Clearwater REI, LLC v. Focus Consulting Advisors, LLC

Filing 31

MEMORANDUM AND ORDER RE: Motions for Summary Judgment- Defendant's motion for summary judgment be, and the same hereby is, GRANTED on the ground that this court lacks personal jurisdiction over defendant and DENIED as moot in all other respects. Plaintiff's motion for summary judgment be, and the samehereby is, DENIED as moot. This action is hereby ordered TRANSFERRED to the United States District Court for the District of Arizona. Signed by Judge William B. Shubb. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by jm)

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UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF IDAHO

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----oo0oo----

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CLEARWATER REI, LLC, an Idaho
limited liability company,

NO. CIV. 1:10-448 WBS

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Plaintiff,

MEMORANDUM AND ORDER RE:
MOTIONS FOR SUMMARY JUDGMENT

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v.
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FOCUS CONSULTING ADVISORS,
LLC, an Arizona limited
liability company,

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Defendant.
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/

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----oo0oo----

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Plaintiff Clearwater REI, LLC, brought this action

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against defendant Focus Consulting Advisors, LLC, seeking

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declaratory judgment regarding the amount of payment due under a

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contract between the parties.

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judgment, arguing that the court lacks personal jurisdiction and

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that the action is barred by the Statute of Frauds.

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also moves for summary judgment on its claim.

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///

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///

Defendant now moves for summary

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Plaintiff

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I.

Standard

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Summary judgment is proper “if the movant shows that

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there is no genuine dispute as to any material fact and the

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movant is entitled to judgment as a matter of law.”

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P. 56(a).

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of the suit, and a genuine issue is one that could permit a

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reasonable jury to enter a verdict in the non-moving party’s

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favor.

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(1986).

Fed. R. Civ.

A material fact is one that could affect the outcome

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
The party moving for summary judgment bears the initial

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burden of establishing the absence of a genuine issue of material

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fact and can satisfy this burden by presenting evidence that

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negates an essential element of the non-moving party’s case.

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Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986).

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Alternatively, the moving party can demonstrate that the

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non-moving party cannot produce evidence to support an essential

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element upon which it will bear the burden of proof at trial.

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Id.

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Once the moving party meets its initial burden, the

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burden shifts to the non-moving party to “designate ‘specific

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facts showing that there is a genuine issue for trial.’”

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324 (quoting then-Fed. R. Civ. P. 56(e)).

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the non-moving party must “do more than simply show that there is

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some metaphysical doubt as to the material facts.”

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Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

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“The mere existence of a scintilla of evidence . . . will be

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insufficient; there must be evidence on which the jury could

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reasonably find for the [non-moving party].”

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at 252.
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Id. at

To carry this burden,

Matsushita

Anderson, 477 U.S.

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In deciding a summary judgment motion, the court must

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view the evidence in the light most favorable to the non-moving

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party and draw all justifiable inferences in its favor.

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255.

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and the drawing of legitimate inferences from the facts are jury

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functions, not those of a judge . . . ruling on a motion for

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summary judgment . . . .”

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II.

Id. at

“Credibility determinations, the weighing of the evidence,

Id.

Relevant Facts
Daniel Welker, then an employee of plaintiff, first

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became acquainted with Matthew Lyons in 2008.

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Resp. to Def.’s Mot. for Summ. J. (“Welker Aff. II”) ¶ 2 (Docket

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No. 20-1).)

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interested in purchasing distressed notes.

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responded that he was “putting together a group” that could help

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with such purchases.

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defendant in this suit, consisting of himself and two other

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members: Thomas Driessen and Joseph Driessen.

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Driessen Decl. in Supp. of Def.’s Resp. to Pl.’s Mot. for Summ.

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J. ¶ 2 (Docket No. 21-1).)

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would be interested in using defendant’s services to review and

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potentially acquire certain distressed notes in a portfolio

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offered by defendant.

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negotiated, via e-mail and phone, and executed a Consulting

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Agreement.

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Supp. of its Mot. for Summ. J. Ex. A (“Consulting Agreement”)

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(Docket No. 16-2).)

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(Welker Aff. in

Welker indicated to Lyons that plaintiff was

(Id.

(Id. ¶ 4.)

(Id. ¶ 3.)

Lyons

Lyons then created that group,

(Id. ¶ 5; Thomas

Lyons asked Welker whether plaintiff

(Welker Aff. II ¶ 5.)

The parties then

¶ 6; see Def.’s Separate Statement of Facts in

The Consulting Agreement was executed on May 15, 2009,
between plaintiff (“Client”), defendant (“Consultant”), and
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Mobey, LLC (“Mobey”).1

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Consulting Agreement provides that:

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(Consulting Agreement at 1.)

