Case Information
*1 FOR PUBLICATION
UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT C AROLYN L AZAR , a citizen of No. 15-15078 Arizona,
Plaintiff-Counter-Defendant-Cross- D.C. No. Defendant-Appellant , 2:14-cv-01511- DLR v.
M ARK G. K RONCKE , in his capacity OPINION as Administrator of the Estate of George Thomas Kroncke, a citizen of California,
Defendant-Counter-Defendant- Appellee , and
C HARLES S CHWAB & C O ., I NC ., a California corporation,
Defendant-Counter-Claimant-Cross-
Claimant. Appeal from the United States District Court for the District of Arizona Douglas L. Rayes, District Judge, Presiding Argued and Submitted February 14, 2017 San Francisco, California Filed July 14, 2017
Before: Eugene E. Siler, Jr., [*] A. Wallace Tashima, and Andrew D. Hurwitz, Circuit Judges. *2 Opinion by Judge Siler
SUMMARY [**]
Revocation-on-Divorce Statute / Contracts Clause The panel affirmed the district court’s dismissal of a constitutional challenge to the application of Arizona’s revocation-on-divorce statute in the allocation of the proceeds of the plaintiff’s ex-husband’s individual retirement account following his death.
The panel affirmed the district court’s conclusion that an Arizona state court would disregard the IRA’s choice of law provision and instead apply Arizona’s revocation-on- divorce statute.
The panel held that the application of the Arizona statute was not preempted by the Employee Retirement Income Security Act or other federal statutes and regulations governing IRAs.
[*] The Honorable Eugene E. Siler, Jr., United States Circuit Judge for the U.S. Court of Appeals for the Sixth Circuit, sitting by designation.
[**] This summary constitutes no part of the opinion of the court. It has been prepared by court staff for the convenience of the reader. The panel reversed the district court’s ruling that the plaintiff lacked standing to bring her constitutional challenge under the Contracts Clause because, as a designated beneficiary, she possessed only an expectation interest in the IRA. The panel held that the plaintiff had standing because Arizona’s revocation-on-divorce statute operated to extinguish her valid expectancy interest in the IRA. This injury was actual, concrete, and particularized, and a ruling in the plaintiff’s favor would redress her injury.
The panel held that the Contracts Clause challenge nonetheless failed on the merits. The revocation-on-divorce statute was enacted after the IRA was established. Agreeing with the Tenth Circuit, the panel concluded that this change in state law did not operate as a substantial impairment of a contractual relationship because the plaintiff never possessed a vested contractual right.
The panel held that the California district court in which the action was filed did not abuse its discretion in transferring the case to Arizona based on a lack of personal jurisdiction over the estate of the plaintiff’s ex-husband. The panel also concluded that the plaintiff waived a dormant Commerce Clause claim, and the district court did not abuse its discretion in staying discovery.
COUNSEL
Josh A. Lazar (argued), The Geraci Law Firm, Irvine, California, for Plaintiff-Counter-Defendant-Cross- Defendant-Appellant.
Timothy James Ryan (argued), Frazer Ryan Goldberg & Arnold LLP, Phoenix, Arizona; Jared M. Toffer, Finlayson Toffer Roosevelt & Lilly LLP, Irvine, California; Charles W. Wirken, Gust Rosenfeld PLC, Phoenix, Arizona; for Defendant-Counter-Defendant-Appellee.
OPINION
SILER, Senior Circuit Judge:
Plaintiff Carolyn Lazar appeals the district court’s grant of Defendant Mark G. Kroncke’s motion to dismiss her second amended answer and cross-claim (“SAACC”). For the reasons set forth below, we reverse the district court’s ruling that Lazar lacks standing to bring her constitutional challenge under the Contracts Clause, but nonetheless affirm the judgment finding that Lazar’s constitutional challenge fails and affirming the district court’s other rulings.
FACTUAL AND PROCEDURAL BACKGROUND Lazar was married to George Thomas Kroncke (“Decedent”) when he established an individual retirement account (“IRA”) in 1992 with Charles Schwab & Co., Inc. (“Schwab”). The Decedent named Lazar as the IRA beneficiary. Lazar and the Decedent divorced in 2008 while domiciled in Arizona. Before Decedent’s death in 2012, he neither removed nor reaffirmed Lazar as the IRA beneficiary. After the Decedent’s death, Kroncke, as administrator of his father’s estate (the “Estate”), made a demand on Schwab for the IRA proceeds on the basis of Arizona’s revocation-on-divorce (“ROD”) statute, A.R.S. *4 § 14-2804. Schwab froze the IRA pending judicial resolution.
