Barta v. Dealer Trade Incorporated

• Court: District Court, D. Arizona
• Decided: March 13, 2024
• Docket: 2:23-cv-00211
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 William Barta, et al., No. CV-23-00211-PHX-DWL

10 Plaintiffs, ORDER

11 v.

12 Dealer Trade Incorporated,

13 Defendant. 14 15 Pending before the Court is a Rule 12(b)(6) motion to dismiss filed by 16 Plaintiff/Counterdefendant Leeder Automotive, LLC (“Leeder”). (Doc. 30.) For the 17 following reasons, the motion is granted. 18 RELEVANT BACKGROUND 19 On February 1, 2023, William Barta (“Barta”) and Leeder (together, “Plaintiffs”) 20 initiated this action by filing the complaint. (Doc. 1.) 21 The complaint alleges as follows. In June 2022, Plaintiffs bought a boat from Dealer 22 Trade, Inc. (“Dealer Trade”) for $73,000. (Id. ¶¶ 1-2, 17.) Before agreeing to buy the boat, 23 Plaintiffs reviewed one of Dealer Trade’s online advertisements, which contained various 24 representations and warranties concerning the boat. (Id. ¶¶ 1-2, 11-17.) However, “[u]pon 25 delivery of the Boat to Plaintiffs, it was discovered that [Dealer Trade’s] express warranties 26 and affirmative representations were false.” (Id. ¶ 3, emphasis omitted.) Plaintiffs then 27 asked Dealer Trade “to rescind the sale transaction” but Dealer Trade “refused.” (Id. 28 ¶¶ 27-28.) Based on these allegations, Plaintiffs assert claims for breach of express 1 warranty, consumer fraud, fraudulent misrepresentation, negligent misrepresentation, and 2 promissory estoppel. (Id. ¶¶ 29-61.) 3 On October 5, 2023, after unsuccessfully moving to dismiss the complaint for lack 4 of subject-matter jurisdiction (Doc. 23), Dealer Trade filed an answer and counterclaim. 5 (Doc. 24.) 6 On November 17, 2023, Dealer Trade filed an amended counterclaim. (Doc. 29.) 7 The sole named counterdefendant is Leeder. (Id. ¶ 2.) In Counts One and Two, Dealer 8 Trade asserts contract-based counterclaims premised on allegations that Leeder improperly 9 failed to pay the agreed-to purchase price for the boat, improperly initiated a chargeback, 10 and improperly retained the boat. (Id. ¶¶ 17-31.) In Count Three, which is the only 11 counterclaim at issue here, Dealer Trade asserts a counterclaim for malicious prosecution. 12 (Id. ¶¶ 32-41.) This counterclaim arises from an earlier lawsuit that Leeder filed against 13 Dealer Trade, arising from the same boat transaction, in Nebraska. (Id.)1 “The Nebraska 14 litigation was dismissed because it was an improper forum for [Leeder] to bring its action.” 15 (Id. ¶ 15.) According to Dealer Trade, the Nebraska lawsuit qualifies as a malicious 16 prosecution because it “was primarily motivated by malice,” was brought “for an ulterior 17 purpose not proper in the regular conduct of proceedings, including but not limited to 18 exposing [Dealer Trade] to excessive attorney’s fees and legal expenses while forum 19 shopping,” was brought “without probable cause and without a reasonable belief that 20 [Nebraska] was the proper forum for adjudication of claims involving the sale of the Boat,” 21 and “was terminated in favor of [Dealer Trade].” (Id. ¶¶ 32-41.) 22 On November 29, 2023, Leeder filed the pending Rule 12(b)(6) motion to dismiss 23 Count Three of the amended counterclaim. (Doc. 30.) 24 On December 15, 2023, Dealer Trade filed a response in opposition. (Doc. 31.) 25 On December 29, 2023, Leeder filed a reply. (Doc. 35.) Neither side requested oral 26 argument. 27 1 Although the amended counterclaim alleges that the lawsuit was filed in the United 28 States District Court for the District of Nebraska, Dealer Trade has now clarified that it was filed in Nebraska state court. (Doc. 31 at 3 & n.2.) 1 DISCUSSION 2 I. Legal Standard 3 “[T]o survive a motion to dismiss [under Rule 12(b)(6)], a party must allege 4 sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its 5 face.” In re Fitness Holdings Int’l, Inc., 714 F.3d 1141, 1144 (9th Cir. 2013) (internal 6 quotation marks omitted). “A claim has facial plausibility when the plaintiff pleads factual 7 content that allows the court to draw the reasonable inference that the defendant is liable 8 for the misconduct alleged.” Id. (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). 9 “[A]ll well-pleaded allegations of material fact in the complaint are accepted as true and 10 are construed in the light most favorable to the non-moving party.” Id. at 1144-45 (citation 11 omitted). However, the court need not accept legal conclusions couched as factual 12 allegations. Iqbal, 556 U.S. at 679-80. Moreover, “[t]hreadbare recitals of the elements of 13 a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678. 14 The court also may dismiss due to “a lack of a cognizable legal theory.” Mollett v. Netflix, 15 Inc., 795 F.3d 1062, 1065 (9th Cir. 2015) (citation omitted). 16 II. The Parties’ Arguments 17 Leeder contends the elements of Count Three are “that Leeder: (1) instituted a civil 18 action that was (2) motivated by malice, (3) begun without probable cause, (4) terminated 19 in [Dealer Trade’s] favor, and [5] damaged [Dealer Trade].” (Doc. 30 at 3.)2 Beginning 20 with the fourth element, Leeder contends that Dealer Trade has not established (and cannot 21 establish) a favorable termination because the Nebraska action was dismissed for lack of 22 personal jurisdiction, which does not qualify as a favorable termination for malicious- 23 prosecution purposes. (Id. at 4.) Next, Leeder contends that Dealer Trade has not 24 adequately pleaded a lack of probable cause, as required under the third element, because 25 the allegations in the amended counterclaim on that issue are “conclusory” and 26

