Clearwater REI, LLC v. Focus Consulting Advisors, LLC

CLEARWATER REI, LLC an Idaho limited liability company, Plaintiff, v. FOCUS CONSULTING ADVISORS, LLC an Arizona limited liability company, Defendant.

NO. CIV. 1:10-448 WBS

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF IDAHO

DATED: July 22, 2011

MEMORANDUM AND ORDER RE:

MOTIONS FOR SUMMARY JUDGMENT

Plaintiff Clearwater REI, LLC, brought this action against defendant Focus Consulting Advisors, LLC, seeking declaratory judgment regarding the amount of payment due under a contract between the parties. Defendant now moves for summary judgment, arguing that the court lacks personal jurisdiction and that the action is barred by the Statute of Frauds. Plaintiff also moves for summary judgment on its claim.

I. Standard

Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). A material fact is one that could affect the outcome of the suit, and a genuine issue is one that could permit a reasonable jury to enter a verdict in the non-moving party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The party moving for summary judgment bears the initial burden of establishing the absence of a genuine issue of material fact and can satisfy this burden by presenting evidence that negates an essential element of the non-moving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). Alternatively, the moving party can demonstrate that the non-moving party cannot produce evidence to support an essential element upon which it will bear the burden of proof at trial. Id.

Once the moving party meets its initial burden, the burden shifts to the non-moving party to "designate 'specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting then-Fed. R. Civ. P. 56(e)). To carry this burden, the non-moving party must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). "The mere existence of a scintilla of evidence . . . will be insufficient; there must be evidence on which the jury could reasonably find for the [non-moving party]." Anderson, 477 U.S. at 252.

In deciding a summary judgment motion, the court must view the evidence in the light most favorable to the non-moving party and draw all justifiable inferences in its favor. Id. at 255. "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment . . . ." Id.

II. Relevant Facts

Daniel Welker, then an employee of plaintiff, first became acquainted with Matthew Lyons in 2008. (Welker Aff. in Resp. to Def.'s Mot. for Summ. J. ("Welker Aff. II") ¶ 2 (Docket No. 20-1).) Welker indicated to Lyons that plaintiff was interested in purchasing distressed notes. (Id. ¶ 3.) Lyons responded that he was "putting together a group" that could help with such purchases. (Id. ¶ 4.) Lyons then created that group, defendant in this suit, consisting of himself and two other members: Thomas Driessen and Joseph Driessen. (Id. ¶ 5; Thomas Driessen Decl. in Supp. of Def.'s Resp. to Pl.'s Mot. for Summ. J. ¶ 2 (Docket No. 21-1).) Lyons asked Welker whether plaintiff would be interested in using defendant's services to review and potentially acquire certain distressed notes in a portfolio offered by defendant. (Welker Aff. II ¶ 5.) The parties then negotiated, via e-mail and phone, and executed a Consulting Agreement. (Id. ¶ 6; see Def.'s Separate Statement of Facts in Supp. of its Mot. for Summ. J. Ex. A ("Consulting Agreement") (Docket No. 16-2).)

The Consulting Agreement was executed on May 15, 2009, between plaintiff ("Client"), defendant ("Consultant"), andMobey, LLC ("Mobey").¹ (Consulting Agreement at 1.) The Consulting Agreement provides that:

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.

(Id.)

The Consulting Agreement sets a term of engagement of four months, with non-circumvention obligations continuing for another six months. (Id. at 1, 4.) Compensation to defendant and Mobey is set by a fee schedule based on the purchase price of the loan or property purchased, due at the closing of the purchase. (Id. at 2.) Untimely payments are set to accrue interest at the rate of eight percent annually. (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

(Id. at 4-5.)