Lazar filed this action in the Central District of California against Schwab for breach of contract and against the Estate for declaratory relief. In her first amended complaint (“FAC”), Lazar challenged the constitutionality under the Contracts Clause of applying Arizona’s ROD statute retroactively because the IRA was established in 1992 and the ROD statute was enacted in 1995.
Schwab filed a counterclaim against both parties under Federal Rule of Civil Procedure 22 seeking to liquidate the securities held by the IRA and interplead those funds into the district court. The California district court granted Schwab’s motion to be dismissed as an interpleader but ordered it to continue to hold and not liquidate the securities in the IRA.
The district court dismissed Lazar’s FAC on the basis that it did not state a claim under the Contracts Clause because Lazar had no vested interest in the IRA. The district court permitted Lazar to file her SAACC. The SAACC added a claim that the IRA statute and the regulations promulgated thereunder preempted Arizona’s ROD statute to the extent it retroactively revokes IRA beneficiary designations. The district court dismissed Lazar’s SAACC on the grounds that it lacked personal jurisdiction over the Estate and ordered the case transferred to the District of Arizona pursuant to 28 U.S.C. § 1406(a).
After the case was transferred to the District of Arizona, the district court granted the Estate’s renewed motion to dismiss, holding that the pertinent IRA statutes and regulations did not preempt the operation of Arizona’s ROD statute, that the prior decision on the Contracts Clause was the law of the case and the court would have reached the same outcome for the same reasons, and that the Commerce Clause argument need not be considered since it was not included in the SAACC. The district court stayed the distribution of IRA proceeds pending appeal.
6 L AZAR V . K RONCKE
STANDARD OF REVIEW
We review the dismissal of the SAACC de novo.
See
Syed v. M-I, LLC
, 853 F.3d 492, 499 (9th Cir. 2017). A
dismissal for lack of personal jurisdiction is reviewed de
novo.
Harris Rutsky & Co. Ins. Servs. v. Bell & Clements
Ltd.
,
DISCUSSION
Enforceability of the IRA’s Choice of Law Provision
under Arizona Law
Two documents govern the IRA: the Schwab Individual Retirement Plan (“the Plan”) and the Schwab IRA Application (“the Adoption Agreement”). The Plan sets forth the rights and responsibilities of the account holder and Schwab, and the Adoption Agreement designates beneficiaries. The Plan contains a choice-of-law provision specifying that:
The Plan is intended to qualify as an individual retirement account plan under [Internal Revenue] Code Section 408. Accordingly, the Plan shall be governed by and interpreted under the laws of the United States, and, to the extent such laws do not apply, shall be governed by and interpreted under the laws of the State of California. The Adoption Agreement does not itself contain a choice-of- law provision but does state “I hereby adopt the Charles Schwab & Co., Inc., INDIVIDUAL RETIREMENT PLAN (‘the Plan’) which is made part of this Agreement . . . .” The district court did not resolve whether the choice-of-law provision governed both the Plan and the Adoption Agreement, instead concluding that the choice-of-law provision was unenforceable under Arizona law.
The district court began from the proposition that “[a]
federal court sitting in diversity must look to the forum
state’s choice of law rules to determine the controlling
substantive law.”
Zinser v. Accufix Research Inst.
,
Inc.
,
253 F.3d 1180, 1187 (9th Cir. 2001). Arizona generally
follows the Restatement (Second) of Conflict of Laws
(“Restatement”) to assess the validity of choice-of-law
provisions.
See Swanson v. Image Bank, Inc.
,
For instruments governing donative transfers, Arizona has deviated from the Restatement’s choice-of-law analysis as set forth at Arizona Revised Statute § 14-2703: “The meaning and legal effect of a governing instrument is determined by the local law of the state selected in the governing instrument unless the application of that law . . . is contrary to any other public policy of this state otherwise applicable to the disposition.” An IRA is a “governing instrument” under the statute. A.R.S. § 14-1201(22).
