719 F.2d 992 (9th Cir. 1983), 82-4327, Interpetrol Bermuda Ltd. v. Kaiser Aluminum Intern. Corp.

Docket Nº:82-4327.
Citation:719 F.2d 992
Party Name:INTERPETROL BERMUDA LIMITED, a Bermuda corporation, Plaintiff-Appellant, v. KAISER ALUMINUM INTERNATIONAL CORPORATION, a corporation; Occidental Crude Sales, Inc., a corporation; Occidental Petroleum Company, a corporation; Robert E. Traweek and Geraldine Traweek, Defendants-Appellees. Fred M. Traweek, Third-Party Defendant-Appellee.
Case Date:November 01, 1983
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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719 F.2d 992 (9th Cir. 1983)

INTERPETROL BERMUDA LIMITED, a Bermuda corporation,

Plaintiff-Appellant,

v.

KAISER ALUMINUM INTERNATIONAL CORPORATION, a corporation;

Occidental Crude Sales, Inc., a corporation; Occidental

Petroleum Company, a corporation; Robert E. Traweek and

Geraldine Traweek, Defendants-Appellees.

Fred M. Traweek, Third-Party Defendant-Appellee.

No. 82-4327.

United States Court of Appeals, Ninth Circuit

November 1, 1983

Argued and Submitted May 9, 1983.

As Amended Jan. 27, 1984.

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[Copyrighted Material Omitted]

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Thomas P. Devitt, Thelen, Marrin, Johnson & Bridges, John Anderson, Landels, Ripley & Diamond, San Francisco, Cal., for appellees.

Kurt W. Melchior, Severson, Werson, Berke & Melchior, San Francisco, Cal., for plaintiff-appellant.

Appeal from the United States District Court for the Northern District of California.

Before ANDERSON, SKOPIL and NORRIS, Circuit Judges.

SKOPIL, Circuit Judge:

INTRODUCTION

InterPetrol Bermuda Limited ("InterPetrol") appealed from the district court's dismissal of its fraud and contract related claims against Kaiser Aluminum International Corporation ("Kaiser"). We affirm the district court.

FACTS

Trako Energy Corporation ("Trako"), a petroleum broker controlled by the Traweek family, entered into a contract with the Chinese Petroleum Corporation ("CPC") to have crude oil refined at CPC's refinery in Taiwan.

On April 11, 1979 Trako and Occidental Crude Sales, Inc. ("Oxy Crude"), a large supplier of crude oil, entered into a contract for the sale to Trako of heavy Arabian crude oil for shipment from the Persian Gulf to Taiwan.

In early May 1979 Trako contracted to sell specified quantities of refined oil products to Kaiser, with delivery to be taken in Taiwan in the latter half of June. Trako informed Kaiser that the source of supply would be Oxy Crude.

Immediately after arranging the purchase from Trako, Kaiser contracted with InterPetrol, an international spot trader in petroleum, to sell to InterPetrol the refined oil products that Kaiser was to obtain from Trako. InterPetrol was to take delivery at the CPC terminal in Taiwan, but was unaware of the source of the crude CPC would be refining. The contract was made orally and confirmed in Telexes.

The last term to be agreed on was a force majeure clause excusing performance by Kaiser. The force majeure clause was negotiated orally with parts of the negotiations, including a final confirmation of agreement, revealed by Telexes. The primary dispute in this case is the meaning and effect to be given this force majeure clause.

The volatile market for petroleum experienced a dramatic rise in price during April of 1979. To take advantage of this market, Oxy Crude sought a release from Trako from the contract to supply crude for the Trako/Kaiser/InterPetrol deal. On May 9, 1979 Trako and Oxy Crude executed a release from their sales contract. Oxy Crude then resold the crude oil originally intended for refining and delivery to Kaiser. Pursuant to the terms of the release agreement

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between Oxy Crude and Trako, Oxy Crude paid Trako one half of the profits on the resale of the oil. The two split approximately 6.5 million dollars. Subsequently, Kaiser invoked the force majeure clause in its contract with InterPetrol to excuse its own failure to perform by reason of the loss of its supply of oil.

PROCEEDINGS BELOW

In March 1980 InterPetrol brought a diversity action against Kaiser for breach of contract and related fraud claims. InterPetrol joined as defendants Occidental Petroleum Company and its subsidiary, Oxy Crude, and the Traweek family members individually. InterPetrol's suit against the later joined defendants was in tort for interference with contractual relations and under the Uniform Commercial Code ("U.C.C.") 1 on the theory that Kaiser's contract rights against Oxy Crude and the Traweeks should be assigned to InterPetrol if Kaiser were excused under the force majeure clause. Kaiser filed a third-party complaint against Trako, Oxy Crude and the Traweeks for breach of contract and related claims. Oxy Crude filed counterclaims and cross-claims against Kaiser and InterPetrol, demanding indemnification from the injuries it might be found to have caused the other.

InterPetrol's tort claims against Occidental Petroleum, Oxy Crude and the Traweeks were dismissed by the trial court. 2 The court then ordered the trial conducted in two parts, with the first part limited to InterPetrol's contract and fraud claims against Kaiser. After InterPetrol had presented its case in a bench trial, Kaiser's motion to dismiss under Fed.R.Civ.P. 41(b) was granted. The court held that the force majeure clause excused Kaiser, that InterPetrol did not thereby inherit Kaiser's claims against its suppliers, and that there was no substance to the claim that InterPetrol's contract with Kaiser was fraudulently induced. Kaiser, Oxy Crude and the Traweeks chose not to pursue their counterclaims and cross-claims and the third-party action was dismissed without prejudice. InterPetrol appealed.

ISSUES

  1. Was Oxy Crude a supplier of Kaiser?

  2. Did the district court err in denying InterPetrol's claim that its contract with Kaiser was fraudulently induced?

  3. Was the force majeure clause intended to excuse Kaiser if its suppliers defaulted for economic reasons?

  4. Was Kaiser required to transfer its rights against its suppliers to InterPetrol?

    DISCUSSION

  5. Kaiser's Suppliers.

    InterPetrol claims that Oxy Crude as well as Trako was a supplier to Kaiser because Oxy Crude and Trako were joint venturers as to the crude oil cargo.

    Minute Maid Corp. v. United Foods, Inc., 291 F.2d 577 (5th Cir.1961), cited by appellant, is most persuasive. 3 In Minute Maid, a cold storage business furnished financing and warehouse facilities to make possible expanded use of United Foods' status as a direct buyer of Minute Maid products. The agreement between the two businesses provided for joint control over the mutual enterprise, with profits to be shared.

    Little distinguishes Minute Maid from the present case. Oxy Crude was more

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    than just the source of crude oil for Trako. Oxy Crude provided the credit for Trako's refining contract with CPC. Profits generated were to be divided equally between Oxy Crude and Trako. More important, Oxy Crude and Trako agreed to share potential losses. The indicia of partnership discussed in Minute Maid are present. We are persuaded that Oxy Crude and Trako's relationship was a joint venture with respect to the crude oil cargo. Oxy Crude was thus as much a supplier of Kaiser as was Trako, with whom Kaiser dealt directly.

  6. Fraud Claims.

    We review a district court's findings on fraud claims under the clearly erroneous standard of review. Lenske v. Knutsen, 410 F.2d 583, 585 (9th Cir.1969); Lyon Furniture Mercantile Agency v. Carrier, 259 F.2d 106, 109 (9th Cir.1958).

    InterPetrol contends that Kaiser made four specific...

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