## Facts

- Frank Aries, an Arizona resident and experienced yacht owner, contracted with Palmer Johnson, Inc. (a Wisconsin yacht builder that marketed and solicited business nationally, including in Arizona) to build and sell him a custom Alden 75 sailing yacht.
- After an earlier financing-related cancellation, Palmer Johnson continued soliciting Aries through calls, mail, promotional materials, and advertising reaching Arizona.
- In August 1982, the parties executed a contract for a custom yacht (about $1.24 million) with a scheduled delivery date of June 25, 1983; Palmer Johnson repeatedly represented the build was on schedule.
- By early June 1983, Aries and his captain learned the yacht was far from complete; delivery occurred about five months late (November 23, 1983).
- After delivery, the yacht experienced significant defects and breakdowns, requiring extensive post-delivery repairs; evidence showed 168 repair days, with at least 50 days viewed as excessive by witnesses.
- Aries claimed the late delivery and repair downtime deprived him of personal and charter use during peak periods; evidence of daily use value ranged from $1,200 to $2,000, and the trial court used $1,000 per day.
- Aries sued for breach of contract, breach of express and implied warranties, and fraud (primarily tied to delivery-date and quality representations); Palmer Johnson counterclaimed for wrongful interference, which was resolved against Palmer Johnson on summary judgment (not appealed).

## Issues

1. Whether Arizona courts could exercise personal jurisdiction over Palmer Johnson consistent with due process where the seller solicited an Arizona buyer and the dispute arose from that relationship.
2. Whether Arizona law properly governed the dispute despite the yacht being built in Wisconsin.
3. Whether loss-of-use damages for late delivery and excessive repair time were recoverable and sufficiently proven, including whether recovery required Aries to rent a substitute yacht.
4. Whether attorney’s fees under A.R.S. § 12-341.01 could include paralegal time, and whether prejudgment interest was required on liquidated amounts.

## Decision

- The court affirmed personal jurisdiction, holding Palmer Johnson purposefully directed solicitation and communications into Arizona and the claims arose from that activity.
- The court affirmed application of Arizona law based on Arizona’s relationship to the parties’ dealings and its interest in protecting residents from contract breaches and fraud.
- The court affirmed liability for breach of contract, breach of warranties, and fraud, and largely affirmed the damages award, including loss-of-use damages.
- The court upheld loss-of-use damages measured by reasonable rental value, rejecting arguments that damages were speculative or barred because Aries did not rent a replacement yacht.
- The court affirmed the award of attorney’s fees to Aries but remanded for reconsideration of whether paralegal services should be included and for correction of prejudgment interest on liquidated sums.

## Legal Principles

- A nonresident defendant is subject to personal jurisdiction when it purposefully solicits business in the forum state and the plaintiff’s claims arise from that solicitation; jurisdiction must also be fair and reasonable under due process.
- Choice of law may favor the forum state when the transaction is substantially connected to the forum and the forum has a strong interest in regulating conduct harming its residents.
- Loss-of-use damages for delayed delivery or defective performance may be awarded when (a) the loss was within the parties’ contemplation at contracting and (b) the value of lost use is proven with reasonable certainty.
- Reasonable rental value is an acceptable measure of loss of use even if the injured party does not actually rent a substitute.
- In fixing loss-of-use amounts, a factfinder may apply conservative assumptions and limit recovery to periods supported by evidence (e.g., expected patterns of use; excessive repair time beyond what is reasonable).
- Attorney’s fees in Arizona contract actions may be awarded under A.R.S. § 12-341.01; whether paralegal time is compensable depends on whether it is part of the legal services reasonably billed.
- Prejudgment interest is generally required on liquidated claims (amounts ascertainable by calculation) from the time they are due.

## Conclusion

The court upheld Arizona jurisdiction and Arizona law, affirmed damages including loss-of-use based on reasonable rental value without requiring substitute rental, and sustained the fee award while remanding to determine inclusion of paralegal time and to correct prejudgment interest on liquidated amounts.


Aries v. Palmer Johnson, Inc., 153 Ariz. 250, 735 P.2d 1373 (Ct. App. 1987)