Advanced Reimbursement Solutions LLC v. Spring Excellence Surgical Hospital LLC et al

Filing 40

ORDER denying 22 Motion to Dismiss for lack of personal jurisdiction and improper venue or, alternatively, motion to transfer. Signed by Judge Douglas L Rayes on 10/12/2017. (MMO)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Advanced Reimbursement Solutions LLC,
Plaintiff,

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ORDER

v.

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No. CV-17-01688-PHX-DLR

Spring Excellence Surgical Hospital LLC,
et al.,

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Defendants.
This action arises out of a series of contracts Defendant Joanna Davis negotiated
with Plaintiff Advanced Reimbursement Solutions, LLC (ARS), and signed as Chief
Executive Officer of Defendant Spring Excellence Surgical Hospital, LLC (SESH).
ARS seeks damages from SESH for either breach of contract and the implied covenant of
good faith and fair dealing, or for unjust enrichment. Alternatively, ARS seeks damages
from Davis for breaching the implied warranty of authority. Before the Court is SESH’s
motion to dismiss for lack of personal jurisdiction and improper venue or, alternatively,
motion to transfer. (Doc. 22.) The motion is fully briefed. (Docs. 22, 28, 33.) For the
reasons stated below, SESH’s motion is denied.
I. Background
ARS is a third-party medical billing service located in Phoenix, Arizona. (Doc. 18
¶¶ 1, 12.) The company contracts with medical providers to process and bill out-ofnetwork health insurance claims. (¶ 13.) In August 2016, ARS began discussions with
Davis, who represented that she was responsible for the day-to-day management of

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SESH. (¶ 15.) At some point thereafter, Davis, purporting to be SESH’s CEO, executed

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the Executive Billing Agreement (EBA) with ARS. (¶¶ 14-33.) SESH directed patient

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and medical services information to ARS, which began filing medical claims for

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reimbursement. (Doc. 28-1 ¶¶ 25-26.) In December 2016, ARS began sending invoices

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to SESH for its services, but SESH refused to pay. (Doc. 18 ¶¶ 43-67.)

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ARS and SESH dispute the parties to the EBA. ARS alleges that SESH, through

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its agent Davis, entered into a contract for its billing services. (¶¶ 16-17.) Pursuant to

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that contract, ARS was entitled to compensation for its reimbursement claims processing

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services on behalf of SESH. (¶¶ 28-31.) Alternatively, if Davis did not have the

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authority to contract on behalf of SESH, ARS argues that SESH nevertheless ratified the

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contract by accepting approximately $2.78 million in reimbursement claims filed by ARS

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on its behalf. (Doc. 28 at 8-9.) Under either theory, ARS argues that SESH is subject to

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the forum selection clause contained within the EBA, under which the parties stipulated

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to Phoenix, Arizona as the exclusive jurisdiction for actions arising out of the EBA. (Id.)

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In contrast, SESH claims that ARS unreasonably relied on Davis’ representations that she

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was SESH’s CEO. (Doc. 22 at 3-4; Doc. 33 at 2-4.) SESH argues that ARS fails to

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allege facts plausibly demonstrating that SESH held Davis out as an agent with the

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authority to contractually bind it with ARS. (Doc. 22 at 4.) SESH also argues that it is

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not subject to the EBA’s forum selection clause and it has not consented to jurisdiction in

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Arizona because it is not a party to the contract. (Id. at 2-4.)

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II. Personal Jurisdiction

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A. Legal Standard

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

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

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

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

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

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

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Cir. 2011). Moreover, “uncontroverted allegations in [the plaintiff’s] complaint must be

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taken as true, and conflicts between the facts contained in the parties’ affidavits must be

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resolved in [the plaintiff’s] favor for purposes of deciding whether a prima facie case for

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personal jurisdiction exists.” Am. Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94

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F.3d 586, 588 (9th Cir. 1996) (internal quotation and citation omitted). Here, the Court

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takes ARS’ allegations as true because none are contradicted by affidavit.

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B. Analysis

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

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jurisdiction over persons.” Walden v. Fiore, -- U.S. --, 134 S. Ct. 1115, 1121 (2014); see

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also Fed. R. Civ. P. 4(k)(1)(A). Arizona authorizes courts to exercise jurisdiction to the

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maximum extent permitted by the Due Process Clause of the United States Constitution.

