                      NOTICE: NOT FOR OFFICIAL PUBLICATION.
  UNDER ARIZONA RULE OF THE SUPREME COURT 111(c), THIS DECISION IS NOT PRECEDENTIAL
                  AND MAY BE CITED ONLY AS AUTHORIZED BY RULE.




                                     IN THE
              ARIZONA COURT OF APPEALS
                                 DIVISION ONE


        JTF AVIATION HOLDINGS INC, et al., Plaintiffs/Appellants,

                                         v.

            CLIFTONLARSONALLEN LLP, Defendant/Appellee.

                              No. 1 CA-CV 18-0530
                                FILED 7-2-2019


            Appeal from the Superior Court in Maricopa County
                           No. CV2017-003641
                 The Honorable Daniel G. Martin, Judge

                                   AFFIRMED


                                    COUNSEL

Aiken, Schenk, Hawkins & Ricciardi, PC, Phoenix, AZ
By Joseph A. Schenk, Heather A. Macre
Co-Counsel for Plaintiffs/Appellants

Debus, Kazan & Westerhausen, LTD, Phoenix, AZ
By Larry Debus
Co-Counsel for Plaintiffs/Appellants

Moss & Barnett, PA, Minneapolis, MN
By Thomas J. Shroyer, Charles E. Jones, Taylor D. Sztainer, Joshua P. Oie
Co-Counsel for Defendant/Appellee

Renaud Cook Drury Mesaros PA, Phoenix, AZ
By John A. Klecan
Co-Counsel for Defendant/Appellee
                  JTF, et al. v. CLIFTONLARSONALLEN
                             Decision of the Court



                        MEMORANDUM DECISION

Judge Jennifer M. Perkins delivered the decision of the Court, in which
Presiding Judge Diane M. Johnsen and Judge Michael J. Brown joined.


P E R K I N S, Judge:

¶1            JTF Aviation Holdings, Inc. (“JTF”) and Jeremy T. Freer
appeal the superior court’s order barring their claims for professional
negligence, negligent misrepresentation, and breach of fiduciary duty as
untimely under a contractual limitation period. Because our resolution of
only one issue from Freer’s appeal merits publication, we have addressed
that argument in a separate opinion issued simultaneously with this
memorandum decision. See Ariz. R. Sup. Ct. 111(h). For the following
reasons, and for those reasons addressed in our opinion, we affirm.

           FACTUAL AND PROCEDURAL BACKGROUND

¶2           Freer is the founder, president, and sole shareholder of JTF. In
August 2013, CliftonLarsonAllen (“CLA”), a national accounting firm,
agreed to provide JTF with a billing, collection, and revenue-cycle analysis.
The scope of work was memorialized in an engagement letter dated August
15, 2013. On December 30, 2013, JTF and CLA entered into a second
engagement letter (the “December Engagement Letter”), which provided
that CLA would audit JTF’s consolidated financial statements and perform
other non-audit services. In the letter, JTF’s management agreed it would
be “responsible for the preparation and fair presentation of the financial
statements in accordance with [the United States generally accepted
accounting principles (“GAAP”)].”

¶3             The December Engagement Letter stated that “any Dispute
will be governed by the laws of the State of Minnesota, without giving effect
to choice of law principles” and included the following provision:

      The parties agree that, notwithstanding any statute or law of
      limitations that might otherwise apply to a Dispute, any
      action or legal proceeding by you against us must be
      commenced within twenty-four (24) months (‘Limitation
      Period’) after the date when we deliver our final audit report
      under this agreement to you, regardless of whether we do



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                  JTF, et al. v. CLIFTONLARSONALLEN
                             Decision of the Court

       other services for you relating to the audit report, or you shall
       be forever barred from commencing a lawsuit or obtaining
       any legal or equitable relief or recovery. The Limitation
       Period applies and begins to run even if you have not suffered
       any damage or loss, or have not become aware of the
       existence or possible existence of a Dispute.

The letter defined “Dispute” as “[a]ny disagreement, controversy, or claim
. . . that may arise out of any aspect of [CLA’s] services or relationship with
[JTF].”

¶4            On February 3, 2014, CLA delivered its audit report for 2013
pursuant to the December Engagement Letter. The report was addressed to
“Shareholder,” i.e., Freer.

