedly defrauding Premier and unjustly enriching Aviva. Except for the home

5

of the Kimballs, none of these facts involve Utah. The only states implicated by these

6

transactions are Arizona, where Premier is located, and Iowa, where Aviva is located.

7

Although Aviva may have spent time in Utah uncovering the fraud and dealing with the

8

Kimballs, none of that is directly relevant to Aviva’s retention of the premiums.

9

Aviva’s argument fails the Restatement’s most significant relationship test. The

10

applicable sections of the Restatement require a forum to have contacts with the relevant

11

issues, and, under these sections, Arizona has the most contacts.

12

(Second) of Conflict of Laws §§ 145 (stating the “general principle” for choice-of-law for

13

tort claims), 148 (giving specific rules for claims of fraud), 221 (giving specific rules for

14

claims for restitution). The funds in question originated in Arizona. The funds were

15

wired by Premier from Arizona to Aviva in Iowa. Aviva decided to retain the funds, and

16

actually retained them, in Iowa. Although there might be an argument that Iowa has

17

more significant contacts with the relevant facts than Arizona, Premier makes no such

18

assertion. And as between Arizona and Utah, Arizona has the most significant contacts

19

with the relevant events at issue in Premier’s claim against Aviva. Furthermore, the

20

general principles that govern choice-of-law issues do not require application of Utah

21

law. See id. § 6.7

See Restatement

22
7

23
24
25
26
27
28

Section 6(2) provides basic policy considerations that apply in every choice of
law case. These include the needs of the interstate system, the policies of the forum, the
policies of other interested states, the protection of justified expectations, the policies
underlying the field of law, uniformity of result, and ease in determination of application
of the law to be applied. Restatement (Second) of Conflict of Laws § 6(2). None of
these factors clearly favors the application of either Arizona or Utah law. “The basic
policy in the law of torts is to deter tortious conduct and provide compensation for the
injured victim,” Gordon v. Kramer, 604 P.2d 1153, 1156 (Ariz. Ct. App. 1979), but the
Court cannot conclude that this policy favors Utah or Arizona law. Neither state’s
policies, nor the needs of the interstate system appear to favor one state over another.
The factor regarding the protection of justified expectations does not cut in either party’s
favor. Premier may rightly assume that Arizona law will protect it from fraudulent
transactions, and Aviva may rightly expect that Iowa law or the law of the insured’s
- 12 -

1

The Court finds that Arizona law governs the issues between Premier and Aviva.

2

C.

3

Analysis.
1.

Fraud.

4

Aviva argues that Premier has failed to state a claim of fraud because Premier has

5

not identified a misrepresentation that Aviva made to Premier. Doc. 27 at 8-10. Premier

6

argues that Aviva’s conduct amounts to a “ratification” of Baldwin’s fraud and that this is

7

sufficient to state a claim of fraud under Arizona law. Doc. 40 at 8-10.

8

In Arizona, a principal may be liable for an agent’s fraud if the principal either

9

authorized or ratified the fraud. See Jerger v. Rubin, 471 P.2d 726, 730 (Ariz. 1970).

10

Arizona courts have expounded this principle of law in the context of misrepresentations

11

by real-estate brokers:

12
13
14
15
16
17
18
19
20
21
22
23
24

It is true that in a broker-negotiated sale, where the misrepresentation is by
the broker, the property owner is bound by the broker’s misrepresentations
only when he was expressly authorized to make such representations or
when the owner, after notice of the fraud, insists upon holding the
purchaser to his bargain, thereby ratifying the alleged representations of the
broker.
Barnes v. Lopez, 544 P.2d 694, 697-98 (Ariz. Ct. App. 1976) (citing Jerger, 471 P.2d
726; Light v. Chandler Improvement Co., 261 P. 969 (Ariz. 1928)). The Court sees no
reason, nor has Aviva argued any, why this principle should not apply to this case.
According to Premier’s complaint, Richard Baldwin at all relevant times was
acting as Aviva’s agent. Doc. 84, ¶ 19. Baldwin defrauded Premier by presenting
promissory notes that Baldwin knew had been forged. Id., ¶ 74. Premier reasonably
relied on these promissory notes when it wired $566,850 to Aviva to pay the premiums
on the Kimballs’ purported life insurance policies. Id., ¶¶ 74-83. In Arizona, this
conduct amounts to fraud. See Echols v. Beauty Built Homes, Inc., 647 P.2d 629, 631

