Newman v. Lifeline Systems Inc, No. 4:2008cv00583 - Document 27 (D. Ariz. 2009)
Court Description: REPORT AND RECOMMENDATION re 6 Motion to Remand/Objection : Recommending District Court Enters Order Granting Plaintiff's Motion to Remand. Signed by Magistrate Judge D Thomas Ferraro on 5/1/09. (LSI, )
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Newman v. Lifeline Systems Inc Doc. 27 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 David Newman, 9 Plaintiff, 10 vs. 11 Lifeline Systems, Co., 12 Defendant. 13 ) ) ) ) ) ) ) ) ) ) ) No. CV-08-583-TUC-CKJ-DTF REPORT & RECOMMENDATION 14 Pending before the Court is Plaintiff’s November 14, 2008 Request for Remand. 15 (Dkt. 6.) Defendant filed an opposition and Plaintiff filed a reply. (Dkts. 7, 8.) As directed 16 by the Court, Defendant also filed a sur-reply. (Dkt. 19.) Pursuant to the Rules of Practice 17 in this Court, the matter was assigned to Magistrate Judge Ferraro for a report and 18 recommendation. The Magistrate Judge granted a request for oral argument, which was held 19 on April 16, 2009. The Magistrate recommends the District Court, after its independent 20 review of the record, enter an order granting Plaintiff’s Request for Remand. 21 FACTUAL AND PROCEDURAL BACKGROUND 22 On October 3, 2008, Plaintiff David Newman, as the surviving beneficiary of William 23 Newman, filed a complaint in Pima County Superior Court against Lifeline Systems, Co., 24 dba as Lifeline Systems, Inc., alleging wrongful death. (Dkt. 1-3 at 3.) The Complaint 25 alleges Defendant had a contract with Pima County to provide emergency services to 26 qualified elderly and disabled persons. (Id.) Plaintiff alleges William Newman was provided 27 such services, but it took five hours for anyone to respond when he triggered his emergency 28 alert. (Id. at 3-4.) Plaintiff further alleges William Newman died due to Defendant’s Dockets.Justia.com 1 negligence and Plaintiff has suffered as a consequence. (Id. at 4.) On October 28, 2008, Defendant filed a Notice of Removal, removing the action to 2 3 this Court under 28 U.S.C. § 1332. Defendant simultaneously filed an Answer. (Dkt. 2.) 4 DISCUSSION 5 Plaintiff contends the Court should remand this action because Defendant waived its 6 right to remove through a forum selection clause in its contract with Pima County. 7 Defendant argues the forum selection clause does not apply to this case and removal was 8 proper. Before reaching the parties’ dispute over waiver and the forum clause, the Court 9 must first assess whether it has subject matter jurisdiction. 10 Federal Jurisdiction 11 The district courts have original jurisdiction of cases in which the amount in 12 controversy exceeds $75,000, and the parties are citizens of different states. 28 U.S.C. 13 § 1332(a)(1). A corporation is “a citizen of any State by which it has been incorporated and 14 of the State where it has its principal place of business.” 28 U.S.C. § 1332(c)(1). The legal 15 representative of a decedent’s estate is treated as a citizen of the same state as the decedent. 16 28 U.S.C. § 1332(c)(2). Title 28 U.S.C. § 1441(a) provides that “any civil action brought in 17 a State court of which the district courts of the United States have original jurisdiction, may 18 be removed by the defendant.” 19 Plaintiff did not contest this Court’s jurisdiction over the action in his briefs nor at oral 20 argument.1 Plaintiff (as the representative of decedent) is a citizen of Arizona and Defendant 21 is a citizen of Massachusetts; the amount in controversy exceeds $75,000. Further, Plaintiff 22 does not contend Defendant violated any of the procedural requirements for removal set forth 23 in 28 U.S.C. § 1446 – the Court’s review indicates removal was timely and Defendant 24 1 25 26 27 28 Plaintiff’s motion to remand focuses almost entirely on his contention that the state courts of Arizona have personal jurisdiction over Defendant. (Dkt. 6.) That issue is not in dispute; at oral argument, Defendant stated it did not contest personal jurisdiction in Arizona (RT 4/16/09 at 13). Further, Plaintiff agreed at oral argument that personal jurisdiction was not a basis for remand, rather it showed jurisdiction would be proper if the case were remanded. (Id. at 5.) -2- 1 complied with the statutory requirements. (Dkt. 1.) It is Defendant’s burden upon removal 2 to demonstrate the Court has federal subject matter jurisdiction and it has satisfied that 3 burden. See Gaus v. Miles, Inc., 980 F.2d 564, 566 (9th Cir. 1992) (noting the presumption 4 against removal jurisdiction). 