Hunt v. BP Exploration Co.(Libya) Ltd.

• Decision Date: 23 June 1980
• Docket Number: No. CA-3-75-0715-G.,CA-3-75-0715-G.
• Citation: 492 F. Supp. 885
• Parties: Nelson Bunker HUNT v. BP EXPLORATION COMPANY (LIBYA) LTD.
• Court: U.S. District Court — Northern District of Texas

492 F. Supp. 885

Nelson Bunker HUNT v. BP EXPLORATION COMPANY (LIBYA) LTD.

No. CA-3-75-0715-G.

United States District Court, N. D. Texas, Dallas Division.

June 23, 1980.

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Ivan Irwin, Jr., A. B. Conant, Jr. of Shank, Irwin, Conant, Williamson & Grevelle, Dallas, Tex., for plaintiff.

Mark Martin, Patrick F. McGowan, James K. Peden, Strasburger & Price, Dallas Tex., Sullivan & Cromwell, Robert MacCrate, James H. Carter, D. Stuart Meiklejohn, New York City, for defendant.

MEMORANDUM OPINION AND ORDER

PATRICK E. HIGGINBOTHAM, District Judge.

Nelson Bunker Hunt ("Hunt"), an American citizen, asks this court to declare that British Petroleum Exploration Company (Libya) Ltd. ("BP"), an English company, is indebted to him and that he owes BP nothing. BP has moved for summary judgment, asserting that Hunt's requested declaration cannot be granted because of a judgment entered in England by the High Court of Justice, Queen's Bench Division, Commercial Court, Cause 1975 B No. 4490 on June 30, 1978 (first part) and on March 26, 1979 (second part). Hunt replies that the English judgment is not entitled to recognition.

The court finds that the English judgment is entitled to recognition and that such recognition would bar most if not all of Hunt's claims in this litigation, but because the English judgment is on appeal the court cannot grant partial or complete summary judgment in favor of BP. The court stays proceedings in this case until appeals of the English judgment have been exhausted.

I. Background of This Litigation

This parallel London/Dallas litigation stems from a relationship between BP and Hunt with respect to an oil field located in Concession No. 65 in Libya. In 1957, Libya granted Hunt Concession No. 65 in the province of Cyrenaica. In June, 1960, Hunt entered into a letter agreement as to Concession No. 65 with BP accompanied by an Operating Agreement, a proposed form of Assignment, and a specification of accounting procedures. The 1960 Agreement provided that Hunt would convey to BP an undivided one-half interest in Concession No. 65, plus a production payment, in return for BP making certain initial payments and being initially responsible for costs of exploration and development on Concession No. 65. BP was entitled to reimbursement of 3/8 of Hunt's ½ of the production payment. Clause 6 of the Letter Agreement provided that:

It is specifically understood and agreed that Hunt shall have no personal liability to repay the sums required in the Operating Agreement and this letter agreement to be advanced by BP for Hunt's account or paid to Hunt, but BP's right to recover any such sums which BP is required to pay or advance for Hunt's account shall be limited to recovery solely out of three-eighths ( 3/8 ) of Hunt's half of the production, and in the manner specified under Section 9 of the Operating Agreement, if, as and when provided, saved and delivered at the Libyan sea terminal.

As contemplated, Hunt in November, 1960, assigned the half interest and the production payment to BP. The Assignment provided, in part:

... Hunt hereby assigns to BP an undivided one-half (½) interest and title in and to the Concession, subject to the rights and obligations contained in the Concession.

. . . . . .

BP shall be entitled to take and receive three-eighths ( 3/8 ) of Hunt's share of the oil production from the Concession delivered f. o. b. Libyan seaboard until BP has received a quantity of crude oil equal in value to one hundred and twenty-five per cent (125%) of all costs and expenses advanced by BP for Hunt's account on exploration, development or any other work performed in or in connection with the Concession.

BP struck oil in the conceded land, and developed what came to be known as "Sarir field." The exploration and development phases of the field were completed by the end of 1966, and export of oil began in January 1967. BP then received the first "reimbursement" oil toward repayment of the "farm-in" payments and of the expenses incurred on Hunt's behalf in the development stage 1960-1966.

In June 1967, the parties by a "Memorandum of Agreement" noted that "the Letter Agreement dated 24th June 1960 and draft Operating Agreement between Nelson Bunker Hunt ("Hunt") and BP Exploration Company (Libya) Ltd. ("BP") are agreed to be amended as set out below with effect from 1st July 1967." It provided for certain reductions in BP's obligations and, in lieu of the 125% formula, set the total amount of oil that BP was entitled to under the production payment at 50 million barrels limited to 18,750 barrels per day of "reimbursement oil," or 3/8 of Hunt's share of daily production, whichever was less.