25
26
27
28

forum (Utah) will govern an insurance policy. As for “certainty, predictability, and
uniformity of result,” this factor does not clearly apply. The comment to Section 6 states
that “[p]redictability and uniformity of result are of particular importance in areas where
the parties are likely to give advance thought to the legal consequences of their
transactions.” Restatement § 6 cmt. i. This factor may apply where parties contemplated
their relationship in advance, but it appears to have little application here. Finally, the
Court finds that it would be equally easy to apply the law of Arizona or Utah.
- 13 -

1

(Ariz. 1982). Aviva received the $566,850 that originated with Premier. Doc. 84, ¶ 83.

2

At some point after receiving the money, Aviva became aware that Baldwin had

3

fraudulently obtained the life insurance policies and the money used to pay the premiums,

4

id., ¶¶ 96-105, but decided to keep the money, id., ¶¶ 109, 156. Like a real-estate

5

“owner, [who] after notice of the fraud, insists upon holding the purchaser to his bargain

6

[with the agent],” Barnes, 544 P.2d at 698, Aviva may be liable for ratifying Baldwin’s

7

fraud. The Court will deny Aviva’s motion to dismiss the fraud claim.

8

2.

Insurance Fraud.

9

Premier argues, and the Court agrees, that Arizona law applies to the issues

10

between Premier and Aviva. Yet for its claim of insurance fraud, Premier relies on

11

Utah’s insurance fraud statute and does not cite Arizona law. See Doc. 84, ¶¶ 260-76;

12

Doc. 40 at 10-11. Premier argues that it may plead alternative, inconsistent theories of

13

liability. Id. (citing Arnold & Assocs., Inc. v. Misys Healthcare Sys., 275 F. Supp. 2d

14

1013, 1030 (D. Ariz. 2003)). But this does not mean that Premier may rely on laws that

15

do not apply to this case. Premier apparently prefers Utah’s statute because it makes it

16

unlawful for an insurer to “knowingly accept[] a benefit from the proceeds derived from a

17

fraudulent insurance act.” Utah Code Ann. § 31a-31-103(3)(c). Arizona’s insurance

18

fraud statute does not have a similar statement. See Ariz. Rev. Stat. Ann. § 20-463.

19

Premier does not explain, nor can the Court discern, how Arizona law supports its claim

20

of insurance fraud. The Court will dismiss Premier’s claim of insurance fraud.

21

3.

Unjust Enrichment.

22

“To recover under a theory of unjust enrichment, a plaintiff must demonstrate five

23

elements: (1) an enrichment, (2) an impoverishment, (3) a connection between the

24

enrichment and impoverishment, (4) the absence of justification for the enrichment and

25

impoverishment, and (5) the absence of a remedy provided by law.”

26

Sorchych, 245 P.3d 927, 936 (Ariz. Ct. App. 2011). Under this law, Premier has alleged

27

a plausible claim of unjust enrichment. When Premier wired $566,850 on account of

28

Baldwin’s misrepresentations, Aviva was enriched and Premier was impoverished by that

- 14 -

Freeman v.

1

amount. There is a clear connection between the enrichment and impoverishment, and

2

there is an absence of justification. Finally, if Premier’s other claims fail as this case

3

proceeds, there will be an absence of a remedy provided by law.

4

Aviva argues that “insurers who are deceived into issuing life insurance policies

5

under misleading pretenses are often permitted to keep the premiums paid on those

6

fraudulent policies,” and cites many cases that have so held. Doc. 27 at 12. These cases

7

are distinguishable, however, because either the insured or the third-party financer knew

8

or had reason to know of the fraud.