27 2 Leeder also notes that although Count Three “is pled as [a claim] for malicious prosecution,” “malicious prosecution is a term applied to the wrongful institution of 28 criminal proceedings while the proper term in a civil context is wrongful use of civil proceedings.” (Id. at 3, cleaned up.) 1 “threadbare” and “do not plausibly suggest that Leeder lacked a reasonable belief that it 2 could prevail in the Nebraska Action.” (Id. at 4-5.) Leeder also identifies reasons why its 3 belief that Nebraska was a proper forum was objectively reasonable. (Id. at 5.) Finally, 4 Leeder contends that Dealer Trade has not adequately pleaded malice, as required under 5 the second element, for similar reasons. (Id. at 5-6.) 6 In response, Dealer Trade first argues that the Nebraska Action qualifies as a 7 favorable termination because “[w]hile a dismissal for lack of personal jurisdiction 8 typically does not involve the merits of the claims, there are instances, such as here, where 9 the jurisdictional issue is so intertwined with the substantive issues of a cause of action that 10 the question of jurisdiction is dependent on the resolution of the merits.” (Doc. 31 at 3-4.) 11 Dealer Trade continues: “Leeder filed in Nebraska seeking application of Nebraska law. 12 The Nebraska court’s determination that neither [Dealer Trade] nor the events at issue . . . 13 have even a minimal relationship with Nebraska is determinative that Arizona law applies. 14 Leeder must agree because its Complaint in this action references Arizona law. Thus, 15 [Dealer Trade] prevailed in the Nebraska Lawsuit on an issue that is determinative of the 16 substantive issue in this case of choice of law.” (Id. at 5.) Next, Dealer Trade argues that 17 the lack-of-probable-cause element is satisfied because “the unambiguous terms of the 18 agreement between the parties stat[e] that an action must be adjudicated in Maricopa 19 County, Arizona” and Leeder did not, in any event, make the sort of showing necessary to 20 establish personal jurisdiction over a non-resident defendant. (Id. at 6-8.) Finally, Dealer 21 Trade argues that the malice element is satisfied for similar reasons. (Id. at 8-9.) 22 In reply, Leeder reiterates its contention that a dismissal for lack of personal 23 jurisdiction does not qualify as a favorable termination for purposes of a malicious 24 prosecution claim (Doc. 35 at 2-5 & n.2); argues that the supposedly contrary case cited by 25 Dealer Trade is distinguishable (id. at 4); notes that there appears to be “no legal authority 26 recognizing personal jurisdiction (as opposed to the tenability of the underlying claims) as 27 being subject to the probable cause element” (id. at 5-6); argues that, in any event, Leeder’s 28 attempt to file suit “in Nebraska was tenable based on the facts alleged in the Nebraska 1 Action and Nebraska [personal jurisdiction] precedent” (id. at 6-7); and argues that Dealer 2 Trade’s malice-related arguments fail for the addition reason that Dealer Trade “relies on 3 the unsupported assumptions that litigating the Nebraska Action would be more expensive 4 than litigating the matter elsewhere (and excessively so)” without pleading “any factual 5 allegations to support that this is the case” (id. at 6). Finally, Leeder contends that leave to 6 amend should be denied because amendment would be futile. (Id. at 7-8.) 7 III. Analysis 8 “There are five elements to a claim for wrongful prosecution of a civil action. 9 Plaintiff must prove defendant (1) instituted a civil action which was (2) motivated by 10 malice, (3) begun without probable cause, (4) terminated in plaintiff’s favor and (5) 11 damaged plaintiff.” Bradshaw v. State Farm Mut. Auto. Ins. Co., 758 P.2d 1313, 1318-19 12 (Ariz. 1988).3 The Court will limit the analysis here to the fourth element because it is 13 dispositive. 