5 Waiver of Removal 6 Plaintiff contends Defendant waived its right to remove this case by agreeing to a 7 forum selection clause in the Emergency Alert System and Monitoring Services Agreement 8 between Defendant and Pima County (“Agreement”). 9 demonstrating that Defendant waived its right to remove. Ferrari, Alvarez, Olsen & 10 Ottoboni v. Home Ins. Co., 940 F.2d 550, 554 (9th Cir. 1991). Forum selection causes are 11 presumed valid and enforceable absent specific circumstances Defendant has not raised in 12 this case – enforcement is shown to be unreasonable or the clause was obtained through fraud 13 or overreaching. Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15 (1972). Thus, the Court 14 should remand a case over which it has jurisdiction when it is not the forum selected by the 15 parties. Pelleport Investors, Inc. v. Budco Quality Theatres, Inc., 741 F.2d 273, 280 (9th Cir. 16 1984). Plaintiff bears the burden of 17 Plaintiff’s argument raises two questions necessary to resolution of this motion: 18 (1) was William Newman a third-party beneficiary entitled to enforce the Agreement; and 19 (2) does the forum selection clause apply to a wrongful death negligence action? 20 Third-party Beneficiary Status 21 Under Arizona law, to establish third-party beneficiary status, a person or class of 22 persons must be indicated as a beneficiary in the contract: 25 For a third party to maintain an action on a contract, the contract must have been entered into for the express benefit of the third party; the party cannot be merely an incidental beneficiary. The benefit must be both intentional and direct, and “it must definitely appear that the parties intend to recognize the third party as the primary party in interest.” 26 Araiza v. U.S. West Bus. Res., Inc., 904 P.2d 1272, 1278, 183 Ariz. 448, 454 (Ct. App. 1995) 27 (quoting Norton v. First Fed. Sav., 624 P.2d 854, 856, 128 Ariz. 176, 178 (1981)); see also 23 24 28 -3- 1 Lake Havasu Resort, Inc. v. Comm. Loan Ins. Co., 678 P.2d 950, 956, 139 Ariz. 369, 375 (Ct. 2 App. 1983) (recognizing that contract can benefit class of which third party is a member). 3 The third-party must be the “real promisee”; “[t]he promise must be made to him in fact 4 although not in form,” and the contract must evidence that the parties intended him to be 5 privy to the promise. Basurto v. Utah Constr. & Mining Co., Inc., 485 P.2d 859, 863, 15 6 Ariz. App. 35, 39 (1971). 7 Here, the Agreement including its attachments evidences that the parties intended to 8 directly benefit a class, of which William Newman was a member. Accordingly, Mr. 9 Newman was a third-party beneficiary. Most critical to this assessment is the fact that the 10 purpose of the Agreement was for Defendant (for consideration) to provide emergency alert 11 services to eligible elderly and physically disabled individuals, defined as “Members” (Dkt. 12 19-2 at 4-5, 10); Members were “entitled to receive services pursuant to th[e] Agreement” 13 (id. at 29 (emphasis added)) and are mentioned repeatedly throughout (id. at 1-53). Thus, 14 Members were promised an entitlement and the Agreement indicated an intention to provide 15 a benefit to Members. Defendant was obligated to provide Members continuity of care, to 16 not bill Members for covered services, and to provide Members prompt services at 17 acceptable professional standards and in accordance with the law. (Id. at 10, 11, 43.) 18 Further, Defendant was required to make a reasonable effort to obtain awareness of and 19 incorporate Members’ cultural customs into treatment and to provide Members interpretive 20 services. (Id. at 52.) 21 Attachment B to the Agreement sets forth with specificity the services Defendant was 22 obligated to provide and Members were entitled to receive. The stated service goals were 23 to aid Member’s self-sufficiency and well-being. (Id. at 21.) Persons providing the services 24 had to have training regarding elderly and physically disabled populations. (Id.) Further, 25 most of Defendant’s sixteen listed tasks were direct service to Members: providing 26 information and training about the service, installing the units, developing emergency plans 27 28 -4- 1 specific to each Member, as well as monitoring, testing, and responding to emergency alerts.2 2 (Id. at 21-22.) Defendant’s payment was based on the installation, maintenance, and 3 monitoring of a unit per individual Member. (Id. at 21, 23.) All of these contractual 4 provisions make clear that Members, a group to which William Newman belonged, were 5 direct, intended beneficiaries of the Agreement. 