Nissho-Iwai Co., Ltd. v. Occidental Crude Sales, Inc.
| Decision Date | 01 July 1988 |
| Docket Number | NISSHO-IWAI,No. 86-2809,86-2809 |
| Citation | 848 F.2d 613 |
| Parties | , 25 Fed. R. Evid. Serv. 1425 CO., LTD., Plaintiff-Appellee, Cross-Appellant, v. OCCIDENTAL CRUDE SALES, INC., Defendant-Appellant, Cross-Appellee. Robert B. Weintraub, Intervenor-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Louis Nizer, Jay F. Gordon, Clark Steven Abrams, Nancy M. Frieden, New York City, Linda L. Addison, Jerry V. Walker, Houston, Tex., for Occidental.
Larry H. Mitchell, Washington, D.C., for intervenor-Robert B. Weingtaub.
Robert A. Meadows, Wm. B. Allison, Gordon A. Holloway, Gayle M. Pearson, Sewell & Riggs, Houston, Tex., for Nissho-Iwai Co., Ltd.
Appeals from the United States District Court for the Southern District of Texas.
Before CLARK, Chief Judge, JOLLY, Circuit Judge, and BARBOUR *, Acting Chief District Judge.
This may well be a case in which our effort to completely develop the issues misled rather than clarified the course of complex litigation. Whatever the cause, the fact remains that the district court misconstrued parts of the prior panel's mandate in this contract dispute between Nissho-Iwai Company (Nissho) and Occidental Crude Sales, Inc. (Occidental). To correct this error, we vacate the judgment notwithstanding the verdict and reinstate the zero damages verdict rendered by the jury. We also affirm the partial directed verdict on the settlement of shipping contract damages.
Our prior opinion detailed the nature of the dispute between Nissho and Occidental. See Nissho-Iwai Co. v. Occidental Crude Sales, Inc., 729 F.2d 1530 (5th Cir.1984). We outline here only those facts necessary to understand today's rulings and to bring the procedural history of the case up to date. In 1971, Occidental contracted to sell "Zueitina Medium" crude oil to Nissho in varying quantities from October 1, 1972 to September 30, 1975. Nissho then negotiated a contract with Nereus Shipping Company (Nereus) to transport this oil from Libya to Japan. Nissho also entered into a contract with Kansai Electric Power Company (Kansai) to purchase this oil. Subsequently, Nissho and Occidental executed a new contract, Contract 1038, which, among other things, extended the purchase and sale relationship of Nissho and Occidental through December 31, 1978. Contract 1038 also designated California law as the law governing the agreement. Nissho and Nereus then extended their contract of affreightment to correspond with the amended duration of Contract 1038.
The prior panel determined that Occidental breached its contract with Nissho by failing to supply any oil during the last four months of 1975 and the first four months of 1976. Occidental's statement to Nissho that September 1975 oil would not be available because of production restrictions imposed by the Libyan Government was knowingly false. After Kansai cancelled its contract with Nissho, Nissho and Occidental agreed to suspend their contract from October 1, 1976 to March 31, 1977. Nissho's failure to load ships in September and October of 1975 prompted Nereus to file an arbitration claim for breach of the affreightment contract. Nissho settled this dispute by paying Nereus $2,225,000. Nissho maintains that $2,268,000, the cost of the settlement plus $43,000 in related attorney fees, is attributable to Occidental's breach.
This case has now generated four jury verdicts in the course of three trials and two appeals. 1 Nissho originally filed suit against Occidental on April 21, 1980. The amended complaint sought damages for breach of contract and fraud. In February of 1982, a jury returned a verdict of $2,269,000 in contract damages and $2,250,000 in punitive damages for fraud. A mistrial was declared when the jury, after being recalled and instructed that compensatory damages for fraud are a prerequisite to an award of punitive damages, returned a second verdict awarding Nissho a total of $6,769,000 in damages. The second trial produced a jury award for Nissho of $7,025,000 in damages on the contract claim and $283,000 in damages on the fraud claim. Occidental appealed this verdict.