¶5            In June 2014, Vistria Group, LP (“Vistria”), through its
subsidiary Aviation West Charters, LLC, as purchaser, entered an Asset
Purchase Agreement with JTF, as seller, along with Freer, as JTF’s
shareholder, for the sale of substantially all of JTF’s assets for $80,000,000,
plus assumed liabilities. In the agreement, JTF warranted to Vistria that
JTF’s financial statements “were prepared in accordance with GAAP
consistently applied and present fairly the financial position and results of
operations.”

¶6             In September 2014, Vistria filed a complaint in Delaware state
court (the “Delaware Lawsuit”) against Freer, JTF, and JTF’s chief financial
officer, Richard Larson, alleging fraudulent inducement, breach of contract,
breach of warranty, breach of good faith and fair dealing, and civil
conspiracy. Vistria alleged the defendants fraudulently induced it to
purchase JTF at an inflated price because the company financial statements
on which it relied did not conform to GAAP. It asserted Freer and Larson
inflated JTF’s 2013 earnings before interest, taxes, depreciation, and
amortization (“EBITDA”) to $40,800,000, when in reality, JTF’s EBITDA
amounted only to $11,000,000.

¶7            In September 2016, Vistria settled its claims against Freer and
the other defendants in exchange for payment of $4,850,000.

¶8            On April 10, 2017, Freer and JTF sued CLA in Maricopa
County Superior Court, alleging that professional negligence, negligent
misrepresentation, and breach of fiduciary duty by CLA gave rise to the
claims against them in the Delaware Lawsuit. In its answer, CLA asserted
that applicable statutes of limitations and contractual limitations periods
barred the claims.


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                   JTF, et al. v. CLIFTONLARSONALLEN
                              Decision of the Court

¶9            On cross motions for summary judgment, the superior court
held that Freer was bound by the 24-month contractual limitations period
in the December Engagement Letter, and ruled the limitation provision
barred both plaintiffs’ claims. Freer and JTF timely appealed.

                                DISCUSSION

¶10            We review de novo the superior court’s grant of summary
judgment and application of the law. Andrews v. Blake, 205 Ariz. 236, 240,
¶ 12 (2003). Summary judgment is proper when no genuine issues of
material fact exist and the moving party is entitled to judgment as a matter
of law. Ariz. R. Civ. P. 56(a); Orme Sch. v. Reeves, 166 Ariz. 301, 309–10 (1990).
We construe the facts and reasonable inferences in the light most favorable
to the opposing party. Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement
Masons Local No. 395 Pension Tr. Fund, 201 Ariz. 474, 482, ¶ 13 (2002). We
may affirm the entry of summary judgment if it is appropriate for any
reason. See Guo v. Maricopa County Med. Ctr., 196 Ariz. 11, 15, ¶ 16 (App.
1999).

I.            Minnesota Law Applies to the Tort Claims.

¶11              In Arizona, “[a] general principle of contract law is that when
parties bind themselves by a lawful contract, the terms of which are clear
and unambiguous, a court must give effect to the contract as written.”
Grosvenor Holdings, L.C. v. Figueroa, 222 Ariz. 588, 593, ¶ 9 (App. 2009)
(quoting Grubb & Ellis Mgmt. Serv., Inc. v. 407417 B.C., L.L.C., 213 Ariz. 83,
86, ¶ 12 (App. 2006)). Likewise, in Minnesota, “when a contract is
unambiguous, a court gives effect to the parties’ intentions as expressed in
the four corners of the instrument, and clear, plain, and unambiguous terms
are conclusive of that intent.” Knudsen v. Transp. Leasing/Contract, Inc., 672
N.W.2d 221, 223 (Minn. App. 2003) (citing Hyperbaric Oxygen Therapy Sys.,
Inc. v. St. Joseph Med. Ctr., Inc., 683 N.E.2d 243, 247 (Ind. App. 1997)).

¶12          Nevertheless, JTF and Freer argue that the Minnesota choice
of law provision should not apply to their tort claims against CLA. JTF
relies on Winsor v. Glasswerks PHX, LLC, 204 Ariz. 303 (App. 2003), and
Manetti-Farrow, Inc. v. Gucci America, Inc., 858 F.2d 509 (9th Cir. 1988), for
the proposition that the choice of law provision only applies to contract
claims.