6 This case is analogous to Nahom v. Blue Cross and Blue Shield of Arizona, Inc., 885 7 P.2d 1113, 180 Ariz. 548 (Ct. App. 1994). In Nahom, an insured sued a hospital alleging he 8 was entitled to enforce a fixed fee contractual agreement between the hospital and the 9 insurer, Blue Cross. The court found the insured was a third-party beneficiary of the contract 10 because the fixed fee arrangement was an intentional and direct benefit to the subscriber, and 11 the insured was the “primary party in interest.” Although the hospital and the insurer also 12 benefitted from the agreement, the focus of the limited fee provision was to benefit the 13 insured. Similarly, Members were primary parties in interest under the Agreement, which 14 provided them direct benefits and entitlement to services. Further, in Nahom, the court noted 15 that the defined class of “subscribers” were mentioned throughout the contract, just as 16 Members are referenced repeatedly in the Agreement. 17 To support its position that William Newman was merely an incidental beneficiary, 18 Defendant analogies this case to Basurto v. Utah Constr. & Mining Co., Inc.,3 which 19 20 21 22 23 24 25 26 27 28 2 In Defendant’s Reply to the motion and at oral argument, Defendant asserted Pima County enrolled the members, provided the equipment, and installed the units. Defendant indicated its only role was to provide the electrical software and receive incoming calls; “[o]ther than a responsibility to handle incoming alert calls, Lifeline had no relationship with Plaintiff.” (Dkt. 7 at 3.) These assertions, while they may be accurate, do not alter the terms of the Agreement or Defendant’s contractual obligations to Members. 3 Defendant relies on two other cases holding that persons who benefit from government contracts are assumed to be incidental beneficiaries with no entitlement to enforce the contract. See County of Santa Clara v. Astra USA, Inc., 540 F.3d 1094, 1101 (9th Cir. 2008); Smith v. Cent. Ariz. Water Conservation Dist., 418 F.3d 1028, 1035 (9th Cir. 2005). These cases do not control because they are based on federal law and involve federal contracts. Further, the assumption under federal law is overcome if there is “clear intent” to benefit a third-party; the standard for establishing “clear intent” under federal law, and thereby third-5- 1 involved a contract for construction work at a mining site. 485 P.2d 859, 15 Ariz. App. 35. 2 Basurto, an employee of the construction company, was injured on the site and he sought to 3 recover under the contract as a third-party beneficiary. Id. at 863, 15 Ariz. App. at 39. In 4 evaluating Basurto’s relationship to the contract, the court relied on a paragraph captioned 5 “Protection of the Public, and Work, and Property”: 6 9 The Contractor shall provide and maintain all necessary watchmen, barricades, red lights and warning signs and take all necessary precautions for the protection and safety of employees on the work, of all other persons and adjacent private and public property. The Contractor at all times shall maintain adequate protection of the work from damage and shall protect the Owner’s property and all persons thereon from injury, damage or loss by reason of any act or omission of the Contractor or any Subcontractor. 10 Id. at 862, 15 Ariz. App. at 38. The court held this provision created a duty upon which a tort 11 could be premised. Id. at 863, 15 Ariz. App. at 39. However, it did not confer contractual 12 third-party beneficiary status on employees because the relevant terms were about the 13 relationship between the parties and protecting the owner from failures by the contractor. 14 Id. at 864, 15 Ariz. App. at 40. 7 8 15 Drawing a parallel with Basurto, Defendant contends that “[o]verall, the Agreement 16 governs the business relationship between Pima County and Defendant,” and only one 17 section of the Agreement, paragraph III.5, appears to benefit Members: 18 20 COMPANY agrees to ensure that all Covered Services provided by COMPANY shall be instituted as promptly as is practicable, and in accordance with accepted community professional standards. COMPANY shall provide professional services in accordance with all laws, rules and regulations of all governmental authorities having jurisdiction. 