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JAYNE v. ROYAL JORDANIAN AIRLINES CORP.

July 15, 1980

Maxine Elizabeth JAYNE, Plaintiff,
v.
The ROYAL JORDANIAN AIRLINES CORP., a/k/a Alia et al., Defendants; Peggy Ann BUCHMAN et al., Plaintiffs, v. ARAB WINGS et al., Defendants; Peggy Ann BUCHMAN et al., Plaintiffs, v. ALIA, THE ROYAL JORDANIAN AIRLINES CORP. et al., Defendants; Peggy Ann BUCHMAN et al., Plaintiffs, v. ARAB WINGS et al., Defendants; Maxine Elizabeth JAYNE, Plaintiff, v. The ROYAL JORDANIAN AIRLINES CORP., a/k/a Alia et al., Defendants; ROYAL JORDANIAN AIRLINES, INC. et al., Plaintiffs, v. GATES LEARJET CORPORATION et al., Defendants



The opinion of the court was delivered by: BRODERICK

MEMORANDUM ORDER

I.

 These cases, or portions of them, *fn1" are before me for consolidated or coordinated pretrial proceedings by orders of the Judicial Panel on Multidistrict Litigation filed on October 16, 1978 and February 4, 1980. See 28 U.S.C. § 1407. In all actions except Nos. 78 Civ. 4964 and 78-M-0026, defendant Arab Wings Company Limited ("Arab Wings") has moved for orders dismissing the complaints for lack of personal jurisdiction. *fn2" See Rule 12(b)(2), Fed.R.Civ.P.

 For the reasons set forth below, Arab Wings' motions are denied.

 II.

 The cases here numbered 78 Civ. 4962 and 78 Civ. 4963 were originally commenced in the Circuit Court of Cook County, Illinois. They were removed to the District Court for the Northern District of Illinois, Eastern Division, and thereafter consolidated for all purposes prior to transfer here. The case here numbered 78 Civ. 4964 was commenced in the Northern District of Illinois. The cases here numbered 78 Civ. 585 and 78 Civ. 3493 were both commenced in this district.

 These five cases, in which defendant Arab Wings has moved for dismissal of the complaints for lack of personal jurisdiction, arise from the crash of an Arab Wings aircraft in Amman, Jordan on September 23, 1977. Plaintiffs Buchman and Jayne, citizens of Illinois and New York, respectively, sue for wrongful death and survival damages. Plaintiff Jayne sues as the administratrix (78 Civ. 585) and executrix (78 Civ. 4964) of the estate of her husband, an American citizen who died as a result of the crash. Plaintiff Buchman sues in her own and in her children's behalf and as administratrix of the estate of her husband, also an American citizen who died as a result of the crash. Defendant Arab Wings is a corporation organized under and existing by virtue of the laws of the Hashemite Kingdom of Jordan, with its principal place of business in Amman. Defendant Gates Learjet Corporation ("Gates"), which manufactured the Arab Wings aircraft, is a Delaware corporation with its principal place of business in Kansas.

 These are diversity actions, and the amenability of a defendant to suit in a diversity action is normally governed by the law of the state in which the federal district court sits. See Gelfand v. Tanner Motor Tours, Ltd., 385 F.2d 116, 119 (2d Cir. 1967), cert. denied, 390 U.S. 996, 88 S. Ct. 1198, 20 L. Ed. 2d 95 (1968). In determining the amenability of the defendant to suit in a multidistrict litigation, however, a transferee court must apply the law of the transferor forum, see In re Plumbing Fixtures Litigation, 342 F. Supp. 756, 758 (Jud.Pan.Mult.Lit.1972) (citing Van Dusen v. Barrack, 376 U.S. 612, 84 S. Ct. 805, 11 L. Ed. 2d 945 (1964)). Thus in determining whether there is personal jurisdiction over defendant Arab Wings, I must apply the law of New York to the cases commenced in New York and the law of Illinois to the cases commenced there.

 III.

 Service of process on Arab Wings in these actions was effected by service of the summons and complaint in New York and Illinois on corporate officers of ALIA, The Royal Jordanian Airlines Corporation ("ALIA"), also a defendant in these actions. ALIA, which is Jordan's government-owned airline, has appeared in these actions and concedes that it is subject to in personam jurisdiction in New York and Illinois.

 IV.

 I find the following facts for the limited purposes of these motions to dismiss. The findings are based on the affidavits, exhibits, and deposition testimony submitted: no hearing was held.

 Arab Wings was organized in 1975 as an air charter company engaged in the transportation of passengers and cargo between points outside the United States. Arab Wings holds no foreign air carrier permit from the United States Civil Aeronautics Board and has never had scheduled or unscheduled service to any United States point. Arab Wings is not licensed or otherwise authorized to do business in New York or Illinois, does not maintain offices in either state, does not own, directly or indirectly, any type of property in either state, and has never paid taxes in either state. Arab Wings does not maintain a telephone listing, business listing, mailing address, or bank account in either state. No lawsuits, other than the instant actions, are pending against Arab Wings in either state, and it has never filed a suit in either state. Arab Wings has never leased, occupied, or sold space in any facility located in either state. Meetings of its board of directors take place in Amman, and all officers, directors, and employees live outside New York or Illinois.

