Farmland Industries, Inc. v. Grain Bd. of Iraq
| Citation | 284 U.S.App. D.C. 276,904 F.2d 732 |
| Decision Date | 12 June 1990 |
| Docket Number | No. 89-7127,89-7127 |
| Parties | FARMLAND INDUSTRIES, INC., Appellant, v. GRAIN BOARD OF IRAQ, et al. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Richard M. Ziccardi, with whom Curtis E. Pew, New York City, and Jack P. Janetatos, Washington, D.C., were on the brief, for appellant.
Michael T. Shor, with whom William D. Rogers and Hadrian R. Katz, Washington, D.C., were on the brief, for appellees.
Before RUTH B. GINSBURG, SILBERMAN, and THOMAS, Circuit Judges.
Opinion for the Court filed by Circuit Judge SILBERMAN.
This case turns on the meaning of a disputed provision in several large wheat sales contracts between appellant Farmland Industries, Inc., an American agriculture and agribusiness concern, and appellee Grain Board of Iraq, an agency of the government of Iraq that purchases wheat, barley, and rice for that country. The contracts provided for the payment to Farmland of certain charges in the event that ships assigned to transport American wheat to points in the Middle East failed to arrive in American loading ports on time. And the contracts also called for Farmland to receive incentive payments if it loaded the wheat into the ships ahead of schedule. When the shipowners refused to pay any of these charges, Farmland brought suit in the district court against them and the Grain Board. The district court granted the Grain Board's motion for summary judgment, and Farmland challenges that order before us. We conclude that no genuine issue of material fact existed because no evidence supported Farmland's interpretation of the contract and that its tort claims are meritless. We therefore affirm the judgment of the district court.
Through a series of seven commodity sales contracts between December 1983 and September 1984, Farmland sold approximately 750,000 metric tons of hard red winter wheat to the Grain Board. The Grain Board paid for the wheat in full, an amount totalling $112 million, and those sums are not in dispute here. Since the Grain Board purchased the wheat on an "F.O.B." basis, it bore the cost and responsibility of arranging for the shipment of the cargo from the United States to ports in the Middle East. Consequently, the Grain Board entered into several maritime contracts (known as "charterparties") with three disponent shipowners 1 to transport the wheat: Compania Imacasa Maritime Corporation ("Imacasa"), Cerrigina Maritime Ltd. ("Cerrigina"), and Bulkferts, Inc. ("Bulkferts"). Imacasa carried the wheat from the first four sales contracts for December 1983 to March 1984, Cerrigina was assigned the April 1984 sales agreement, and Bulkferts shipped the wheat from the final two contracts for June and September 1984. As called for in the charterparties, the Grain Board opened letters of credit with a London bank to pay the vessel owners.
This dispute primarily involves a claim for payment of "carrying charges." 2 Carrying charges are designed to compensate a commodity seller for the storage and interest costs it incurs in the event the vessels on which the commodities are to be shipped are delayed. Five of the sale contracts provided for these charges to be paid to Farmland if the transporting ship failed to arrive in American ports on time for loading. 3 In the typical F.O.B. sales contract the buyer would be responsible for paying these charges to the seller, but here the parties sought to vary the normal commercial understanding. The carrying charge clause reads:
In case buyer [Grain Board] fails to ship during the period [?] shall make an allowance of 20 cents per M/T [metric ton] per day to be settled directly between [disponent vessel] owners and shippers [Farmland].
We agree with the district court and the Grain Board that a word is missing in the contract--the key subject in the payment clause--between the words "period" and "shall." The Grain Board contends that the clause was intended to place sole responsibility on the disponent shipowners to pay any carrying charges (i.e., the missing word should be "owners"). Farmland, on the other hand, does not argue that the missing word is "buyer," which would impose sole liability on the Grain Board. Instead, claiming the clause is ambiguous, Farmland reads the whole clause to establish a primary obligation to pay on the vessel owners and a secondary liability on the Grain Board. Any other interpretation, it argues, would deviate too much from normal commercial practice.