21 (Dkt. 19-2 at 11.) Defendant argues the purpose of this provision was to protect Pima 22 County from any failures by Defendant and to give the County a right of indemnity against 23 Defendant. This argument is undermined by a review of the Agreement as a whole. The 24 quoted paragraph is in the section captioned “Quality Management Provisions,” and does not 25 mention “protection” or “acts or omissions,” which might intimate the intent is 19 26 27 28 party beneficiary status, is similar to the Arizona third-party standard set forth above. See Santa Clara, 540 F.3d at 1101-02; Smith, 418 F.3d at 1035. -6- 1 indemnification. Further, there is a separate paragraph of the Agreement captioned 2 “Indemnification,” in which Defendant agrees to indemnify the County for actions arising 3 out of any failures by Defendant. (Id. at 8.) 4 More importantly, Defendant’s argument patently ignores the purpose of the 5 Agreement and the many other express provisions setting forth the benefits intended for 6 Members. The purpose of the contract in Basurto was not to benefit employees but to 7 complete construction work, which incidentally included employee safety. The Agreement 8 at issue here was created to provide direct services to “Members”; therefore, William 9 Newman was not just an incidental beneficiary. 10 At oral argument, in response to the Court’s question concerning what more was 11 required to make William Newman a third-party beneficiary under the Agreement, the 12 Defendant averred: 15 [U]nder the case law, they would have to have asserted [sic] a clause within the contract indicating that all members who participate with this service are third party beneficiaries and the primary party in interest to the special services and that they would then be entitled to stand inside the shoes of Pima County to enforce agreement.4 16 (RT 4/16/09 at 16.) Although the Arizona standard is stringent, the caselaw does not 17 establish the bright-line test advocated by Defendant. In City of Phoenix v. Daly, No. CV07- 18 110, 2007 WL 3046758 (D. Ariz. Oct. 17, 2007), relied upon by Defendant to support its 19 narrow view, the court did not require the kind of language identified by Defendant. Instead, 20 in a section captioned “Third Party Beneficiary,” the parties explicitly provided that the 21 contract should not be construed to give benefits or rights to anyone other than the 22 contracting parties and the contract was for the sole benefit of the named parties. Id. at *2. 23 Thus, the Daly case undermines, rather than supports Defendant’s narrow view. Had Pima 13 14 24 25 26 27 28 4 In follow-up questioning, Defendant confirmed its position that there is a black-andwhite rule applicable to third-party beneficiary status. Counsel agreed that “if there isn’t a specific paragraph that says this is a third party beneficiary contract written to benefit the members of plan, that [the contracting parties] could have said almost anything else and it still wouldn’t have been under Arizona law [a] third-party beneficiary contract.” (RT 4/16/09 at 16-17, 23-24.) -7- 1 County and Defendant intended Members to be merely incidental beneficiaries, thereby 2 limiting liability to third-parties, according to Daly, they could have explicitly provided for 3 this in the Agreement. Without such a provision in the Agreement, it does “definitely appear 4 that the parties intended to recognize the third party [Members] as the primary party in 5 interest.” Araiza v. U.S. West Bus. Res., Inc., 904 P.2d at 1278, 183 Ariz. at 454. 6 Application of the Forum Selection Clause to this Negligence Action 7 The Agreement’s forum selection clause provides: “Any action relating to this 8 Agreement shall be brought in a court of the State of Arizona in Pima County.” (Dkt. 19-2 9 at 7.) Defendant argues the forum selection clause does not encompass this tort action. 10 Plaintiff counters that the language of the clause is broad enough to encompass the wrongful 11 death action and this tort claim relates to Defendant’s duties under the Agreement. 12 The Court assesses the applicability of a forum selection clause under federal law, 13 rather than state law. Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509, 513 (9th 14 Cir. 1988). “Whether a forum selection clause applies to tort claims depends on whether 15 resolution of the claims relates to interpretation of the contract.” Id. at 514. 