LAC VIEUX v. CARDONA

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NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Sup. Ct. 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24 IN THE COURT OF APPEALS STATE OF ARIZONA DIVISION ONE LAC VIEUX DESERT BAND OF LAKE SUPERIOR CHIPPEWA INDIANS HOLDINGS MEXICO, LLC., a corporate enterprise of the Lac Vieux Desert Band of Lake Superior Chippewa Indians, a federally recognized Indian Tribe; LAC VIEUX DESERT BAND OF LAKE SUPERIOR CHIPPEWA INDIANS, a federally recognized Indian Tribe, ) ) ) ) ) ) ) ) ) ) ) ) Plaintiffs/Appellants/ ) Cross-Appellees, ) ) v. ) ) ARTURO ROJAS CARDONA; JUAN JOSE ) ROJAS CARDONA; JUEGOS DE ) ENTRETENIMIENTO Y VIDEOS DE ) GUADALUPE; ENTRETENIMIENTO DE ) MEXICO; ATLANTICA DE ) INVERSIONES CORPORATIVAS; and ) GUADALUPE RECREATION HOLDINGS, ) L.L.C., ) ) Defendants/Appellees/ ) Cross-Appellants. ) __________________________________) DIVISION ONE FILED: 4/16/2013 RUTH A. WILLINGHAM, CLERK BY: mjt 1 CA-CV 11-0128 Department D MEMORANDUM DECISION (Not for Publication Rule 111, Rules of the Arizona Supreme Court) Appeal from the Superior Court in Maricopa County Cause No. CV2008-090935 The Honorable John Ditsworth, Judge The Honorable Joseph Kreamer, Judge Affirmed in part; Reversed and Remanded in part Rosette & Associates, PC by Robert A. Rosette Saba Bazzazich Vanessa L. Verri Attorneys for Plaintiffs/Appellants Chandler Alvarez & Gilbert, PLLC by John T. Gilbert Scottsdale And Hymel Davis & Peterson, LLC By Michael Reese Davis Attorneys for Defendants/Appellees Baton Rouge, LA T H O M P S O N, Judge ¶1 Plaintiffs-Appellants Lac Vieux Desert Band of Lake Superior Chippewa Indians and Lac Vieux Desert Band of Lake Superior Tribe) Amended Chippewa appeal the Complaint Indians trial for Holdings court s insufficient Mexico (collectively, dismissal service of of their the Second process. We reverse and remand as to defendant Guadalupe Recreation Holding (GRH). As to all other defendants, we affirm. FACTUAL AND PROCEDURAL HISTORY ¶2 This is a business case. In 2006, the Tribe1 loaned $6.5 million dollars to defendants2 in exchange for a 26 percent 1 The Lac Vieux Desert Band of Lake Superior Chippewa Indians is a small federally recognized Indian Tribe located on its Reservation on the Upper Peninsula of Michigan where it operates a casino pursuant to the Indian Gaming Regulatory Act, 25 U.S.C § 2701, et seq. 2 share in the building Guadalupe, Mexico. defendants failed failed pay to and Among to running other comply a casino claims, with contractually of the obligated the venture Tribe partnership profits in asserts agreement, and converted funds. ¶3 Term As part of the transaction, the parties made a Master Sheet and ultimately signed a Security Depository Agreement and a Pledge Agreement. Agreement, a Other agreements, such as a Joint Venture Agreement and a Partnership Purchase Agreement, were contemplated by the Master Term sheet but never completed. The Master Term Sheet states the Security and Depository Agreements shall be under the jurisdiction and laws of the State of Arizona, United States, but also states the parties will submit arbitration in Mexico. all disputes to binding and final The Security Agreement says the Mexican Counterparts, a term defined as the defendants other than Juan Cardona, consent to the jurisdiction of the courts of the State of Arizona and agree any action or claim arising out of, or any dispute in connection with, this Agreement . . . may be brought in the Courts of Arizona and that service of process in any action may be made upon 2 them by certified mail or Six defendants are appellees in the current appeal: two individuals (the Cardona brothers), three foreign companies, and one Nevada corporation (GRH). Other defendants were dismissed earlier in this litigation for lack of personal jurisdiction. 