Lazar contends that the district court erred by not conducting a Swanson Restatement analysis and instead basing its decision on the Arizona statute. She argues that because the parties could have resolved this issue by contract, subsection 187(1) of the Restatement is satisfied and that concludes the analysis. But the Restatement expressly recognizes that “[t]he chosen law should not be applied without regard for the interests of the state which would be the state of the applicable law with respect to the particular issue involved in the absence of an effective choice by the parties.” § 187 cmt. g. We cannot conclude that an Arizona court would ignore an Arizona statute directly on point in favor of a Restatement analysis, so Lazar’s argument to that effect is unavailing.
The purpose of Arizona’s ROD statute is to “achiev[e]
the social goal of implementing [a person’s] probable
*7
intention in the wake of a divorce.”
In re Estate of Dobert
,
Lazar challenges the strength of Arizona’s interest
because a donor can override the operation of Arizona’s
ROD statute. She draws an analogy to
Cardon v. Cotton
Lane Holdings, Inc.
, where the Arizona Supreme Court
allowed California law to govern a deed of trust and preclude
a deficiency judgment which would have been available
under Arizona law because in both states it was legal to
contract away the availability of a deficiency judgment.
The Plan’s choice-of-law provision is not an “express term” for the purposes of Arizona’s ROD statute. A.R.S. § 14-2804(A). The reference to “express terms” in the ROD statute pertains only to the effect on an instrument wrought by divorce, so any “express terms” removing an instrument from the scope of the ROD statute must address the effect of divorce. Ibid . (“Except as provided by the express terms of a . . . contract relating to the division of the marital estate made between a divorced couple . . .”). The Plan’s choice- of-law provision was silent in this regard. The district court *8 10 L AZAR V . K RONCKE thus correctly determined that an Arizona state court would disregard the choice-of-law provision in the Plan and instead apply Arizona’s ROD statute.
Conflict Preemption
Lazar claims that application of Arizona’s ROD statute
is preempted by federal statutes and regulations governing
IRAs. None of these statutes or regulations contains an
express preemption clause, but state law must nevertheless
yield to federal law to the extent the laws conflict.
See
Crosby v. Nat’l Foreign Trade Council
,
The Plan states that it “is intended to qualify as an individual retirement account under Code Section 408,” referring to 26 U.S.C. § 408—the section of the Internal Revenue Code creating IRAs. It is undisputed that IRAs are governed by federal law. The dispute is between Lazar’s position that IRA regulations compel distribution to her even in the face of the ROD statute and the Estate’s position that the regulations do not govern who must be paid the IRA proceeds but instead only dictate how those funds must be paid out for taxation purposes.
*9 a. Lazar’s Definitional Argument Fails In arguing that she is entitled to the IRA, Lazar first relies upon the Employee Retirement Income Security Act’s (“ERISA’s”) definition of beneficiary: “[A] person designated by a participant, or by the terms of the employee benefit plan, who is or may become entitled to a benefit thereunder.” 29 U.S.C. § 1002(8). The second provision on which she relies is the IRA distribution rule:
[A]n IRA is subject to the required minimum distribution rules provided in section 401(a)(9) [applicable to ERISA plans]. In order to satisfy section 401(a)(9) for purposes of determining required minimum distributions . . . the rules of [26 C.F.R.] §§ 1.401(a)(9)-1 through 1.401(a)(9)-9 and 1.401(a)(9)-6 for defined contribution plans must be applied, except as otherwise provided in this section.
26 C.F.R. § 1.408-8, Q&A-1(a). Lazar argues that this IRA distribution rule necessarily incorporates ERISA’s definition of “beneficiary” any time it is used in the term “designated beneficiary.”
Building upon this asserted equivalence, Lazar argues that IRA distribution rules demarcate the only two methods whereby someone can become a beneficiary: “[a]n individual may be designated as a beneficiary under the plan either by the terms of the [IRA] plan or, if the plan so provides, by an affirmative election by the [IRA’s owner]. . . specifying the beneficiary.” 26 C.F.R. § 1.401(a)(9)-4, Q&A-1(a). As provided in 26 C.F.R. § 1.408-8, Q&A-1(b), the ERISA language reading “employee” can be altered to read “IRA owner.” Since the regulation describing the procedures for making someone a designated beneficiary does not contemplate the operation of ROD statutes and she was designated as the beneficiary on the Plan documents, Lazar argues that this combination of statutes and regulations compels distribution to her.
