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Scott v. Kemp - 3/5/2020

Arizona Court of Appeals Division One holds that non-resident officers, managers, and partners of a nationwide network of skilled-nursing and other long-term care facilities are subject to personal jurisdiction in Arizona.


Various corporate officers, managers, or partners, all Texas residents, of an interrelated network of Texas-based limited liability companies and partnerships and entities that ran multiple skilled nursing homes and other long-term care facilities in Arizona and elsewhere were sued by the estate of one of their Arizona residents on a claim of negligence.  The officers, managers, and partners filed a motion to dismiss for lack of jurisdiction.  The superior court denied the motion.  The officers, managers, and partners requested special action relief.

The Court of Appeals granted review and denied relief.  The Court of Appeals first held that the fiduciary shield doctrine, adopted by some courts, is inconsistent with Arizona Rule of Civil Procedure 4.2(a), which allows personal jurisdiction to the extent of the United States and Arizona constitutions.  Under the fiduciary shield rule, there must be reason to pierce the corporate veil before a person’s mere association with a corporate entity subjects them to jurisdiction.  The Court of Appeals followed the Ninth Circuit in determining that the corporate shield is not an issue of constitutional dimensions.  The Court of Appeals also rejected the argument that simply because a decision is made nationwide or companywide, it cannot be a purposeful contact directed at Arizona, as necessary to find specific personal jurisdiction. 

The Court of Appeals then determined whether each officer, manager, and partner had sufficient contacts with Arizona related to the specific cause of action to allow the exercise of personal jurisdiction.  Two of the individuals were the co-managers of the general partnership that held the license to operate nursing homes in Arizona, and signed documents necessary for licensure in Arizona and for Medicare payments for Arizona operations.  Arizona allowed their partnership to operate care facilities because there were real people behind the partnership to take responsibility.  The co-managers had regular, ongoing duties related to operating the general partnership and maintaining the license.  The remaining individuals were the managers of a limited liability company that held a contract to provide managerial services at the interrelated networks’ facilities, and only those facilities.  By entering into a contract to provide managerial services in Arizona to the Arizona residents of the facilities, these individuals too were subject to personal jurisdiction. 

Judge McMurdie delivered the unanimous opinion of the court.  Presiding Judge Thumma and Judge Perkins joined.

Posted by: Emma J. Cone-Roddy

 

Posted On: 4/6/2020