3 international courier at a Nuevo Leon, Mexico address listed in the Security Agreement (the Mexican address). ¶4 The procedural history of this matter is complex. A related case was originally filed in the U.S. District Court, District of Arizona. The Tribe apparently served, or at least attempted to serve in person, the foreign defendants in Mexico during a meeting regarding this first federal suit.3 Meanwhile, the Tribe had filed the instant matter, CV 2008-090935, in the Superior Court of Maricopa County, listing more than a dozen defendants. Defendants removed the superior court matter to district court on diversity grounds and motions to dismiss were filed in federal matter 2:08-cv-01067-ROS. complaint, defeated federal The Tribe amended jurisdiction on its the diversity claim and the matter was remanded to Maricopa County Superior Court. ¶5 In March 2009, after various service problems, Judge Kreamer approved the Tribe s request for alternative service. The methods authorized in his order included serving the defendants attorneys of record via certified mail, serving Juan Cardona via his two known email addresses and serving all six defendants via Federal Express at the Mexican address, return 3 The foreign defendants was the term used to indicate the three foreign corporations and the Cardona brothers. The record is not clear as to whether the Cardona brothers are, in fact, residents or citizens of either the U.S. or Mexico or both. 4 requested.4 receipt Judge Kreamer deemed service on Arturo Cardona complete because he had been served by mail at three of his three last known U.S. addresses, but there was no return receipt. The Tribe filed an affidavit of service of completion of alternative service consistent with the trial court s order. The foreign defendants dismiss for made a limited appearance to insufficient service of process move to specifically, violation of Arizona Rule of Civil Procedure 4.2(i)(l) and the Hague Service Convention (Hague Convention);5 defendants additionally asserted lack of personal jurisdiction and lack of subject matter jurisdiction.6 to dismiss for The trial court denied the motions insufficient matter jurisdiction entirely. to dismiss signatories on and, personal service process and subject The trial court denied the motion jurisdiction additionally, transactional participant. of as to grounds Juan as to Cardona, all as a The non-signatory corporations were dismissed for lack of personal jurisdiction. This left the six defendants we have here. 4 The motion for alternative service only discusses the foreign defendants; it does not mention GRH. 5 Entitled Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, Nov. 15, 1965, 20 U.S.T. 361, 658 U.N.T.S. 163. 6 GRH did not move to dismiss for insufficient service of process nor for lack of personal jurisdiction, but only moved to dismiss for lack of subject matter jurisdiction. 5 ¶6 Defendants filed a special action in this Court. declined jurisdiction Defendants filed a in December petition for 2009 in review 1 We CA-SA-09-0281. raising the three procedural/jurisdictional issues from their motions to dismiss. ¶7 The Arizona Supreme Court took jurisdiction to address only the issue related to service in Mexico and issued an opinion in CV-10-0017-PR on July 30, 2010. The Court found, pursuant to the via Ministry of Foreign obtaining Hague service Convention, Affairs to Mexico and in be service the only therefore the valid vacated Mexican means the of order denying foreign defendants motion to dismiss for insufficient service of process, and remanded to the trial court. See Cardona v. Kreamer, 225 Ariz. 143, 235 P.3d 1026 (2010). ¶8 Upon the foreign defendants return to the trial court, a new trial judge heard arguments and took extensive supplemental briefing on the motion to dismiss for insufficient service of process. The trial court found insufficient service and dismissed as to all defendants, including GRH, in a signed minute entry stating The Court finds that the Plaintiff was required to utilize the requirements under the Hague convention to serve process and personal jurisdiction, they did not. subject matter jurisdiction related to arbitration were not addressed. for reconsideration. Alternate issues of and issues There was no motion The Tribe did not ask for additional time 6 to perfect service nor did it attempt to serve any of the foreign defendants by use of the Mexican Ministry for Foreign Affairs. The Tribe timely appealed.7 DISCUSSION ¶9 The Tribe raises four issues on appeal: 1. It was error for the trial court to sua sponte dismiss the suit in its entirety, as GRH was not a party to the insufficient service motion, was properly served and therefore remained a defendant in the suit. 2. It was error to find the Hague Convention applied to service within the United States. 