¶13           In Winsor, the parties’ contract stated “[t]h[e] Agreement is to
be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and to be performed wholly within such
State, without regard to the conflicts of laws principles thereof.” Winsor, 204


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                   JTF, et al. v. CLIFTONLARSONALLEN
                              Decision of the Court

Ariz. at 306, ¶ 8. Likewise, the contract in Manetti-Farrow designated
Florence, Italy as the forum for resolving disputes regarding
“interpretation” or “fulfillment” of the parties’ contract. Manetti-Farrow,
Inc., 858 F.2d at 513–14.

¶14           The choice of law provisions at issue in Winsor and Manetti-
Farrow both referenced the parties’ contract, while the broader provision
here specifically applies to “any Dispute,” without limitation. Moreover, the
Manetti-Farrow court noted that “forum selection clauses can be equally
applicable to contractual and tort causes of action.” Manetti-Farrow, 858 F.2d
at 514. Here, the plain language of the December Engagement Letter is
unambiguous and does not limit the applicability of the choice of law
provision to contract claims, unlike in the Winsor and Manetti-Farrow cases.
Thus, the superior court correctly determined that Minnesota law applies.

II.    The Contractual Limitations Provision Is Enforceable Under
       Minnesota Law.

¶15           JTF and Freer argue the 24-month limitation period mandated
by the December Engagement Letter is ineffective under Arizona and
Minnesota law. As stated above, Minnesota law applies to the tort claims.
In addition, based on the reasoning in our separate opinion, Freer is bound
by the choice of law provision in the December Engagement Letter and
Minnesota law applies to his claims. Because we determine Minnesota law
applies, we need not analyze the issue under Arizona law.

¶16            In Minnesota, the statute of limitations for claims for
professional negligence, negligent misrepresentation, and breach of
fiduciary duty is six years. Minn. Stat. § 541.05, subd. 1(1), (5). The limitation
period begins to run when the cause of action accrues, unless a statute
provides otherwise. Minn. Stat. § 541.01. A cause of action generally accrues
when a party may bring suit without dismissal for failure to state a claim.
Levin v. C.O.M.B. Co., 441 N.W.2d 801, 803 (Minn. 1989). The statute is not
tolled by ignorance of the cause of action unless fraudulent concealment is
involved. Herrmann v. McMenomy & Severson, 590 N.W.2d 641, 643 (Minn.
1999). In that case, the limitations period is tolled until the concealment is
or could have been discovered through reasonable diligence. Wild v. Rarig,
234 N.W.2d 775, 795 (Minn. 1975).

¶17           Minnesota generally permits contracting parties to “limit the
time within which legal claims may be brought provided there is no statute
specifically prohibiting the use of a different limitations period in such a
case and the time fixed is not unreasonable.” Davies v. Waterstone Capital



                                        5
                  JTF, et al. v. CLIFTONLARSONALLEN
                             Decision of the Court

Mgmt., L.P., 856 N.W.2d 711, 717–18 (Minn. App. 2014) (quoting Peggy Rose
Revocable Trust v. Eppich, 640 N.W.2d 601, 606 (Minn. 2002)); see also Henning
Nelson Const. Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 650–51
(Minn. 1986); Prior Lake State Bank v. National Sur. Corp., 80 N.W.2d 612, 616
(Minn. 1957). “Whether the contractual limitations period is reasonable
depends upon the particular facts presented; what is acceptable in one case
may be objectionable in another.” Peggy Rose, 640 N.W.2d at 606.

¶18            JTF and Freer rely on Peggy Rose to argue the December
Engagement Letter’s 24-month contractual limitations period is
unreasonable. However, Peggy Rose is distinguishable because it addressed
a fraud claim, for which Minnesota has enacted a statutory discovery rule
not applicable to JTF and Freer’s claims. A real estate agreement provided
that the parties needed to request arbitration within 18 months after closing,
or they would forfeit any claims. Id. at 602. Two years after the closing, the
buyers sued for fraud after they discovered significant water damage to
their home. Id. at 609. The Minnesota Supreme Court held the contract
provision was not reasonable because it was inconsistent with a statute
under which a fraud claim does not accrue until discovery of the facts. Id.
at 607; see Minn. Stat. § 541.05(1)(6). The court concluded that under the
facts presented, i.e. a home sale where pre-existing water problems led to
structural damage, the extent of which could only be discovered by
removing portions of the home’s exterior, the 18-month contractual
limitation was “not within the bounds of reasonableness when applied to
the claim of fraud.” Id. at 609. Moreover, the court explained that “there is
a difference between merely shortening the time within which an existing
claim may be brought and altering the date on which a cause of action
accrues.” Id. at 610.