The terms “beneficiary” and “designated beneficiary” cannot be conflated in this manner. Otherwise it would have been redundant to have a separate definition of designated beneficiary:
A designated beneficiary is an individual who is designated as a beneficiary under the plan. An individual may be designated as a *10 beneficiary under the plan either by the terms of the plan or, if the plan so provides, by an affirmative election by the [IRA owner] . . . specifying the beneficiary. . . . A designated beneficiary need not be specified by name in the plan or by the [IRA owner] to the plan in order to be a designated beneficiary so long as the individual who is to be the beneficiary is identifiable under the plan. . . . The fact that an [IRA owner’s] interest under the plan passes to a certain individual under a will or otherwise under applicable state law does not make that individual a designated beneficiary unless the individual is designated as a beneficiary under the plan.
26 C.F.R. § 1.401(a)(9)-4, Q&A-1 (emphasis added). This definition contemplates that “designated beneficiary” demarcates a smaller class than does “beneficiary” for two reasons. First, only an individual can be a designated beneficiary, excluding any trust or estate from the status. Second, an interest is allowed to pass under a will or through the operation of otherwise applicable state law to someone who is not a designated beneficiary, but such passage does not confer designated beneficiary status upon the recipient.
We thus find it clear that “beneficiary” and “designated beneficiary” are not interchangeable, a conclusion consistent with the preferential tax treatment provided to designated beneficiaries, such as avoiding application of the IRS’s five- year distribution rule. See 26 C.F.R. § 1.401(a)(9)-8, Q&A- 11; IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs) ( available at http://www.irs.gov/pub/irs-pdf/p590b.pdf) at 10 (“The 5- year rule applies in all cases . . . where any beneficiary is not an individual (for example, the owner named his or her estate the beneficiary).”). Thus, the regulation Lazar cites as setting out the only ways an individual can become a “beneficiary” actually sets forth the ways someone can become a “designated beneficiary” eligible for preferential tax treatment. See 26 C.F.R. § 1.401(a)(9)-4 Q&A 1 (beginning by saying “an individual may be designated as the beneficiary ”) (emphasis added). This means the district court correctly concluded that “designated beneficiary” is a term-of-art and that the IRA distribution rules govern only how distributions will be treated for tax purposes and does not determine who is entitled to them.
Further support for our conclusion is found in the regulation listing as possible IRA beneficiaries “(except where the context indicates otherwise) the estate of the individual, dependents of the individual, and any person designated by the individual to share in the benefits of the account after the death of the individual.” 26 C.F.R. 1.408- 2(b)(8). Because an estate is a potential IRA beneficiary, an IRA beneficiary need not be someone who qualifies as a “designated beneficiary” under ERISA.
Lazar argues that the district court erred by failing to consider the parenthetical “except where the context indicates otherwise” in § 1.408.2(b)(8) as a clear reference to the IRA Plan. She asserts that the terms of the Plan exclude the Estate as a beneficiary by defining beneficiary as “the person or persons designated from time to time by a Participant . . . to receive benefits by reason of the death of the Participant. . . .” It is difficult to see how the parenthetical “except where the context indicates otherwise” is a clear reference to the Plan when the word “plan” appears numerous times elsewhere in the same regulation. In any event, the terms of the Plan list the Estate as the default beneficiary in the absence of a valid beneficiary designation and so do not exclude it.
b. Lazar’s Reliance on ERISA and FEGLIA Cases Is Misplaced
In support of her preemption claim, Lazar cites Egelhoff , where the Supreme Court ruled that Washington’s ROD statute could not be applied to ERISA-qualified plans. Egelhoff , 532 U.S. at 150. The Court held that the ROD statute was preempted since it had a “connection with” ERISA plans by interfering with the statutory requirements that ERISA “plans be administered, and benefits be paid, in accordance with plan documents.” Ibid. The Court has also held that a divorce decree is ineffective to revoke an ex- wife’s interest as the named beneficiary of an ERISA plan. See Kennedy v. Plan Adm’r for DuPont Sav. & Inv. Plan , 555 U.S. 285, 288 (2009). It also conducted a similar analysis when it considered a Federal Employee Group Life Insurance (“FEGLIA”) policy, ruling that a Virginia statute permitting a current wife to recover funds distributed to an
L AZAR V . K RONCKE 15
ex-wife was preempted as an obstacle to Congress’s intent
to establish a clear procedure for designating a beneficiary.