3. It was error for the trial court to determine that service was insufficient on foreign defendants domestic counsel given that service was court-ordered as other means service under Rule 4.2(i)(3) on domestic counsel. The Tribe asserts such service was valid and effective even if Attorney Davis was not an authorized agent. 4. It was error to dismiss the suit instead of permitting appellants to attempt re-service as there is no time deadline for foreign service. We review de novo whether the trial court erred in granting the motion to dismiss pursuant to Rule 12(b)(6). Coleman v. City of Mesa, 230 Ariz. 352, 355, ¶ 7, 284 P.3d 863, 866 (2012). review questions of law de novo. We Phx. Newspapers, Inc. v. Dep t of Corr., 188 Ariz. 237, 244, 934 P.2d 801, 808 (App. 1997). 7 Defendants filed a notice of cross-appeal. The Tribe filed a motion to dismiss the cross-appeal which was not defended. This court dismissed the cross-appeal as unnecessary, as defendants had been the wholly successful party below. 7 A. Guadalupe Recreation Holding8 ¶10 The Tribe asserts that even if the defendants were properly dismissed, GRH should remain as it was never a party to the motion to dismiss for insufficient service of process and service was completed pursuant to Arizona Rule Civil Procedure 4.2(h) and 4.1(k) for outside of Arizona. 1. ¶11 direct service on a U.S. corporation We agree. Service As a Nevada corporation, Procedure 4.2(h) and 4.1(k), apply. Arizona Rules of Civil Service on GRH was made on May 15, 2008, by service on its resident agent in Nevada and the affidavit of such service is in the record on appeal. Such service on an agent authorized by statute to receive service complies with Rules 4.1(k) and 4.2(h). The Hague Convention does not apply to this Nevada corporation.9 The trial court erred in dismissing GRH for insufficient service of process. 8 GRH is, according to the Second Amended Complaint, a Nevada Corporation. The complaint alleges half of GRH s shares are owned by Arturo Cardona, personally, with the other half owned by co-defendant Atlantica. Atlantica is alleged to be wholly owned by Arturo Cardona. We note that defendants spend very little, if any, time on the remaining issues as they apply to GRH specifically. 9 In the motion to dismiss hearing below, defendants asserted that GRH was dissolved at the time of service. Defendants have not made this assertion on appeal and have presented no argument or authority as to the significance, if any, of GRH s asserted dissolution. This argument is waived. 8 2. Subject Matter and Personal Jurisdiction ¶12 Defendants affirmable due to generally a lack assert of the personal dismissal and is subject also matter jurisdiction. Defendants argue there is no personal or subject matter jurisdiction over the foreign defendants because they have had no contacts in or with Arizona, the casino is located in Mexico, and the parties agreed to arbitrate in Mexico.10 They assert that the Security Agreement is the only document which mentions that Arizona law controls and it is an ancillary document, not at issue in the litigation, with narrow application including prerequisites that have not been met. ¶13 Subject matter jurisdiction is the power of a court to hear and determine a controversy. State v. Bryant, 219 Ariz. 514, 517, ¶ 14, 200 P.3d 1011, 1014 (App. 2008) (quoting Marks v. LaBerge, 146 Ariz. 12, 15, 703 P.2d 559, 562 (App. 1985)); see also State ex rel. Milstead v. Melvin, 140 Ariz. 402, 404, 682 P.2d 407, 409 (1984) ( Subject matter jurisdiction means the power to hear and determine a general class of cases to which a particular proceeding belongs. ). The jurisdiction of the superior court is constitution and statutes. conferred upon it by the state Schoenberger v. Bd. of Adjustment 10 Defendants further assert that the trial court s determination of personal jurisdiction over Juan Cardona as a beneficial transactional participant is unsupported by either the facts or law. We need not reach this issue. 