Butler Law v. Winslow Memorial

A theme of this opinion is “don’t conflate venue and liability,” which is apparently what the trial court did. But it also talks about what a limited-liability corporation is or isn’t.

A hospital in Navajo County hired a Maricopa County lawyer regarding employment matters. It later sued him, his P.L.L.C., and an outside associated lawyer for malpractice in Navajo County. Defendants moved for change of venue since they reside in Maricopa County. The trial court denied Defendants’ motion; the Court of Appeals denied special action.

The Supreme Court reverses. Plaintiff argued that the representation/fee agreement was a contract to perform services in Navajo County. But although a written contract to perform in a county permits venue there (12-401(5)), the contract must require that performance either expressly or by necessary implication. The fee agreement said nothing about the place of performance. The fact that the hospital was in Navajo didn’t matter; “place of performance” does not include “a place where performance merely causes an effect.” (The court has no occasion to address the question you litigators are asking: what if the agreement were for representation in a Navajo County lawsuit? And would that question be harder or easier if the agreement were for the defense of future lawsuits with no reference to where they might be filed?)

So far the opinion amounts to “the statute means what it says.” But then comes the L.L.C. part.

12-401(18) allows certain types of companies and also “other corporations” to be sued where the cause of action arose. Plaintiff argued that an L.L.C. is an “other corporation.” The court disagrees.

The Arizona Constitution defines “corporation” as “all associations and joint-stock companies . . . having any powers or privileges of corporations not possessed by individuals or co-partnerships.” The court says, in one conclusory sentence, that that doesn’t include an L.L.C.

Having completed its constitutional analysis the court turns, “more importantly,” to statutory analysis. Why it considers the statutes more important that the Constitution isn’t clear. In any event, the legislature put the L.L.C. laws in Title 29 (partnerships) rather than in Title 10. So they’re not corporations. In Arizona (the court points out, evidently believing that this bolsters the argument) they’re not partnerships, either but, rather, a “distinct business entity.” Although the powers of corporations and L.L.C.s are “overlapping,” an L.L.C. can waive corporate powers and has features that corporations don’t.

Yeah, maybe so. But doesn’t that leave you still wondering about associations and companies having powers or privileges of corporations not possessed by individuals or partnerships?

At the end of the opinion the court says that seeing L.L.C.s as corporations would “substantially increase the reach of” 12-401(18), which it won’t do “absent legislative action.” The court does not always display such exquisite restraint.

Plaintiff also made some arguments about the lawyers’ personal liability and piercing corporate veils. The court basically says that venue depends on the statute, not that stuff.

Reversed and remanded.

(Opinion: Butler Law et al. v. Hon. Higgins/Winslow Memorial)