¶19            By contrast, in Davies, the plaintiff sued his former employer
for wrongful termination, a cause of action with no attendant discovery rule
in Minnesota law. Minn. Stat. §§ 541.06(1)(1), 541.07. The employment
agreement stated that “[a]ny request for arbitration must be filed with the
American Arbitration Association within ninety (90) days of the events
giving rise to the claim.” Davies, 856 N.W.2d at 713–14. The plaintiff did not
file a demand for arbitration until 273 days after he was terminated. Id. at
714.

¶20           The Davies court, distinguishing Peggy Rose, held that under
the totality of the circumstances, the 90–day limitations period was not
unreasonable. Davies, 856 N.W.2d at 718–19. The court noted that the
plaintiff was a sophisticated party who negotiated the terms of his
employment, and there was nothing in the record to suggest the 90-day


                                      6
                  JTF, et al. v. CLIFTONLARSONALLEN
                             Decision of the Court

limit precluded a sufficient opportunity to investigate and file an action. Id.
at 719. It did not matter that the statutory limitations periods governing the
former employee’s claims were significantly longer than 90 days (six years
for breach of contract and two years for defamation). Id.

¶21            As in Davies, the 24-month contractual limitation period in
this case is reasonable. CLA and JTF’s attorney negotiated the December
Engagement Letter. Further, nothing in the record suggests the 24-month
limit precluded a sufficient opportunity to investigate and file an action.
Davies, 856 N.W.2d at 719. Indeed, JTF and Freer knew there might be a
problem with CLA’s performance less than a year after CLA delivered the
final audit report when Vistria sued them alleging JTF’s financial
statements did not comply with GAAP.

¶22            We are not persuaded by JTF and Freer’s arguments that the
24-month contractual limitation could have required a suit to be filed before
a loss could be ascertained. Even assuming the amount of damage from the
alleged negligence and breach of duty could not be determined within the
24-month contractual limitation period, under Minnesota law, limitations
statutes may bar a cause of action even when damage is not discovered until
after the statute of limitations has run. Antone v. Mirviss, 720 N.W.2d 331
(Minn. 2006); Herrmann, 590 N.W.2d 641.

¶23            In Herrmann, a law firm prepared an employee benefit
pension plan and trust for the clients. Herrmann, 590 N.W.2d at 642. The law
firm failed to advise the clients that tax laws prohibited them certain
transactions with the plan, and the clients later engaged in those prohibited
transactions. Id. The Herrmann court held the clients’ legal malpractice claim
accrued when they engaged in prohibited transactions, even though they
did not discover the transactions were prohibited until six years later. Id.

¶24           Likewise, in Antone, the Minnesota Supreme Court held that
a malpractice claim against an attorney for negligently drafting a prenuptial
agreement accrued on the client’s wedding date, even though the client was
unaware of the cause of action until his divorce proceedings many years
later. Antone, 720 N.W.2d at 338. The court concluded that the plaintiff
suffered some damage on the date of his marriage. Id.

¶25            We conclude that under Minnesota law, the contractual
limitation period in the December Engagement Letter was not unreasonable
as applied to JTF and Freer’s claims. Therefore, JTF and Freer were required
to bring their lawsuit against CLA within 24 months of February 3, 2014,
the date CLA delivered the final audit report. JTF and Freer did not file their



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                  JTF, et al. v. CLIFTONLARSONALLEN
                             Decision of the Court

lawsuit until April 10, 2017. Accordingly, the superior court correctly
determined that JTF and Freer’s lawsuit is time-barred.

¶26            Finally, JTF and Freer argue, for the first time in their reply
brief, that the 24-month contractual limitation is analogous to a statute of
repose rather than a statute of limitations. However, we do not consider
arguments made for the first time in a reply brief. Dawson v. Withycombe,
216 Ariz. 84, 111, ¶ 91 (App. 2007). In any event, the new argument would
not change our conclusion, given that reasonable contractual limitation
periods are enforceable under Minnesota law. Herrmann, 590 N.W.2d at 642;
Antone, 720 N.W.2d at 338.

                               CONCLUSION

¶27           For the foregoing reasons and for those stated in the opinion
issued this date, we affirm the superior court’s grant of summary judgment
in favor of CLA on all claims.




                          AMY M. WOOD • Clerk of the Court
                          FILED: AA




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