9 of the City of Phx., 124 Ariz. 528, 530, 606 P.2d 18, 20 (1980); see Ariz. Const. art. VI, § 14 (specifying scope of superior court's jurisdiction, which includes in subsection (11), such other jurisdiction as may be provided by law ); A.R.S. §§ 12 121 to 136 such (establishing courts' county authority and superior courts jurisdiction). question of law we review de novo. and prescribing Jurisdiction is a See Mitchell v. Gamble, 207 Ariz. 364, 367, ¶ 6, 86 P.3d 944, 947 (App. 2004). ¶14 subject GRH was a party to the motion to dismiss for lack of matter jurisdiction. matter jurisdiction. The trial court found subject Defendants argue that the instant lawsuit was not brought to enforce the Security Agreement, therefore the agreement s Arizona forum selection clause is inapplicable and Arizona lacks subject matter jurisdiction. We disagree. The second-amended complaint explicitly brings claims related to the Security Agreement as well as other business tort claims. Arizona contract and business matters. agreements, courts We and routinely have various deal subject with matter jurisdiction. ¶15 Defendants jurisdiction. broadly assert a lack of personal GRH was not a party to the motion to dismiss for lack of personal jurisdiction. The trial court found personal jurisdiction over all contract signatories, including GRH. Parties may contract to select a forum for litigation and doing 10 so creates personal jurisdiction. Morgan Bank (Del.) v. Wilson, 164 Ariz. 535, 537, 794 P.2d 959, 961 (App. 1990) (enforcing forum selection clause and resulting personal jurisdiction over parties). To the extent that personal jurisdiction is an issue, we find GRH has submitted to the personal jurisdiction of this court. GRH signed the Security Agreement which contained the forum selection clause naming Arizona as the proper forum for litigating disputes. The Security Agreement formed a part of the transaction that GRH signed. 3. ¶16 Defendants Arbitration Claims Do Not Nullify Subject Matter Jurisdiction Defendants assert, as part of their jurisdiction argument, that any dispute was subject, first and foremost, to arbitration. Defendants assert that the trial court should have enforced the arbitration clause and dismissed the matter and that the arbitration matter jurisdiction. that the instant agreement stripped Arizona of subject This assertion comes from their position case does not follow from the Security Agreement, and is therefore not subject to Arizona law. We disagree. ¶17 Although it is commonly said that the law favors arbitration, it is more accurate to say that the law favors arbitration of disputes that the parties have agreed to arbitrate. See Clarke v. ASARCO Inc., 123 Ariz. 587, 589, 601 11 P.2d 587, 589 (1979); see also Pima Cnty. by Tucson v. Maya Const. Co., 158 Ariz. 151, 154, 761 P.2d 1055, 1058 (1988). ¶18 Defendants assert that the parties arbitration agreement strips Arizona of subject matter jurisdiction. The cases cited by defendants, including Medasys Acquisition Corp. v. SDMS, P.C., 203 Ariz. 420, 423-24, ¶¶ 15-17, 55 P.3d 763, 766-67 (2002) (discussing legal versus equitable remedies) and Greater Arizona Savings and Loan Ass n v. Tang, 97 Ariz. 325, 327, 400 P2d 121, 123 (1965) (petitioners sought a writ of mandamus seeking to correct summary judgment ruling), do not support defendants argument that an deprives this court of jurisdiction. arbitration agreement The federal district court cases cited by defendants, including Ripmaster v. Toyoda Gosei, Co., 824 F. Supp. 116 (E.D. Mich. 1993) (citing Siderius, infra) and Siderius, Inc. v. Campainia de Acero del Pacifico S.A., 453 F. Supp. 22 (S.D.N.Y. 1978), in ostensible support of the claim of lack of subject matter distinguishable11 and unpersuasive. jurisdiction, are both At least two federal circuit courts have found no lack of subject matter jurisdiction when international arbitration Mediterranee Compagnia may be pending. Francese 11 Di See, e.g., Assicurazioni Rhone E The cases are distinguishable as the matters involved were assertedly referred with finality to arbitration without further judicial involvement. See e.g. Siderious, 453 F. Supp. at 25. Under Arizona provisions, arbitration matters are stayed pending further judicial enforcement. See A.R.S § 12-1502. 