See Hillman v. Maretta
,
It does not follow from these cases that IRA plans should be treated in the same manner. Both ERISA and FEGLIA include express preemption clauses, see 29 U.S.C. § 1144(a) (ERISA) and 5 U.S.C. § 8709(d) (FEGLIA), while IRA statutes do not. Although the absence of an express preemption clause is not dispositive, see de la Cuesta , 458 U.S. at 153, the contrast between ERISA’s expansive preemption language and the absence of such language in the IRA statutes is persuasive as “pre-emption claims turn on Congress’s intent.” Gobeille v. Liberty Mut. Ins. Co. , 136 S. Ct. 936, 946 (2016) (alteration and citation omitted).
Despite conceding that the ERISA preemption provision does not govern IRAs, Lazar nonetheless claims that policies underlying IRAs—avoiding probate proceedings, avoiding uncertainty and potential resulting losses, and avoiding the siphoning off of funds to pay administrative, legal, and tax fees—dictate that preemption should be coextensive. Even assuming the validity of these policies, they offer no justification to preempt the ROD statute because there is no underlying conflict between the ROD statute addressing who receives benefits and the IRA regulations mandating how those benefits are distributed.
c. Debickero Does Not Mandate Distribution to Lazar
Lazar additionally relies on Charles Schwab & Co. v. Debickero , 593 F.3d 916 (9th Cir. 2010), to assert that *13 federal regulations mandate distribution of the IRA to her. This over-reads Debickero . In Debickero , the IRA custodian filed an interpleader action to determine whether the surviving spouse or the adult children designated as beneficiaries were entitled to the IRA. Id. at 917–18. The surviving spouse claimed that ERISA regulations mandating distribution to a surviving spouse should apply to IRAs, but we rejected that argument, holding the regulations insufficient to overcome the beneficiary designation made on an IRA by the decedent. Id. at 917–22. Contrary to Lazar’s assertion that federal law mandates any particular distribution outcome, we made clear that IRA regulations “leave the designation of beneficiaries to the individual account holder.” Id. at 922.
Contracts Clause Challenge a. The District Courts Erred When They Denied Lazar Had Standing The Contracts Clause prevents any state from passing a law impairing the obligation of contracts. See U.S. Const. art. I, § 10. The crux of Lazar’s claim is that Arizona’s ROD statute violates this constitutional provision by interfering with her contractual rights.
The Arizona district court cited the California district court’s prior order denying standing to raise the Contracts Clause challenge as the law of the case and stated that it would have reached the same conclusion for the same reasons. The California district court held that Lazar lacks standing to challenge the application of the ROD statutes because she possessed only an expectation interest in IRA. This conflated standing with the merits. To have standing, a party must have suffered an injury “concrete, particularized, and actual or imminent; fairly traceable to the challenged action; and redressable by a favorable ruling.” Monsanto Co. v. Geertson Seed Farms , 561 U.S. 139, 149 (2010). Arizona’s ROD statute operated to extinguish Lazar’s valid expectancy interest in the IRA—an injury which is actual, concrete, and particularized. She challenges the constitutionality of the ROD statute, and a ruling in her favor would redress her injury because invalidation of Arizona’s ROD statute would entitle her to the IRA funds. This is sufficient to confer standing.
b. Lazar’s Contracts Clause Challenge Fails on the Merits
Because the lower courts addressed the merits and the
issue was fully briefed, we too proceed to the merits of
Lazar’s Contracts Clause challenge. The question of
whether the operation of an ROD statute violates the
Contracts Clause is an issue of first impression in this circuit.
In conducting a Contracts Clause analysis, we first ask if the
change in state law has “operated as a substantial impairment
of a contractual relationship.”
Gen. Motors Corp. v. Romein,
(1) Divergent Authority: Whirlpool and Stillman The Eighth Circuit has held Oklahoma’s ROD statute unconstitutional as applied to a life insurance policy. Whirlpool Corp. v. Ritter , 929 F.2d 1318, 1323 (8th Cir. 1991). The Eighth Circuit construed the life insurance contract to contain a term that the insurance company would pay the decedent’s chosen beneficiary. Id. at 1322. The court therefore determined that when operation of the ROD statute amended the beneficiary, Oklahoma substantially impaired the decedent’s contract with the insurance company. Ibid . In its reasonableness analysis, the Eighth Circuit found Oklahoma’s justification legitimate but insufficient for retroactive application, citing the possibility that the decedent did not desire to revoke his ex-wife’s beneficiary status as evidence of constitutional infirmity. Id . at 1323 The Eighth Circuit reasoned that the possibility of the decedent’s reaffirming his ex-wife as beneficiary after divorce bolstered its conclusion—just as an individual could not be presumed to know he must change beneficiary status after a change in family arrangements (the rationale behind ROD statutes), it is also unreasonable for people to be required to investigate positive changes in the law enacted after they make beneficiary designations. Ibid . On that *15 basis, the court found it inappropriate and unreasonable to apply the ROD statute retroactively in light of the statutory purpose of effectuating donor intent. Ibid .
