632 F.2d 539 (5th Cir. 1980), 78-1518, Pan-Islamic Trade Corp. v. Exxon Corp.

Docket Nº:78-1518.
Citation:632 F.2d 539
Party Name:PAN-ISLAMIC TRADE CORPORATION, Plaintiff-Appellant, v. EXXON CORPORATION et al., Defendants-Appellees.
Case Date:December 10, 1980
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 539

632 F.2d 539 (5th Cir. 1980)

PAN-ISLAMIC TRADE CORPORATION, Plaintiff-Appellant,

v.

EXXON CORPORATION et al., Defendants-Appellees.

No. 78-1518.

United States Court of Appeals, Fifth Circuit

December 10, 1980

Page 540

[Copyrighted Material Omitted]

Page 541

Benton Musslewhite, Houston, Tex., Louis R. Koerner, Jr., New Orleans, La., for plaintiff-appellant.

Cloy D. Monzingo, Houston, Tex., for Getty.

Hurst K. Groves, New York City, for Mobil.

Robert L. Norris, Jr., San Diego, Cal., for Exxon & Standard.

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Joseph P. Foley, White Plains, N. Y., Jack D. Childers, Houston, Tex., for Texaco.

B. J. Bradshaw, Houston, Tex., for Amerada Hess.

John S. Kingdon, Washington, D. C., William Simon, Stuart H. Harris, W. G. Winters, Jr., Houston, Tex., for Shell.

Thomas H. Burton, Houston, Tex., for Continental.

Harry M. Reasoner, Max Hendrick, III, Houston, Tex., for Mobil and Exxon.

Morris Harrell, Stan McMurry, Dallas, Tex., for Phillips.

Maurice R. Glover, Chicago, Ill., for Standard & American Oil.

Dean J. Capp, James M. Appelt, Houston, Tex., for American Oil.

Larry F. York, Houston, Tex., for Occidental Petroleum.

E. William Barnett, Houston, Tex., for Tenneco.

Robert M. Dubbs, Radnor, Pa., for Sun Oil.

Alan S. Gover, L. Denman Moody, Houston, Tex., for Atlantic Richfield & Getty Oil.

James A. Drexler, Houston, Tex., for Exxon.

William N. Armstrong, Houston, Tex., for Tenneco.

Appeal from the United States District Court for the Southern District of Texas.

Before COLEMAN, Chief Judge, REAVLEY and ANDERSON, Circuit Judges.

R. LANIER ANDERSON, III, Circuit Judge:

Pan-Islamic Trade Corporation ("Pan-Islamic") brought suit against sixteen oil companies, 1 claiming that it was prevented from selling Algerian crude oil which it had purchased from Sonatrach, the national oil company of Algeria, as a result of an unlawful worldwide boycott and conspiracy against Algerian oil entered into by the defendant oil companies. Pan-Islamic alleged violation of Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2, and tortious interference with contract rights. During the course of the litigation below, Pan-Islamic moved for, but was denied, leave to file an amended complaint. After discovery, the trial court, in a decision reported at 1976-2 Trade Cas. P 61,024 (S.D.Tex.1976), granted all the defendants' motions for summary judgment with respect to all claims. The issues we must decide on this appeal are (1) whether leave to amend should have been granted, (2) whether discovery was improperly limited, and (3) whether summary judgment should have been granted the defendants with respect to the Section 1 Sherman Act claim. 2 We affirm the trial court's decision in all respects.

I. Preliminary Facts

Pan-Islamic's story is that of a small group of businessmen daring to obtain the immense fortune promised by world crude oil trade, only to be frustrated either by their own inexperience in failing to appreciate market prices, and thus contracting with Sonatrach at too high a price, as argued by the defendant oil companies, or by an illegal conspiracy to boycott Algerian crude oil, as alleged by Pan-Islamic.

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Pan-Islamic was organized on April 29, 1971, by five individuals who had no experience whatsoever in buying or selling crude oil. Mr. Erkan Icsel, a steamship agent, became president of the corporation; Mr. Terrence Clark, a former salesman and employee of the National Maritime Union, and Mr. Walter Wantschek, a salesman for a company conducting job training programs, became vice-presidents; Mr. Gerald Goodwin, who had a business supplying unionized temporary labor to shippers, became secretary-treasurer; and Mr. Benton Musslewhite, a practicing attorney, became its attorney and a stockholder.

The impetus to form Pan-Islamic came in early 1971, when Mr. Jeffrey V. Miller, a Dallas crude oil broker, telephoned Icsel requesting his help in obtaining forty million barrels of Algerian crude oil for sale to Miller's unspecified European client at a price of approximately $3.12 per barrel. 3 On the basis of Miller's telephone call and information obtained from Sonatrach that crude oil might be available at $3.05 per barrel f. o. b. Algeria, the Pan-Islamic principals formed their business venture.