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See Ariz. R. Civ. P. 4.2(a).

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jurisdiction over a defendant who is not physically present in Arizona if the defendant has

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sufficient minimum contacts with the State, such that the suit can be maintained without

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

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

Thus, courts in this District may exercise personal

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Personal jurisdiction may be general or specific. General personal jurisdiction

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over a nonresident defendant requires “continuous corporate operations within a state so

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substantial and of such a nature as to justify suit against it on causes of action arising

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from dealings entirely distinct from those activities.” Id. at 318. Conversely, specific

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personal jurisdiction exists when a lawsuit arises out of, or is related to, the defendant’s

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contacts with the forum. Helicopteros Nacionales de Colo., S.A. v. Hall, 466 U.S. 408,

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414 n.8 (1984). Here, ARS contends only that SESH is subject to specific jurisdiction.

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(Doc. 28 at 10-11.)

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In determining whether specific jurisdiction over an out-of-state defendant exists,
the Court applies a three-prong test:
(1) The non-resident defendant must purposefully direct [its]
activities or consummate some transaction with the forum or
resident thereof; or perform some act by which [it]
purposefully avails [itself] of the privilege of conducting
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activities in the forum, thereby invoking the benefits and
protections of its laws;

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(2) the claim must be one which arises out of or relates to the
defendant’s forum-related activities; and

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(3) the exercise of jurisdiction must comport with fair play
and substantial justice, i.e. it must be reasonable.

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Schwarzenegger v. Fred Martin Motor Co., 374 F.3d 797, 802 (9th Cir. 2004). ARS

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bears the burden of satisfying the first two prongs. Id. at 802. If ARS succeeds, the

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burden shifts to SESH to “present a compelling case” that the exercise of jurisdiction

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would not be reasonable. Id.

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1. Purposeful Availment

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ARS has shown that SESH purposefully availed itself of this forum.

The

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purposeful availment prong requires SESH to “have performed some type of affirmative

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conduct which allows or promotes the transaction of business within the forum state.”

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Sinatra v. Nat’l Enquirer, Inc., 854 F.2d 1191, 1195 (9th Cir. 1988.) SESH argues that

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“[b]eyond actions by Davis exceeding her authority, [ARS] directs this Court to no other

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evidence to tie SESH to Arizona.” (Doc. 33 at 6.) This argument, however, overlooks

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the affidavit of Jeffrey L. Webb, ARS’ National Director of Sales, in which he details

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how SESH sent patient and medical services information to ARS in Arizona. (Doc. 28-1

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¶¶ 25-26.) Based on this information, ARS submitted approximately $2.78 million in

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reimbursement claims on SESH’s behalf. (Doc. 28 at 15; Doc. 18 ¶¶ 44-45, 48-49, 52-

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53, 56-57, 60-61.)

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affidavit concerns conduct by Davis, SESH fails to offer discovery materials, affidavits,

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or declarations supporting this point. The Court therefore finds that, by sending patient

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and medical services information to and accepting reimbursement payments from ARS in

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Arizona, SESH engaged in sufficient affirmative conduct purposefully availing itself of

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this forum. Brink v. First Credit Res., 57 F. Supp. 2d 848, 860-61 (D. Ariz. 1999)

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(finding that “by purposefully directing [] letters to residents of Arizona, [defendants]

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fulfilled the purposeful availment element”).

Although SESH argues in its reply memorandum that Webb’s

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2. ARS’ Claim Arises Out of SESH’s Forum-Related Activities

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ARS also has shown that its claims arise out of SESH’s contacts with the forum.

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A claim arises out of a defendant’s contacts with the forum when the claim would not

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have arisen “but for” the defendant’s actions in the forum. Panavision Int’l v. Toeppen,

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141 F.3d 1316, 1322 (9th Cir. 1998). Here, ARS’ alleges, at least in part, that SESH was

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unjustly enriched by receiving $2.78 million in reimbursement claims without paying the

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invoices for ARS’ services. (Doc. 18 ¶¶ 45, 49, 53, 57, 61, 71.) SESH provided ARS

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patient and medical services information that enabled ARS to process out-of-network

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reimbursement claims for SESH. But for providing ARS this information, ARS would

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neither have been able to submit claims on SESH’s behalf nor suffered the harm alleged.