The

Client hereby engages Consultant to provide advisory
services to Client in connection with Client’s possible
purchase of one or more Loans described in the Portfolio
Notice, including introductions to the Lender and/or the
lender’s
representative,
notifying
Client
of
opportunities to purchase Loans, assistance with due
diligence and related advisory services. Client hereby
engages Mobey as Client’s sole and exclusive agent for
the purchase of Properties described in the Portfolio
Notice.

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(Id.)
The Consulting Agreement sets a term of engagement of

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four months, with non-circumvention obligations continuing for

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another six months.

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and Mobey is set by a fee schedule based on the purchase price of

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the loan or property purchased, due at the closing of the

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purchase.

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interest at the rate of eight percent annually.

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(Id. at 1, 4.)

(Id. at 2.)

Compensation to defendant

Untimely payments are set to accrue
(Id.)

The Consulting Agreement also includes a choice of law
provision and forum selection clause:
This Agreement will be interpreted and construed
exclusively in accordance with the laws of the State of
Arizona without regard to its choice of law principles.
The parties further agree that proper and exclusive venue
for any dispute arising in connection with this Agreement
will be the federal or state courts located in Maricopa
County, Arizona.2

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Mobey is not a party to this suit. It is unclear
whether Mobey acted as an agent or played any role in the events
at issue.
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The parties agree that the forum selection clause is
not enforceable under Idaho law but that the choice of law
provision applies. See Cerami-Kote, Inc. v. Energywave Corp.,
116 Idaho 56, 58-59 (1989); (see Def.’s Mem. in Supp. of Mot. for
Summ. J. at 2:14-15, 5:11-13 (Docket No. 16).)
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(Id. at 4-5.)

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In June of 2009, plaintiff began bidding to purchase a

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note secured by real property known as the “Trail Walk

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Condominiums” in Kenmore, Washington.

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Mot. for Summ. J. (“Welker Aff. I”) ¶ 2 (Docket No. 17-2); Lyons

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Decl. in Supp. of Def.’s Resp. to Pl.’s Mot. for Summ. J. ¶ 4

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(Docket No. 21-1).)

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note became too competitive, and Welker requested that defendant

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take a reduced commission in order to help plaintiff purchase the

(Welker Aff. in Supp. of

During the bidding process, the price on the

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note.

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ever agreed to a reduced commission; plaintiff represents that

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Lyons agreed to a reduced fee of $10,000.00.

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Plaintiff then placed a final bid and successfully purchased the

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Trail Walk note on June 29, 2009.

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(Welker Aff. I ¶ 2.)

The parties dispute whether they

(Id. ¶ 4.)

(Id. ¶ 6; Lyons Decl. ¶ 12.)

On September 4, 2009, Lyons sent plaintiff a letter

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offering to accept $10,000.00 in full satisfaction of plaintiff’s

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obligations relating to the Trail Walk note if payment was

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received by September 25, 2009.

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Facts in Supp. of its Mot. for Summ. J. Ex. C.)

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schedule in the Consulting Agreement, the fee for the Trail Walk

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note would otherwise have been $171,240.00.

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Plaintiff did not make a payment by September 25.

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17.)

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him that the deadline to pay had expired.

(Def.’s Separate Statement of
Based on the fee

(Id. Ex. B.)
(Lyons Decl. ¶

On October 12, 2009, Lyons sent Welker an e-mail informing
(Id. ¶ 18.)

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Plaintiff then filed suit in Ada County Court on July

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21, 2010, which was removed to this court on September 2, 2010.

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Plaintiff seeks declaratory judgment that it owes only $10,000.00

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to defendant.
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After plaintiff filed this action, defendant filed an

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action against plaintiff in the District of Arizona, which was

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dismissed in deference to the instant action based solely on the

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first-to-file rule.

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of Mot. for Summ. J. ¶ 6 (Docket No. 16-2).)

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III. Discussion

(Def.’s Separate Statement of Facts in Supp.

A plaintiff has the burden of establishing that the

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court has personal jurisdiction over a defendant.

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Corp., 248 F.3d 915, 922 (9th Cir. 2001) (citing Cubbage v.

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Doe v. Unocal

Merchent, 744 F.2d 665, 667 (9th Cir. 1984)).
“Personal jurisdiction over a nonresident defendant is

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tested by a two-part analysis.

First, the exercise of

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jurisdiction must satisfy the requirements of the applicable

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state long-arm statute.

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must comport with federal due process.”

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Calderon, 422 F.3d 827, 830 (9th Cir. 2005) (quoting Chan v.