In contrast, the Tenth Circuit has upheld the constitutionality of Utah’s ROD to an annuity, finding no contractual impairment had occurred. Stillman v. Teachers Ins. & Annuity Ass’n Coll. Ret. Equities Fund , 343 F.3d 1311, 1322 (10th Cir. 2003). The Tenth Circuit conceptualized the annuity as having both contractual and donative transfer elements. Ibid . The contractual elements were those between the annuity company and the annuitant—to fund the annuity and pay as directed by the annuitant—and the Contracts Clause would only be violated if the state statute interfered with those elements. The donative transfer element was naming the beneficiary. Ibid . The Tenth Circuit characterized the annuity company as an escrow-agent, and because its obligation to pay the proceeds of the annuity was not impacted by the operation of Utah’s ROD statute, there was no violation of the Contracts Clause. Ibid . Because it found no significant contractual impairment, the Tenth Circuit did not address the state’s justification for enacting the legislation.
(2) Lazar’s Interest Never Vested so Her
Contracts Clause Challenge Fails
We agree with the
Stillman
court and conclude that no
substantial contractual
impairment occurred
through
application of Arizona’s ROD statute to the IRA, and we
find there was no violation of the Contracts Clause. Because
Lazar never possessed a vested contractual right, she
suffered no contractual impairment.
See Dodge v. Bd. of
Educ. of City of Chicago
,
Jurisdiction
The California district court transferred this action to the District of Arizona under 28 U.S.C. § 1406(a) on the grounds that it lacked personal jurisdiction over the Estate. Lazar argues that the Estate waived any objection to personal jurisdiction in California by moving to dismiss Lazar’s cross-claim and not Schwab’s counterclaim, and that in any event, the Estate’s contacts with California were sufficient to establish personal jurisdiction in California. We conclude that the California district court did not abuse its discretion in transferring the case to Arizona.
a. Potential Waiver of the Personal Jurisdiction Defense
Lazar posits that the Estate waived any personal jurisdiction defense because it did not move to dismiss Lazar’s cross-claim until after Schwab’s counterclaim had already been dismissed, arguing that the Estate should have challenged Schwab’s counterclaim under Federal Rule of Civil Procedure 12(b)(2) and not in response to Lazar’s cross-claim. Because Schwab was dismissed from the case before the Estate filed its renewed motion to dismiss, Lazar argues, the Estate waived any personal jurisdiction defense.
Generally, waiver of the defense of personal jurisdiction
requires a showing of conduct inconsistent with raising or
maintaining the defense.
See, e.g.
,
Peterson v. Highland
Music, Inc.
,
The cases upon which Lazar relies do not demonstrate
that the California district court abused its discretion.
[1]
One
case even expressly recognized that a personal jurisdiction
defense remains viable when the cross-claim defendant (here
the Estate) has not waived personal jurisdiction.
See United
States v. All Right, Title & Interest in Contents of Following
Accounts at Morgan Guar. Trust Co. of N.Y.
, No. 95 CIV.
10929 HB THK,
[1]
Lesnik v. Public Industrial Corp.
involved a challenge to improper
venue and not to personal jurisdiction.
Lazar contends that the Estate’s contacts with California
were sufficient to confer specific personal jurisdiction.
Lazar cites four different contacts with California: (1) the
Decedent opened the IRA with Schwab, a California
corporation; (2) the Decedent made an average of 124 trades
per year in the account from 1992 to 2012; (3) the Decedent
made Schwab his “agent and attorney-in-fact” for purposes
of buying and selling on the account; and (4) the Estate sent
a letter to Schwab from California. The California district
court found that the first three contacts were not sufficiently
“substantial” or “continuous and systematic” to confer
general personal jurisdiction,
see Helicopteros Nacionales
de Colombia, S.A. v. Hall
,
Lazar does not assert on appeal that there was general personal jurisdiction. She argues only that the California contacts established specific personal jurisdiction. We *18 utilize a three-part test when making specific personal jurisdiction determinations:
(1) The non-resident defendant must purposefully direct his activities or consummate some transaction with the forum or resident thereof; or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws; (2) the claim must be one which arises out of or relates to the defendant’s forum-related activities; and (3) the exercise of jurisdiction must comport with fair play and substantial justice, i.e. it must be reasonable.