12 Riassicurazoni v. Lauro, 712 F.2d 50, 54-55 (3d Cir. 1983); Borden, Inc. v. Meiji Milk Prods. Co., 919 F.2d 822, 826 (2d Cir. 1990), cert. denied, 500 U.S. 953 (1991); see also Filanto, S.p.A. v. Chilewich Intern. Corp., 789 F. Supp. 1229, 1241-42 (S.D.N.Y. 1992) (finding the proposition that the federal court lacks subject matter jurisdiction in the face of an arbitration agreement facially absurd because the enabling legislation [9 U.S.C. § 206 (1988)] gives the district court the power at least to compel arbitration. How could even this limited power be exercised without subject matter jurisdiction? ). We agree that the assertion that Arizona lacks subject matter jurisdiction due to the existence of an arbitration agreement is, indeed, absurd. ¶19 If GRH wishes to compel arbitration it may file a motion with the trial court. See A.R.S. § 12-1502(A) (2003). The trial court s review on a motion to compel arbitration is limited to agreement the exists determination under the implicate the case s merits. as to facts of whether this case an arbitration and does not See A.R.S. § 12-1502(A)-(B); Foy v. Thorp, 186 Ariz. 151, 153-54, 920 P.2d 31, 33-34 (App. 1996). The trial court may then enter a stay of the proceedings as required by A.R.S. § 12-1502(D). B. The Other Defendants 13 ¶20 The Tribe never served any of the remaining parties in this litigation in accordance with Rule 4.2(b)(direct service) or 4.2(c)(service by mail), Arizona Rules of Civil Procedure. The Tribe did not attempt service by publication pursuant to Rule 4.2(f). attempt Following the Cardona opinion, the Tribe did not to defendants serve via the the foreign Mexican corporations Ministry of or the Foreign foreign Affairs as required by our supreme court in Cardona or attempt any further service on any party.12 The Tribe had previously complied with the alternative service guidelines provided by the trial court originally pursuant to Rule 4.2(i)(3) (for service upon individuals in a foreign country). ¶21 The Tribe makes a number of claims as to why its service attempts should be sufficient to withstand the motion to dismiss for insufficient defendants. service as to the remaining five Those claims boil down to an assertion that it tried to effect service and did what the trial court told it to do, including defendants serving lawyers Juan and Cardona mailing via email, documents serving to the Arturo. Ultimately, the Tribe falls back on the claim that defendants had notice. 12 The Tribe has not argued that its service by FedEx in Mexico complied with the terms of the contract with defendants, thereby altering the standard service requirements, and we do not address that possibility. 14 ¶22 Service is a formal requirement. process is essential for the court to Proper service of obtain jurisdiction. Koven v. Saberdyne Sys., Inc., 128 Ariz. 318, 321, 625 P.2d 907, 910 (App. 1980); see Murphy Bros. v. Michetti Pipe Stringing, 526 U.S. 344, 350 (1999). See Ariz. R. Civ. P. 15. Amended complaints must be served. The Tribe s attempt to bootstrap the service of one defendant, or one representative, into sufficient service of all defendants fails. 1. GRH ¶23 The Tribe asserts that GRH is the parent company, subsidiary, Proper or service balance of ¶24 of on does the relatedness. 2. partner GRH every other not defendants, corporate substitute regardless for of Appellee. serving their the inter- See Ariz. R. Civ. Proc. 4.1(d), (k), 4.2(a)-(e). The Lawyers Service of defendants their clients, is not sufficient. lawyers, absent consent by See Kline v. Kline, 221 Ariz. 564, 570, ¶¶ 19-20, 212 P.3d 902, 908 (App. 2009). An attorney does not automatically qualify as an authorized agent to receive service, even if the attorney has been retained by the individual. Rotary Club of Tucson v. Chaprales Ramos de Pena, 160 362, Ariz. 365, 773 P.2d 467, 470 (App. We do not find service on defendants lawyers sufficient. 15 1989). 