 In March 1975, ALIA was considering the formation of a jet charter service called "Arab Wings (Air Charters)" in the Middle East with the financial cooperation of certain Arab gulf states and the financial and technical cooperation of an American company engaged in a similar service. *fn3" A March 1975 memorandum suggested that ALIA and the American company each own 20%, the remaining 60% to be accounted for by other Jordanian entities and Arab gulf states. The American company would provide a marketing expert for three to six months to train a member of ALIA's marketing staff to be the service's marketing manager. ALIA's offices would be the general sales agents for all marketing and sales activities, the dispatch centers of ALIA and Arab Wings would be adjacent to each other, Arab Wings would be entitled to use ALIA's communications system, and an ALIA person was to be responsible for administration and accounts. Maintenance would be done by ALIA, and the American company would satisfy itself that ALIA could perform the maintenance.

 On June 25, 1975, Mr. Ali Ghandour, who is president and chairman of the board of both ALIA and Arab Wings, distributed a memorandum on Arab Wings' letterhead to all ALIA vice presidents, directors, and managers in which Arab Wings was introduced to them as "our business jet charter service" and as a wholly owned subsidiary of ALIA. About three months later, an advertisement in the Wall Street Journal stated that the service of Arab Wings was "backed by the full resources of ALIA. . . . Our aircraft are flown, maintained and dispatched under the direction of true professionals who are required to meet the same high standards of performance set for all ALIA people." The advertisement named ALIA's United States and Canadian manager as an avenue for reserving an Arab Wings aircraft. This information was generally repeated in a 1976 Arab Wings promotional brochure, prepared by a New York public relations firm. The brochure also indicated that ALIA agents could secure hotel accommodations and "ease airport red tape" for the customers of Arab Wings, and that an Arab Wings aircraft could be reserved "by contacting your local ALIA office or by telexing Flight Control Center in Amman, Jordan. An integral but distinct part of the ALIA headquarters, Arab Wings Flight Control Center can call upon the full resources of the airline and its agents." *fn4"

 The ownership and maintenance arrangements of Arab Wings appear later to have changed. In Arab Wings' 1976 annual report, the American company is referred to as having had a short-term equity in Arab Wings, *fn5" "but subsequently Arab Wings became totally Arab owned and was absorbed into the parent ALIA operation." Since 1977 Arab Wings has been an 88% subsidiary of ALIA. The remaining 12% is owned by the Sultanate of Oman.

 Regarding maintenance, the 1976 annual report states that "aircraft receive full service at Arab Wings' maintenance facility in Amman. . . . Arab Wings maintenance is further supported by the technical expertise of ALIA." The current Vice President of Finance and Administration of Arab Wings states that Arab Wings operates its own maintenance and service center at Amman airport, maintains its own supply of parts and ground equipment, has its own hangars, and does not use any of ALIA's facilities at Amman or other airports. Any occasional services rendered to Arab Wings by ALIA are charged against an account maintained by Arab Wings with ALIA. No services are gratuitous.

 The management of the two companies has a history of interrelatedness. The notes to the financial statements in Arab Wings' 1976 annual report contained a statement under Note 3, "Management of the Company," to the following effect: "According to an agreement between the Company and Alia The Royal Jordanian Airline, the latter assumes management of the Company in return for a fee equal to 30% of the company's annual salaries."

 ALIA's Vice President for Finance and Arab Wings' Vice President for Finance and Administration deny that a management agreement, written or oral, exists between ALIA and Arab Wings. The ALIA officer explained that what auditors referred to as a "management agreement" was, in fact, an "internal ALIA letter," never subscribed to or implemented by Arab Wings.

 In addition to Ali Ghandour, who is president and chairman of the board of both Arab Wings and ALIA, three other directors of Arab Wings, which has a five member board, are directors of ALIA.

 Key management personnel have been transferred between the two companies under ALIA's "secondment" program. Under this program, ALIA receives a fee for all transfers, and ALIA employees receive no benefits from ALIA while in the employ of Arab Wings, though they can return to ALIA in at least their departing rank. Thus ALIA's executive assistant to the president became Arab Wings' vice president for marketing and sales for one year beginning August 1, 1977. ALIA's dispatcher became Arab Wings' chief dispatcher from 1975 to 1978. ALIA's traffic officer became Arab Wings' dispatcher from 1975 to 1978. ALIA's superintendent of the finance department became Arab Wings' accounts manager in 1977 and continues as such. ALIA's vice president for special projects became Arab Wings' senior vice president for marketing and sales in 1978 and continues as such. *fn6"

 Arab Wings' day-to-day operations are performed independently by the staff and employees of Arab Wings, who are not employed by ALIA. Arab Wings and ALIA maintain separate books and records, and Arab Wings files a tax return in Jordan independent of ALIA. Arab Wings makes no financial or operational reports to ALIA and its profits do not inure to ALIA. Arab Wings and ALIA maintain separate offices in Amman and own their own fleets of aircraft, though the markings on the aircraft are similar in color and arrangement. Arab Wings employs and trains its own flight and cabin crews and does not "borrow" crews from ...


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