550 F.2d 68 (2nd Cir. 1977), 9, Hunt v. Mobil Oil Corp.

Docket Nº:9, Docket 76-7052.
Citation:550 F.2d 68
Party Name:Nelson Bunker HUNT et al., Plaintiffs-Appellants, v. MOBIL OIL CORPORATION et al., Defendants-Appellees.
Case Date:January 12, 1977
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit
 
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550 F.2d 68 (2nd Cir. 1977)

Nelson Bunker HUNT et al., Plaintiffs-Appellants,

v.

MOBIL OIL CORPORATION et al., Defendants-Appellees.

No. 9, Docket 76-7052.

United States Court of Appeals, Second Circuit

January 12, 1977

Argued Oct. 26, 1976.

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Daniel P. Levitt, New York City (Nickerson, Kramer, Lowenstein, Nessen, Kamin & Soll, Kenneth Berlin, New York City, Philip Hirschkop & Associates Ltd., Philip J. Hirschkop, Alexandria, Va., of counsel), for plaintiffs-appellants.

Edward F. Howrey, Washington, D.C. (Howrey & Simon, A. Duncan Whitaker, Harry E. Jennings, Jr., Mark D. Wegener, Washington, D.C., Richard H. Zahm, New York City, Juliet Shepard, Englewood, N.J., of counsel), for defendant Mobil Oil Corp.

Kaye, Scholer, Fierman, Hays & Handler, Milton J. Schubin, Texaco Inc., Charles F. Kazlauskas, Jr., G. Kenneth Handley, Lawrence R. Jerz, New York City, of counsel, for defendant Texaco, Inc.

Lord, Day & Lord, Gordon B. Spivack, John W. Castles, 3d, Harry G. Sklarsky, David H. Marks, Carolyn Ellis, New York City, Pillsbury, Madison & Sutro, Turner H. McBaine, Wallace L. Kaapcke, Thomas E. Haven, San Francisco, Cal., of counsel, for defendant Standard Oil Co. of Cal.

Shea, Gould, Climenko, Kramer & Casey, Bruce A. Hecker, Joseph Ferraro, New York City, of counsel, for British Petroleum Co., Ltd.

Sullivan & Cromwell, Robert MacCrate, Robert M. Osgood, Barbara A. Mentz, New York City, of counsel, for defendant Exxon Corp.

Before MULLIGAN and VAN GRAAFEILAND, Circuit Judges, and GAGLIARDI, District Judge. [*]

MULLIGAN, Circuit Judge:

This appeal raises the question whether the district court properly dismissed before trial, on the basis of the act of state doctrine, the third antitrust claim of the plaintiffs-appellants' complaint seeking treble

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damages from the named defendants-appellees as the result of the nationalization of the plaintiffs' oil producing properties in the Sarir Field by the Libyan government on June 11, 1973. We hold that the motion to dismiss was correctly decided and affirm the judgment of the district court.

I

Nelson Bunker Hunt filed a complaint on March 3, 1975 in the United States District Court for the Southern District of New York charging in the first three counts that the named defendants had unlawfully combined and conspired to the damage of the plaintiff in violation of section 1 of the Sherman Act, 15 U.S.C. § 1, and section 73 of the Wilson Tariff Act, 15 U.S.C. § 8. A fourth claim alleged damages arising from a breach of contract. The complaint was amended by stipulation on January 9, 1976 adding as plaintiffs W. Herbert Hunt and Lamar Hunt. Hereinafter the plaintiffs are referred to as "Hunt." The complaint on the basis of the antitrust claims alone seeks damages of not less that $125 million before trebling. Prior to filing its answers containing denials, affirmative defenses and counterclaims, certain of the defendants (Mobil Oil Corporation, Texaco, Inc., Standard Oil Company of California, The British Petroleum Company (B.P.), Exxon Corporation, Gulf Oil Corporation, Occidental Petroleum Corporation and Grace Petroleum Corporation) moved to dismiss the first, second and third claims for lack of subject matter jurisdiction and for failure to state claims upon which relief could be granted, pursuant to Rule 12(b)(1) and (6) of the Federal Rules of Civil Procedure. These defendants also moved to dismiss the breach of contract claim on grounds not relevant to this appeal. In an opinion, reported at 410 F.Supp. 10, filed on November 5, 1975, United States District Judge Edward Weinfeld denied the motion to dismiss the first and second antitrust claims but granted the motion to dismiss the third antitrust claim. The disposition of the breach of contract claim in covered in the trial court's opinion but is not here pertinent.

Thereafter, on January 22, 1976, Judge Weinfeld granted Hunt's motion for a final judgment dismissing the third claim as to all the defendants pursuant to Fed.R.Civ.P. 54(b) upon the express condition that the appeal be prosecuted with dispatch. A final judgment dismissing the third claim as to all defendants was entered on February 4, 1975, thus permitting this otherwise interlocutory appeal by Hunt.

