Armstrong v. Aramco Services Co.

• Decision Date: 09 July 1987
• Docket Number: No. 1,CA-CIV,1
• Citation: 155 Ariz. 345,746 P.2d 917
• Parties: Barbara M. ARMSTRONG and Russell W. Armstrong, her husband, Plaintiffs-Appellants, v. ARAMCO SERVICES COMPANY, a Delaware corporation and Arabian-American Oil Company, a Delaware corporation, Defendants-Appellees. 8657.
• Court: Arizona Court of Appeals

Page 917

746 P.2d 917

155 Ariz. 345

Barbara M. ARMSTRONG and Russell W. Armstrong, her husband, Plaintiffs-Appellants, v. ARAMCO SERVICES COMPANY, a Delaware corporation and Arabian-American Oil Company, a Delaware corporation, Defendants-Appellees.

No. 1 CA-CIV 8657.

Court of Appeals of Arizona,

Division 1, Department A.

July 9, 1987.

Reconsideration Denied Sept. 22, 1987.

Review Denied Jan. 5, 1988.

[155 Ariz. 346] Langerman, Begam, Lewis and Marks by Frank Lewis, and Wendi A. Sorensen, Phoenix, for plaintiffs-appellants.

Fennemore, Craig, von Ammon, Udall & Powers, P.C. by Timothy Berg, Gregory Osborne, and E.J. Kotalik, Jr., Phoenix, for defendants-appellees.

OPINION

CONTRERAS, Presiding Judge.

This is an appeal from the trial court's orders granting appellees' motions to dismiss. Two issues are presented for our review: (1) whether the trial court had personal jurisdiction over appellees Aramco Services Company (ASC) and Arabian-American Oil Company (Aramco), and (2) whether appellants' claim against Aramco is barred by the statute of limitations. We conclude that the trial court properly dismissed the complaint based on lack of personal jurisdiction over ASC and Aramco, and affirm the trial court's decision. Therefore, we do not decide whether the applicable statute of limitations had run as to Aramco.

Appellant Barbara Armstrong was injured on May 2, 1982, when she fell on a sidewalk in Dhahran, Saudi Arabia, while residing in Saudi Arabia with her husband, Russell Armstrong, an Aramco employee. Russell Armstrong was recruited by ASC for employment with Aramco in Saudi Arabia after answering an advertisement in a Phoenix newspaper, placed by an advertising agency under contract with ASC. On April 12, 1984, the Armstrongs filed a complaint against ASC in Maricopa County Superior Court, alleging that Mrs. Armstrong's injuries were caused by ASC's negligence in maintaining the sidewalk in Dhahran. On May 16, 1984, ASC filed a motion to dismiss the complaint, arguing that the court lacked personal jurisdiction over ASC.

On August 16, 1984, the Armstrongs filed a motion for leave to file an amended complaint, which was granted by minute entry dated September 26, 1984. The Armstrongs' first amended complaint, which named Aramco as an additional defendant, was filed on November 16, 1984. Aramco then filed a motion to dismiss the first amended complaint, based on lack of personal jurisdiction over Aramco and expiration of the applicable statute of limitations. In their respective motions to dismiss, ASC and Aramco contended that they were neither doing business nor had caused an event to occur in Arizona.

In support of their claims that they were not doing business in Arizona so as to subject themselves to the jurisdiction of the Arizona courts, ASC and Aramco relied on affidavits which established the following facts. ASC is a Delaware corporation with its principal place of business in Houston, Texas. ASC is qualified to do business in Arizona; however, it owns no facilities in Arizona, has no employees in Arizona, maintains no bank accounts, books, or records in Arizona, and has no Arizona mailing address or telephone listings. Additionally, ASC solicits no business in Arizona, owns no real or personal property located in Arizona, has no offices in Arizona, and has no goods or property stored or warehoused or on consignment in Arizona. Russell Armstrong has never been an employee of ASC, and ASC has never owned, leased, controlled, maintained, or employed any persons to maintain, any property in Dhahran, Saudi Arabia, including the sidewalk where Barbara Armstrong's injuries allegedly occurred.

Aramco is a Delaware corporation with its principal place of business in Saudi Arabia. Aramco owns no facilities in Arizona, employs no one within Arizona, maintains no bank accounts, books, or records in Arizona, and has no mailing address or telephone listings in Arizona. ASC is a wholly owned subsidiary of Aramco. ASC performs services for Aramco pursuant to a service agreement, which include personnel recruitment and preparation for employment with Aramco. ASC and Aramco are required to pay each other for any services rendered, and to keep separate records and books. ASC and Aramco perform all services as independent contractors.

