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Bright Development v. Touton

July 16, 2010

BRIGHT DEVELOPMENT, A CALIFORNIA CORPORATION, PLAINTIFF,
v.
TOD M. TOUTON, INDIVIDUALLY AND AS AN EMPLOYEE, OFFICER, DIRECTOR, SHAREHOLDER, PARTNER AND/OR MEMBER ATTORNEY OF LIONEL SAWYER & COLLINS, LTD., LIONEL SAWYER & COLLINS, LTD., A PROFESSIONAL CORPORATION; AND DOES 1 THROUGH 50, INCLUSIVE, DEFENDANTS.



ORDER FINDING LACK OF PERSONAL JURISDICTION OVER DEFENDANTS AND TRANSFERRING CASE

[Document # 10]

This is an action in diversity for legal malpractice and breach of fiduciary duty by Plaintiff Bright Development Corp. ("Bright" or "Plaintiff") against the Nevada law firm of Lionel Sawyer & Collins, Ltd., and Todd M. Touton, an individual attorney employed by that law firm (collectively, "Defendants"). In the instant action, Defendants seek to dismiss the action PURSUANT TO Rule 12(b)(2) of the Federal Rules of Civil Procedure for lack of personal jurisdiction or, in the alternative, to transfer based on enforcement of the forum selection provision contained in the engagement agreement the parties executed prior to Defendants' representation of Plaintiff in underlying construction lawsuits. This court has jurisdiction pursuant to 28 U.S.C. § 1332 to determine both its jurisdiction and the venue issue presented by Defendants' motion.

FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff is a California corporation located in Stanislaus County that engages in the development of residential subdivisions in California's Central Valley and in Northern Nevada. The parties do not dispute that, between 1999 and 2005, Plaintiff developed a 130-home development in Sparks, Nevada (the "Development"). Beginning in August of 2002 Bright began receiving complaints of structural cracks in homes and common areas in the Development. The structural problems appeared to be connected to work performed by two subcontractors who were separately insured for liability arising from construction defects. Early in 2005, Plaintiff approached Defendants for the purpose of seeking legal representation in an anticipated class action lawsuit and for other matters arising out of the construction defects. On or about February 12, 2005, Defendants undertook representation of Plaintiff pursuant to a letter of engagement which was signed on behalf of Plaintiff by Ms. Carol Bright, Plaintiff's secretary.

The Engagement Letter provided as follows, in pertinent part: Scope of Engagement The Firm is engaged to provide legal representation with two construction defect matters, business entity and structural matters and other miscellaneous and associated legal matters ("the Matters").

Dispute Arbitration Any dispute with respect to this engagement or as to the amount of legal fees shall be submitted for final and binding arbitration in Nevada. If the entire dispute can and will be heard by the Fee dispute Committee of the State Bar of Nevada, then that shall be the forum for arbitration. If the entire dispute cannot or will not be heard by the Fee Dispute Committee of the State Bar of Nevada, then the entire dispute shall be submitted for arbitration before the American Arbitration Association.

Intergation This engagement letter contains the entire agreement between the Client and the Firm regarding the Matters and the fees, costs and expenses relative to the Matters. This engagement letter shall not be modified except by written agreement signed by the Firm and the Client. This engagement letter shall be binding upon the Client and the Firm and their respective heirs, executors, legal representatives and successors.

Doc.# 11-1, Exh. A-1.

In his affidavit in support of Defendants' motion to dismiss, Defendant Touton states:

16. Bright solicited [Defendants' law firm] representation in Nevada and all aspects of [the Firm's] representation were undertaken in Nevada. Neither I nor any other representative of [the Firm] ever traveled to California to meet with Ms. Bright, any other representative of Bright, or any other person or entity on Bright's behalf. All personal meetings with Bright were held in Bright's offices at the [Development] in Sparks, Nevada or at [the Firm's] offices in Reno, Nevada. All aspects of Bright's pending dispute with [the Firm] pertain to Bright's [Development] in Sparks, Nevada and are governed by the Engagement Letter, requiring binding and final arbitration in Nevada.

Doc. # 11-1 at ¶ 16.

To support its contention that Defendants are subject to personal jurisdiction in California courts, Plaintiffs allege a number of instances in which Defendants communicated or interacted with parties in California. Those instances include several instances where copies of communications that were carried out on behalf of Plaintiffs between Defendants and third parties located in California, Nevada and other states and were faxed to Plaintiff's office in California. Similarly, Plaintiffs point to a number of instances where correspondence between Defendants and insurance entities, engineering firms, claims processing services, claims investigators and various other insurance-related persons and entities were copied and faxed to Plaintiffs in California. Defendants do not dispute that the communications alleged by Plaintiff occurred or that the communications were directed both to Plaintiff and to other persons and entities in California. Defendants simply contend that such communications incidental to Defendant representation of Plaintiff, are not sufficient to constitute personal jurisdiction over Defendants in California courts.

Plaintiff's complaint alleging one claim for professional negligence and one claim for breach of fiduciary duty was filed in this court on March 16, 2010. The instant motion to dismiss pursuant to Rule 12(b)(2) of the Federal Rules of Civil Procedure was filed on May 18, 2010. Plaintiff's opposition was filed on June 7, 2010, and Defendants' reply was filed on June 14, 2010. ...


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