THE SUPREME COURT HAS AFFIRMED THIS OPINION

This jurisdiction case offers about as slender a basis for it as you’ll find.

Beverage’s accountant, Fitzpatrick, wanted him to invest in a tax shelter. Fitzpatrick called Pullman, a Connecticut law firm, to get an opinion letter on the shelter. Pullman sent Fitzpatrick its brochure and a fee agreement for Beverage to sign. It had two phone calls with him to  discuss the facts. It then issued an opinion letter favorable to the shelter. When the IRS later disallowed the shelter Beverage sued various defendants including Pullman. Pullman moved to dismiss for lack of jurisdiction. The trial court granted the motion.

The Court of Appeals reverses. Why? Pullman “accepted a telephone call” from Arizona, sent “promotional materials” (the brochure), “affirmatively agreed to represent Beverage knowing he lived in Arizona (one wonders what the court thinks “affirmatively” adds to its analysis, as opposed to its rhetoric), made two phone calls to get information, then sent the opinion letter “knowing that Beverage would rely on the letter in filing his federal income tax return from Arizona” (though the letter expressly did not cover state tax issues). These acts are about the least you can do for a client who calls you from another state but the court tells us that they are “purposeful contacts targeting Arizona.”

This purports to be “guided by” Planning Group of Scottsdale but in fact relies on out-of-state-lawyer cases from out of state. Its hard not to conclude that it also rests on the fact – mentioned in the first sentence and four more times in the opinion – that Pullman charged $50,000. But nobody else seemed to complain that that was excessive or out of the ordinary for this multi-million dollar deal. Why does the court go out of its way to leave the impression that the result might have been different had Pullman charged 3800 bucks? Some courts are shocked, shocked by fees they are no longer able to charge.

Its also hard to square this with some of the products-liability jurisdiction cases. In any event, the moral for out-of-state firms is apparently not to accept calls from Arizona.

(link to opinion)

Rule 67(d) is an old friend to defendants. As always happens, though (remember the notice-of-claim cases), some defendants use their tools crudely rather than carefully and the courts have to slap them down.

Thiele’s suit claimed that a city inspector hit him. Because he owned no property in the state the city, pursuant to the rule, moved that he be required to post a cost bond. For $30,000.

Now lets pause a moment. $30,000? For taxable costs? In a little he-said-she-said personal-injury case?The city tried an excuse – Thiele had sued it before and used “dilatory tactics . . . likely to . . . increase the costs of litigation.” But come on, guys, $30,000? That’s just dumb. At least pretend to be actually concerned about costs, not just about trying to set up dismissal.

In the enough-blame-to-go-around department, the trial court ordered a bond in that amount. Thiele said he couldn’t pay it, there was a hearing about that, and the court reduced it to $15,000  — but never, at least on the appellate record, required the city to justify that, or any other, amount. Thiele couldn’t pay; the court dismissed the case. Thiele appealed.

The first question was whether the rule is constitutional. The court holds that under the rational-basis test it is. It has the legitimate purpose of protecting defendants from the inability to satisfy a cost judgment but does not exclude from the legal system those who can’t afford to pay since 67(e) exempts them.

The next question was the amount of the bond. “In fixing the amount of a security, the trial court must consider the estimated taxable costs of the litigation.” Nothing in the record supported even $15,000 and the facts “strongly” suggested that that’s too high.

The dismissal is reversed and the case is remanded with instructions to reconsider the amount of the bond.

In the old days a trial judge would have spotted this problem before getting reversed for it – and would probably have chewed you out for pulling such a stunt. Now that trial judges are bureaucrats who mostly sign whatever their JAs put in front of them you are less likely to get tough love from the bench but more likely to get reversed.

(link to opinion)