9

Hathaway Family Ins. Trust ex rel. Hathaway, No. 2:10-CV-67, 2013 WL 6230351, at

10

*10 (D. Utah Dec. 2, 2013) (finding that parties were aware of the fraudulent scheme);

11

Carlton v. B&B Equities Grp., LLC, 827 F. Supp. 2d 1235, 1247 (D. Nev. 2011) (finding

12

that the third-party financer was “at least on inquiry notice of the illicit scheme”); TTSI

13

Irrevocable Trust v. ReliaStar Life Ins. Co., 60 So. 3d 1148, 1149 (Fla. Dist. Ct. App.

14

2011) (“Where a party wrongfully procures a life insurance policy on an individual in

15

whom it has no insurable interest, the party is not entitled to a return of premiums paid

16

for the void policy.”). Construing the facts in Premier’s favor, Premier had no reason to

17

know of Baldwin’s fraud at the time it wired the money. Furthermore, Aviva’s argument

18

that it would be inequitable to return the money to Premier is best resolved at a later stage

19

in the litigation. The Court will not dismiss Premier’s claim of unjust enrichment.

20

4.

See, e.g., PHL Variable Ins. Co. v. Sheldon

Constructive Trust.

21

Premier lists “constructive trust” as a claim. Doc. 84, ¶¶ 297-301. As Aviva

22

rightly points out, a constructive trust is a remedy, not a cause of action. “A constructive

23

trust is an equitable remedial device, generally used to prevent unjust enrichment. In

24

particular, a constructive trust will arise whenever it is inequitable that property should be

25

retained by the legal title holder.” Burch & Cracchiolo, P.A. v. Pugliani, 697 P.2d 674,

26

678 (Ariz. 1985) (citations omitted); see King v. Uhlmann, 437 P.2d 928, 936-37 (Ariz.

27

1968). If Premier succeeds on the merits of its unjust enrichment claim, it may be

28

entitled to a constructive trust, but it need not plead constructive trust as a claim. To the

- 15 -

1

extent the complaint pleads constructive trust as a cause of action, that cause of action is

2

dismissed.

3

5.

Conversion.

4

“Conversion is the ‘act of wrongful dominion or control over personal property in

5

denial of or inconsistent with the rights of another.’ To maintain such an action, the

6

plaintiff must have the right to immediate possession of the property at the time of the

7

conversion.” Koss Corp. v. Am. Exp. Co., 309 P.3d 898, 914 (Ariz. Ct. App. 2013)

8

(quoting Case Corp. v. Gehrke, 91 P.3d 362, 365 (Ariz. Ct. App. 2004)). “[M]oney can

9

be the subject of a conversion action if the funds can be described, identified or

10

segregated and there is an obligation to treat the funds in a specific manner.” Id. Thus,

11

to make a plausible claim of conversion under Arizona law, Premier must show, at the

12

time of the alleged conversion, “(1) that [Premier] had a right to immediate possession of

13

the Proceeds; (2) that the funds [Premier] seeks are described; (3) that the funds [Premier]

14

seeks are identified or segregated; and (4) that [Aviva] had an obligation to treat the

15

funds in a specific manner.” Liberty Life Ins. Co. v. Myers, No. CV 10-2024-PHX-JAT,

16

2013 WL 530317, at *13 (D. Ariz. Feb. 12, 2013).

17

Premier argues that Aviva converted Premier’s money – which had been wired to

18

pay for the Kimballs’ purported life insurance policies – when Aviva decided to keep the

19

money after receiving notice of Baldwin’s fraud. Doc. 84, ¶¶ 317-31. Aviva argues that

20

it cannot be liable for conversion because Premier voluntarily transferred the money to

21

Aviva. Doc. 27 at 14-16. The Court finds, based on the reasoning in Koss Corp., that

22

Aviva may be liable for conversion.