Schwarzenegger v. Fred Martin Motor Co. 374 F.3d 797, 802 (9th Cir. 2004). Purposeful availment and purposeful direction are distinct inquiries. The personal availment inquiry asks if the defendant “purposefully avail[ed] [himself] of the privilege of conducting activities in the forum State, thus invoking the benefits and protections of its laws.” Ibid . The purposeful direction inquiry asks if the defendant directed an action at the forum state such that personal jurisdiction could be exercised even without physical contacts with the forum. Id. at 803.
In its transfer order, the California district court focused
on the purposeful direction test. Purposeful direction
requires a defendant to have “(1) committed an intentional
act, (2) expressly aimed at the forum state, [and] (3) causing
harm that the defendant knows is likely to be suffered in the
forum state.”
Yahoo! Inc. v. La Ligue Contre Le Racisme Et
L’Antisemitisme
, 433 F.3d 1199, 1206 (9th Cir. 2006)
(quoting
Schwarzenegger
,
The Estate’s sending of a demand letter to Schwab was
an intentional act.
See, e.g.
,
Bancroft & Masters, Inc. v.
Augusta Nat’l Inc.
, 223 F.3d 1082, 1088 (9th Cir. 2000)
(finding that sending a letter constituted an intentional act).
But, as the California district court found, the act of sending
the letter was aimed at Arizona and not California. We look
to who would suffer the harm and where the harm would be
*19
24
L AZAR V . K RONCKE felt when determining whether a defendant expressly aimed
his activities at the forum state.
See Metro. Life Ins. Co. v.
Neaves
,
The California district court also did not abuse its
discretion when it conducted a purposeful availment analysis
in assessing two additional contacts with California which
Lazar claimed conferred specific personal jurisdiction over
the Estate. The first contact is the choice-of-law provision
in the IRA stipulating that California law governs in the
absence of applicable federal law. Because it is not essential
that the state whose law will be applied to a lawsuit exercise
jurisdiction over the litigation, this contact did not confer
specific personal jurisdiction.
See Shaffer v. Heitner
,
Lazar’s Dormant Commerce Clause Claim Was Waived
Lazar concedes that she failed to specifically allege a violation of the dormant Commerce Clause in her SAACC. In seeking to bring this challenge on appeal, she relies on her general allegation below that ROD statutes are unconstitutional for reasons “including but not limited to” a violation of the Contracts Clause and conflict preemption. *20 But, Federal Rule of Civil Procedure 5.1 requires a party challenging the constitutionality of a state statute to “file a notice of constitutional question stating the question and identifying the paper that raises it” so that a state attorney general can intervene if desired to defend the statute. Lazar filed such a notice, but specified only the Contracts Clause and conflict preemption as grounds for her constitutional challenge.
Lazar now asserts before this court that her Commerce
Clause argument should be considered anyway because it
was briefed and alternatively addressed on the merits by the
district court, meeting the standard that an “argument must
be raised sufficiently for the trial court to rule on it.”
In re
E.R. Fegert, Inc.,
Stay of Discovery
The district court stayed discovery pending resolution of
the Estate’s motion to dismiss the SAACC. District courts
orders controlling discovery are reviewed for an abuse of
discretion.
Alaska Cargo
,
Lazar also argues that discovery should have proceeded because of a purported 2001 designation which made the Marital Trust the contingent beneficiary of the IRA. Lazar did not argue below either that the Estate is not the default beneficiary of the IRA or that she has title to the IRA through some other post-divorce instrument, and Schwab identified *21 only Lazar’s and the Estate’s claims in its interpleader. The district court therefore did not abuse its discretion in denying discovery on this issue pending resolution of the Estate’s motion to dismiss.
CONCLUSION
For the foregoing reasons, although we disagree with the district court’s holding that Lazar lacks standing to raise her Contracts Clause challenge, we affirm the judgment below.
AFFIRMED .