In granting the Rule 54(b) motion, Judge Weinfeld stated, inter alia, that if the motion were denied, and thereafter on appeal from any judgment entered with respect to the first two claims the dismissal of the third claim was reversed, a duplicative lengthy trial would be required creating additional but unnecessary expense to the parties. He further found that this appeal would not delay the prospective trial nor would it interfere with the discovery process. We agree that on these grounds the motion was properly decided. Therefore, we reject the defendants' argument that this determination constituted an abuse of discretion and consequently proceed to the merits of the appeal.

II

Hunt is a non-integrated independent producer of oil which in 1957 obtained an oil concession in Libya. The seven major oil producers, who are included as defendants here, sometimes called "The Seven Sisters", are vertically integrated companies generally producing oil in both Libya and the Persian Gulf fields. 1 In November 1961, low sulphur oil was discovered in Libya at the

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Sarir Field, which eventually reached a level of 450,000 barrels a day shared equally by Hunt and B.P. which had a one-half undivided interest in the concession. In September 1969, Colonel Mu'ammar al-Qadhafi assumed power in Libya under a new government, the Revolutionary Command Council (RCC) which announced a policy of increasing the price of Libyan crude oil as well as the government's share or "take" in the price. The RCC's policy envisioned increased governmental control over production and production facilities. The heightened militancy of Libya resulted in agreements which were forced upon all the oil producers in Libya in September 1970, substantially increasing the take of the Libyan government in their profits. These agreements occasioned similar demands by the Persian Gulf countries which were members of the Organization of Petroleum Exporting Countries. That organization formulated a series of resolutions promulgated in December 1970 calling for more control by the producing nations over production. Despite the recently concluded agreements of Libya with its oil producers, the RCC demanded new increases in prices as well as taxes early in January 1971. The Libyan government first moved against Hunt and Occidental making certain unilateral "non-negotiable" demands which had to be accepted prior to January 16, 1971 and which were at variance with existing agreements with those oil producers.

In an effort to present a united front and fearful that the Libyan policy would escalate the demands of the producing nations in the Persian Gulf area, the seven majors met secretly in January 1971 in New York City to structure their resistance to the demands of the oil producing countries. In light of their concerted activity and the antitrust implications it presented, the major oil companies sought and obtained a clearance letter from the Department of Justice which indicated that it had no present intention of bringing any antitrust action on condition that the independent Libyan oil producers be included in any joint action proposed. The independent producers, including Hunt, were thereupon invited to participate in the meetings with the majors. These meetings culminated in the drafting of a so-called "sharing arrangement" known as the Libyan Producers Agreement of January 15, 1971 (the Agreement) which was supplemented and amended on October 18 and December 16, 1971 and November 21, 1972. The Agreement in general provided that if any party's crude oil production in Libya was cut back as the result of government action, all other producers would share in the cutback on a proportionate basis. It further provided that if there was insufficient Libyan oil to meet contractual obligations to existing European or Western Hemisphere customers due to restrictions or a government shutdown, the Persian Gulf producers would supply the Libyan producers with Persian Gulf oil at cost, with an option to pay cash in lieu of oil at a nominal sum per barrel. At that time Hunt had three such customers, all of whom were signatories to the Agreement and two of whom, Exxon and Shell, were among the seven majors. The Agreement as well as the subsequent amendments and supplements were reported to the antitrust division of the Department of Justice. Hunt was a party to the initial agreement and the subsequent modifications.

On December 7, 1971 the Libyan government nationalized B.P.'s half of the Sarir Field and demanded that Hunt market B.P.'s share of the Sarir production for Libya's account. Appellants allege that in response to the requests and assurances of B.P. and the other majors and in reliance upon the Agreement, Hunt refused the Libyan demand. As a result Libya evicted Hunt personnel from Sarir in early 1972 and cut back Hunt's permissible oil production by 50%. Hunt and B.P. as a consequence of these events received crude oil from the other parties to the Agreement. In October 1972, the Libyan government demanded an immediate 50% equity participation in Hunt's interests in Sarir. Hunt

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again rejected the Libyan demands. Hunt alleges that as a result of his non-cooperation with the Libyan demands, the Libyan government on December 11, 1972 refused to permit further export of Hunt's oil. On May 24, 1973 Libya terminated his right to produce and export crude oil and on June 11, 1973 pursuant to Law 42 of 1973 it nationalized all of Hunt's assets.

III

The sole issue on this appeal is whether the district court erred in dismissing the third antitrust claim of Hunt which is set forth in the margin. 2 The gravamen of...

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