Carolyn Lazar, a citizen of Arizona, Plaintiff-Counter-Defendant-Cross-Defendant-Appellant,
Mark G. Kroncke, in his capacity as Administrator of the Estate of George Thomas Kroncke, a citizen of California, Defendant-Counter-Defendant-Appellee, and Charles Schwab & Co., Inc., a California corporation, Defendant-Counter-Claimant-Cross-Claimant.
and Submitted February 14, 2017 San Francisco, California
from the United States District Court for the District of
Arizona Douglas L. Rayes, District Judge, Presiding D.C. No.
A. Lazar (argued), The Geraci Law Firm, Irvine, California,
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
Before: Eugene E. Siler, Jr., [*] A. Wallace Tashima, and Andrew D.
Hurwitz, Circuit Judges.
Statute / Contracts Clause
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.
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
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.
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.
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.
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.
SENIOR CIRCUIT JUDGE:
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
AND PROCEDURAL BACKGROUND
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. § 14-2804. Schwab froze the IRA pending
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.
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.
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).
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.
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., 328 F.3d 1122, 1128 (9th Cir. 2003).
Transfer orders pursuant to 28 U.S.C. § 1406(a) are
reviewed for an abuse of discretion. King v.
Russell, 963 F.2d 1301, 1304 (9th Cir.1992). Stays of
discovery pending resolution of the motion to dismiss are
also reviewed for an abuse of discretion. Alaska Cargo
Transp., Inc. v. Alaska R.R. Corp., 5 F.3d 378, 383 (9th
Enforceability of the IRA's Choice of Law Provision under
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.
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,