By the spring of 1984, carrying charges began to mount as the shipowners experienced delays in arriving to the United States. When the carriers declined to pay the charges, Farmland told the Grain Board it would refuse to make any further shipments of wheat unless the carrying charges were paid. The letters of credit directed the bank to withhold carrying charges from the freight payments to the carriers. Soon after Farmland threatened to halt the wheat shipments, the bank (presumably instructed by the Grain Board) began to deduct, from freight charges the Grain Board paid to the carriers, an amount equal to the carrying charges; the withheld sums remained in the Grain Board's account. In May 1984, the owners of Imacasa and Cerrigina contacted Farmland to arrange a meeting in Kansas City, Missouri to discuss the carrying charges. According to Farmland, after a day of negotiations a representative of the two carriers told Farmland that he had been instructed by the Grain Board to break off the talks.
In July, August, and September 1984, the Grain Board transferred to Farmland a total of $476,025.99, which the Grain Board claimed reflected all of the carrying charges withheld from Cerrigina. Farmland asserted, however, that it was owed additional carrying charges from the Cerrigina delay in excess of the amounts withheld by the Grain Board's issuing bank. Later in September, representatives of Imacasa, Cerrigina, Farmland, and the Grain Board met in Baghdad, Iraq to resolve the carrying charge dispute. The parties apparently reached a tentative settlement, but it soon fell apart. Thereafter, on March 19, 1985, the Grain Board transferred to Farmland $377,564.16 withheld for carrying charges traceable to Imacasa vessels' delays. And later, Farmland received an additional $75,584.85 from the Grain Board attributable to Bulkferts' carrying charges. But the Grain Board halted further transfers to Farmland when the carriers disputed the carrying charges and asserted an interest in additional withheld sums. The Grain Board explains that to avoid the possibility of having to pay the same sum to both the shipowners and Farmland, it held and continues to hold, as a stakeholder only, the remaining $383,052.33 withheld from the carriers.
Since Farmland believed that it was still owed considerably more money than was paid to it, the company filed suit against both the shipowners and the Grain Board for $1,229,714.41. The complaint alleged breach of contract, unjust enrichment, conversion, and tortious interference with contractual relations. Since the jurisdictional statute precludes jury trials against the Grain Board, which is an instrumentality of a foreign government, see 28 U.S.C. Sec. 1330(a), no jury demand was made. The district court dismissed the complaint with respect to Imacasa and Bulkferts because of ineffective service of process and also dismissed the suit against Cerrigina due to the absence of personal jurisdiction. Each of the carriers are now insolvent and in liquidation proceedings, and the Grain Board has asserted that Farmland's suit is an attempt to circumvent the arbitration clause contained in the charterparties, under which Farmland is a third party beneficiary. 4 After the completion of discovery and the production of virtually all of the evidence that would have appeared in the bench trial, the Grain Board moved for summary judgment. The district court granted the motion, determining that although the carrying charge provision was ambiguous, extrinsic evidence made clear that only the disponent shipowners were liable. The court also rejected Farmland's tort claims; it held that the Grain Board was acting only as a stakeholder and therefore had not been unjustly enriched, that a conversion cause of action was not available to enforce a debt, and that the tort of interference with contractual relations does not lie when the defendant is a party to that contract.
A party is entitled to summary judgment if no genuine issue of material fact exists and the moving party is entitled to a judgment as a matter of law. See Fed.R.Civ.P. 56. Material facts are those "that might affect the outcome of the suit under the governing law," Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510 91 L.Ed.2d 202 (1986), and a genuine dispute about material facts exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party," id. 5 Appellant contends that, with respect to its contract claims, the district court committed two errors in applying the summary judgment standard. First, it is asserted that under District of Columbia contract law Farmland was entitled to a trial on the meaning of the disputed contract provisions. Second, appellant argues that the district court improperly granted summary judgment under the Federal Rules because it either ignored or insufficiently credited inferences favorable to Farmland's interpretation of the contract. 6 We reject both of these arguments because they are based on incorrect understandings of District of Columbia contract law and federal summary judgment law.
Under District of Columbia law, according to appellant, a plaintiff is entitled to a trial to resolve a disputed term of a contract if it is facially ambiguous. Even the cases appellant cites in support of this dubious proposition, however, indicate that it has misread local law. When the...
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