On that appeal, a panel of this court affirmed the finding that Occidental had breached its contract with Nissho and held that events in Libya did not relieve Occidental of liability under the contract's "Force Majeure" clause. The panel also remanded the case for a complete retrial of damages. Our opinion specifically indicated that Occidental could raise the reasonableness of the $2,225,000 settlement and the defenses of mutual suspension and termination. It also permitted Occidental to claim that section 9.2(g) of the contract barred recovery of all consequential damages. Finally, we held that California law did not permit Nissho to maintain a separate action for fraud because those injuries were not separate and distinct from the injuries caused by the breach of contract.
On remand, the trial judge ruled that section 9.2(g) of the contract was unambiguous and did not apply to the type of damages sought by Nissho. In an attempt to avoid airing the fraud issue before the jury trying damages, Occidental stipulated to the reasonableness of the Nereus settlement and withdrew its defenses of suspension and termination. The district court directed a verdict for Nissho on the Nereus settlement. The rest of the case was submitted to a jury which awarded Nissho no damages for lost profits or for loss of goodwill. The district court granted Nissho a judgment notwithstanding the verdict which reinstated the second jury's $7,025,000 award for breach of contract. The court's order also provided that if the judgment notwithstanding the verdict were set aside the court granted Nissho's motion for a new trial. Both parties appeal numerous points.
Nissho sought damages from three sources: lost profits, loss of goodwill and its settlement with Nereus. The prior panel remanded issues of causation and mitigation as to lost profits and loss of goodwill but remanded only the reasonableness of the Nereus settlement. In the damages section of its opinion, the panel acknowledged that "Occidental raises a number of challenges to the amount of damages awarded Nissho" but "[b]ecause we find that the [suspension claim] has merit and requires a complete retrial of damages, we need not consider the other arguments in detail." Nissho, 729 F.2d at 1546. The panel's detailed consideration of the suspension claim discusses causation and mitigation as they pertain to lost profits and loss of goodwill. Id. at 1547. 2 The panel remanded these issues as part of "a complete retrial of contract damages." Id. at 1548. The damages section of the opinion discusses the Nereus settlement under a separate subheading. Id. at 1549. The panel addressed only the trial court's refusal to give an instruction on the reasonableness of the settlement amount. Causation and mitigation are not mentioned. The panel did not remand the Nereus settlement for a complete retrial on damages; instead, it remanded so that Occidental might challenge "the reasonableness of the settlement." Id.
Without deciding whether Nissho preserved its right to move for a judgment notwithstanding the verdict under Federal Rule of Civil Procedure 50, we hold that the district court erred by granting Nissho's motion. The district court properly instructed the jury to consider causation and mitigation in connection with the claim for lost profits and loss of goodwill. After the jury returned a zero damages verdict, however, the district court granted Nissho's motion for a judgment notwithstanding the verdict. It held that the following three events eliminated all predicates necessitating a new trial on damages: (1) the ruling limiting the contract's consequential damages clause to demurrage claims; (2) the stipulation to the reasonableness of the Nereus settlement; and (3) the withdrawal of Occidental's defenses of suspension and termination. This decision to set aside the verdict was based on the flawed assumption that our prior opinion foreclosed issues of causation and mitigation on the claim for lost profits and loss of goodwill. The district court therefore erred by granting the judgment notwithstanding the verdict and by reinstating the $7,025,000 jury verdict.
Before voir dire, Occidental stipulated that the amount Nissho had paid Nereus and the $43,000 in related attorneys' fees it had incurred constituted a "reasonable sum." Occidental did not stipulate to causation and mitigation. At the time of the stipulation, Occidental stated "[w]e do not admit that we, therefore, are liable for it, but we admit that it was reasonable." In a telephone conference later that day Occidental argued to the judge that causation and mitigation remained at issue despite its stipulation to reasonableness. At the close of all the evidence, however, the judge granted Nissho's motion for a directed verdict on the grounds that the stipulation to reasonableness resolved the only issue regarding the Nereus settlement which our prior opinion left open for retrial. Despite Occidental's protestations to the contrary, the district court properly interpreted the prior opinion. It may be that Occidental made a tactical error by entering the stipulation. If it did, it cannot rue back the bargain it made. We affirm the directed verdict on the Nereus settlement in the amount of $2,268,000 and remand to the district court with directions to enter judgment in accord with this opinion.
Occidental raises three other points of error that we now address. The first point relates to the district court's offer to let Occidental withdraw its stipulation to the reasonableness of the Nereus settlement. Occidental declined to do so unless the court would rule inadmissible certain testimony by Hattrick,...
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