23

An employee of Koss embezzled company funds by using checks drawn on Koss

24

bank accounts to pay for her American Express credit card bills. Koss Corp., 309 P.3d at

25

901-02. American Express became aware of the embezzlement as it was occurring, but

26

failed to stop payments or alert Koss until months later. Id. The court found that “a

27

conversion action can apply even to a third-party recipient of funds obtained for value

28

who has knowledge of the fraudulent obtaining of the funds.” Id. at 914 (emphasis

- 16 -

1
2
3
4
5
6

added). The court explained:
Koss had a possessory interest in the funds represented by the cashier’s
checks and wire transfers, which American Express allegedly interfered
with when it cashed the checks allegedly knowing of Sachdeva’s fraud and
used the proceeds of the cashier’s checks and wire transfers to pay the
merchants who had provided goods or services to Sachdeva charged on her
American Express account. If [American Express] had knowledge that
Sachdeva was embezzling funds from Koss to pay her American Express
bills, it could be liable for conversion.

7

Id. Although not explicitly stated, American Express’ knowledge of Sachdeva’s fraud

8

was presumably sufficient to satisfy the other elements of conversion. The knowledge

9

would have required American Express to segregate and specially treat the funds it had

10

received and would have given Koss a right to immediate possession of the funds.

11

Premier also had a possessory interest in the money it wired to Aviva to pay for

12

the Kimballs’ life insurance policies. If Aviva received and used the funds knowing that

13

they had been procured by fraud, Aviva may be liable for conversion.

14

complaint is not clear as to when Aviva became aware of the fraud. Premier wired the

15

$566,850 to Aviva on November 9. Doc. 84, ¶ 80. At the latest, Aviva was put on notice

16

of the possibility of fraud when it received a letter from the Kimballs stating that they did

17

not want a life insurance policy. Id., ¶¶ 97-98. This letter was dated November 23. Doc.

18

84-2 at 9. Construing the facts in favor of Premier, Cousins, 568 F.3d at 1067, it is

19

plausible that Aviva knew that Premier’s money had been procured by fraud at the time

20

of or shortly after receiving the money. Under Koss, this would be sufficient to state a

21

claim for conversion. The Court will not dismiss Premier’s claim of conversion.

22

6.

Premier’s

Aiding & Abetting.

23

Under Arizona law, claims of aiding and abetting tortious conduct require proof of

24

three elements: “(1) the primary tortfeasor must commit a tort that causes injury to the

25

plaintiff; (2) the defendant must know that the primary tortfeasor’s conduct constitutes a

26

breach of duty; and (3) the defendant must substantially assist or encourage the primary

27

tortfeasor in the achievement of the breach.” Wells Fargo Bank v. Arizona Laborers,

28

Teamsters & Cement Masons Local No. 395 Pension Trust Fund, 38 P.3d 12, 23 (Ariz.

- 17 -

1

2002) (citing Gomez v. Hensley, 700 P.2d 874, 876 (Ariz. Ct. App. 1984)); Restatement

2

(Second) of Torts § 876(b)). “[S]ubstantial assistance does not mean assistance that is

3

necessary to commit the fraud. The test is whether the assistance makes it ‘easier’ for the

4

violation to occur, not whether the assistance was necessary.”

5

omitted). “If the encouragement or assistance is a substantial factor in causing the

6

resulting tort, the one giving it is himself a tortfeasor and is responsible for the

7

consequences of the other’s act.” Restatement (Second) of Torts § 876 cmt. d; see also

8

Sec. Title Agency, Inc. v. Pope, 200 P.3d 977, 988 (Ariz. Ct. App. 2008).

Id. at 27 (citations

9

Aviva argues that because its actions do not amount to an independent and

10

separate tort, it cannot be liable for aiding and abetting Baldwin’s fraud. Doc. 27 at 17

11

(citing Young v. Liberty Mut. Grp., Inc., No. CV-12-2302-PHX-JAT, 2013 WL 840618

12

(D. Ariz. Mar. 6, 2013)). The Court agrees that Premier has failed to state a claim of

13

aiding and abetting, but for different reasons. For Premier’s aiding and abetting claim,

14

the primary tortfeasor is Richard Baldwin, who defrauded Premier. Premier has alleged

15

that at some point Aviva became aware of Baldwin’s fraud. See Doc. 84, ¶¶ 97-98.