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3. Reasonableness of Exercising Jurisdiction over Defendants

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Because ARS has shown that SESH purposefully availed itself of this forum and

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that its claims arise out of those forum-related contacts, the Court may exercise specific

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personal jurisdiction unless SESH otherwise demonstrates that it would be unreasonable

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to do so. Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir. 2008) (noting that

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defendant “must come forward with a compelling case that the exercise of jurisdiction

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would not be reasonable”). In assessing the reasonableness of jurisdiction, the Court

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balances seven factors: (1) the extent of defendant’s purposeful interjection into the

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forum state, (2) the burden on defendant, (3) the conflicts of the law between the forum

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state and defendant’s home jurisdiction, (4) the forum state’s interest in adjudicating the

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dispute, (5) the most efficient judicial resolution of the controversy, (6) the plaintiff’s

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interest in convenient and effective relief, and (7) the existence of an alternative forum.

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Terracom v. Valley Nat’l Bank, 49 F.3d 555, 561 (9th Cir. 1995).

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In its response memorandum, ARS demonstrates that the multifactor balancing

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test weighs in its favor. (Doc. 28 at 13.) SESH, however, presents no arguments

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regarding the reasonableness of jurisdiction. Instead, SESH argues only that it is not

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subject to personal jurisdiction in the forum because Davis was not its agent and therefore

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could not contractually bind it. (Doc. 22 at 2-4; Doc. 33 at 5-6.) For the reasons

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articulated above, however, the Court may exercise specific personal jurisdiction over

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SESH based on its forum-related contacts regardless of whether it is bound by the EBA.

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Because SESH has failed to offer a “compelling case” that exercising jurisdiction would

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be unreasonable, the Court finds that it has specific personal jurisdiction over SESH.

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III. Venue

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SESH also contends that venue is improper in Arizona, both because it is not a

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party to the EBA and, pursuant to 28 U.S.C. § 1391(b), Texas is the proper venue. (Doc.

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22 at 4-5; Doc. 33 at 7.) ARS argues, however, that venue is proper in Arizona under

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either § 1391(b)(2) or (b)(3). (Doc. 28 at 15-16.) The Court finds that venue is proper in

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the District of Arizona.
Venue in federal court is governed by § 1391(b), which states in relevant part that
an action may be brought in:
(2) a judicial district in which a substantial part of the events
or omissions giving rise to the claim occurred, or a substantial
part of property that is the subject of the action is situated; or
(3) if there is no district in which an action may otherwise be
brought as provided in this section, any judicial district in
which any defendant is subject to the court’s personal
jurisdiction with respect to such action.
Here, provision (b)(3) is inapplicable because there is at least one other district—the
Southern District of Texas—in which this action could be brought.

Nevertheless,

pursuant to (b)(2), venue is proper in Arizona because a substantial part of the events or
omissions giving rise to the claims occurred in Arizona. See Texmo Oil Co. Jobbers, Inc.
v. Y Travel LLC, No. 13-cv-8290, 2014 WL 2617248, at *2 (D. Ariz. June 12, 2014)
(“[F]or venue to be proper, significant events or omissions material to the plaintiff’s
claim must have occurred in the district in question, even if other material events
occurred elsewhere.”). As previously discussed, SESH directed patient information and
medical claims documents to Arizona in order for ARS to perform work on its behalf.
Moreover, ARS employees processed these reimbursement claims in and submitted them

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from Arizona.1

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IV. Conclusion

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For the foregoing reasons, the Court finds that it has specific personal jurisdiction

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over SESH, and that venue is proper in this District. Because the Court’s findings are

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based on SESH’s forum-related contacts, it need not prejudge the applicability of the

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forum selection clause contained within the EBA or whether an agency relationship exists

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between SESH and Davis.

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IT IS ORDERED that SESH’s motion to dismiss for lack of personal jurisdiction
and improper venue or, alternatively, motion to transfer (Doc. 22) is DENIED.
Dated this 12th day of October, 2017.

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Douglas L. Rayes
United States District Judge

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SESH notes that the Court has discretion to transfer a case to a different venue if
warranted by the convenience of the parties and witnesses, and if such a transfer would
promote the interests of justice. (Doc. 22 at 4.) SESH fails, however, to develop this
argument. Indeed, SESH does not even cite 28 U.S.C. § 1404(a) as a basis for its motion.
The Court therefore does not address whether the Southern District of Texas is a more
convenient forum.
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