14 “When a termination or dismissal indicates in some fashion that the accused is 15 innocent of wrongdoing it is a favorable termination. However, if it is merely a procedural 16 or technical dismissal it is not favorable.” Frey v. Stoneman, 722 P.2d 274, 278 (Ariz. 17 1986). “The ultimate legal decision with respect to what constitutes a favorable 18 termination rests with the judge. However, when the circumstances surrounding the 19 termination of the prior proceedings are ambiguous, the determination of those 20 circumstances belongs to the factfinder.” Id. at 279 (citation omitted). 21 Here, there is no ambiguity surrounding the prior proceedings—the Nebraska action 22 was dismissed without prejudice for lack of personal jurisdiction.4 A dismissal for lack of 23 3 Both sides agree that Arizona law applies here. 24 4 Dealer Trade acknowledges that the Nebraska action “was dismissed for lacking jurisdiction” or “for lack of jurisdiction.” (Doc. 29 ¶¶ 28, 40.) Additionally, Leeder has 25 provided a copy of the actual dismissal order, which is incorporated by reference into Dealer Trade’s pleading. United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). In 26 relevant part, the dismissal order provides: “The above-captioned matter came before the Court on October 17, 2022 for hearing on Defendant’s Motion to Dismiss for Lack of 27 Personal Jurisdiction. . . . Plaintiff has not sufficiently demonstrated that its jurisdictional allegations could be supplemented through discovery; therefore, Plaintiff’s request for 28 jurisdictional discovery is denied. Further, based upon the record and the relevant authority, this court lacks the basis to exercise personal jurisdiction over the Defendant, 1 personal jurisdiction does not qualify as a favorable termination in this context because it 2 is “merely . . . procedural” and does not indicate, in any way, that Dealer Trade was 3 “innocent of [the] wrongdoing” alleged in the dismissed action. Frey, 722 P.3d at 278. 4 Notably, the Ninth Circuit has reached this exact conclusion in a decision (albeit 5 unpublished) applying Arizona law. Fish v. Watkins, 298 F. App’x 594, 597 (9th Cir. 6 2008) (“Because the opinion dismissed Fish’s claims for lack of personal jurisdiction, the 7 underlying dispute was dismissed on a purely technical matter and did not terminate in 8 Fish’s favor.”) (citing Frey, 722 P.2d at 277). Other courts have reached the same 9 conclusion in cases involving jurisdiction-based dismissals. See, e.g., Health Mgmt. 10 Associates, Inc. v. Weiner, 264 So.3d 747, 753 (Miss. 2019) (“[H]olding that a dismissal 11 on the jurisdictional element in federal court does not reflect on the merits is consistent 12 with caselaw from around the country.”); Gressett v. Contra Costa Cty., 2013 WL 13 2156278, *12 (N.D. Cal. 2013) (“In general, a resolution of the underlying litigation that 14 leaves some doubt as to the defendant’s innocence or liability is not a favorable 15 termination. Instances in which courts have found sufficient doubt to deny the existence 16 of a favorable termination include dismissals: (1) on statute of limitations grounds; (2) 17 pursuant to a settlement; (3) on laches grounds; (4) for lack of jurisdiction; (5) for 18 mootness; (6) for lack of standing; (7) for being premature; and (8) to avoid litigation 19 expense.”) (cleaned up) (emphasis added); Gervais v. United States, 2010 WL 610282, *12 20 (W.D. Wash. 2010) (“[T]he vast majority of jurisdictions have followed the rule that a 21 dismissal of the underlying civil matter on technical or procedural grounds, such as for lack 22 of jurisdiction, is not a favorable termination because the termination cannot be said to 23 reflect on the merits or propriety of the action.”) (citations omitted); Murphy v. Lynn, 118 24 F.3d 938, 948 (2d Cir. 1997) (“Certain types of dispositions that do not result from 25 adjudication of the merits have generally been held not sufficiently favorable . . . . These 26 include dismissals for lack of subject matter jurisdiction . . . .”). 27