In June of 2009, plaintiff began bidding to purchase a note secured by real property known as the "Trail Walk Condominiums" in Kenmore, Washington. (Welker Aff. in Supp. of Mot. for Summ. J. ("Welker Aff. I") ¶ 2 (Docket No. 17-2); Lyons Decl. in Supp. of Def.'s Resp. to Pl.'s Mot. for Summ. J. ¶ 4 (Docket No. 21-1).) During the bidding process, the price on the note became too competitive, and Welker requested that defendant take a reduced commission in order to help plaintiff purchase the note. (Welker Aff. I ¶ 2.) The parties dispute whether they ever agreed to a reduced commission; plaintiff represents that Lyons agreed to a reduced fee of $10,000.00. (Id. ¶ 4.) Plaintiff then placed a final bid and successfully purchased the Trail Walk note on June 29, 2009. (Id. ¶ 6; Lyons Decl. ¶ 12.)

On September 4, 2009, Lyons sent plaintiff a letter offering to accept $10,000.00 in full satisfaction of plaintiff's obligations relating to the Trail Walk note if payment was received by September 25, 2009. (Def.'s Separate Statement of Facts in Supp. of its Mot. for Summ. J. Ex. C.) Based on the fee schedule in the Consulting Agreement, the fee for the Trail Walk note would otherwise have been $171,240.00. (Id. Ex. B.) Plaintiff did not make a payment by September 25. (Lyons Decl. ¶ 17.) On October 12, 2009, Lyons sent Welker an e-mail informing him that the deadline to pay had expired. (Id. ¶ 18.)

Plaintiff then filed suit in Ada County Court on July 21, 2010, which was removed to this court on September 2, 2010. Plaintiff seeks declaratory judgment that it owes only $10,000.00 to defendant.

After plaintiff filed this action, defendant filed an action against plaintiff in the District of Arizona, which was dismissed in deference to the instant action based solely on the first-to-file rule. (Def.'s Separate Statement of Facts in Supp. of Mot. for Summ. J. ¶ 6 (Docket No. 16-2).)

III. Discussion

A plaintiff has the burden of establishing that the court has personal jurisdiction over a defendant. Doe v. Unocal Corp., 248 F.3d 915, 922 (9th Cir. 2001) (citing Cubbage v. Merchent, 744 F.2d 665, 667 (9th Cir. 1984)).

"Personal jurisdiction over a nonresident defendant is tested by a two-part analysis. First, the exercise of jurisdiction must satisfy the requirements of the applicable state long-arm statute. Second, the exercise of jurisdiction must comport with federal due process." Dow Chem. Co. v. Calderon, 422 F.3d 827, 830 (9th Cir. 2005) (quoting Chan v. Soc'y Expeditions, Inc., 39 F.3d 1398, 1404-05 (9th Cir. 1994)). Idaho's long-arm statute is "intended to exercise all the jurisdiction available to the State of Idaho under the due process clause of the United States Constitution." Doggett v. Elecs. Corp. of Am., Combustion Control Div., 93 Idaho 26, 30 (1969). Therefore, the remaining issue is whether the court's exercise of personal jurisdiction over defendant comports with federal due process. See Calderon, 422 F.3d at 831.

For a court to exercise personal jurisdiction over a nonresident defendant, due process requires that the defendant have "at least 'minimum contacts' with the relevant forum such that the exercise of jurisdiction 'does not offend traditionalnotions of fair play and substantial justice.'" Schwarzenneger v. Fred Martin Motor Co., 374 F.3d 797, 801 (9th Cir. 2004) (citing Int'l Shoe Co. v. Washington, 326 U.S. 310, 316 (1945)). A district court may exercise either general or specific jurisdiction over a non-resident defendant. Id. at 801-02. Plaintiff does not contend that the court has general jurisdiction; only specific jurisdiction is at issue.

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.

Id. at 802 (internal quotation marks omitted) (quoting Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987)). "The plaintiff bears the burden of satisfying the first two prongs of the test. If the plaintiff fails to satisfy either of these prongs, personal jurisdiction is not established in the forum state." Id. (citation omitted). "On the other hand, if the plaintiff succeeds in...