16

Premier argues that Aviva substantially assisted or encouraged Baldwin’s fraud by

17

ratifying and concealing the fraud. Doc. 40 at 17. But these actions were taken after

18

Baldwin had completed his fraud by presenting forged documents to Premier and Aviva,

19

having Premier wire $566,850 to Aviva, and accepting Aviva’s commission.

20

Doc. 84, ¶¶ 74-86. Aviva’s alleged decision to ratify and conceal Baldwin’s fraud after it

21

occurred cannot be “a substantial factor in causing the resulting tort[.]” Restatement

22

(Second) of Torts § 876 cmt. d. Premier has cited no authority to the contrary. The

23

Court will dismiss Premier’s claim of aiding and abetting.

24
25

7.

See

Constructive Fraud.

Constructive fraud has two elements.

First, there must be a confidential or

26

fiduciary relationship between the parties. McAlister v. Citibank (Arizona), a Subsidiary

27

of Citicorp, 829 P.2d 1253, 1261 (Ariz. Ct. App. 1992) (citing Rhoads v. Harvey Publ’ns,

28

Inc., 700 P.2d 840, 846-47 (Ariz. Ct. App. 1984)). Examples include “husband and wife,

- 18 -

1

parent and child, guardian and ward, attorney and client, partners, and joint

2

adventurers[.]”

3

relationship there must be something approximating business agency, professional

4

relationship, or family tie.”

5

confidential relationship and its concomitant fiduciary duties that, “irrespective of the

6

moral guilt or intent of the party charged, the law declares fraudulent because of its

7

tendency to deceive others, to violate public or private confidence, or to injure public

8

interests.” Id. at 846. A confidential relationship includes a “duty to make a full and

9

truthful disclosure of all material facts[.]” Id. at 846-47.

Rhoads, 700 P.2d at 847.

Id. at 847.

“To establish a fiduciary (confidential)

Second, there must be a breach of that

10

Aviva argues that Premier has failed to allege a confidential relationship between

11

Premier and Aviva. Doc. 27 at 17-18. The Court agrees. The extent of their relationship

12

is the wiring of money from Premier to Aviva – through a third-party company – and

13

Premier’s subsequent requests for the return of the money. This is not sufficient to create

14

a confidential relationship. In Rhoads, the court considered whether a cartoonist who

15

worked for more than twenty years as an independent contractor for a publication had a

16

confidential relationship with that publication. Id. at 841-42. In finding no confidential

17

relationship, the court emphasized that “there was no great intimacy, disclosure of

18

secrets, or entrusting of power. Any superiority of position is no different than that

19

which would exist between any master and servant or employer-employee.” Id. at 847.

20

Here also, there was “no great intimacy, disclosure of secrets, or entrusting of power”

21

between Premier and Aviva. Arguably their relationship is similar to debtor-creditor, but

22

Arizona courts have not found this to be a confidential relationship. See McAlister, 829

23

P.2d at 1258.

24

Premier argues that because it has alleged a claim for constructive trust, Aviva as a

25

constructive trustee had fiduciary duties to Premier. Doc. 40 at 17-18. But as discussed

26

above, a constructive trust is not a claim but rather a remedy, and cannot be used to

27

support a claim of constructive fraud.

28

constructive fraud.

The Court will dismiss Premier’s claim of

- 19 -

1

IT IS ORDERED:

2

1.

Defendant Lengelings’ Motion to Dismiss (Doc. 26) is granted.

3

2.

Defendant Lengelings’ Alternative Motion to Dismiss (Doc. 28) is denied
as moot.

4
5
6
7

3.

Defendant Aviva’s Motion to Dismiss (Doc. 27) is granted in part as set
forth above.

Dated this 8th day of December, 2014.

8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

- 20 -