Butler Law v. Hon. higgins/winslow Memorial
410 P.3d 1223
Ariz.2018Background
- Winslow Memorial Hospital (Navajo County) hired The Butler Law Firm, PLC (a Maricopa County PLLC) in 2013 under a written representation agreement to provide legal services for the Hospital’s CEO contract; the agreement listed BLF’s Phoenix address and reimbursable travel/costs but did not specify a place of performance.
- Relationship deteriorated and in January 2016 the Hospital sued BLF and two Maricopa-resident attorneys (Butler and Williams) for legal malpractice, breach of fiduciary duty, and breach of the covenant of good faith.
- Defendants moved to transfer venue to Maricopa County under A.R.S. § 12-404(A); trial court denied the motion, finding venue proper in Navajo County under A.R.S. § 12-401(5) (written contract to perform in county) and § 12-401(18) ("other corporations" exception), relying in part on veil-piercing analogies.
- Court of Appeals denied special-action review; Arizona Supreme Court granted review to decide (1) whether the representation agreement contracted to perform in Navajo County and (2) whether an LLC/PLLC qualifies as an "other corporation" under § 12-401(18).
- The Supreme Court reversed, holding venue did not properly lie in Navajo County as to any defendant and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 12-401(5) applies (contracted in writing to perform obligation in Navajo County) | Agreement concerned Hospital (located in Navajo Co.), so BLF necessarily contracted to perform in Navajo County (including by travel or remote effects) | Agreement did not specify place of performance; no allegation contract required BLF to work in Navajo County | Not applicable: contract did not expressly or necessarily require performance in Navajo County; § 12-401(5) inapplicable |
| Whether individual attorneys (Butler, Williams) are subject to venue under § 12-401(5) | PLLC professional-liability rule makes individual attorneys liable for negligent acts performed on behalf of the PLLC, so venue follows | Attorneys did not themselves contract; Butler signed as BLF’s agent; Williams did not sign and is non-member employee | Rejected: subsection (5) applies to persons who contracted in writing; agents are not personally bound when contracting for the LLC; venue not proper as to attorneys |
| Whether § 12-401(18) ("other corporations") includes LLCs/PLLCs | LLC/PLLC should be treated as "other corporation" for venue because of similar limited-liability features and susceptibility to veil-piercing | LLCs are statutorily distinct (ALLCA, title 29) from corporations (title 10); statute and history do not include LLCs in the exception | Rejected: LLCs are distinct unincorporated entities under Arizona law and not "other corporations" for § 12-401(18) |
| Whether veil-piercing/alter-ego considerations justify expanding venue exception to LLCs | Because members may be subject to veil-piercing, venue policy should permit suing LLCs in counties where their business effects arose | Venue concerns (convenience) differ from alter-ego doctrine (remedy for misuse); courts must not expand statutory exceptions absent legislative action | Rejected: alter-ego and venue are distinct doctrines; courts will not enlarge the statutory exception to include LLCs |
Key Cases Cited
- Miller Cattle Co. v. Mattice, 38 Ariz. 180 (1931) (contract must plainly specify or necessarily imply place of performance to support venue under the written-contract exception)
- Morgensen v. Superior Court, 127 Ariz. 55 (App. 1980) (focuses on whether defendant was required to perform in the county, not where plaintiff is located)
- Blakely v. Superior Court, 6 Ariz. App. 1 (1967) (place of performance must be expressly or necessarily implied from the contract)
- Queiroz v. Harvey, 220 Ariz. 273 (2009) (agency principles: when an LLC binds itself through an agent, the agent is not personally bound to the contract)
- Wray v. Superior Court, 82 Ariz. 79 (1957) (statutory venue exceptions are narrowly construed; courts may not enlarge them)
- NetJets Aviation, Inc. v. LHC Commc’ns, LLC, 537 F.3d 168 (2d Cir. 2008) (distinguishes veil-piercing/alter-ego remedies from venue/choice-of-forum considerations)