ASC has recruited Arizona residents for eventual employment with Aramco in Saudi Arabia. The contract of employment between these recruits and Aramco is not executed until certain preconditions are met, the fifth of which requires the recruit to proceed to Texas to complete the employment process. Advertisements for employment with Aramco, requiring response of the candidates to ASC, appeared in national publications available in Arizona from 1980 to 1982. Additionally, nine advertisements were placed in Arizona newspapers by an independent advertising agency under contract with ASC in 1980 and 1981.

Between January of 1978 and December of 1980, ASC transferred 11 employees to Arizona to work as part of a project management team on a project at Honeywell, Inc. in Phoenix. These employees were in Arizona on a one-time temporary basis; they did not become Arizona residents during their stay and did not generate income within Arizona. Between 1982 and 1984, ASC had contracts with 16 independent contractors who reside in Arizona, including a recruitment consultant.

The trial court granted ASC's motion to dismiss for lack of personal jurisdiction and granted Aramco's motion to dismiss based on lack of personal jurisdiction and the expiration of the statute of limitations. The Armstrongs appeal from the trial court's orders granting both motions to dismiss.

PERSONAL JURISDICTION

On appeal, the Armstrongs argue that the trial court improperly granted ASC's and Aramco's motions to dismiss based on lack of personal jurisdiction for two reasons. First, the Armstrongs argue that another judge's ruling that Arizona courts have personal jurisdiction over ASC in a prior case, unrelated to the present action but involving the same parties (Maricopa County Cause No. C-507541), is dispositive of the issue in this case. Second, they argue that ASC's activities in Arizona meet the "doing business" requirements of Arizona's long-arm rule and comport with due process. They contend that jurisdiction can be imputed to Aramco based on ASC's activities because ASC is Aramco's agent, or alternatively, its alter ego.

Effect of Prior Ruling

The Armstrongs seem to imply that the prior ruling in C-507541 has some res judicata or collateral estoppel effect; however, they cite no legal authority to support this argument. The ruling in question arose out of another suit brought by the Armstrongs in Maricopa County Superior Court against ASC and Atlas Van Lines involving issues of breach of contract, breach of bailment for hire, and negligence in connection with alleged damage to the Armstrongs' personal property while in storage. Judge Voss denied ASC's motion to dismiss for lack of personal jurisdiction in that suit. For the following reasons, we reject the Armstrongs' contention that the prior ruling is dispositive.

The doctrine of res judicata precludes parties from relitigating a cause of action that has been finally determined by a court of competent jurisdiction. Bernhard v. Bank of America National Trust and Sav. Ass'n, 19 Cal.2d 807, 809, 122 P.2d 892, 894 (1942). The rule is based upon the public policy of limiting litigation by preventing a party who has had one fair trial on an issue from again drawing it into controversy. Id. For a prior ruling to have res judicata effect, the following three factors must be present: 1) the issue decided in the prior adjudication must be identical to the one presented in the action in question; 2) the prior ruling must be a final judgment on the merits; and 3) the party against whom the plea is asserted must be a party or in privity with a party to the prior adjudication. Spettigue v. Mahoney, 8 Ariz.App. 281, 283, 445 P.2d 557, 559 (1968) (quoting Bernhard, 19 Cal.2d at 810, 122 P.2d at 895).

The case presently before us clearly does not involve relitigating a cause of action or an issue of liability that has been finally determined on the merits at trial. It is undisputed that the issues of liability in the two cases are totally unrelated. While some of the same facts and arguments may be relevant in both cases to determining whether ASC engaged in continuous and systematic business activities in Arizona, the connection between ASC's Arizona contacts and the cause of the action in each case differs. Thus, although the parties are the same, the facts relevant to a determination of jurisdiction in each case are not. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (relationship between defendant and forum must be such that it is "reasonable ... to require the corporation to defend that particular suit "). Additionally, the order denying ASC's motion to dismiss in the prior suit was not a final judgment on the merits. Therefore, ASC was not collaterally estopped from asserting lack of jurisdiction, and the prior ruling has no res judicata effect. See Arizona Downs v. Superior Court, 128 Ariz. 73, 76, 623 P.2d 1229, 1232 (1981).

Relationship Between Long-Arm Rule and Due Process

Next, the Armstrongs argue that this case falls within Arizona's long-arm rule, Rule 4(e)(2), Arizona Rules of Civil Procedure. That rule allows Arizona courts to exercise jurisdiction over a foreign corporation doing business in the state or over one who has caused an event to occur in the state out of which the claim which is the subject of the complaint arose. To be "doing business" in Arizona for purposes of Rule 4(e)(2), the corporation must have engaged in a systematic and continuous course of conduct in the state. Rowell Laboratories v. Superior Court, 117 Ariz. 400, 402, 573 P.2d 91, 93 (App.1977). The plaintiff has the...