3. Arturo Cardona ¶25 Service by mail on a person outside Arizona governed by Arizona Rule of Civil Procedure 4.2(c). is That rule expressly permits service to be completed by the use of any form of mail requiring a signed and returned receipt. Certified mail with a return postal receipt would fall within this definition. Therefore, to effect proper mail service outside the state, the serving party must . . . obtain the signed postal receipt and then . . . prepare and file an affidavit, as described in Rule 4.2(c), to which the receipt must be attached. Postal Instant Press, Inc. v. Corral Rests., Inc., 186 Ariz. 535, 537, n.2, 925 P.2d 260, 262 (1996). [A]s long as service remains incomplete, or is defective, the court never acquires jurisdiction. When a serving party elects to serve process by mail, we believe the rule which regulates the method of sending and receiving service, and the return and filing thereof, must be followed. Id. at 537, 925 P.2d at 262. The attempted service on Arturo Cardona did not comply with the Arizona Rules of Civil Procedure and, as such, was not effective. 4. ¶26 Jose Cardona The trial court allowed alternative service on Jose Cardona via email to two known email addresses. The Cardona opinion does not permit alternative service in Mexico. 16 The Rules of Civil Procedure do permit alternate service by methods such as email to persons in the United States but outside Arizona. 5. ¶27 Additional Time to Serve13 The general rule that service must be complete within 120 days for timely domestic service is found in Rule 4(i); additional time may be granted for good cause. By its terms Rule 4(i) does not apply to service in a foreign country. Defendants argue that the service window is not open forever and that Judge Ditsworth acted within his discretion to dismiss this matter. The Tribe argues that it should have been given additional time to complete service, rather than dismiss the case. To this end, the Tribe cites Stinson v. Johnson, 3 Ariz. App. 320, 323, 414 P.2d 169, 172 (1966). 13 Section 12-504(A), the Arizona saving statute, reads: If an action is commenced within the time limited for the action, and the action is terminated in any manner other than by abatement, voluntary dismissal, dismissal for lack of prosecution or a final judgment on the merits, the plaintiff ... may commence a new action for the same cause after the expiration of the time so limited and within six months after such termination. If an action timely commenced is terminated by abatement, voluntary dismissal by order of the court or dismissal for lack of prosecution, the court in its discretion may provide a period for commencement of a new action for the same cause, although the time otherwise limited for commencement has expired. Such period shall not exceed six months from the date of termination. 17 ¶28 The trial court has discretion to allow more time for service or dismiss when it determines that process has not been served. See Riley v. Superior Court, 116 Ariz. 89, 91, 567 P.2d 1218, 1220 (App. 1977). The non-complying plaintiff has the burden to show due diligence in trying to timely serve. Id. Here, the Tribe did not argue below that, if the court found the service of process insufficient, the court should simply quash service and allow additional time to accomplish proper service. This argument is waived, and we do not address it on appeal. See Ames v. State, 143 Ariz. 548, 552, 694 P.2d 836, 840 (App. 1981) ( It is well established that matters not presented to the trial court cannot be raised for the first time on appeal. ). FEES ¶29 The Tribe and defendants each request fees and costs on appeal pursuant to A.R.S. § 12-341, 12-341.01 and Arizona Rule of Civil Appellate Procedure 21. Defendants are granted reasonable fees upon compliance with Rule 21, ARCAP, to the extent they were successful herein. 18 CONCLUSION ¶30 For the above stated reasons, the judgment of the trial court is reversed as to GRH and affirmed as to all other defendants. /s/ _____________________________ JON W. THOMPSON, Judge CONCURRING: /s/ ______________________________ PETER B. SWANN, Presiding Judge /s/ _____________________________ MICHAEL J. BROWN, Judge 19

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