Schmidt, Sethi & Akmajian Blog

Jurisdiction Over Foreign Trustee

Posted by Ted A. Schmidt | Aug 26, 2015 | 0 Comments

Hoag Charitable Remainder Unitrust v. French, 719 Ariz. Adv. Rep. 40 (App. Div. I, August 18, 2015) (J. Gould)


Plaintiff, Wells Fargo Bank, obtained a $2.5 million default judgment against the defendant Hoag personally and against his trust. Garnishment began. Thereafter defendant resigned as trustee, met in Florida  with co-defendant IBMC, administrating out of the Bahamas,  making IBMC the new trustee.  IBMC made regular payments out of the trust to pay taxes and insurance on Hoag's residence in Chandler, spousal maintenance to Hoag's  ex-wife and to Hoag personally, both residing in Arizona.  Wells Fargo sued Hoag and IBMC for fraudulent conveyance. IBMC moved to dismiss for lack of jurisdiction. The trial court denied the motion but on special action the Arizona Court of Appeals reversed and remanded.

Here jurisdiction was sought under the U.S. Constitution and  A.R.S. §14-10202(A). The statute provides that personal jurisdiction over a trustee is tied to the principal place where the trust is currently being administered. Because the statute does not refer to a trust that had its principal place of administration in Arizona, the court of appeals found no jurisdiction under the statute. 

Next the court analyzed the constitutional argument. Rule 4.2 of the Arizona Rules of Civil Procedure creates personal jurisdiction, general and specific, to the fullest extent allowed under the U.S. Constitution.  As such jurisdiction will only lie when the “defendant has 'sufficient contacts' with the forum state 'such that the maintenance of the suit does not offend "traditional notions of fair play and substantial justice."'  Under the minimum contacts test the question is whether, "[c]onsidering all of the contacts," the "defendants engaged in purposeful conduct for which they could reasonably expect to be haled into that state's courts with respect to that conduct.”

General jurisdiction exists when the nonresident defendant has “continuous and pervasive” contacts with the state where suit is brought. Where general jurisdiction exists, a defendant may be sued regardless of whether or not the claim at issue is related to these contacts.  Specific jurisdiction exists only for the specific claim being brought and that claim must relate to the necessary minimum contacts. This case involves specific jurisdiction. 

The court of appeals found minimum contacts here lacking:

The unilateral activities of a plaintiff do not establish the requisite minimum contacts; the connection must arise from "the defendant's 'purposeful' conduct." Thus, in determining whether IBMC purposely availed itself of Arizona as a forum state,we focus on IBMC's conduct as trustee, not Hoag's conduct as grantor/beneficiary or Wells Fargo's as plaintiff.

Without evidence that the defendant actually reached out to the plaintiff's state of residence to create a relationship-say, by solicitation,- the mere fact that the defendant willingly" accepted an appointment as a trustee "does not carry the day."

About the Author

Ted A. Schmidt

Ted's early career as a trial attorney began on the other side of the fence, in the offices of a major insurance defense firm. It was there that Ted acquired the experience, the skills and the special insight into defense strategy that have served him so well in the field of personal injury law. Notable among his successful verdicts was the landmark Sparks vs. Republic National Life Insurance Company case, a $4.5 million award to Ted's client. To this day, it is the defining case for insurance bad faith, and yet it is only one of several other multi-million dollar jury judgments won by Ted during his career. He is certified by the State Bar of Arizona as a specialist in "wrongful death and bodily injury litigation".


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