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Soc’y Expeditions, Inc., 39 F.3d 1398, 1404-05 (9th Cir. 1994)).

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Idaho’s long-arm statute is “intended to exercise all the

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jurisdiction available to the State of Idaho under the due

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process clause of the United States Constitution.”

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Elecs. Corp. of Am., Combustion Control Div., 93 Idaho 26, 30

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(1969).

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exercise of personal jurisdiction over defendant comports with

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federal due process.

Second, the exercise of jurisdiction
Dow Chem. Co. v.

Doggett v.

Therefore, the remaining issue is whether the court’s

See Calderon, 422 F.3d at 831.

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For a court to exercise personal jurisdiction over a

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nonresident defendant, due process requires that the defendant

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have “at least ‘minimum contacts’ with the relevant forum such

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that the exercise of jurisdiction ‘does not offend traditional
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notions of fair play and substantial justice.’”

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v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004)

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(citing Int’l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)).

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A district court may exercise either general or specific

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jurisdiction over a non-resident defendant.

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Plaintiff does not contend that the court has general

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jurisdiction; only specific jurisdiction is at issue.

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Schwarzenneger

Id. at 801-02.

The Ninth Circuit applies a three-part test to
determine whether the exercise of specific personal jurisdiction
is proper:
(1) The non-resident defendant must purposefully direct
his activities or consummate some transaction with the
forum or resident thereof; or perform some act by which
he purposefully avails himself of the privilege of
conducting activities in the forum, thereby invoking the
benefits and protections of its laws;
(2) the claim must be one which arises out of or relates
to the defendant’s forum-related activities; and
(3) the exercise of jurisdiction must comport with fair
play and substantial justice, i.e., it must be
reasonable.

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Id. at 802 (internal quotation marks omitted) (quoting Lake v.

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Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)).

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the burden of satisfying the first two prongs of the test.

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the plaintiff fails to satisfy either of these prongs, personal

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jurisdiction is not established in the forum state.”

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(citation omitted).

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succeeds in satisfying both of the first two prongs, ‘the burden

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then shifts to the defendant to present a compelling case that

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the exercise of jurisdiction would not be reasonable.’”

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v. Emm, 503 F.3d 1050, 1057 (9th Cir. 2007) (quoting

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Schwarzenegger, 374 F.3d at 802).

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“The plaintiff bears
If

Id.

“On the other hand, if the plaintiff

Menken

Either purposeful availment of the forum or the
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purposeful direction of activities towards the forum can satisfy

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the first prong.

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used in suits sounding in contract.

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analysis, on the other hand, is most often used in suits sounding

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in tort.”

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Here, the action sounds in contract.

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not argue that defendant directed any of its activities toward,

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or consummated any transactions in, Idaho.

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court will apply the purposeful availment analysis.

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“A purposeful availment analysis is most often
A purposeful direction

Schwarzenegger, 374 F.3d at 802 (citation omitted).
Furthermore, plaintiff does

Accordingly, the

At its base, the purposeful availment requirement seeks

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to ensure that a defendant is not haled into court for contacts

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that are random, fortuitous, or attenuated.

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Rudzewicz, 471 U.S. 462, 475 (1985).

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own actions that create a connection with the forum.

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have purposefully availed itself of the privilege of doing

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business in the forum, a defendant must have “performed some type

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of affirmative conduct which allows or promotes the transaction

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of business within the forum state.”

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1357, 1362 (9th Cir. 1990) (quoting Sinatra v. Nat’l Enquirer,

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Inc., 854 F.2d 1191, 1195 (9th Cir. 1988)).

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defendant “purposely avails itself of the privilege of conducting

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activities within the forum State, thus invoking the benefits and

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protections of its laws.”

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(1958).

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protections, the defendant must submit to the burden of

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litigation in the forum state.

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Burger King Corp. v.

It focuses on a defendant’s
Id.

To

Sher v. Johnson, 911 F.2d

In this way, a

Hanson v. Denckla, 357 U.S. 235, 253

In exchange for the forum state’s benefits and

Burger King, 471 U.S. at 476.

“A showing that a defendant purposefully availed
himself of the privilege of doing business in a forum state
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typically consists of evidence of the defendant’s actions in the

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forum, such as executing or performing a contract there.”

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Schwarzenegger, 374 F.3d at 802.

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Supreme Court’s holding in Burger King, merely contracting with a

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resident of the forum state is insufficient to confer specific

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jurisdiction over a nonresident.”

Ziegler v. Indian River Cnty.,

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64 F.3d 470, 473 (9th Cir. 1995).