28 either generally or specifically. Accordingly, the court finds the present action should be and hereby is dismissed without prejudice.” (Doc. 30-2.) 1 Dealer Trade’s arguments to the contrary are unavailing. Even assuming, as Dealer 2 Trade contends, that the Nebraska court’s ruling might have some sort of preclusive effect 3 with respect to future disputes between the parties over choice-of-law issues, that is not 4 enough to qualify as a favorable termination. As noted, the sine qua non of a favorable 5 termination under Arizona law is that the dismissal of the prior proceeding “indicates in 6 some fashion that the accused is innocent of wrongdoing.” Frey, 722 P.2d at 278. 7 Foreclosing future disputes over choice-of-law issues is not tantamount to innocence of 8 wrongdoing. Nor does Pro Sales, Inc. v. Texaco, U.S.A., 792 F.3d 1394 (9th Cir. 1986), 9 support Dealer Trade’s position. As Leeder correctly notes, that decision “neither involves 10 a claim for malicious prosecution, nor any analysis related to whether a prior dismissal is 11 a favorable termination for purposes of such a claim.” (Doc. 35 at 4.) 12 For these reasons, Count Three is dismissed. Additionally, Dealer Trade’s request 13 for leave to amend is denied. Rule 15(a) of the Federal Rules of Civil Procedure “advises 14 the court that ‘leave [to amend] shall be freely given when justice so requires.’” Eminence 15 Cap., LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003) (citation omitted). “This 16 policy is ‘to be applied with extreme liberality.’” Id. (citation omitted). Thus, leave to 17 amend should be granted unless “the amendment: (1) prejudices the opposing party; (2) is 18 sought in bad faith; (3) produces an undue delay in litigation; or (4) is futile.” 19 AmerisourceBergen Corp. v. Dialysist W., Inc., 465 F.3d 946, 951 (9th Cir. 2006). Here, 20 amendment would be futile because it would be impossible for Dealer Trade to plead new 21 facts that might transform the personal jurisdiction-based dismissal of the Nebraska action 22 into a favorable termination. 23 … 24 … 25 … 26 … 27 … 28 … 1 Accordingly, 2 IT IS ORDERED that Leeder’s motion to dismiss (Doc. 30) is granted. Count || Three of Dealer Trade’s amended counterclaim is dismissed without leave to amend. 4 Dated this 13th day of March, 2024. 5 6 7 OO ‘Dominic W. Lanza g United States District Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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