To aid it in negotiations, Pan-Islamic hired as a consultant Mr. Charles Ragan, an attorney with brief experience in structuring crude oil contracts but with no previous participation in the actual purchase or sale of crude oil. In early May, 1971, Musslewhite and Ragan traveled to Algeria to negotiate with Sonatrach. Pan-Islamic entered these negotiations ill-prepared. Its principals had determined neither the posted price, 4 the market price f. o. b. of Algerian crude, the market price of crude delivered to American harbors, nor the transportation costs of crude from Algeria to the United States. Instead, Musslewhite and Ragan were prepared to negotiate a contract on the basis of a tentative offer of $3.12 per barrel f. o. b. Algeria from Miller despite not having ascertained Miller's authority to speak for his principal, not having an absolutely firm commitment from Miller's principal, 5 not knowing the identity of his principal, and not making a credit check to determine whether Miller or his principal had sufficient funds to purchase the oil.

While in Algeria, Musslewhite received a telex from Icsel informing him that a second party, Coastal States Gas Producing Company ("Coastal States"), might be interested in purchasing forty million barrels of oil. There is nothing in the record to indicate the extent of Coastal States' interest and it is clear that when the contract with Sonatrach was consummated, there was no firm agreement with Coastal States.

Despite having no firm contract with Miller's principal and with Coastal States, and not having investigated current market prices, on May 14, 1971, Pan-Islamic executed a contract with Sonatrach that obligated it to purchase eighty million barrels of crude oil at $2.98 per barrel f. o. b. Algeria to be lifted over a twelve month period beginning with the contract date. Pan-Islamic also received an option to purchase forty million barrels each year thereafter for the next four years. Pan-Islamic had a guarantee of the price of $2.98 per barrel through June 30, 1972, for a maximum of forty million barrels. The option thereafter linked the contract price to the

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posted price at Bejaia, 6 with a limitation in the contract price to 60% of the variations in the posted price.

Shortly after the contract with Sonatrach was consummated, Musslewhite learned the identity of Miller's principal, Mr. Kroening, and contacted him concerning a sale. Kroening indicated that the price Pan-Islamic was asking was too high. Because of the continuing inability of Pan-Islamic and Kroening to agree upon price, the transaction promised by Miller's contact never came to fruition.

Similarly, Pan-Islamic was unable to complete negotiations with Coastal States for a resale of its Algerian crude oil. Coastal States offered to purchase 24,000,000 barrels at $2.55 per barrel, and later made a second offer at $2.70 per barrel, but both offers were rejected by Pan-Islamic.

After the transactions with Coastal States and Miller's principal failed to materialize, Pan-Islamic entered negotiations in June with a company named Petroco for the lifting of 25,000 barrels of Algerian crude per day. The principals of Pan-Islamic disagree among themselves as to whether a contract with Petroco was ever consummated. It is undisputed that Petroco did not take delivery of any oil at the appointed time.

Also during June, Pan-Islamic began an effort to sell its crude oil to the defendant oil companies and others. 7 How many of the defendant oil companies were ever contacted by Pan-Islamic and what offers Pan-Islamic made to those contacted are matters which we shall discuss in detail below. No one ever purchased Pan-Islamic's Algerian crude oil.

The parties to this suit dispute when Pan-Islamic's contract with Sonatrach terminated. The defendant oil companies claim the contract was terminated by July 27, 1971. The record shows that on June 9, 1971, Sonatrach notified Pan-Islamic that Pan-Islamic's failure to withdraw the required quantity of oil was in violation of the contract. On June 17, 1971, Sonatrach informed Pan-Islamic that as a result of the breach, Sonatrach considered itself released from the contract. A subsequent telex dated July 27, 1971, confirmed Sonatrach's position.

Pan-Islamic claims that the contract was not terminated on July 27 but that it was able in August to renegotiate the price from Sonatrach down to approximately $2.84 per barrel f. o. b. Algeria. It is clear that by September or October, 1971, Pan-Islamic' contract with Sonatrach was terminated.

On April 3, 1974, Pan-Islamic filed this suit against the defendant oil companies. The complaint is sparse, conclusory and inartfully drafted. The only claim which is relevant to this appeal concerns an alleged conspiracy to boycott the crude oil purchased by Pan-Islamic. The complaint alleges a French-sponsored boycott of Algerian crude oil in response to the Algerian government's partial nationalization of French oil interests in Algeria. It alleges that each of the defendant oil companies participated in this boycott both by express and implied agreement. Although the complaint did not so indicate, it was clear from the evidence submitted by Pan-Islamic that it was relying heavily on the theory of conscious parallelism to establish an inference of conspiracy.

The trial court granted summary...

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