Whether a contract signifies

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purposeful availment depends upon a number of additional factors,

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which include “prior negotiations and contemplated future

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consequences, along with the terms of the contract and the

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parties’ actual course of dealing.”

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479.

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However, “[c]onsistent with the

Burger King, 471 U.S. at

Here, the only potential basis for jurisdiction over

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defendant is the Consulting Agreement between the parties.

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Supreme Court has emphasized that “parties who ‘reach out beyond

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one state and create continuing relationships and obligations

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with citizens of another state’ are subject to regulation and

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sanctions in the other State for the consequences of their

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activities.”

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Health Ass’n v. Virginia, 339 U.S. 643, 647 (1950)).

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the defendant directly solicits business in the forum state, the

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resulting transactions will probably constitute the deliberate

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transaction of business invoking the benefits of the forum

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state’s laws.”

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F.2d 834, 840 (9th Cir. 1986).

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negotiations in the forum state will probably qualify as an

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invocation of the forum law’s benefits and protections.”

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The

Burger King, 471 U.S. at 473 (quoting Travelers
“Thus, if

Decker Coal Co. v. Commonwealth Edison Co., 805
“Similarly, conducting contract

Id.

However, when a plaintiff solicits a defendant to enter
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into a contract, the defendant is not normally considered to have

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availed itself of the laws of the plaintiff’s state.

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e.g., Sher, 911 F.2d at 1363 (“Out-of-state legal representation

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does not establish purposeful availment of the privilege of

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conducting activities in the forum state, where the law firm is

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solicited in its home state and takes no affirmative action to

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promote business within the forum state.”); Advance Fin. Res.,

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Inc. v. Cottage Health Sys., Inc., No. CV 08-1084, 2009 WL

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1080547, at *4, 6 (D. Or. Apr. 21, 2009) (finding no personal

See,

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jurisdiction over defendant after considering, inter alia, that

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plaintiff initiated contract discussions and defendant did not

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benefit from the fact that plaintiff happened to reside in

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Oregon).

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Even taking the facts in the light most favorable to

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plaintiff, defendant cannot be said to have initiated the

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parties’ contract discussions.

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who first informed Lyons, one of the members of defendant, that

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plaintiff was looking for a consultant; in response, defendant

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then offered its services to plaintiff.

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characterize the transaction as part of a larger, ongoing

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relationship between the parties.

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to show that defendant reached out first.

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interaction could be described as mutual solicitation.

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Lyons reached out to plaintiff by explaining that he had formed a

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company that could serve plaintiff’s previously-expressed needs,

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such behavior falls short of the sort of solicitation that would

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serve as a basis for finding that a defendant purposefully

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availed itself of the forum state’s laws.

It was an employee of plaintiff

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Plaintiff attempts to

However, plaintiff still fails
At best, the
Even if

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Plaintiff has presented no other facts that could

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support a finding of purposeful availment.

There is no evidence

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that any representative of defendant ever traveled to Idaho.

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parties only communicated via telephone and e-mail, which is

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insufficient to establish purposeful availment.

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Kennedy, 771 F.2d 1244, 1262 (9th Cir. 1985) (“[O]rdinarily ‘use

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of the mails, telephone, or other international communications

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simply do not qualify as purposeful activity invoking the

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benefits and protection of the [forum] state.’”) (quoting Thos P.

The

See Peterson v.

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Gonzales Corp. v. Consejo Nacional de Produccion de Costa Rica,

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614 F.2d 1247, 1254 (9th Cir. 1980)) (second alteration in

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original).

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Furthermore, the Consulting Agreement required

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defendant to perform services in Arizona, not Idaho.

Plaintiff

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has not presented any evidence that defendant could benefit from

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the fact that plaintiff resides in Idaho.

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with facts similar to these, courts have declined to find

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purposeful availment.

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plaintiff in California solicited Florida attorneys to represent

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him in Florida and one attorney traveled to California on three

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occasions to prepare the case, the individual attorneys had not

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purposefully availed themselves of California law); Carreras v.

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PMG Collins, LLC, 741 F. Supp. 2d 375, 382-83, 385-86 (D.P.R.