16 In Manetti-Farrow the forum selection clause provided: “For any controversy 17 regarding interpretation or fulfillment of the present contract, the Court of Florence [Italy] 18 has sole jurisdiction.” Id. at 511. Manetti-Farrow maintained its causes of action did not 19 relate to “interpretation” or fulfillment” of the contract, but were “pure” tort claims 20 independent of the contract. Id. at 514. Ultimately, the Court concluded the tort claims – 21 alleging a price squeeze, fraudulent use of business information, wrongful neglect of 22 delivery, and abrogation of the contract – “related in some way to rights and duties 23 enumerated in the exclusive dealership contract”; therefore, the claims related to 24 interpretation of the contract and the forum selection clause governed. Id. 25 To prove negligence, Arizona law requires: (1) a duty recognized by law to exercise 26 a standard of care; (2) defendant’s failure to conform to the standard; (3) causal connection 27 between conduct and injury; and (4) actual damage. Ontiveros v. Borak, 136 Ariz. 500, 504, 28 667 P.2d 200, 204 (1983). The scope of Defendant’s duty to provide emergency response, -8- 1 and alleged breach thereof, necessary to establishing negligence directly relates to the rights 2 and duties set forth in the Agreement. Indeed, Defendant admits in its Answer that “it 3 entered into an arrangement with Pima Community Services Program to provide emergency 4 response services to people within their homes.” (Dkt. 2 at 2.) In its brief and at oral 5 argument, Defendant also acknowledged it undertook a duty to William Newman based upon 6 the Agreement (Dkt. 19 at 5; RT 4/16/09 at 19, 22). See Hugel v. Corp. of Lloyd’s, 999 F.2d 7 206, 207, 209 (7th Cir. 1993) (finding a forum selection clause, which designates a forum 8 for “any dispute” “arising out of or relating to” the contract, governs a tort action “if the duty 9 arises from the contract”). 10 Significantly, the relationship between Plaintiff and Defendant came into existence 11 solely because of the Agreement. Further, the Agreement defined the duties owed by 12 Defendant to William Newman, i.e., installing the units, developing emergency plans 13 specific to each Member, as well as monitoring, testing, and responding to emergency alerts. 14 As in Manetti-Farrow, Plaintiff’s claim relates in some way to the rights and duties 15 enumerated in the Agreement; thus, it is within the bounds of the forum selection clause. 16 This conclusion is reinforced by the plain language of the forum selection clause – 17 covering any actions “relating to” the Agreement – which is broader than the language at 18 issue in Manetti-Farrow, 858 F.2d at 510 (“regarding interpretation or fulfillment of the 19 contract”). See Doe 1 v. AOL LLC, 552 F.3d 1077, 1081 (9th Cir. 2009) (instructing that 20 courts first look to the plain language of the contract and give terms their ordinary meaning); 21 see also Mediterranean Enter., Inc. v. Ssangyong Corp., 708 F.2d 1458, 1464 (9th Cir. 1983) 22 (finding a clause that uses “relating to” broad); Prima Paint Corp. v. Flood & Conklin Mfg. 23 Co., 388 U.S. 395, 406 (finding language “arising out of or relating to” broad). Because the 24 parties’ relationship arises out of the Agreement and the alleged negligence is connected to 25 the contracted services, this action “relates to” the Agreement. Oxford American Dictionary 26 762 (Heald Colleges Ed. 1980) (defining “relate” as to have “connection with”). 27 28 In sum, the broad language of the Agreement’s forum selection clause encompasses Plaintiff’s negligence action. -9- 1 CONCLUSION 2 The Court’s review of the governing law and the Agreement reveal that Plaintiff is a 3 third-party beneficiary entitled to enforce the forum selection clause, which encompasses this 4 wrongful death action because it “relates to” the Agreement. Plaintiff is entitled to have the 5 action heard in Pima County Superior Court. Therefore, the Magistrate Judge recommends 6 the District Court, after its independent review of the record, enter an order GRANTING 7 Plaintiff’s Motion for Remand (Dkt. 6). 8 Pursuant to 28 U.S.C. § 636(b), any party may serve and file written objections within 9 10 days of being served with a copy of this Report and Recommendation. If objections are 10 not timely filed, they may be deemed waived. If objections are filed, the parties should use 11 the following case number: CV-08-0583-TUC-CKJ. 12 DATED this 1st day of May, 2009. 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 - 10 -
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