In December, 1971, the Libyan government nationalized BP's interest in Concession No. 65 and announced its proposed transfer to the Arabian Gulf Exploration Company (AGECO). AGECO is a joint stock company whose company was to be wholly owned by (Libya's) National Oil Corporation.

On May 24, 1973, Libya informed Hunt's representative in Benghazi, Libya, that no further oil would be delivered to Hunt's account. On June 11, 1973, the Libyan government passed a law purporting to nationalize all of Hunt's rights in Concession No. 65 and to transfer them to AGECO.

On November 20, 1974, BP reached an agreement with the Libyan government concerning the expropriation of BP's interests and other legal disputes between them. On May 19, 1975, Hunt and Libya entered into a similar settlement agreement. The Hunt-Libya agreement provided, among other things, that "Libya acknowledges full and final settlement of all claims it may have as successor in interest to BP Exploration Company (Libya) Limited."

On May 2, 1975, BP instituted suit in England, relying primarily on Section 1(3) of the Law Reform (Frustrated Contracts) Act, 1943 ("Act"). BP's claim under the Act was that its contract with Hunt was frustrated when BP's interest in the concession was expropriated, and that, because of BP's contractual performance before expropriation, Hunt obtained a valuable benefit. Hunt declined to accept service of the writ issued on May 2, 1975 through agents and solicitors in the U.K. and attempts to serve him personally during a short visit also provided unsuccessful. On June 19, 1975, the High Court of Justice, Queen's Bench Division, Commercial Court, granted BP's request for service by mail.

On July 23, 1975, Hunt sought dismissal of BP's suit on the basis that the court lacked jurisdiction. On November 4, 1975, Mr. Justice Kerr overruled the objection, concluding that the leave to serve out of the jurisdiction was properly given and Hunt's application to set aside service of notice of the writ and of all subsequent proceedings failed. Hunt filed a Notice of Appeal but did not pursue it further.

After filing of the English action but before service of process, Hunt filed this suit. Hunt sought "a declaration, based upon his contracts with BP that provided for `no personal liability', that he owes no monies to BP, and that neither the Libyan expropriation of BP's interests nor any other claims by BP abrogated this contractual protection." Memorandum in Opposition to Defendant's Motion for Summary Judgment, at 5-6. BP moved to dismiss the complaint or in the alternative to stay the proceedings. Judge Hill of this Court overruled BP's motion on March 17, 1976. After further pretrial maneuverings, Hunt filed an amended complaint seeking a declaratory judgment limiting the liability of Hunt to BP and affirmative claims (i) under the Act (paragraphs 24, 25, and 26 of the Amended Complaint), (ii) that BP did not diligently develop the field or produce the field at its maximum efficient rate (paragraphs 28 and 29) "due diligence," (iii) that BP wrongly refused to seek resolution of its differences with Libya (paragraph 30), (iv) that BP breached its obligation to provide oil under clause 10 of the Letter Agreement (paragraph 31), and (v) that BP's mode of settlement with Libya was a breach of clause 22 of the operating agreement (paragraph 32).

Meanwhile in London, trial on the merits began on October 24, 1977 before Mr. Justice Goff of the Queen's Bench Division. On June 30, 1978, Mr. Justice Goff entered judgment against Hunt, and held that the counterclaim under the Act failed. He held that BP was entitled to recover approximately $35 million from Hunt under the Act, plus approximately 120,000 pounds on a related claim. Judgment (June 30, 1978), at 191 and 226. This was amended on March 26, 1979, to award BP $15,575,823 and £ 8,922,060. Both Hunt and BP appealed but the Court of Appeals in England has not yet decided the appeals.

II. Relation of Recognition to Bar of the Present Litigation

"Res judicata" is often used to denote two things in respect to the effect of a valid final judgment:

(1) that such a judgment, when rendered on the merits, is an absolute bar to a subsequent action, between the same parties or those in privity with them, upon the same claim or demand; and (2) that such a judgment constitutes an estoppel between the same parties or those in privity with them, as to matters that were necessarily litigated or determined although the claim or demand in the subsequent action is different.

1B Moore's Federal Practice ¶ 0.4051 at 621 (2d ed. 1974). The first concept is often called res judicata, strictly defined, and the second concept, collateral estoppel. Under res judicata, strictly defined, the judgment applies as a bar, preventing relitigation of all grounds for recovery or defenses available in relation to the same "claims" before the judgment court regardless of whether all grounds for recovery or defenses were judicially determined. Moore, supra, at 622-23; see also Stevenson v. International Paper Co., Mobile, Alabama, 516 F.2d 103, 109 (5th Cir. 1975).

Defining precisely the dimension of a "claim" or a single "cause of action" is difficult. Moore, ...