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2010) (where defendants in Florida contacted plaintiffs in Puerto

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Rico regarding property, plaintiffs signed purchase agreements to

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buy property in Florida from defendants, and Florida law governed

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the agreements, defendants could not have reasonably anticipated

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being subject to suit in Puerto Rico); Advance Fin. Res., Inc.,

In a number of cases

See Sher, 911 F.2d at 1360, 1366 (where

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2009 WL 1080547, at *4-6 (where plaintiff in Oregon initiated

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contact with defendant in California, the parties contacted each

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other via telephone, e-mail, and fascimile, no representatives of

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defendant traveled to Oregon, plaintiff carried out its

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obligations in Oregon and defendant carried out its obligations

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in California, and California law governed the contract, no

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purposeful availment found); Inamar Inv., Inc. v. Lodge Props.,

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Inc., 737 F. Supp. 12, 12-14 (D.P.R. 1990) (where defendant, a

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condominium manager in Colorado, mailed rental agreement to

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plaintiff, a corporate citizen of Puerto Rico that owned an

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interest in the condominium, plaintiff signed agreement, the

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parties corresponded via letters, material performance of the

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contract occurred in Colorado, and Colorado law governed the

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contract, defendant never purposefully availed itself of the

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benefits and protections of Puerto Rico law).

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Additionally, the fact that the parties expressly

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agreed that Arizona law governed the Consulting Agreement is an

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important factor in determining whether defendant purposefully

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availed itself of the benefits and protections of Idaho law.

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Advance Fin. Res., Inc., 2009 WL 1080547, at *4; see Jones v.

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Petty-Ray Geophysical Geosource, Inc., 954 F.2d 1061, 1069 (5th

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Cir. 1992) (noting that choice of law provision designating non-

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forum state’s laws “indicate[d] rather forcefully” that the

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defendant “did not purposely direct its activities toward” the

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forum); Nanoexa Corp. v. Univ. of Chicago, No. 10-CV-2631, 2010

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WL 4236855, at *5 (N.D. Cal. Oct. 21, 2010) (“[Defendant]

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received no benefit, privilege, or protection from California, as

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the parties agreed to an Illinois choice of law provision in the
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License Agreement.”).

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the protections of Idaho law, it presumably would not have

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negotiated to include the Arizona choice-of-law provision and

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forum selection clause in the Consulting Agreement.

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defendant specifically sought the application of Arizona law

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strongly indicates that it did not purposefully avail itself of

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Idaho law.

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defendant purposefully availed itself of the privilege of

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conducting activities in Idaho, thereby invoking the benefits and

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If defendant intended to avail itself of

That

Accordingly, plaintiff has not demonstrated that

protections of its laws.3
Given that plaintiff cannot establish the first prong

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of the test for specific personal jurisdiction, the court need

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not proceed to the remaining inquiries under the Ninth Circuit’s

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test.

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2008) (“[I]f the plaintiff fails at the first step, the

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jurisdictional inquiry ends and the case must be dismissed.”).

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Plaintiff has thus failed to demonstrate that the court has

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specific personal jurisdiction over defendant.

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See Boschetto v. Hansing, 539 F.3d 1011, 1016 (9th Cir.

Pursuant to 28 U.S.C. § 1631, if a court “finds that

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there is a want of jurisdiction, the court shall, if it is in the

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interest of justice, transfer such action . . . to any other such

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court in which the action . . . could have been brought at the

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time it was filed or noticed . . . .”

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see Miller v. Hambrick, 905 F.2d 259, 262 (9th Cir. 1990).

28 U.S.C. § 1631;
The

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Defendant has requested an evidentiary hearing in the
event that the court should find that there are questions of
fact; plaintiff has not made such a request. An evidentiary
hearing is not necessary given that, even taking the facts in the
light most favorable to plaintiff, plaintiff has not demonstrated
an issue of fact as to defendant’s purposeful availment.

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court can find no reason that this action could not have been

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brought in the District of Arizona.

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Dismissing this action and requiring the parties to

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file a new action in Arizona would waste both the parties’ and

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the court’s resources. “Normally transfer will be in the interest

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of justice because normally dismissal of an action that could be

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brought elsewhere is ‘time-consuming and justice-defeating.’”

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Miller, 905 F.2d at 262 (quoting Goldlawr, Inc. v. Heiman, 369

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U.S. 463, 467 (1962)).

Defendant previously filed an action

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against plaintiff in the District of Arizona, which was dismissed

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in deference to the instant action solely on the ground that this

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action was first-filed.

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Supp. of Mot. for Summ. J. ¶ 6.)

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that transfer to the District of Arizona would be in the interest

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of justice.

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(Def.’s Separate Statement of Facts in
Accordingly, the court finds

IT IS THEREFORE ORDERED that:
(1) Defendant’s motion for summary judgment be, and the same

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hereby is, GRANTED on the ground that this court lacks personal

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jurisdiction over defendant and DENIED as moot in all other

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respects;

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(2) Plaintiff’s motion for summary judgment be, and the same
hereby is, DENIED as moot; and
(3) This action is hereby ordered TRANSFERRED to the United

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States District Court for the District of Arizona.

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DATED:

July 22, 2011

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